AICPA Town Hall Special Edition: Government Shutdown Update

Date: October 16, 2025
Podcast: AICPA Town Hall
Host: AICPA & CIMA
Key Panelists:

• Lisa Simpson, VP of Firm Services, AICPA
• Mark Peterson, Advocacy
• Melanie Lauridsen, IRS Specialist
• Dan Noel, VP, Financial Reporting and Audit Quality
• Sue Hicks, Director, Employee Benefit Plan Auditing and Accounting
• Lindsey Kinnamer, Senior Director, Governmental Auditing and Accounting
• Jason Brodmerkel, Financial Institutions
• Stephanie Otero, VP, Small Firm Advocate

Episode Overview

This special edition provides urgent updates and practical guidance for accountants and their clients amidst the ongoing federal government shutdown (Day 16 as of recording). The discussion explores the political landscape driving the shutdown, its broad impact on key federal agencies—including the IRS, SEC, DOL, HUD, HHS, federal bank regulators—and implications for nonprofits. The panel addresses frequently asked questions, highlights advocacy efforts, and shares actionable strategies for practitioners navigating regulatory slowdowns and uncertainties.

Key Discussion Points & Insights

1. Political Context and Prospects for Resolution

Speaker: Mark Peterson ([02:31])

• The federal shutdown began Oct 1, 2025, with no immediate end in sight; the record stands at 35 days.
• Current Offers on the Table:
  • Republican: Clean extension of current funding into late November.
  • Democrat: Willing to vote for extension, but want permanent ACA premium tax credit extension, Medicaid & PBS funding, and protection against post-deal spending rescissions.
• Negotiating Tactics:
  • “There is such little legislation actually getting done that they have to have these leverage points in order to negotiate. And that's why we come so close to these cliffs...” — Mark Peterson ([04:37])
• The Senate requires bipartisan agreement (60 votes), but offers are stalling. Defense appropriations have been suggested as a temporary workaround.
• Inflection Points:
  • Military pay dates (15th, next on Nov 1) often create political urgency.
  • Essential services (like air traffic control) still operate but without pay, which could cause disruptions.

2. Shutdown’s Impact on IRS Operations

Speaker: Melanie Lauridsen ([12:14])

• Contingency Planning:

  • Initially, 100% of IRS staff remained for five days. As of Oct 8, 46% of employees are furloughed. Priority retained staff include criminal investigations (data breaches), seasonal/future filing season prep, HR1 implementation, and taxpayer services.
  • “There are no winners when there is a government shutdown.” — Melanie Lauridsen ([15:07])

• Potential Consequences:

  • Filing season delays likely, especially affecting HR1 implementation.
  • Practitioner Service hotline has skeleton crew; backlog threatens to exceed COVID-era levels.
  • Over 1,400 IRS staff received Reduction in Force (RIF) notices, including both essential and compliance staff.
  • Walk-in service appointments were canceled without notice to taxpayers.

• AICPA Advocacy: Letter to IRS with practical asks ([17:52]):

  • Discontinue compliance actions for 60 days post-shutdown.
  • Keep online systems operational.
  • Streamline reasonable cause penalty waivers.
  • Safe harbor penalty relief for estimates/late payments.

3. SEC, PCAOB, and Standard Setters

Speaker: Dan Noel ([24:09])

• SEC: Effectively “shut for business” except for emergencies; staff not reviewing filings, conducting pre-clearances, or answering questions.
  • “The likelihood is…the typical way you’d conduct affairs with human beings is shut down.” — Dan Noel ([24:17])
  • EDGAR system remains operational—deadlines for 8-Ks, 10-Qs, IPO filings still apply, but bottlenecks expected post-shutdown.
• PCAOB: Operational (funding independent of appropriations), but their budget and certain new standards are frozen due to SEC inaction.
• FASB/GASB: Unaffected and operational.
• Federal Accounting Standards Advisory Board (FASAB): Shut down.

4. Department of Labor (DOL) & Pension Benefit Guaranty Corporation (PBGC)

Speaker: Sue Hicks ([28:55])

• DOL: 25% of staff retained; essential functions (wage, hour, mine safety) continue.
  • “Any non-essential functions will be suspended… audits and most worker protection investigations will all lapse.” — Sue Hicks ([30:38])
  • Unemployment benefits, black lung, and illness compensation funded by prior appropriations continue.
  • Data releases (inflation, labor stats) may be delayed/restated.
  • Form 5500 filing remains available via EFAST2, but no DOL staff support.
  • Delays in enforcement and reviews; uncertain if daily fines/penalties will accrue during shutdown.
• PBGC: Not impacted; plan terminations proceed normally.

5. OMB, HUD, and HHS

Speaker: Lindsey Kinnamer ([37:15])

• OMB: 2025 Compliance Supplement delayed further by shutdown, disrupting audit/backlog timelines and funding decisions.
  • “The longer that delay continues…more audit and funding disruptions will occur.” — Lindsey Kinnamer ([38:40])
• HUD: 84% staff furloughed; grant processing/oversight severely impacted; monthly subsidies continue while prior funding lasts.
• HHS: 41% staff furloughed; core programs (Medicare, Medicaid, CHIP) continue. Some operational slowdowns and delays in grants, Head Start operating only for pre-existing grants; new ones paused.
• General Agency Impact: Monitor risk to funding flows, program disruptions, and ongoing communication with auditors/regulators is critical.

6. Federal Banking and Credit Union Regulators

Speaker: Jason Brodmerkel ([45:23])

• Federal Reserve, OCC, FDIC, NCUA: All independently funded and fully operational.
  • “All four agencies are operational with limited disruptions during the shutdown, including their examination process.” — Jason Brodmerkel ([46:00])
• Indirect Effects: Slowdown in National Flood Insurance Program and SBA/commercial loan processing; key economic data delays may affect allowance calculations for banks.

7. Nonprofits: Real-World Challenges and Proactive Steps

Speaker: Stephanie Otero ([48:19])

• Most nonprofits resilient in short-term, already accustomed to disruptions.
  • “Nonprofits...they are resourceful and resilient.” — Stephanie Otero ([49:06])
• Risks if shutdown stretches: delayed reimbursements (especially for those on cost-reimbursement grants), cash-flow stress, program cutbacks, increased community demand.
• CPA Guidance:
  • Inventory current federal funding sources and exposure.
  • Step up cash flow management and document shutdown impacts for future grant support.
  • Communicate transparently with boards, donors, and clients.
  • Seek flexible funding, negotiate vendor terms, diversify revenue, or open lines of credit.
  • CPA firms can proactively reach out to clients, assist with forecasting, and provide regulatory updates.

8. Advocacy and Resources (Throughout)

• AICPA is actively advocating for relief, information, operational clarity, and regulatory flexibility with agencies and Congress.
  • “We know they're listening, we know they have their ears open, but we too have our listening ears from our members to be able to really take positive actions in this difficult time.” — Melanie Lauridsen ([21:40])
• Members are encouraged to provide ongoing feedback for inclusion in advocacy efforts.
• Robust resource center (including on the shutdown) is available to all members via AICPA.com.

Notable Quotes & Memorable Moments

• On Congressional Deal-making

  “There is such little legislation actually getting done that they have to have these leverage points in order to negotiate. And that's why we come so close to these cliffs…”
  — Mark Peterson ([04:37])

• On IRS' Practical Capabilities:

  “There are no winners when there is a government shutdown.”
  — Melanie Lauridsen ([15:07])

• On SEC Operations During Shutdown:

  “The likelihood is…the typical way you’d conduct affairs with human beings is shut down.”
  — Dan Noel ([24:17])

• On Nonprofit Resilience:

  “Nonprofits...they are resourceful and resilient.”
  — Stephanie Otero ([49:06])

• On Advocacy Efforts:

  “We know they're listening, we know they have their ears open, but we too have our listening ears from our members...”
  — Melanie Lauridsen ([21:40])

• On the "Nuclear Option" in the Senate:

  “Once that is open, that procedure has changed, it will never go back. And so I think there's a big hesitancy to do it. It's possible. It's been discussed. I think unlikely.”
  — Mark Peterson ([55:18])

Timestamps for Major Segments

• State of Shutdown & Political Update: [02:31] – [10:25]
• IRS Impacts & Practitioner Concerns: [12:14] – [23:26]
• SEC, PCAOB, Standard Setters: [24:09] – [28:23]
• Department of Labor, PBGC: [28:55] – [36:43]
• OMB, HUD, HHS: [37:15] – [44:50]
• Federal Banking/Credit Unions: [45:23] – [47:38]
• Nonprofits Guidance: [48:19] – [54:51]
• Nuclear Option (Senate discussion): [55:18]

Practical Takeaways

• Accountants should proactively review client exposures, especially in nonprofit and heavily federally-regulated sectors.
• Stay updated through the AICPA resource portal and regular communications.
• Expect delayed regulatory response times, possible penalty waivers, and backlogs—as seen with the IRS, SEC, DOL, and auditing of grants.
• Encourage clients to document shutdown impacts for relief and advocacy opportunities.
• Maintain open communication with agency contacts, clients, boards, and stakeholders.

Closing

Deep uncertainty remains, but the AICPA continues to advocate and provide rapid guidance for practitioners. All members are urged to utilize the resource center, keep lines of feedback open, and support each other and their clients during this accelerated period of change.