HBA-EDN C.S.S.B. 1037 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1037 By: Ellis, Rodney Ways & Means 4/30/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Several innovative approaches to auditing and collections may be able to improve the efficiency and productivity of the programs administered by the comptroller of public accounts (comptroller). One such approach is Florida's certified audit program, a cooperative effort between the Florida Department of Revenue (DOR) and the Florida Institute of Certified Public Accountants, the state's licensing program for certified public accountants (CPA). Under this program, taxpayers are allowed to hire, at their own expense, qualified CPA firms to review their sales tax compliance. As an incentive to incur the cost of a certified audit, penalties are waived and interest abated on the first $25,000 of interest and an additional 25 percent of any interest liability in excess of the first $25,000. Except in cases of fraud or misrepresentation, DOR will not audit taxpayers for the same period or tax covered by the certified audit period. Before a CPA can be certified to conduct audits for the state, the CPA must pass an examination after completing a state-prescribed self-study course and be employed by a qualified CPA firm. Taxpayers who have not been mailed a notice of intent to audit are eligible for the program. The program is not available to taxpayers who collect a state tax but fail to remit it to the state. In Texas, a certified audit program, modeled after Florida's program, could increase voluntary compliance by taxpayers while decreasing state involvement in business. C.S.S.B. 1037 authorizes the comptroller to create a certified audit program to train and certify independent CPAs to conduct tax audits. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking is expressly delegated to the comptroller of public accounts in SECTION 1 (Section 151.0232, Tax Code) of this bill. ANALYSIS C.S.S.B. 1037 amends the Tax Code to authorize the comptroller of public accounts (comptroller), by rule, to establish a program in which a taxpayer may hire a certified public accountant (CPA) who is not employed by the comptroller to perform an audit to determine a taxpayer's liability for a limited sales, excise, and use tax. The bill sets forth guidelines for requirements and safeguards that such a program must include. Unless the audit or other information available to the comptroller discloses fraud or wilful tax evasion, the bill prohibits the comptroller from assessing a penalty and authorizes the comptroller to waive all or part of the accrued interest on an amount identified to be due as a result of an audit performed under these provisions. EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 1037 modifies the original by stipulating that a safeguard to protect the confidentiality of information used in connection with an audit must include a provision that a certified public accountant hired under the program is subject to the requirements and penalties that apply to an employee of the comptroller of public accounts (comptroller) regarding the confidentiality and disclosure of information obtained from an audit. The substitute prohibits the comptroller from assessing a penalty and authorizes the comptroller to waive all or part of the accrued interest on an amount due as a result of an audit unless the audit or other information discloses fraud or wilful tax evasion, whereas the original authorized the comptroller to waive a penalty or all or part of the accrued interest irrespective of any information disclosed.