Why is MTCPA opposing the tax credit?

By Allen Lloyd, CAE, Executive Director

You may have seen a news story about one of the many tax credits that have been proposed during session this year.  Maybe it was related to a topic you support and as you read you were surprised to see that the Montana Society of CPAs was the lone opponent to the bill.  So why is the Society opposed to tax credit?

During the 2021 Session Senate Bill 399 passed, greatly simplifying the Montana Tax Code and removing the majority of tax credits.  Those changes are set to be fully implemented on January 1, 2024. The Society supported that effort starting in 2013.  The MTCPA State Taxation Committee decided that since we supported the simplification effort we should work to ensure the tax code remains simple. 

If you watched any of the hearings or read quotes, you would see that the Society has been very careful in how we oppose these bills.  Our opposition is never to addressing the issue, but specifically in using tax credits as the solution.  When possible we even offer alternatives to achieve the goals without complicating the tax code. 

So why is a simple tax code good anyway?  As CPAs doesn’t a complicated tax code mean more work for the profession?  Below are some of the arguments we have made in promoting a simplified tax code:

1.     Each credit benefits those who use the credit at the cost to all other taxpayers.  While the state’s coffers are full today, in the future when revenue is needed a higher rate is needed to fill the holes left by tax credits. 

2.    A simpler tax code allows more taxpayers to complete their own tax return.  Even if taxpayers are not using credits the longer form can be intimidating.  As CPAs we would prefer to help clients who have more complex situations than to prepare returns for people who should be able to do it themselves. 

3.    Each credit requires attention from tax software providers.  Being a smaller state, Montana is not typically high on the list for software companies.  Adding complexity slows the process for the software to be created and approved by the state.

4.    Credits slow the processing of tax returns.  The Department of Revenue has to process the additional information related to each credit submitted.  This slows the process for all taxpayers.

Now you may be thinking the same thing the legislators are, sure a bunch of credits is bad, but just this one isn’t going to ruin our tax system.  We agree that any of the credits proposed could be added.  The Department of Revenue could administer it and CPAs could help their clients use the credits.  BUT, if we only oppose some credits we are forced to make bigger policy decisions.  The Society has decided that we will oppose all tax credits.  Our testimony makes the case for a simple tax system.  It is then the job of the Legislature to decide if keeping the tax system simple is more important than using the tax system to address these issues. 

If you have an interest in the legislative process and helping to shape the Society’s position we would invite you to join one of our legislative committees or join us for one of our Monday morning calls.