1995 legislative preview: the new agenda and what it means to the accounting profession.

Sweeping victories in the 1994 elections have left both House and Senate Republicans poised to implement their legislative agendas. House leaders have coined their list of reforms the Contract with America and plan to have a new tax bill ready by this month, while Senate majority leader Bob Dole (R-Kans.) said his party will begin very quickly with Judiciary Committee hearings on a balanced budget amendment.

The Republican maneuvering follows what promised to be a construction year for the Democrats, whO entered the 103rd Congress with a majority in both the House and Senate. But Democrats recessed in October bitterly divided after formidable Republican challenges killed much of proposed 1994 legislation. Most if not all of this legislation will be reintroduced in the Republican-lead 104th Congress.

The accounting profession achieved some of its legislative goals last year and is positioned to proceed on others in the new Congress. Here's a review of legislation important to CPAs and where it stands given the new political climate.

Securities litigation reform

Securities litigation reform was a major issue before Congress in 1994 and, although it did not become law, it is well positioned for further consideration this year. The House has placed litigation reform on the list of 10 bills it wants considered during the first 100 days of the new Congress. Two hearings on the issue were held in the House last year before the Telecommunications and Finance Subcommittee, and another two were held in the Senate before Senator Christopher Dodd's (D-Conn.) Securities Subcommittee. A full legislative schedule forced postponement of the vote on litigation reform last year, but Republicans are expected to keep up the pressure on Congress to act early on this issue.

Workload compression

Proposals to solve the accounting profession's workload compression problem did not make their way before Congress in 1994. The American Institute of CPAs, however, has launched a campaign to win congressional approval of a proposal that would lighten the burden on CPAs caused by the number of companies adopting a calendar yearend for tax purposes under the Tax Reform Act of 1986. AICPA board chairman Robert L. Israeloff has made workload compression a high-priority issue, promising a "full-court press" to regain full use of fiscal years. It is difficult to forecast, however, if the new Congress will draft legislation backing the AICPA proposal during the 104th Congress.

Taxes

House and Senate Republican leaders are working on legislation intended to cut taxes. The GOP-controlled Congress is expected to introduce a capital gains tax cut very early this year. Other priority legislative issues on the Republican agenda include technical corrections legislation, the elimination of the marriage penalty and tax simplification. Legislation supporting a simplified tax code passed the House in May 1994 but was not addressed by the Senate Finance Committee. Republican leaders also propose replacing the income tax with a consumption tax, but this is not expected to pass this year.

The only tax bill to pass the 103rd Congress was HR 4278, more commonly known as the nanny tax bill, which raised the threshold for paying domestic workers' Social Security taxes from $50 per quarter to $1,000 per year. The accounting profession also scored a few silent victories in 1994. The AICPA helped defeat a proposed Treasury Department plan to make up tariff income by repealing the lower of cost or market inventory method, a measure related to the General Agreement on Tariffs and Trade. The 1991 individual estimated tax rules were repealed when President Clinton signed into law the 1993 budget plan, which included a proposal to restore a prior-year tax safe harbor to individual taxpayers required to make quarterly estimated tax payments.

Auditing and accounting

None of the auditing and accounting bills introduced during the 103rd Congress received final approval. It is expected, however, that most of them will emerge before Congress again this year. Among the bill proposals expected to resurface is a version of the controversial Financial Accounting Standards Board employee stock option proposal, requiring the Securities and Exchange Commission's approval of any new accounting principle. The AICPA opposed this proposal last year, saying it would add an unnecessary layer to an already time-consuming procedure. The Institute also opposed auditor rotation legislation. Introduced in the Senate Commerce Committee in 1994, this bill would have required mandatory audit firm rotation and contained a provision requiring state commissions to select independent auditors.

The AICPA did support pension reform legislation, introduced-in both the House and the Senate, and testified before the House Ways and Means Committee to endorse the bill's expanded disclosure of information to workers and retirees, as well as improved plan funding levels.