Current status of the tax curriculum in accounting programs.

In 1996, an AICPA task force developed the Model Tax Curriculum (MTC) in response to two factors: (1) recommendations for reforming the accounting curriculum and (2) many universities had dropped a second tax course from their undergraduate curriculum (see O'Neil, et al., Tax Education," Assessing the Impact of the AICPA Model Tax Curriculum on the First Tax Course Taught at AACSB-Accredited Institutions" TTA, August 1999, p. 596). This column focuses on recent efforts to reexamine the current status of the tax curriculum in light of the many changes that have taken place in both accounting practice and education since the MTC's introduction.

An Evolving Profession

Since 1996, 44 states have adopted the CPA examination's 150-hour requirement, and four others have passed such legislation. In Spring 2004, a new CPA examination was inaugurated. Finally, events such as Enron and WorldCom, along with the enactment of the Sarbanes-Oxley Act, forced universities to reexamine their curricula. As a result, in 2003 the AICPA's Pre-Certification Executive Education Committee created a joint task force comprised of members from the AICPA and the American Taxation Association (ATA), to revisit the MTC.

Task Force Objectives

As it began deliberating, the AICPA/ATA joint task force realized that little current information is available about the tax component of the accounting curriculum. An exception is the AICPA's Tax Education Committee's survey, which found that new hires were not fulfilling firms' expectations of tax technical knowledge; see Schnee, Tax Education, "Evaluating Tax Education: A Survey of New Hires," TTA, August 2002, p. 540.

In Fall 2003, the joint task force conducted an online survey to (1) gather information about the current state of affairs in tax education and (2) obtain broad input about the tax component of the accounting curriculum. The survey focused on the first tax course, which nearly all accounting majors take as part of their accounting education.

The survey was sent to the ATA's 1,000 members; 103 professors responded and 55 elected to include demographic information. Based on this subset, the sample includes universities serving major metropolitan areas, as well as primarily residential, less urban campuses. It represents flagship campuses of major public universities, private universities and regional public universities. It also covers universities from at least 25 states and the District of Columbia, embodying all major U.S. geographical regions.

Tax Courses Offered

Exhibit 1 on p. 713 shows how many undergraduate tax courses are offered at respondents' universities and whether those courses are elective or required. At least 34% of universities had accounting graduates who did not take more than one tax class. Many universities offer elective tax courses, but only 11.7% require two undergraduate tax classes. Despite the availability of electives, 57.15% of accounting graduates, on average, took only one tax course. Thus, well over one-half of students embarking on accounting careers with solely an undergraduate accounting education, have a foundation in tax based on only one course. However, the widespread implementation of the 150-hour requirement means that students entering careers in public accounting may be broadening their tax knowledge by taking additional courses as graduate students.

Approximately 50% of the respondents were teaching at universities that offer a graduate tax program or a graduate program with a tax track, in addition to an undergraduate accounting program. For schools offering graduate programs, 37.3% think it is possible for students to graduate with only one tax course taken during undergraduate and graduate studies. For these programs, 34.5% of students, on average, graduated with only one tax course. Thus, across the subset of universities offering graduate studies, a mean of 12.87% of students took only one tax course during their graduate and undergraduate studies combined.

Although reliance on one undergraduate tax course for tax knowledge has been mitigated by the growing number of graduate accounting programs, students can fulfill the 150-hour requirement without attending graduate school. As a result, these students--as well as those not planning on a career in public accounting--rely solely on their undergraduate curriculum. Thus, the content of the first tax course is worth examining.

First Tax Course

The survey attempted to assess both the content of the first course and pedagogy. From a list of potential topics offered in a first course based on the new CPA examination's content-specification outlines--the survey ranked topics as follows: (1) in-depth coverage, (2) moderate coverage, (3) brief mention, (4) as an outside-of-class assignment only or (5) not included.

The survey compared the content of the first tax course between schools offering only one course and those with more than one course. In general, both highly emphasize property transactions and individual income taxation. Schools with a single tax course tend to stress selected, individual income tax topics less and to cover some aspects of the taxation of business entities more. These schools also place more emphasis on tax planning and research. However, while some students are gaining exposure to essential elements of business entity taxation, tax planning and tax research, many taking only one tax course are not being exposed to some critical basics.

Review of Selected Topics

Students taking only one course do so by two means. First, their university may offer only one course. Second, they take only the required course of a two-course sequence in which the other course is an elective. Within this setup, 45.9% of students take only the first course. The following discussion focuses on programs offering only one required course (percentages in parentheses represent the first course in a two-course sequence); for a detailed analysis, see www.cob.sjsu.edu/nellen_a/ Tax%20Curriculum11-04.pdf. The survey indicated the following:

* For business entities, the most popular topic is the similarities and distinctions in tax reporting across business entities, with 76.5% (41.2%) of schools repotting moderate or in-depth coverage. While most universities with only one tax course include this topic, further coverage of C corporations, partnerships and S corporations declines dramatically after that point. For example, 41.2% (approximately 70%) of schools do not cover or only briefly mention income determination for C corporations or partnerships. In addition, 17.6% (48.9%) of schools do not cover (or only briefly mention) any business entity topics (other than sole proprietorship taxation).

* 41% (68.9%) of schools do not integrate (or only briefly mention) financial reporting in their tax course.

* 35% (53.3%) of schools do not integrate (or only briefly mention) the business environment in their tax course.

* 29.4% (48.9%) of schools do not cover (or only briefly mention) tax research, either inside or outside the classroom.

* While approximately 80% (46.7%) of courses incorporate the role of taxes in decisionmaking in some form, 47.1% (73.3%) do not cover (or only briefly mention) cashflow and net-present-value analyses.

While it is clear that some schools offering only one tax course have tried to modify that course to incorporate essentials, it is also apparent that the first course falls short in many ways. Respondents constrained to one tax course commented that it is insufficient and that they want to add coverage to fill in significant gaps. The most common topics on their wish lists are tax research, tax planning and business entities. Respondents who can incorporate these topics expressed frustration due to a lack of class time to teach the topics in depth.

Pedagogy

Lecture and problem-solving are the dominant teaching methods, averaging 78% of class time. Although 63% of respondents use writing assignments, 52% use cases and almost 50% use group assignments, the time devoted to these latter methods is far less than that for lecturing and problem-solving.

Teaching methods, according to the Accounting Education Change Commission, should "expand and reinforce basic communication, intellectual, and interpersonal skills...."; see Accounting Education Commission, "Objectives of Education of Accountants: Position Statement Number One," 6 Issues in Accounting Education 310 (Fall 1990). It also advocates using more active learning pedagogies, as well as having students solve unstructured problems requiring multiple resources. Pedagogies such as cases, writing assignments, oral presentations, team assignments and role-playing can facilitate the development of communication, intellectual and interpersonal skills.

Exhibit 2 below compares the percentage of faculty in the survey who use a given pedagogy in the first tax course versus what Albrecht and Sack reported for all accounting courses; see Albrecht and Sack, Accounting Education Series, 16 Accounting Education: Charting a Course through a Perilous Future, American Accounting Association (2000). In both groups, lecture is the dominant teaching method. Respondents tend to use lecture more and active learning pedagogies less than the average use across the accounting curriculum. However, not all courses are amenable to different teaching methods.

Albrecht and Sack also found that 77% of faculty use technology-based assignments throughout. As to the survey respondents, 64% use computer-based research assignments in the first undergraduate course (18% use non-computer-based assignments), 43% use computers for preparing returns (56% use another method) and 13% use other types of computer-based assignments. Additionally, 19% of respondents use assignments involving the volunteer income tax assistance program.

Conclusion

Faculty teach at universities with different missions and different curricula serving them. Thus (not surprisingly), there is a great degree of variability in the number of tax courses offered at the undergraduate level and how many are required or elective. Fifty-seven percent of students take one tax course to obtain their undergraduate degrees. If students further-their education by attending graduate school, 87% take at least two tax courses.

Frequently, students do not need to pursue graduate degrees to fulfill the 150 hours required to take the CPA examination. Also, students who do not wish to pursue a career in public accounting do not need to obtain a graduate degree. Thus, many students embark on their careers with only one tax course under their belts.

As expected, schools vary in the course content they emphasize and how they teach courses. While there will always be debate about the depth and breadth of content, the survey noted several significant gaps in course content when respondents are constrained to a single tax course. These gaps include a significant percentage of universities that either do not cover or only briefly mention several critical areas, such as business entity taxation, tax research, tax planning and the interaction between tax and financial reporting.

Comments from open-ended questions revealed frustration with attempts to incorporate essential concepts into a single course. Helping students build a meaningful framework to understand key tax principles--along with the fundamental features of tax planning and research--while, at the same time, integrating tax with financial reporting issues, is a daunting task. Further, students need a foundation for learning on their own in the future. Given the recent issues in the accounting profession and changes ha accounting education, the time has come for reconsidering the tax curriculum in accounting programs.

The AICPA/ATA joint task force is exploring these and other important issues as it revises the MTC. The task force members are Jane Rubin, Chair (Jane Rubin, CPA), Shirley Dennis-Escoffier, Beth Kern, Ed Maydew *(University of North Carolina), Tom Purcell (Creighton University), Shelley Rhoades-Catanach (Villanova University), Jeff Totten (Deloitte & Touche LLP) and James Young (University of Northern Illinois). The task force welcomes comments or suggestions from readers.

Editor's note: Prof. Nellen is a member of the AICPA Tax Division's Strategic Planning Task Force, and a former member of the AICPA Tax Division's Tax Executive Committee. For more information about this column, contact Prof. Kern at [phone] or [e-mail].

Exhibit 1: Type/percentage of undergraduate tax courses offered

1 required, plus 1 elective      43.7
tax course
1 required tax course            29.1
2 required tax courses           11.7
More than 2 undergraduate tax     9.7
courses
1 elective tax course             3.9
2 elective tax courses            1.0
No required or                    1.0
elective tax courses

Exhibit 2: Pedagogies used for first tax course compared to Albrecht
and Sack for all accounting courses (%)

                                            All
                            First tax    accounting
Pedagogy                     course       courses

Lecture                       99.0          0.0
Problem solving               95.1          N/A
Writing assignments           63.1          78.4
Cases                         52.2          69.3
Team (group) assignments      49.5          74.6
Oral presentations            17.5          62.4
Role-playing assignments       4.9          15.3

Editor:

Annette Nellen, CPA, Esq.

Professor, Department of Accounting & Finance

San Jose State University

San Jose CA

Authors:

Beth B. Kern, Ph.D., CPA

Assistant Professor, School of Business & Economics

Indiana University--South Bend

South Bend, IN

Shirley Dennis-Escoffier, Ph.D., CPA

Associate Professor, School of Business

University of Miami

Coral Gables, FL