Wrong answer: mandatory E-file voted down. (Legislative Update).

Gov. Davis thought he had a great idea to help ease the state's budget woes. CalCPA's Committee on Taxation--and the state Legislature--disagreed.

In early June, the legislative conference committee considering the state budget removed a mandatory e-filing requirement for preparers from the budget bill. The removal was thanks in large part to educational efforts from COT members.

Under the proposed program, tax preparers who prepared more than 100 California individual income tax returns for tax year 2001 would have been required to file all subsequently prepared individual income tax returns electronically. The proposal would have imposed a $50 per return penalty on tax practitioners or businesses for noncompliance.

COT members had many objections, but the root concern was that the proposal would create a basic shift from the CPA as preparer, and the client as the filer, to the CPA as both preparer and filer. The liability and practice implications for such a shift are enormous.

The conference committee's decision to reject mandatory e-filing was unanimous.