by
Chris Hesse, CPA
| Jan 17, 2020
A note from the Chair of the AICPA Tax Executive
Committee, and Tax Advisors Update Instructor
I’m a farm kid from a rural community west of Portland,
Oregon. I had one tax class in college and I hated it. No matter; despite my
college experience, I have since discovered a passion for all kinds of tax
issues.
I started my first job in public accounting with a local
firm in the Eugene-Springfield (Oregon) area. There I learned about the
maxi-tax. Heard of it? It prevented some earned income from being taxed as high
as 70%. It wasn’t long before the maxi-tax went away. I worked through the
Economic Recovery Tax Act (ERTA) (the first major tax legislation of the Reagan
administration). ERTA brought us Accelerated Cost Recovery System (ACRS). We
moved away from useful life depreciation to having just three cost recovery
periods: 3-, 5- and 15-year. ACRS soon changed with the Tax Reform Act of 1986,
bringing us Modified ACRS (MACRS) and passive losses limitations. Passive
losses have been with us for 33 years.
Some people believe that the Tax Cuts and Jobs Act of
2017 (TCJA) was the biggest tax reform since 1986. Big is a subjective term,
but I can confidently assert that the TCJA is a more difficult tax reform to
implement than the 1986 Tax Reform Act (TRA).
TRA was passed in October 1986 and wasn’t generally
effective until the first transition year in 1987. Many of its provisions had
been discussed and debated in 1984 and 1985. It was a bipartisan effort and was
subjected to committee hearings and debates. We didn’t have the benefit of hearings
and debates for the TCJA. Enacted on December 22, 2017, it was effective nine
days later. And for the first time since the 1940s, we needed to quickly figure
out what qualifies as a trade or a business.
Throughout my career, I’ve witnessed substantial changes
in tax policy, and I’m fascinated by it all. My current responsibilities with
the CLA’s National Tax Office include assisting our staff regarding domestic federal
income tax issues. Although I don’t generally deal with estate, gift and trust
issues, or with international or state tax questions, I still have a broad and
interesting portfolio to address. This includes the new deduction for qualified
business interest (QBI) and business interest limitations.
I’m also the National Tax Office person who handles
agricultural tax questions. Although only 2% of the U.S. population is directly
involved in agriculture, our most recent tax reform effort and tariff issues
have demanded that the industry receive a disproportionate amount of attention.
Due to my background and experience, I can speak the language. I know the difference
between a swather and a combine, and between a bull and a steer. And to be
clear, all cows are female, and we don’t need to ask why a dairy only milks the
female cows.
My years of experience with the AICPA’s S Corporation
Technical Resource Panel have been invaluable, and my career will culminate
with my duties as the Chair of the AICPA’s Tax Executive Committee, which speaks
on behalf of the AICPA on tax matters. As members, we discuss policy, advocacy,
and technical issues at the highest level, which filter down to taxpayers with
issues that are not quite as complex. Of course, what may seem simple to a
professional may feel complex to a client — that’s why they value us.
My passion for taxes extends to sharing tax knowledge
with other CPAs. The Tax Advisors Update is coming to Washington in January
2020, and whether you attend in person or virtually, you will come away with a
better understanding of the TCJA and the additional guidance we have received
since last year.
Learning about tax is like putting together pieces of a
jigsaw puzzle without the benefit of knowing the final picture. I build 1,000
to 2,500 piece jigsaw puzzles in the evening while winding down after dinner.
Yes, I have the picture of the completed puzzle, but I usually don’t look at it
while building the puzzle. Blue pieces are either sky or water. Green is
usually a lawn. But is this a mountain scene, a European castle, or a balloon
rally? I learn more about the picture as I assemble the puzzle.
Understanding taxes is the same: we take pieces from what
we learned during our last tax season; read articles from our daily, weekly,
and monthly information sources; attend CPE sessions; and build on prior
experiences. Ultimately, we gain an idea of the scene in the picture. We
understand how the various income tax pieces fit together to achieve the
government’s objectives of raising revenue.
The Tax Advisors Update is one of those learning pieces.
We each learn in different ways and hear different messages from different instructors.
Our instructor team learns from our members. The result of learning together is
that we come to a better idea of the big picture.
Chris Hesse, CPA, is a principal in the National Tax Office of CLA (CliftonLarsonAllen LLP). He is the Chair of the AICPA Tax Executive Committee and resides in TriCities, Washington.
This article appeared in the winter 2020 issue of the Washington CPA Magazine. Read more here.