IFA Launches Group to Address Accounting, Finance and Tax Initiatives
On June 11, the International Franchise Association conducted the inaugural conference call of its Accounting, Finance and Tax Group. The two main agenda items included working with state revenue staff, especially during an audit and state tax nexus issues.
“We’re excited about this new group, which will serve as a forum for accounting, finance and tax professionals in the franchise industry to discuss with their peers such issues as best practices and developing trends,” said Judith Thorman, IFA senior vice president, government relations & public policy. “Further, it will provide an opportunity to share practical advice. This group will also serve as an excellent resource when the franchise industry is faced with complex legislative and regulatory activity. These experts will provide valuable insights which will allow IFA to make sound policy decisions.”
“The timing of this group couldn’t be better,” said Catherine Monson, CFE, CEO of FASTSIGNS International, a 27-year-old graphics and visual communications franchisor based in Carrollton, Texas. It’s a small business with 109 employees.
Seven states–Arizona, California, Missouri, Oregon, Pennsylvania, South Carolina and Wisconsin–have come after FASTSIGNS in the last few years. The company has written more than $115,000 in checks to those states.
States are increasingly trying to tax franchise licenses. Many franchise companies pay these tax assessments because doing so is less expensive than filing legal challenges.
“We know we aren’t alone,” said Monson. “There are more than 825,000 franchise businesses in the United States, and I am sure that many of them are the targets of state tax collectors. Combined, these franchisors generate $2.1 trillion in revenue and employ nearly 18 million people. That’s significant.”
Congress is considering the bipartisan Business Activity Tax Simplification Act or BATSA that would stop states from imposing unfair, unjustified corporate income taxes on U.S. businesses. It would make clear that states can only impose corporate income and similar taxes on companies that have a meaningful physical presence in that state. It would set a uniform standard for all states so businesses wouldn’t have to wonder year to year what their tax liability might be.
The act, co-sponsored by U.S. Reps. from Virginia Bob Goodlatte, a Republican, and Bobby Scott, a Democrat, cleared the House Judiciary Committee last summer and awaits a vote in the full House. The Supreme Court has made plain that a physical presence, not an economic presence, is needed for a state to impose corporate income taxes on companies.
Economy Improving, But State Budgets Crippled
Although there are signs that the nation’s economy is beginning to exhibit some indications of improvement, there are many states that continue to experience crippling budget deficits. For fiscal year 2013, the fiscal year that begins July 1, 2012, 30 states have addressed or have projected shortfalls totaling $54 billion. California, alone, is facing a $16 billion revenue shortfall this year. Until the budgetary woes of the states are resolved, businesses will continue to face departments of revenue aggressively trying to fill the state coffers. This includes states taking an “expansive” view of finding nexus for taxes, where nexus may not have existed before.
IFA continues to push for BATSA to be included as part of comprehensive tax reform next year. The new group will provide an excellent complement to IFA’s existing Legislative Action Group in advising IFA’s government relations staff in its advocacy efforts.
Online Tax Center
In addition to the creation of the Accounting, Finance and Tax Group, IFA will partner with the Internal Revenue Service in developing an online “tax center,” which will be accessible through IFA’s website. The IFA/IRS Tax Center will provide IFA members with the most up-to-date information regarding tax credits, small-business issues and recommended recordkeeping procedures.
IFA has had the privilege of being able to call on some of the most impressive and experienced members in the franchise community, as well as outside experts to address challenges affecting our industry. The IFA Accounting, Finance and Tax Group will ensure the association’s development of sound policy development in this area to benefit its members.
Dean Heyl is director, state government relations, public and tax counsel for the International Franchise Association. He can be reached at
firstname.lastname@example.org or 202-6662-0792.