Senate Bill 0498c1

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    Florida Senate - 1998                            CS for SB 498

    By the Committee on Ways and Means and Senators Sullivan,
    Latvala, Brown-Waite, Dudley, Grant, Casas, Kirkpatrick,
    Bronson, Dyer, Thomas, Kurth, Harris and Ostalkiewicz



    301-2019-98

  1                      A bill to be entitled

  2         An act relating to tax administration; creating

  3         s. 213.285, F.S.; authorizing the Department of

  4         Revenue to initiate a certified audits project

  5         under which taxpayers may hire qualified

  6         practitioners to review and report on their tax

  7         compliance; providing definitions; providing

  8         requirements for participation by such

  9         practitioners and taxpayers; providing

10         requirements for the conduct of certified

11         audits; providing status of the audit report;

12         providing rulemaking authority for the

13         Department of Revenue; amending s. 213.053,

14         F.S.; authorizing the department to provide

15         certain information to the Board of Accountancy

16         or to a court with respect to a certified

17         public accountant participating in the project;

18         amending s. 213.21, F.S.; authorizing

19         settlement or compromise of penalties and

20         abatement of interest for taxpayers who

21         participate in the project; providing for

22         repeal of the certified audits project;

23         providing an appropriation and authorizing

24         positions within the department; providing an

25         effective date.

26

27  Be It Enacted by the Legislature of the State of Florida:

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29         Section 1.  Section 213.285, Florida Statutes, is

30  created to read:

31         213.285  Certified audits.--

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1         (1)  As used in this section, the term:

  2         (a)  "Certification program" means an instructional

  3  curriculum, examination, and process for certification,

  4  recertification, and revocation of certification of certified

  5  public accountants which is administered by an independent

  6  provider and which is officially approved by the department to

  7  ensure that a certified public accountant possesses the

  8  necessary skills and abilities to successfully perform an

  9  attestation engagement for tax compliance review in a

10  certified audits project.

11         (b)  "Department" means the Department of Revenue.

12         (c)  "Participating taxpayer" means any person subject

13  to the revenue laws administered by the department who enters

14  into an engagement with a qualified practitioner for tax

15  compliance review and who is approved by the department under

16  the certified audits project.

17         (d)  "Qualified practitioner" means a certified public

18  accountant who is licensed to practice in Florida and who has

19  completed the certification program.

20         (2)(a)  The department is authorized to initiate a

21  certified audits project to further enhance tax compliance

22  reviews performed by qualified practitioners and to encourage

23  taxpayers to hire qualified practitioners at their own expense

24  to review and report on their tax compliance.  The nature of

25  certified audit work performed by qualified practitioners

26  shall be agreed-upon procedures in which the department is the

27  specified user of the resulting report.

28         (b)  As an incentive for taxpayers to incur the costs

29  of a certified audit, the department shall compromise

30  penalties and abate interest due on any tax liabilities

31  revealed by a certified audit as provided in s. 213.21.  This

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1  authority to compromise penalties or abate interest shall not

  2  apply to any liability for taxes that were collected by the

  3  participating taxpayer but that were not remitted to the

  4  department.

  5         (c)  The certified audits project is repealed on July

  6  1, 2002, or upon completion of the project as determined by

  7  the department, whichever occurs first.

  8         (3)  Any practitioner responsible for planning,

  9  directing, or conducting a certified audit or reporting on a

10  participating taxpayer's tax compliance in a certified audit

11  must be a qualified practitioner.  For the purposes of this

12  subsection, a practitioner is considered responsible for:

13         (a)  "Planning" in a certified audit when performing

14  work that involves determining the objectives, scope, and

15  methodology of the certified audit, when establishing criteria

16  to evaluate matters subject to the review as part of the

17  certified audit, when gathering information used in planning

18  the certified audit, or when coordinating the certified audit

19  with the department.

20         (b)  "Directing" in a certified audit when the work

21  involves supervising the efforts of others who are involved or

22  when reviewing the work to determine whether it is properly

23  accomplished and complete.

24         (c)  "Conducting" a certified audit when performing

25  tests and procedures or field audit work necessary to

26  accomplish the audit objectives in accordance with applicable

27  standards.

28         (d)  "Reporting" on a participating taxpayer's tax

29  compliance in a certified audit when determining report

30  contents and substance or reviewing reports for technical

31  content and substance prior to issuance.

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1         (4)(a)  The qualified practitioner shall notify the

  2  department of an engagement to perform a certified audit and

  3  shall provide the department with the information the

  4  department deems necessary to identify the taxpayer, to

  5  confirm that the taxpayer is not already under audit by the

  6  department, and to establish the basic nature of the

  7  taxpayer's business and the taxpayer's potential exposure to

  8  Florida revenue laws.  The information provided in the

  9  notification shall include the taxpayer's name, federal

10  employer identification number or social security number,

11  state tax account number, mailing address, business location,

12  and the specific taxes and period proposed to be covered by

13  the engagement for the certified audit.  In addition, the

14  notice shall include the name, address, identification number,

15  contact person, and telephone number of the engaged firm.

16         (b)  If the taxpayer has not been issued a written

17  notice of intent to conduct an audit, the taxpayer shall be a

18  participating taxpayer and the department shall so advise the

19  qualified practitioner in writing within 10 days after receipt

20  of the engagement notice.  However, the department may exclude

21  a taxpayer from a certified audit or may limit the taxes or

22  periods subject to the certified audit on the basis that the

23  department has previously conducted an audit, that it is in

24  the process of conducting an investigation or other

25  examination of the taxpayer's records, or for just cause

26  determined solely by the department.

27         (c)  Notice of the qualification of a taxpayer for a

28  certified audit shall toll the statute of limitations provided

29  in s. 95.091 with respect to the taxpayer for the tax and

30  periods covered by the engagement.

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    Florida Senate - 1998                            CS for SB 498
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  1         (d)  Within 30 days after receipt of the notice of

  2  qualification from the department, the qualified practitioner

  3  shall contact the department and submit a proposed audit plan

  4  and procedures for review and agreement by the department.

  5  The department may extend the time for submission of the plan

  6  and procedures for reasonable cause.  The qualified

  7  practitioner shall initiate action to advise the department

  8  that amendment or modification of the plan and procedures is

  9  necessary in the event that the qualified practitioner's

10  inspection reveals that the taxpayer's circumstances or

11  exposure to the revenue laws is substantially different than

12  as described in the engagement notice.

13         (5)  Upon the department's designation of the

14  agreed-upon procedures to be followed by the practitioner in

15  the certified audit, the qualified practitioner shall perform

16  the engagement and shall timely submit a completed report to

17  the department. The report shall affirm completion of the

18  agreed-upon procedures and shall provide any required

19  disclosures.

20         (6)  The department shall review the report of the

21  certified audit and shall accept it when it is determined to

22  be complete.  Once the report is accepted by the department,

23  the department shall issue a notice of proposed assessment

24  reflecting the determination of any additional liability

25  reflected in the report and shall provide the taxpayer with

26  all the normal payment, protest, and appeal rights with

27  respect to the liability.  In cases where the report indicates

28  an overpayment has been made, the taxpayer shall submit a

29  properly executed application for refund to the department.

30  Otherwise, the certified audit report is a final and

31  conclusive determination with respect to the tax and period

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1  covered.  No additional assessment may be made by the

  2  department for the specific taxes and period referenced in the

  3  report, except upon a showing of fraud or misrepresentation of

  4  material facts and except for adjustments made under s. 220.23

  5  or s. 198.16.  This determination shall not prevent the

  6  department from collecting liabilities not covered by the

  7  report or from conducting an audit or investigation and making

  8  an assessment for additional tax, penalty, or interest for any

  9  tax or period not covered by the report.

10         (7)  To implement the certified audits project, the

11  department shall have authority to adopt rules relating to:

12         (a)  The availability of the certification program

13  required for participation in the project;

14         (b)  The requirements and basis for establishing just

15  cause for approval or rejection of participation by taxpayers;

16         (c)  Procedures for assessment, collection, and payment

17  of liabilities or refund of overpayments and provisions for

18  taxpayers to obtain informal and formal review of certified

19  audit results;

20         (d)  The nature, frequency, and basis for the

21  department's review of certified audits conducted by qualified

22  practitioners, including the requirements for documentation,

23  work-paper retention and access, and reporting; and

24         (e)  Requirements for conducting certified audits and

25  for review of agreed-upon procedures.

26         Section 2.  Paragraph (o) is added to subsection (7) of

27  section 213.053, Florida Statutes, to read:

28         213.053  Confidentiality and information sharing.--

29         (7)  Notwithstanding any other provision of this

30  section, the department may provide:

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1         (o)  Information contained in returns, reports,

  2  accounts, or declarations to the Board of Accountancy in

  3  connection with a disciplinary proceeding conducted pursuant

  4  to chapter 473 when related to a certified public accountant

  5  participating in the certified audits project, or to the court

  6  in connection with a civil proceeding brought by the

  7  department relating to a claim for recovery of taxes due to

  8  negligence on the part of a certified public accountant

  9  participating in the certified audits project.  In any

10  judicial proceeding brought by the department, upon motion for

11  protective order, the court shall limit disclosure of tax

12  information when necessary to effectuate the purposes of this

13  section.  This paragraph is repealed on July 1, 2002.

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15  Disclosure of information under this subsection shall be

16  pursuant to a written agreement between the executive director

17  and the agency.  Such agencies, governmental or

18  nongovernmental, shall be bound by the same requirements of

19  confidentiality as the Department of Revenue.  Breach of

20  confidentiality is a misdemeanor of the first degree,

21  punishable as provided by s. 775.082 or s. 775.083.

22         Section 3.  Subsection (7) is added to section 213.21,

23  Florida Statutes, to read:

24         213.21  Informal conferences; compromises.--

25         (7)  In order to determine whether certified audits are

26  an effective tool in the overall state tax collection effort,

27  the executive director of the department or the executive

28  director's designee shall settle or compromise penalty

29  liabilities of taxpayers who participate in the certified

30  audits project.  As further incentive for participating in the

31  program, the department shall abate the first $25,000 of any

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1  interest liability and 25 percent of any interest due in

  2  excess of the first $25,000.  A settlement or compromise of

  3  penalties or interest pursuant to this subsection shall not be

  4  subject to the provisions of paragraph (3)(a), except for the

  5  requirement relating to confidentiality of records.  The

  6  department may consider an additional compromise of tax or

  7  interest pursuant to the provisions of paragraph (3)(a).  This

  8  subsection does not apply to any liability related to taxes

  9  collected but not remitted to the department.  This subsection

10  is repealed on July 1, 2002.

11         Section 4.  The sum of $264,798 is appropriated from

12  the General Revenue Fund to the Department of Revenue, and two

13  positions are established within the department, for the

14  purpose of implementing the provisions of this act.  To

15  expedite the implementation of the program, the Department of

16  Revenue shall contract with the Florida Institute of Certified

17  Public Accountants for instructional curriculum and

18  examinations for the purposes of this act.

19         Section 5.  This act shall take effect July 1, 1998.

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    Florida Senate - 1998                            CS for SB 498
    301-2019-98




  1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
  2                              SB 498

  3

  4  The committee substitute for SB 498 gives the Department of
    Revenue authority to adopt rules relating to:
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    the availability of the certification program required for
  6  participation in the certified audit project;

  7  the requirements and basis for establishing just cause for
    approval or rejection of participation by taxpayers;
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    procedures for assessment, collection, and payment of
  9  liabilities or refund of overpayments and provisions for
    taxpayers to obtain informal and formal review of certified
10  audit results;

11  the nature, frequency and basis for the department's review of
    certified audits conducted by qualified practitioners,
12  including the requirement for documentations, work paper
    retention and access, and reporting; and
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    requirements for conducting certified audits and for review of
14  agreed upon procedures.

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