When a crisis hits, associations matter more than ever. Here’s a look at how the MACPA shifted gears to protect you, your business, and your clients.
The world changed in early March. It might have changed for good.
Businesses scrambled to figure out how to do more with less. The CPA firms that served those businesses scrambled to figure out how to help their clients navigate this strange, new world. Everyone came to grips with the fact that the Hard Trends that surround us — the future facts which will happen whether we like it or not, like technological advances, and legislative oversight, and demographic shifts, the things that were already advancing at an exponential rate before the world went to hell — began accelerating even faster as a result of the crisis.
Every organization felt the impact. And few organizations felt it more acutely than the Maryland Association of CPAs.
When the world went into lockdown, the MACPA went into overdrive.
The association’s focus shifted exclusively to helping our members not only survive the immediate crisis but thrive once it had passed. We began offering free, weekly updates about what our members needed to know to navigate the storm. We quickly shifted gears to offer our live programs in a virtual setting. Everything we did centered on making sure our members’ lives — which were being disrupted from all angles — were being disrupted as little as possible.
Simply put, the value of membership in an association like the MACPA increased significantly when COVID-19 arrived.
To find out how, I sat down with MACPA CEO Tom Hood to talk about how the association’s priorities shifted as a result of the crisis — and how our members have benefited as a result.
Bill Sheridan: Tom, I guess my first question is this: What has the past 90 days been like for you? Give me a snapshot in a day of the COVID-19 life of Tom Hood.
Tom Hood: If I had to put it in one word, it would be crazy … but meaningful. Every day, there seems to be massive new developments in COVID-19. We’ve had four or five major federal legislative pieces. We’ve had tons of state activity. It started in the middle of tax season, which created a new set of dynamics. There have been a massive number of things happening that directly impact accounting and the clients of CPAs. That means we have to stay on top of it. So we’re trying to paddle as fast as we can to stay ahead of this thing.
BS: Life wasn’t necessarily easy before all this happened. How did the MACPA’s priorities shift as a result of this crisis?
TH: The good news is that we were in the wrap-up stages of Maryland’s legislative session, which is one of the most important things we do every year. That session started the first week of January, and it was supposed to end the first week of April. It ended early — I think 19 days early, for the first time since the Civil War. So that gives you the magnitude of what happened. We got through a really successful General Assembly session. We defeated sales taxes on services, we had success in a lot of other areas. And then COVID-19 happened.
And all of a sudden — I’ll never forget it, it was a Friday, March 20. I was on a call with all of my counterparts, the CEOs of the other 50 state CPA societies, and I started hearing about states closing in the northeast — Pennsylvania, New York, and New Jersey. And I’m like, “Oh, God, Maryland is going to be next.” It seemed like it was moving down the coast, and that’s when I realized we had to get permission to keep accounting working as an essential industry. And so I started looking into that. I wrote a letter to (Maryland Gov.) Larry Hogan on March 21, which was a Saturday morning, and requested essential workforce status for our members, because payroll, banking, depositing money — all of that had to keep going, right?
BS: You can’t just shut down what’s happening in the financial sector, right?
TH: Right. So interestingly, when I started to look into it, the question was, “What makes CPAs essential?” With a little bit of homework, I found out that it goes back to Sept. 11 and the Department of Homeland Security. They identified 16 critical industries that are essential to the functioning of the United States. They include some of the usual suspects, like defense and manufacturing, but they also include the finance and accounting sector. That was a blinding flash of the obvious for me, because it’s ultimately why we are licensed as CPAs, why we’ve been licensed since 1900.
The idea of a critical, essential infrastructure got me thinking back to my highway construction days: We work on the infrastructure of our profession. Our profession rides on a road that’s paved with laws and regulations that impact the essential financial infrastructure of the United States, from Main Street to Wall Street. That’s really where we rolled up our sleeves and got to work. And it wasn’t new work for us. It was understanding the players and being able to use our relationships to connect the dots. And we’re not done yet. Fixing that infrastructure and keeping it smooth and anticipating what might break has been the bulk of what we’ve done in the last 90 days.
BS: That notion of infrastructure is a brilliant analogy. You don’t notice it until it breaks, and when it breaks, all hell breaks loose. That, in essence, is what the MACPA does. We maintain that infrastructure.
TH: We apply a whole lot of proactivity to that. When you drive every day to the office, those roads often are neglected. That infrastructure starts to crumble, and then you have to take a lane down and create detours, or a steam pipe breaks, or a water main breaks. Our job is to fix those problems before they happen.
CPAs were deemed essential workers without any worrying about how long it would take. The minute Maryland closed, CPAs were open. Then, we started getting to work on the extension of a due date for tax returns. We worked with the AICPA and got it going through the Treasury Department. We wrote a lot of letters and got that moving. Then, we started to say, “What are the areas where we think this infrastructure is going to fail or get impacted, and what can we do to get ahead of that? How can we lay fresh asphalt and make it smooth so it doesn’t crumble underneath us?”
That brought us to the Paycheck Protection Program and all of the lobbying we’ve done with the Treasury Department and the Small Business Administration. We got the EZ Form for PPP loan forgiveness put into place. My counterparts across the country and their counterparts and the bankers — we all lobbied the Treasury Department and the SBA together, and they allowed (the EZ Form) this week. We thought it would take two months, and it got done a lot sooner. Those are areas in which we’re talking about infrastructure.
And speaking of infrastructure: Who’s going to add new lanes? The MACPA has a student pipeline initiative to recruit people to our profession. That means we have to add a lane. We have to make sure we’ve got a nice, smooth onramp for students to come from high school, to college, to the CPA, and into the profession. That’s a big initiative of ours. The CPA Evolution project will help update the CPA exam. That will be massive, and we’re right in the middle of that.
And then there are some big ones. The notion of limited liability companies and limited liability partnerships — we just widened the whole highway with a new liability-friendly way of practicing. And that was started by CPAs and state societies.
I remember Bob Ehrlich, our former governor who was also a congressman in Maryland, but he was a delegate back then, and he sponsored legislation that led to a new form of practice, not just for our profession, but for every profession: engineers, lawyers, architects — S corporations and limited liability partnerships. That’s an example of a big, proactive victory for our profession.
BS: You mentioned a word a couple of minutes ago — relationships. A lot of the work that the MACPA has done during this crisis speaks to the power of that word — “association,” and of building relationships with key people. Can you give me an example of how that played out over the last few months to our member’s benefit?
TH: There are probably about 10 examples, but the big one is sales taxes on services. We helped form a coalition with the Maryland Chamber of Commerce and the National Federation Independent Business. We helped rally all organized professions and the business community to fight a proposed bill that called for sales taxes on services — and that included accounting, tax, and consulting services. We fought it because of the compliance complexity, not just because it was an increase in taxes. When we educated legislators that five other states had passed similar laws and then repealed them once they understood how complex it was, that made the day. We had a big chart that visually listed all of the states that do not impose sales taxes on services, and we spoke at a press conference. Then we sat in testimony for eight hours that day to get our message heard. That’s how we did it. That was a lot of work with that community.
That community then held over into the COVID-19 crisis. That same group helped us lobby the governor for aid packages and extensions of time, including the deadline for renewing your license. We got that deadline extended through the governor. That was a collective effort from the folks in our community.
Now, how did I figure out that Maryland would close as a result of the pandemic? That was from our other community — the state CPA society executives. Every Wednesday we have a call with this group, so hearing what was happening in other states helped a lot.
Then, there are our legislative relationships — Congress and the Maryland legislature, the comptroller, the governor. When I wrote that letter to the governor (on March 21), the first person who responded was Kelly Schulz, secretary of Maryland’s Department of Commerce. Gov. Hogan had his executive branch making those decisions. Before she was named Commerce secretary, Kelly Schulz was secretary of the Department of Labor, and she swore in Maryland’s new CPAs two years ago, so we know her well. And after I sent that letter to the governor, I got an email back that said, “Tom, don’t worry. You’re covered.” I mean, within an hour. That’s a relationship at work, right? That’s pretty cool.
BS: And so powerful. We talk to members all the time about the importance of building relationships with key people, but those are concrete examples of how that plays out, and it speaks to the importance of building those types of networks.
TH: I also have to congratulate our members, right? At CPA Day in Annapolis in January, we had 200-plus members on the steps of the statehouse. When we were fighting sales taxes on services, that bill was in Maryland’s House Ways and Means Committee, and we had 1,700 members attached to legislators on that Ways and Means Committee. We reached out to those members and said, “Write your legislators a letter and tell them what’s going on.” Sure enough, we overwhelmed their email in-boxes. They couldn’t accept the volume from our members. Ours is the most effective legislative operation down there (in Annapolis) if we can match the districts like that and execute that kind of grassroots effort.
BS: Interestingly, sales taxes on services was the last piece of key legislation we were working on before the COVID-19 crisis hit, and now we’re starting to hear rumblings that we may have to deal with that again next year because of this crisis. Can you explain what’s going on there?
TH: Comptroller (Peter) Franchot had projected a $2.8 billion deficit in Maryland for fiscal 2020 due to the coronavirus. They’ve adjusted that down to a mere $1.1 billion, but it’s as bad or worse than the Great Recession of ’08, which was the last time they had a huge, overwhelming deficit from a reduction in tax revenue. It’s going to be $1.1 billion or more, depending on how long this lockdown continues, so they’re going to have to raise taxes, and they’re going to be looking in all the usual places — gross receipts tax, sales tax on services, a rise in income tax rates probably for corporates. That’s what we’re expecting in that area.
But here’s one I’m really worried about: Pre-COVID, there was a move around the country to eliminate state licensing boards — not just of boards of accountancy, but any licensing. The idea is to effectively give people choice in their jobs and take away “unnecessary” regulation. In that notion, they started to say, “We don’t need tattoo parlors to be licensed. We don’t need cosmetologists to be licensed.”
That slowly grew to include CPAs, engineers, even doctors. Imagine driving over the Chesapeake Bay Bridge and seeing a sign that says, “This bridge built by an engineer with a Yelp rating of 4.2.” No license, just a 4.2 Yelp rating. They literally were having that kind of conversation, because it would save all of the overhead in the Department of Labor, which has to administer these licenses.
That hasn’t happened in Maryland. We have great relationships here, and that type of legislation hasn’t even come up in Maryland. But it came up in 19 other states, including Ohio — some big, progressive states. It scared us.
Now, what’s going to happen in a post-COVID world? There’s going to be a huge appetite for reducing costs or increasing revenue. If you eliminate all those licensing boards, you reduce cost to the state. I’m afraid that’s going to rise in a really big way, and that could literally threaten our whole licensed profession. That would shut down the CPA highway. There would be no licenses for auditing.
We’re already being proactive in this area. We’ve been talking to our Secretary of Labor, Tiffany Robinson. Nobody seems to have an appetite for it, but you never know what the legislature might dream up in this environment, especially if other states are doing it.
BS: It seems like a lot of the most important work that associations do — this type of advocacy work — often goes unnoticed by much of the membership. Is that a source of frustration for you or is it just the cost of doing what we do?
TH: I think there are two elements to it. This is work that most people don’t understand. Most CPAs hate legislative and political stuff. That’s a challenge. It’s also a benefit that non-members get until we can’t do it — you don’t have to be a member, and we’re still going to protect the CPA license in Maryland. But because of COVID, the MACPA has had to make reductions and cuts, and we’re not too far away from wondering when we would start reducing our services in that area because CPAs aren’t valuing it by paying dues for it.
We do need more members. The old adage that there’s strength in numbers has never been more true. If we’re going to fight big things, we’re going to need every CPA in the boat with us, which then helps all of us. That’s number one.
The other part is about selling the invisible part — the infrastructure. We have to make the invisible visible. That’s what we’re trying to do with our recent professional issues updates, CPA Day in Annapolis, our Swearing-In Ceremony for new CPAs. Those are big, visible pieces of our infrastructure and our strength as a profession, which is what politicians pay attention to.
BS: It’s almost like paying dues is a type of insurance for association members.
TH: Yes, because if you don’t join and participate, bad things can happen to you. One example is the story of the rental car industry. Fifteen years ago, the rental car industry consolidated as smaller local rental car companies merged into bigger national firms. The industry very quickly became big names like Hertz, Avis, and Budget, and they stopped supporting their state rental car associations. The minute they pulled out of those associations, 44 states enacted tax surcharges that you now see on your rental car invoice, effectively doubling the cost of an average car rental.
That’s exactly what could happen to CPA firms if we don’t watch this carefully. We saw that happen when Maryland passed a tax on IT consulting services — an industry that did not have any state associations. It was subsequently repealed thanks to a coalition of Maryland business associations, including the MACPA.
BS: The phrase “new normal” has been used so much lately that it’s almost become cliche, but it’s true: Some things have likely changed for good as a result of the pandemic. What does the future of our profession look like to you?
TH: I think our relevancy is going to increase. In the post-COVID era, we’re going to see attempts to pass all kinds of new laws and regulations. For example, right now we’re trying to protect firms and companies from liability when they bring their workers back to the office. Trial lawyers are going to say, “Oh, Bill, you went back to work at the MACPA and you got sick. We’re going to sue the MACPA.” Whether they can prove you got it on the job or not, they’ll still sue. Employers will have to defend themselves against these frivolous lawsuits and that costs precious time and money. So we’ve petitioned our Maryland congressional delegation to enact liability protection for employers and businesses that follow the right federal and state protocols. We have also requested support from Gov. Hogan. The governor said he agrees with us, but we can’t do it until we have a new legislative session, so we’re going to look for bill sponsors and try to set that up for 2021. Congress has proposed that type of protection in the HEROES Act, and if that is enacted, we will have some protection.
In our case, I think it’s three things that line up nicely with our mission: Connect, Protect, Achieve.
First is the power of our community of CPAs. When the pandemic arrived, the MACPA acted quickly to mobilize our network and connect members to the breaking resources they needed to keep up with up-to-the-minute changes, from the CARES Act to reopening guidance. We accelerated this with Connect, our online platform for members.
Second is Protect. This is where we shine the most, from defeating sales taxes on service to getting CPAs classified as essential workers and exempt from the shutdown order.
Third is Achieve. CPAs have risen to the challenge, pivoting from tax and audit season to the frontlines of the financial crisis, showing up and getting businesses relief and helping them survive. I like to think we elevated and accelerated their ability to do that.
Given the uncertainties as we approach the reopening stage and beyond, our work helps CPAs stay in front of the Hard Trends and be even more future-ready to help their clients and companies survive and thrive as they emerge from this pandemic.
I think it’s a bright future from that standpoint, especially for associations like the MACPA who know how to do this. We’ve got the relationships and more than 120 years of experience passing these proactive laws, stopping bad legislation and maintaining our infrastructure for the future.
Watch Tom’s conversation with Bill here: