The Public Company Accounting Oversight Board staff released a new publication highlighting the perspectives of audit committee chairs.

The publication, “2024 Conversations With Audit Committee Chairs,” includes observations and takeaways from 272 interviews that PCAOB staff conducted with audit committee chairs last year. The topics include factors affecting their relationships with the audit firm, the economic environment impacting the audit, and the use of emerging technologies in auditing. Over three-quarters (78%) of them had never previously spoken with the PCAOB. Interacting with audit committee chairs offers important viewpoints for PCAOB staff to consider in planning inspection activities.

The publication includes answers to questions that audit committee chairs frequently raise in their conversations with the PCAOB, such as:

• How are audits selected for review?
• What does an inspection entail?
• Does the PCAOB have educational training or events for audit committee members?

Generally, the audit committee chairs of public companies audited by non-affiliated firms spent more time discussing significant transactions, fraud risks and the related procedures to address the risk of fraud, and matters related to internal controls, while the audit committee chairs of public companies audited by global network firms spent more time on independence and accounting issues.
“Most of the audit committee chairs interviewed review the PCAOB’s latest firm inspection report of their auditor and other information publicly available on the PCAOB website when determining whether to reappoint the auditor,” said the report. “Audit committee discussions with their auditors centered around key findings in the inspection reports and measures taken by the audit firms to address those findings. Certain audit committee chairs indicated that the inspection findings are typically summarized by the auditors for discussion with the audit committee. When the audit committee was considering changing audit firms, the audit committee chairs indicated that the findings in the reports were particularly important.”

The release of the staff publication comes as the PCAOB faces the prospect of having its responsibilities transferred to the Securities and Exchange Commission next year if Congress passes a bill that was recently approved by the House Financial Services Committee.

There has recently been an increasing pushback on property taxes across the country. In November 2024, multiple states including Arizona, Florida, Georgia, New Mexico, Virginia and Wyoming had ballot initiatives passed designed to lower property taxes. Now, Florida lawmakers have taken it one step further by proposing to eliminate property taxes altogether. This begs the question if this is feasible, and if so, how would states generate revenue without property tax revenue? 

Over the last few years, property values have skyrocketed. With property taxes tied to a building’s value, this increase has caused a similar increase in property tax assessments. Lawmakers have felt pushback from constituents who are upset about the tax increase on real estate properties. This often leads to increased homestead exemptions, such as Florida’s recent changes, or exemptions for disabled veterans, as occurred in Colorado, New Mexico and Virginia. Most of these exemptions or changes apply primarily to owner-occupied homes and rarely extend to business assets. 

North Dakota attempted to take this one step further. A ballot measure in North Dakota designed to eliminate property taxes failed after pushback over the spending cuts this would require. This scenario is similar to a measure attempted in 2012, which also failed; however, it is important to know that the 2024 ballot measure was much closer, with only 63.5% voting against, as opposed to 76.5% voting against it in 2012. The increased pushback on property taxes was especially notable when North Dakota Governor Kelly Armstrong unveiled a plan in January to eliminate property taxes for most homeowners within the upcoming decade. 

Florida Governor Ron DeSantis followed suit and is pushing for elimination of property taxes across the state. As a state without an income tax, this could be detrimental to state funding. Property taxes in Florida bring in approximately $50 billion annually, which offsets 50% to 60% of school funding, 18% of county revenue and 17% of municipal revenue. While eliminating the property tax burden sounds good in theory to citizens, making up the gaps in funding becomes an issue. One way to make up this funding deficit would be to increase the sales tax. Unfortunately, to make up the revenue difference, Florida’s sales tax would have to double to nearly 12%.   

Increasing sales taxes to offset property taxes can have negative effects. Sales taxes disproportionately affect lower-income earners as they spend a higher percentage of their income on goods and services than higher-income earners. Additionally, this could exacerbate inflationary pressures already felt across the country. Potentially more important to the government is that sales tax revenue tends to be less stable than property tax revenue. In economic downturns, sales tax revenue drops, leading to increasing instability for the state. 

Another option states should consider is continuing to increase homestead exemptions for homeowners, or look to eliminate property taxes for homeowners, similar to the proposals North Dakota’s governor proposed. One problem with this proposal is that it shifts the tax burden to businesses from individuals. This could be detrimental to states attempting to attract business investment. Shifting the burden of taxation solely to businesses could make owners question putting down roots in specific locations.

All considerations regarding how to change a state’s property tax revenue reveal how much of a burden it has become in recent years. Increasing costs of homes continues to lead to skyrocketing tax rates affecting homeowners, businesses and governments across the country. What is a business owner or their advisor to do in the meantime? The worst thing a business owner can do is to sit back and wait to see if the government will change its position on property tax. If the North Dakota example shows anything, it is that changing property tax structures is difficult and takes time.   

A first step business owners should consider is to question their property tax assessments. What many taxpayers do not realize is that their property tax assessment can — and in many cases should — be reviewed and appealed. With property taxes becoming a much higher burden on businesses and individuals, it’s a perfect time to look to determine if a property is accurately assessed. A qualified property tax consultant can look to determine if the property is accurately assessed or overassessed based on multiple factors. Questioning and appealing assessed values can allow building owners to gain control while waiting to see if local governments will change the way property taxes are levied.

The chair of the House’s tax-writing panel said the $30,000 limit his committee put on the state and local tax deduction is “fair” and lawmakers from high-tax states should accept it.

“It’s not everything that some of the SALT members want, but I have members of our conference that don’t even think that you should be able to deduct $1, let alone $30,000. It’s a fair and balanced approach,” Jason Smith, chair of the House Ways and Means Committee, said Thursday at an Economic Club of Washington, D.C. event.

Demands from New York, New Jersey and California Republicans for a higher limit are one of the few unresolved issues preventing Republicans from advancing President Donald Trump’s economic legislation. Without the SALT lawmakers’ votes, Republicans cannot pass the tax bill.

Smith said he thought his panel had landed on a “good spot.”

Smith spoke a day after his panel advanced the tax-cut portion of Trump’s signature economic legislation, aimed for final passage this summer. The bill would make permanent the individual tax rates reduced in Trump’s 2017 package, and introduce new benefits, including eliminating levies on tips and overtime pay.

Given Republicans’ razor-thin majority in the House, party unity will be vital. But sharp differences over SALT have to be resolved before the economic package is put up for a vote in the House. The current draft raises the cap on that benefit to $30,000, up from a $10,000 limit imposed in 2017, with a phase-out for individuals making more than $200,000 a year and couples making more than $400,000.

Several Republicans from high-tax states have called to increase the cap as high as $62,000 for individuals and $124,000 for couples, a proposition that the Committee for a Responsible Federal Budget estimates would cost $900 billion over the course of a decade.

Smith has criticized those demands, saying the vast majority of taxpayers in high-tax areas would have all their state and local tax payments covered by a $30,000 cap.

Negotiations over SALT are slated to continue Thursday morning in House Speaker Mike Johnson’s Capitol Hill office. Members of the hardline House Freedom Caucus, who are pushing for more spending cuts are also planning to meet with House leadership to seek additional budget reductions.

“We have the smallest majorities in the history of congress,” Smith said. “I could only lose three people. So trying to thread that needle on various provisions including SALT and find that balance is what I’ve been trying to do in this bill.”