Submitted by Scott Nelson... The Professional Issues Committee has set February 24th as the date of the 2015 FPA of MN Advocacy Day at the Minnesota State Capital. The 2014 Advocacy Day was a great success despite being the Committee’s first organized get together of FPA of MN members with state legislators and regulators. The format for the 2015 Advocacy Day is still being planned but preliminary efforts are towards increasing face to face time with Department of Commerce officials and examiners.
Advisors who fall primarily under the auspices of the SEC or FINRA may consider developing relations on the state level of little use. There are numerous ways though that state regulations impact advisors and probably more importantly their clients. Consider the manner in which the State of Minnesota determines residency for tax purposes. There have been several high profile court battles lately between the Minnesota Department of Revenue (Revenue) and taxpayers challenging Revenue’s contention that the taxpayers are residents of Minnesota and must pay state taxes. While the State’s residency rules have not changed in over 3 decades, the state’s addition of the 9.85% tax bracket in 2013 is incentive for some high earners to establish residency in another state. A November 12th, 2014 Star Tribune article also states that some lawyers believe that Revenue is being more aggressive in scrutinizing out of state residency claims.
Revenue uses 26 criteria to establish residency that cover everything from the number of days spent in the state to the location of one’s place of worship. While none of those criteria involves the location of a taxpayer’s financial professionals, there is concern that clients may seek to establish new professional relationships outside the state in order to bolster their change of residency. To head off any “client drain”, the Minnesota Bar Association is looking to have wording added to the State’s residency regulations. The phrase to be added would direct Revenue and the courts to disregard the location of a taxpayer’s attorneys, certified public accountants or financial advisors when determining residency.
This is the second attempt to add the wording as it failed to get passed last year (See HF 3167, Article 3, Section 8). The Bar Association has reached out to the FPA of MN to garner support for the bill. While FPA of MN has not taken a position for or against the bill, it does point out that there are all sorts of issues at the state level that warrant the attention of advisors of all types. The Committee hopes to make FPA of MN Advocacy Day a first step for getting many advisors involved their state’s legislative process.
Reminder: Our December 16 member meeting is our “Allied Professionals” meeting. This is a perfect time to invite your favorite estate planning attorney or tax advisor to both show off this remarkable FPA chapter and to share professional issues with them. You and your guests will be treated to presentations by Tom Brakke, CFA, a noted authority on investment practices and fiduciary issues. The topics (Part I: Investment Beliefs, Assumptions, and the Standard of Care and Part II: Analyzing Asset Management Firms) are of interest to professionals involved in providing advice related to their clients financial planning. And there is a social hour after for networking!