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H 3152

An Act to eliminate contingency fee auditors

194th Legislature (2025-2026) Introduced by Hannah Kane

Prohibits contingent-fee compensation for auditors and tax experts by state and local agencies, boosting independence; effective July 1, 2026; no renewal of such contracts.

Hearing rescheduled to 10/07/2025 from 01:00 PM-02:00 PM in A-2 and Virtual Hearing updated to New End Time
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Bill Summary · H 3152

Summary: H.3152 — An Act to eliminate contingency fee auditors

Purpose and scope

  • Primary aim: Prohibit the use of contingency fee arrangements and similar performance-based compensation for auditors, tax experts, and related services within the Commonwealth. The bill seeks to protect auditor independence and public trust by ensuring compensation is not tied to the amount of tax liability, penalties, or outcomes.
  • Sponsor and introduction: Introduced by Representative Hannah Kane (Shrewsbury) on February 27, 2025. Referred to the committee on Revenue; Senate concurrence noted.
  • Current status: Hearing rescheduled to October 7, 2025 (A-2 and virtual). The committee action and hearing timelines have been updated accordingly.

Key provisions

  • Section 1: Prohibits the Department of Revenue (DOR), the State Treasurer, or any state agency or constitutional officer from contracting with or employing any person, agent, or firm paid on a contingent basis (or any basis tied to tax, interest, or penalties) for services determining taxpayer liability.
  • Section 2: Prohibits contingent fee or similar arrangements when contracting with or employing individuals to assist local municipal assessors, to preserve assessor independence and public perception.
  • Section 3: Creates a new Section 3B in Chapter 14, explicitly prohibiting contingent-fee or similar arrangements for auditors and related independence concerns at the state level.
  • Section 4: Extends the contingent-fee prohibition to the engagement of tax experts in disputes, mediations, or litigation concerning tax liability.
  • Section 5: Repeals regulations that currently authorize contingent-based contracts for state agencies or constitutional officers.
  • Section 6: Amends Chapter 200A, Section 12(i) by adding subsection (j) to permanently prohibit contracting with or employing contingent-fee or similar-independence-impairing arrangements for auditors.
  • Section 7: Effective July 1, 2026. Applies to audits, liability determinations, assessments, and any tax-expert services contracted on or after that date. Prohibits renewal of contingency-fee contracts after July 1, 2026. For pre-existing contingency contracts entered before July 1, 2026, restrictions apply to those that (i) would be prohibited if entered on or after July 1, 2026 and (ii) allow discretionary assignment of audits by the state agency.

Who is affected

  • State entities: Department of Revenue, State Treasurer, other state agencies, constitutional officers.
  • Local government: Municipal assessors and related local officials.
  • Service providers: Auditors, tax experts, and firms currently engaged under contingency-based contracts.
  • Taxpayers: Indirectly impacted by potentially more independent, non-contingent auditing processes.

Procedural and timeline details

  • Effective date: July 1, 2026.
  • Transitional rules: Agencies may not renew contingency-based contracts after July 1, 2026. Pre-existing contracts that would be prohibited post-2026 and allow discretionary assignment face specified restrictions.
  • Legislative track: HD 199 replaces the bill; hearing and schedule updates indicate ongoing committee consideration in the 2025-2026 session.

Potential impact (high-level)

  • Strengthens auditor independence by removing compensation tied to outcomes.
  • Shifts state and local auditing practices away from contingency-based models toward fixed, hourly, or other non-contingent compensation structures.
  • May affect the business model of some auditing and tax-firm arrangements and could influence audit timelines and methodology, given changes in contracting norms.

This summary captures the bill’s core purpose, major provisions, affected parties, and key timelines based on the text and legislative actions provided.

Compiled from official sources — confirm details with the bill’s official record.

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