After months of buildup, on Feb. 24, 2022, Russian President Vladimir Putin announced that the Russian Federation would be taking military action against Ukraine. This act of aggression was met with worldwide condemnation with widespread repercussions throughout the globe. The United States, along with its allies, imposed unprecedented economic sanctions against Russia in response to the invasion. Along with the numerous sanctions implemented by the federal government, a number of states have taken their own actions designed to divest and distance themselves from Russia.
Measures states have taken against Russia include executive orders, legislation, or both. The overlying intent of these actions is to divest state pension funds from Russian firms as well as terminating business dealings with Russia-based companies. New Jersey’s state legislature has passed legislation relating to Russia, S. 1889/A. 3090. This legislation, signed by Gov. Phil Murphy (D) in March, prohibits investment, financial agreements, public contracts, professional services, and tax abatements with the Russian government or any company with ties to Russia. Other states that are considering similar legislation include Alaska, California, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Pennsylvania, South Carolina, and West Virginia.
In addition to these legislative actions, several governors have taken executive actions that aim to divest state funds from Russian firms and companies. On Feb. 27, New York Gov. Kathy Hochul (D) issued Executive Order No. 14, which directs all state agencies to divest money and assets in any institution that is determined to be Russian or that supports Russia. The order also instructs agencies to terminate contracts with Russian companies or companies that support Russia. Additionally, governors in Alaska, Colorado, Connecticut, Michigan, Ohio, Pennsylvania, Rhode Island, Virginia, and Wisconsin have issued similar executive orders.
The Russian invasion of Ukraine will continue to have wide-reaching effects for the near future. In addition to the horrible human toll and impact of the war on entities that have operations in Russia, Ukraine, and neighboring countries, the conflict is increasingly affecting economic and global financial markets and exacerbating ongoing economic challenges.
Potential impacts arising from the war that CPAs and CPA firms may need to consider include interruptions of production in affected areas and neighboring countries, increased costs and expenditures, reductions in sales and earnings of business in affected areas, and the possibility for cyberattacks. As time passes and pressure on lawmakers continues to rise, the list of states acting against Russia is expected to grow. CPAs and CPA firms are encouraged to monitor the situation in the states in which they practice for compliance issues.
For more information on state-specific actions, please contact Justin Baker at Justin.Baker@aicpa-cima.com.