BILL ANALYSIS Ó
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|Hearing Date:June 20, 2011 |Bill No:AB |
| |431 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 431Author:Ma
As Amended:June 6, 2011 Fiscal: Yes
SUBJECT: Retired public accounts.
SUMMARY: Authorizes the California Board of Accountancy (Board) to
establish a retired status license for certified public accountants
and public accountants.
Existing law:
1)Licenses and regulates some 80,000 certified public accountants
(CPAs) and public accountants (PAs) under the Accountancy Act by the
California Board of Accountancy (CBA) within the Department of
Consumer Affairs (DCA).
2)Authorizes any board or bureau within DCA to establish, by
regulation, a system for an inactive license category for persons
not actively engaged in practice, subject to certain provisions,
including: (BPC § 462)
a) The inactive licensee shall not engage in any activity for
which a license is required.
b) The inactive license shall be renewed in the same time period
as an active license, and any continuing education requirements
are not required.
c) The active license renewal fee shall apply for renewal of an
inactive license, unless a lesser fee is specified by the board.
d) An inactive license may be restored to active status upon
payment of the renewal fee and completion of any continuing
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education required for renewal of an active license, as
specified.
1)Requires the holder of an inactive CPA license, when lawfully using
the title "certified public accountant," "CPA," or any other
reference that suggests the person is licensed on materials such as
correspondence, Internet Websites, business cards, nameplates, or
name plaques, to place the term "inactive" immediately after that
designation. (BPC § 5058.2)
2)Provides that expiration, cancellation, forfeiture, or suspension of
a license, practice privilege, or other authority to practice public
accountancy or the surrender of a license shall not deprive the CBA
of jurisdiction to discipline the licensee. (BPC § 5109)
This bill:
1)Authorizes CBA to establish, by regulation, a system for placement of
a license on a retired status, upon application, for CPAs and PAs
who are not actively engaged in the practice of public accountancy
or any activity which requires them to be licensed by the CBA
subject to certain provisions, including:
a) The retired licensee shall not engage in any activity for which
a license is required.
b) Requires CBA to deny an application for a retired status
license if the applicant's permit (license) is canceled,
suspended, revoked, or otherwise punitively restricted by the CBA
or subject to disciplinary action.
c) Beginning one year from the adoption of the retired status
regulations, requires the CBA to deny an application for a
retired status license if the applicant's license is delinquent.
d) The active license renewal fee shall apply for renewal of an
inactive license, unless a lesser fee is specified by the board.
e) Requires the board to establish minimum qualifications for a
retired status license that may include, but are not limited to,
a minimum age requirement and minimum years as a licensee.
f) Authorizes the CBA to exempt the retired status license from
any renewal requirements.
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g) Requires the CBA to establish qualifications to restore a
retired license to an active status, including a requirement for
continuing education and payment of a fee, as specified.
1)Requires the holder of a retired license, when lawfully using the
title "certified public accountant," "CPA," or any other reference
that suggests the person is licensed on materials such as
correspondence, Internet Websites, business cards, nameplates, or
name plaques, to place the term "retired" immediately after that
designation.
2)Provides that the placement of a license on a retired status shall
not deprive the CBA of jurisdiction to take disciplinary action.
3)Establishes fees which shall be fixed by CBA:
a) Application for a retired status license at a maximum of $250.
b) Application for restoration of a retired status license to
active status at a maximum of $1,000.
1)Makes conforming, clarifying and technical changes, including
removing outdated references to the enactment of practice privilege
provisions.
FISCAL EFFECT: The Assembly Appropriations Committee analysis dated
May 4, 2011, indicates an unknown fiscal effect, likely minor impacts
on special fund fee revenues. If retirees shift from on-going, annual
licensure renewal fees to the one-time reduced fee established in this
bill, there will be minor revenue losses. If this bill brings
retirees into licensure status who otherwise would allow their
licenses to expire, this bill may increase fee revenues by a small
amount.
COMMENTS:
1.Purpose. This bill is sponsored by the California Board of
Accountancy (CBA) to allow the CBA to establish a process for CPAs
to receive a retired license designation. According to the Author,
the bill provides consumers with protections by prohibiting
licensees facing disciplinary action from receiving a retired
designation. The Author indicates the bill would allow retired CPAs
& PAs to be exempted from continuing education requirements, while
still performing bookkeeping, financial planning, or management
consulting, similar to inactive licensees provided they do not hold
themselves out as being licensed by the CBA. The Author indicates
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that this measure also requires the CBA to provide licensees
reconsidering retirement a pathway to restore their license to an
active status.
The Author states that at least seven other DCA boards offer their
professionals a retired status option including: doctors, dentists,
pharmacists, architects, and engineers. In the United States, at
least twenty State-accountancy boards offer a retired designation,
according to the Author.
2.Background. According to the CBA, presently, licensees who wish to
retire and no longer renew their license have only two choices
available. Licensees may either allow their license to expire and
eventually cancel, or they may voluntarily surrender their license.
Between January 1994 and December 1998, the CBA offered a retired
option to licensees. This option allowed licensees to request a
retired seal that would be affixed to their wall certificate. By
requesting a retired seal, licensees were in fact voluntarily
allowing their licensees to expire, but were afforded the ability to
use the designation "Retired Certified Public Accountant" or
"Retired Public Accountant." Licensees were no longer allowed to
practice public accountancy, but could continue to perform
bookkeeping, tax, financial planning, or management consulting as
described in Section 5051 (f) through (i) of the Accountancy Act,
since these functions did not require individuals to maintain a CPA
or PAs license. Retired licensees intending to render tax
preparation services were required to either register with the
Internal Revenue Service as an enrolled agent, or register with the
California Tax Education Council, which is a nonprofit organization
created by the Legislature that requires tax preparers to be bonded,
have a certain level of education and continuing education.
The issuance of a retired seal did not affect the status of the
license. After the CBA issued a retired seal, licensees
simultaneously held a retired seal and an expired license. As with
all expired licenses, for a five-year period, licensees could
reinstate their license to an active or inactive status by paying
all applicable license renewal fees, and fulfilling all continuing
education (CE) requirements should the license be reinstated to an
active status. After the five-year period had elapsed, the license
was canceled, though licensees could continue to display the wall
certificate with a retired seal and hold out as a retired licensee.
In 1996, the CBA became aware that some licensees were attempting to
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avoid disciplinary action by requesting a retired seal while a
disciplinary matter or citation was pending. This was a cause for
significant concern as the CBA had no legal mechanism to deny or
delay the issuance of a retired seal to a licensee with a pending
disciplinary matter. Additionally, licensees with revoked licenses
were permitted to continue to display their certificate with the
retired seal. This appeared inconsistent with the CBA's intent to
provide the seal as a positive acknowledgement of licensees' years
of service in the profession.
Based on these concerns, the CBA sponsored legislation SB 2239 (B&P
Committee, Chapter 878, Statutes of 1998) to eliminate the retired
option for licensees, and repeal BPC § 5070.1. Since that time, the
CBA has not issued retired seals or permitted licensees to use the
designation "Retired Certified Public Accountant" or "Retired Public
Accountant." Subsequent amendments to the B&P Code allow a retiring
CPA or PAs to continue to display the wall certificate, provided the
license was not suspended or revoked, and retired licensees may use
the CPA or PAs designation in a social context, with or without the
word "retired." Retirees, however, may not use the CPA or PAs
designation or perform any activity defined as the practice of
public accountancy.
In light of the concerns raised by licensees last year, the CBA began
reconsidering a retired license status. The CBA believes that by
building on past experience it is possible to create a retired
status that is beneficial to all stakeholders. By crafting
legislation that allows for a retired status, while still providing
a legal mechanism for the CBA to deny a retired status based upon
enforcement action, a compromise is possible between the licensees
requesting a retired status, and the ability to protect California
consumers from CPAs trying to avoid enforcement action
3.Recommendation of the Committee's Oversight Hearing to Provide a
Retired Status License. In March of this year, this Committee
conducted a series of Oversight Hearings of the various boards and
bureaus under DCA which are subject to becoming inoperative and
repealed (Sunset) in 2012, including the Board of Accountancy. One
of the issues raised by the CBA in its Report for the Oversight
Hearing was the statutory authorization for the board to establish a
"retired" license status rather than the current status of
"inactive," "delinquent," or "surrendered."
The primary complaint from licensees regarding these options is the
negative connotation associated with "cancelled" or "surrendered."
Neither of these options indicates that the licensee has elected to
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retire, but suggest the licensee was subject to some form of
discipline. Licensees who have practiced for many years are proud
of their service to the profession and believe a "delinquent,"
"canceled," or "surrendered" status is undignified.
The CBA conducted a Customer Satisfaction Survey on its Website.
Licensees provided specific comments regarding a retired status,
such as:
"Surprised to find out the board does not have a category
called retired rather than showing the member as a deadbeat for
non-payment of membership dues."
"It is not reasonable to require full fees for retirees.
Failure to pay fees for a retiree should not result in a
'delinquent' status."
"I don't want my file to indicate my certificate was
cancelled, but that it is retired."
"I am unhappy I have to pay the same fee as active. There
should be a retirement status."
Currently, if a licensee elects not to renew and allow the license
to expire, the license status will reflect "delinquent" on the CBA
Website. It will remain delinquent until five years from the
license expiration date after which it will reflect "canceled."
Licensees choosing to voluntarily surrender their license must
submit a written request to the CBA, and prior to processing the
request, staff verifies with the Enforcement Division that the
license has not been suspended or revoked, and that there are no
pending disciplinary actions or complaints. If a licensee chooses
to voluntarily surrender the license, the license status will
reflect "surrendered" on the CBA Website.
Ultimately, the Committee agreed with the CBA's recommendation that
statutory authorization should be granted to create a retired
license status for CPAs. This bill implements that recommendation.
1.Related Legislation. SB 80 (Budget and Fiscal Review Committee,
Chapter 11, Statutes of 2011) an Urgency measure, effective March
24, 2011, implements the General Government portion of the 2011
State Budget, making numerous changes. Relating to the Board of
Accountancy, this bill deleted the statutory provision in BPC § 5134
(f) that requires the CBA to set renewal fee levels so that there is
a 9-month reserve balance in the board's special fund. NOTE : The
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June 6, 2011 amendments to this bill conform the language in
BPC § 5134, to the amendments made effective earlier in the year by
this Budget bill .
SB 542 (Price) extends the Sunset date on the Board of Accountancy from
January 1, 2012 to January 1, 2016, and extends the CPA peer review
provisions to correspond with the CBA's Sunset date. The bill
passed this Committee May 2 on a 9-0 vote, and is currently pending
hearing in Assembly Business, Professions and Consumer Protection
Committee.
SB 360 (De Leon) reinstates a practice privilege 5-day "safe harbor"
period that had previously expired, to provide that an individual
shall not be deemed to be in violation of the practice privilege
requirements solely because he or she begins practicing as a
certified public accountant in California prior to notifying the CBA
as required; provided that notice is given to the CBA within five
business days. The bill passed this Committee May 2 on Consent, and
is currently pending hearing in Assembly Business, Professions and
Consumer Protection Committee.
SB 819 (Yee, Chapter 308, Statutes of 2009) increased the education
requirement to obtain a CPA license from 120 hours to 150 hours
effective January 1, 2014. These provisions were originally
introduced in SB 961 (Yee) in 2009. The bill also removed the
sunset date on the practice privilege provisions.
SB 1543 (Figueroa, Chapter 921, Statutes of 2004) established the
practice privilege provisions.
SB 2239 (B&P Committee, Chapter 878, Statutes of 1998) repealed BPC
§ 5070.1 to eliminate the previous retired option for licensees.
2.Arguments in Support. In sponsoring the bill, the California Board
of Accountancy states that a delinquent, cancelled or surrendered
license status has a negative connotation and does not accurately
reflect a retired licensee's status to consumers. CBA indicates the
bill would establish a process for a retired status, and protect
consumers by prohibiting licensees facing disciplinary action from
receiving a retired license, and provide a means to restore the
retired license to active status if the licensee desires to do so.
The California Society of CPAs (CalCPA) states in support that CPAs who
are retiring should have an option other than voluntarily
surrendering their license, or allowing their license to expire and
eventually be cancelled. CalCPA suggests that both of these options
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leave those CPAs whose are in good standing with a delinquent,
cancelled, or surrendered status. CalCPA asserts that the retired
status license provided by this bill will accurately reflect the
good standing of CPAs who have chosen to retire from the profession.
3.Fee for Restoring a License to Active Status. This bill would
provide for a fee to be charged to each applicant for restoration of
a license in a retired status to an active status that would be set
by the CBA at an amount not to exceed $1,000. According to the CBA,
establishing this maximum fee amount protects practicing accountants
by placing a cap on the fees, equivalent to sitting out for 5 years,
to ensure that the retired designation is intended for a licensee
who is permanently retiring, and not just seeking temporary relief
from license renewal.
According to CBA staff, when the previous retired status designation
existed, on occasion CPAs who were employed in a position in which
they did not need to use their CPA license (such as CFO of a
company) would move their license to a retired status in order to
avoid paying renewal fees, then when they moved to other employment
where they would be engaged in active, licensed activity, they would
request the license be restored to active status. The CBA believes
that by authorizing a higher fee to be charged to reinstate a
retired license to an active license status, it will discourage
licensees from using the retired designation just avoid paying
renewal fees.
SUPPORT AND OPPOSITION:
Support:
California Board of Accountancy (Sponsor)
California Society of CPAs
Opposition: None on file as of June 14, 2011
Consultant:G. V. Ayers