BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 431|
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                                 THIRD READING


          Bill No:  AB 431
          Author:   Ma (D)
          Amended:  8/30/11 in Senate
          Vote:     21

           
           SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE :  9-0, 
            6/20/11
          AYES:  Price, Emmerson, Corbett, Correa, Hernandez, Negrete 
            McLeod, Vargas, Walters, Wyland
           
          SENATE APPROPRIATIONS COMMITTEE  :  9-0, 8/25/11
          AYES:  Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley, 
            Price, Runner, Steinberg
           
          ASSEMBLY FLOOR  :  72-0, 5/12/11 - See last page for vote


           SUBJECT  :    Retired public accountants

           SOURCE  :     California Board of Accountancy


           DIGEST  :    This bill authorizes the California Board of 
          Accountancy to establish a retired status license for 
          certified public accountants and public accountants.

           ANALYSIS  :    

          Existing law:

          1. Licenses and regulates some 80,000 certified public 
             accountants (CPAs) and public accountants (PAs) under 
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             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:  (Business and 
             Professions Code ÝBPC] Section 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 education required for renewal of 
                an active license, as specified.  

          3. 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 Web sites, business cards, nameplates, or name 
             plaques, to place the term "inactive" immediately after 
             that designation.  (BPC Section 5058.2)

          4. 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 Section 
             5109)

          This bill:

          1. Authorizes CBA to establish, by regulation, a system for 

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             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.

             F.    Authorizes the CBA to exempt the retired status 
                license from any renewal requirements.

             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.

          2. 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 Web sites, 
             business cards, nameplates, or name plaques, to place 
             the term "retired" immediately after that designation. 

          3. Provides that the placement of a license on a retired 
             status shall not deprive the CBA of jurisdiction to take 

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             disciplinary action.

          4. 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.

          5. Makes conforming, clarifying and technical changes, 
             including removing outdated references to the enactment 
             of practice privilege provisions.

           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 

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          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 
          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 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 ( Senate Business, Professions and Economic 
          Development Committee), Chapter 878, Statutes of 1998, to 
          eliminate the retired option for licensees, and repeal BPC 
          Section 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 BPC 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 

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          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

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee:

                         Fiscal Impact (in thousands)

           Major Provisions     2011-12     2012-13      2013-14     Fund  

          Revision of licensing        Likely significant ($50 to 
          up to $300)        Special*
          categories and fees          decrease in license fee 
          revenue annually
                             through 2017; fee revenue increase or
                                                  decrease may vary 
          at board discretion

          * Accountancy Fund


           SUPPORT  :   (Verified  8/26/11)

          California Board of Accountancy (source)
          California Society of Certified Public Accountants

           ARGUMENTS IN SUPPORT  :    According to the author's office, 
          this bill provides consumers with protections by 
          prohibiting licensees facing disciplinary action from 
          receiving a retired designation.  The author's office 
          indicates this bill allows retired CPAs and 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's office indicates that this bill 
          also requires the CBA to provide licensees reconsidering 

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          retirement a pathway to restore their license to an active 
          status.

          The author's office 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 20 
          State-accountancy boards offer a retired designation, 
          according to the author.


           ASSEMBLY FLOOR  :  72-0, 5/12/11
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Campos, Carter, Chesbro, 
            Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, 
            Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, 
            Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey, 
            Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, 
            Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, 
            Ma, Mansoor, Mendoza, Miller, Monning, Morrell, Nestande, 
            Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, 
            Silva, Skinner, Smyth, Solorio, Swanson, Valadao, Wagner, 
            Wieckowski, Williams, John A. Pérez
          NO VOTE RECORDED:  Charles Calderon, Cedillo, Garrick, 
            Gorell, Mitchell, Portantino, Torres, Yamada

          JJA:kc  8/26/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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