BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 431| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED AB 431 Page 2 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 CONTINUED AB 431 Page 3 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 CONTINUED AB 431 Page 4 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 CONTINUED AB 431 Page 5 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 CONTINUED AB 431 Page 6 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 CONTINUED AB 431 Page 7 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 **** END **** CONTINUED