Amended in Senate April 22, 2013

Amended in Senate April 2, 2013

Senate Bill No. 484

Introduced by Senator Wyland

February 21, 2013

An act to amend Sections 22251, begin delete 22252,22253, end delete 22255, begin insert 22256, end insert and 22259 of, and to add Sections 22251.1, 22251.2, begin delete 22251.2.5, end delete 22251.3, begin delete 22252.2, end delete begin insert 22253.1.5, end insert 22253.3, begin insert and end insert 22253.4, begin delete and 22258.1 end delete to, the Business and Professions Code, relating to business.

LEGISLATIVE COUNSEL’S DIGEST

SB 484, as amended, Wyland. Tax preparers.

(1) Existing law requires a tax preparer to maintain a bond in favor of, and payable to, the people of the State of California for each individual preparing tax returns for another person. Existing law requires a tax preparer to register with the California Tax Education Council (council) and makes begin delete it end delete begin insert failure to register end insert a violation of the provisions governing tax preparers begin delete to fail to register end delete . Existing law requires the council to issue a “certificate of completion” when a tax preparer demonstrates completion of not less than 60 hours of specified educational requirements.

This bill would begin delete prohibit a person from preparing a tax return unless he or she has been issued a registration from the council. The bill would end delete require the council to issue a registration to any applicant who submits an application with evidence that he or she has, among other things, (A) successfully completed those educational requirements and (B) paid specified fees to be established by the council. The bill would make a registration subject to annual renewal including the payment of a renewal fee to be established by the council.

This bill would prohibit a registrant or applicant from being disciplined or denied registration by the council except according to specified procedures. The bill would authorize the council to discipline a registrant by, among other things, placing the registration on probation or suspending or revoking the registration. The bill would require the council to notify the Franchise Tax Board and the Internal Revenue Service that a registration is suspended or revoked.

(2) Existing law defines the council as a single organization made up of not more than one representative from each specified entity begin insert , end insert operating as a nonprofit corporation that represents, among others, tax preparers begin insert , end insert with a membership in California of at least 200 for the last 3 years begin insert , end insert and not more than one representative from each for-profit tax preparation corporation that has at least 200 employees and has been operating in California for the last 3 years.

This bill would specify that the council is a nonprofit organization begin insert , end insert and would instead require the council to consist of not more than one representative from each California nonprofit corporation in good standing that represents, among others, tax preparers with a membership in California of at least 400 in each of the previous 3 calendar years begin insert , end insert and not more than one representative from each for-profit tax preparation corporation in good standing that had at least 400 employees or franchisees during the previous calendar year and has been operating in California for the last 3 years.

Existing law requires the council to establish a process by which 6 tax preparers are appointed to the council to serve specified terms.

This bill would specify that those 6 tax preparers are appointed to the board of directors and would require the council to be governed by that board of directors. The bill would authorize the council to adopt rules and regulations necessary to carry out these provisions.

(3)  begin delete Existing law requires a tax preparer, prior to rendering any tax preparation services, to provide the customer in writing with, among other things, his or her name, address, and telephone number. end delete Existing law makes it a violation for a tax preparer to, among other things, obtain a customer’s signature on a document with blank spaces to be filled in after it has been signed and to engage in advertising practices that are fraudulent. A violation of the provisions governing tax preparers is a crime.

This begin delete bill would additionally require a tax preparer to provide his or her e-mail address. The end delete bill would also make it a violation begin insert , but not a crime, end insert to commit certain other acts, and would authorize the council to deny a registration application or discipline a registrant for, among other things, specified unprofessional conduct and conviction of a crime substantially related to the duties of a registrant. begin delete The bill would make it an unfair business practice for any person to hold himself or herself out as a registered tax preparer without meeting the above requirements for registration. end delete

(4) Under existing law, boards scheduled for repeal are required to be evaluated by the Joint Sunset Review Committee.

This bill would instead specify that the council would be subject to review by the appropriate policy committees of the Legislature.

(5) This bill would make other technical and conforming changes.

begin delete

(6) Because a violation of the bill’s requirements would be a crime, the bill would impose a state-mandated local program.

end delete begin delete

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

end delete begin delete

This bill would provide that no reimbursement is required by this act for a specified reason.

end delete

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program:  begin delete yes end delete begin insert no end insert .

The people of the State of California do enact as follows:

SECTION 1.  

Section 22251 of the Business and Professions
Code is amended to read:

22251.  

For the purposes of this chapter, the following words
have the following meanings:

(a) (1) Except as otherwise provided in paragraph (2), “tax
preparer” includes:

(A) A person who, for a fee or for other consideration, assists
with or prepares tax returns for another person or who assumes
final responsibility for completed work on a return on which
preliminary work has been done by another person, or who holds
himself or herself out as offering those services. A person engaged
in that activity shall be deemed to be a separate person for the
purposes of this chapter, irrespective of affiliation with, or
employment by, another tax preparer.

(B) A corporation, partnership, association, or other entity that
has associated with it persons not exempted under Section 22258,
which persons shall have as part of their responsibilities the
preparation of data and ultimate signatory authority on tax returns
or that holds itself out as offering those services or having that
authority.

(2) Notwithstanding paragraph (1), “tax preparer” does not
include an employee who, as part of the regular clerical duties of
his or her employment, prepares his or her employer’s income,
sales, or payroll tax returns.

(b) “Tax return” means a return, declaration, statement, refund
claim, or other document required to be made or filed in connection
with state or federal income taxes or state bank and corporation
franchise taxes.

(c) An “approved curriculum provider,” for purposes of basic
instruction as described in subdivision (a) of Section 22255, and
continuing education as described in subdivision (b) of Section
22255, is one who has been approved by the council as defined in
subdivision (d). A curriculum provider who is approved by the tax
education council is exempt from Chapter 7 (commencing with
Section 94700) of Part 59 of Division 10 of the Education Code.

(d) “Council” means the California Tax Education Council that
is a single nonprofit organization exempt from taxation under
Section 501(c)(3) of Title 26 of the United States Code made up
of not more than one representative from each California nonprofit
corporation in good standing that chooses to participate in the
council and that represents tax preparers, enrolled agents, attorneys,
or certified public accountants with a membership in California
of at least 400 in each of the previous three calendar years, and
not more than one representative from each for-profit tax
preparation corporation in good standing that chooses to participate
in the council and that had at least 400 employees or franchisees,
which number can include the employees of a franchisee, in
California during the previous calendar year and that has been
operating in California for the last three years. The council shall
establish a process by which six individuals who are tax preparers
pursuant to Section 22255 are appointed to the board of directors
of the council with full voting privileges to serve terms as
determined by the council, with their initial terms being served on
a staggered basis. A person exempt from the requirements of this
chapter pursuant to Section 22258 is not eligible for appointment
to the council, other than an employee of an individual in an
exempt category.

(e) “Client” means an individual for whom a tax preparer
performs or agrees to perform tax preparation services.

(f) “Refund anticipation loan” means a loan, whether provided
by the tax preparer or another entity, such as a financial institution,
in anticipation of, and whose payment is secured by, a client’s
federal or state income tax refund or by both.

(g) “Refund anticipation loan fee schedule” means a list or table
of refund anticipation loan fees that includes three or more
representative refund anticipation loan amounts. The schedule
shall separately list each fee or charge imposed, as well as a total
of all fees imposed, related to the making of a refund anticipation
loan. The schedule shall also include, for each representative loan
amount, the estimated annual percentage rate calculated under the
guidelines established by the federal Truth in Lending Act (15
U.S.C. Sec. 1601 and following).

(h) “Registrant” means a tax preparer that has met all of the
requirements of this chapter and has been issued a registration by
the council.

SEC. 2.  

Section 22251.1 is added to the Business and
Professions Code, to read:

22251.1.  

It is the intent of this chapter to enable consumers to
easily identify credible tax preparers who are bonded and
registered, to ensure tax preparers receive adequate education and
treat confidential information appropriately, to prohibit tax
preparers from making fraudulent, untrue, or misleading
representations, and to provide for a self-funded nonprofit oversight
body to register tax preparers and ensure that they meet all of the
requirements of this chapter.

SEC. 3.  

Section 22251.2 is added to the Business and
Professions Code, to read:

22251.2.  

(a) The council shall have the responsibilities and
duties set forth in this chapter. The council may take any reasonable
actions to carry out the responsibilities and duties set forth in this
chapter, including, but not limited to, hiring staff and entering into
contracts. The council shall be governed by a board of directors
comprised in the manner described in subdivision (d) of Section
22151.

(b) The council shall issue registrations, deny applications, and
discipline registrants as authorized by this chapter. The council
may adopt bylaws, rules, regulations, and procedures necessary
to effectuate the purposes of this chapter.

(c) The council shall establish application fees, renewal fees,
delinquent fees, and other fees related to the regulatory cost of
providing services and carrying out the council’s responsibilities
and duties pursuant to this chapter. These fees shall not exceed the
reasonable cost to the council of providing those services and
carrying out those responsibilities and duties.

begin delete

SEC. 4.  

Section 22251.2.5 is added to the Business and
Professions Code, to read:

22251.2.5.  

No person may prepare a tax return without being
issued a registration from the council pursuant to Section 22251.3.

end delete

begin delete SEC. 5. end delete
begin insert SEC. 4. end insert   

Section 22251.3 is added to the Business and
Professions Code, to read:

22251.3.  

(a) The council shall issue a registration to any
applicant who provides satisfactory evidence that he or she meets
all of the requirements of this chapter and who complies with the
bylaws, rules, and procedures established by the council.

(b) In order to obtain a registration, an applicant shall submit a
written application in a form provided by the council and provide
the council with satisfactory evidence that he or she meets all of
the following requirements:

(1) The applicant has successfully completed the educational
requirements described in subdivision (a) of Section 22255.

(2) All fees required by the council as described in subdivision
(c) of Section 22251.2 have been paid.

(3) The applicant meets all of the other requirements for
registration in this chapter.

(c) Any registration under this chapter shall be subject to renewal
every year in a manner prescribed by the council, and shall expire
unless renewed in that manner. The council may provide for the
late renewal of a registration.

begin delete

SEC. 6.  

Section 22252 of the Business and Professions Code
is amended to read:

22252.  

Prior to rendering any tax preparation services, a tax
preparer shall provide the customer in writing with the tax
preparer’s name, address, telephone number, and evidence of
compliance with the bonding requirement of Section 22250,
including the bond number, if any, and e-mail address.

SEC. 7.  

Section 22252.2 is added to the Business and Professions
Code, to read:

22252.2.  

It is an unfair business practice for any person to hold
oneself out or use the title of “registered tax preparer” or any other
term, such as “licensed” that implies or suggests that the person
is registered as a tax preparer without meeting the requirements
of this chapter and being issued a registration by the council.

SEC. 8.  

Section 22253 of the Business and Professions Code
is amended to read:

22253.  

(a) It is a violation of this chapter for a tax preparer to
do or commit, and the council may deny an application for
registration or discipline a registrant for, any of the following:

(1) Unprofessional conduct, including, but not limited to, denial
of licensure, certificate, permit, or registration, or revocation,
suspension, restriction, or any other disciplinary action against an
applicant or registrant by the federal government or another state
or territory of the United States, by any other government agency,
or by another professional licensing board or organization. A
certified copy of the decision, order, or judgment shall be
conclusive evidence of these actions.

(2) Failing to register as a tax preparer with the council.

(3) Procuring or attempting to procure a registration by fraud,
misrepresentation, or mistake.

(4) Violating or attempting to violate, directly or indirectly, or
assisting in or abetting the violation of, or conspiring to violate,
any provision or term of this chapter or any rule or bylaw adopted
by the council.

(5) Conviction of any felony or misdemeanor that is substantially
related to the qualifications, functions, or duties of a registrant, in
which event the record of the conviction shall be conclusive
evidence of the crime.

(6) Impersonating an applicant or acting as a proxy for an
applicant in any situation or examination referred to under this
chapter for the issuance of a registration.

(7) Impersonating a registrant, or permitting or allowing an
unregistered person to use a registration.

(8) Committing any fraudulent, dishonest, or corrupt act that is
substantially related to the qualifications, functions, or duties of a
registrant.

(9) Making, or authorizing the making of, any statement or
representation, oral or written or recorded by any means, which is
intended to induce persons to use the tax preparation service of
the tax preparer, which statement or representation is fraudulent,
untrue, or misleading.

(10) Obtaining the signature of a customer to a tax return or
authorizing document which contains blank spaces to be filled in
after it has been signed.

(11) Failing or refusing to give a customer, for his or her own
records, a copy of any document requiring the customer’s signature,
within a reasonable time after the customer signs the document.

(12) Failing to maintain a copy of any tax return prepared for
a customer for four years from the date of completion or the due
date of the return, whichever is later.

(13) Engaging in advertising practices which are fraudulent,
untrue, or misleading, including, but not limited to, assertions that
the bond required by Section 22250 in any way implies licensure
or endorsement of a tax preparer by the State of California
misleading.

(14) Violating Section 17530.5 or 17530.6.

(15) Violating Section 7216 of Title 26 of the United States
Code.

(16) Failing to sign a customer’s tax return when payment for
services rendered has been made.

(17) Failing to return, upon the demand by or on behalf of a
customer, records or other data provided to the tax preparer by the
customer.

(18) Knowingly give false or misleading information to the
consumer pursuant to Section 22252, or give false or misleading
information to the surety company pursuant to subdivision (a) of
Section 22250, 22252 or give false or misleading information to
the California Tax Education Council pursuant to Section 22255.

(b) Each violation of this section constitutes a separate offense.

end delete

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 22253.1.5 is added to the end insert begin insert Business and
Professions Code end insert begin insert , to read: end insert

begin insert

begin insert 22253.1.5. end insert   

(a) It is a violation of this chapter for a tax preparer
to do or commit, and the council may deny an application for
registration or discipline a registrant for, any of the following:

(1) Unprofessional conduct, including, but not limited to, denial
of licensure, certificate, permit, or registration, or revocation,
suspension, restriction, or any other disciplinary action against
an applicant or registrant by the federal government or another
state or territory of the United States, by any other government
agency, or by another professional licensing board or organization.
A certified copy of the decision, order, or judgment shall be
conclusive evidence of these actions.

(2) Failing to register as a tax preparer with the council.

(3) Procuring or attempting to procure a registration by fraud,
misrepresentation, or mistake.

(4) Violating or attempting to violate, directly or indirectly, or
assisting in or abetting the violation of, or conspiring to violate,
any provision or term of this chapter or any rule or bylaw adopted
by the council.

(5) Conviction of any felony or misdemeanor that is substantially
related to the qualifications, functions, or duties of a registrant,
in which event the record of the conviction shall be conclusive
evidence of the crime.

(6) Impersonating an applicant or acting as a proxy for an
applicant in any situation or examination referred to under this
chapter for the issuance of a registration.

(7) Impersonating a registrant, or permitting or allowing an
unregistered person to use a registration.

(8) Committing any fraudulent, dishonest, or corrupt act that
is substantially related to the qualifications, functions, or duties
of a registrant.

(b) A violation of this section is not subject to subdivision (b)
of Section 22256.

(c) Each violation of this section shall constitute a separate
offense.

end insert

begin delete SEC. 9. end delete
begin insert SEC. 6. end insert   

Section 22253.3 is added to the Business and
Professions Code, to read:

22253.3.  

(a) The council may discipline a registrant by any,
or a combination, of the following methods:

(1) Placing the registration on probation.

(2) Suspending the registration and the rights conferred by this
chapter on a registrant for a period not to exceed one year.

(3) Revoking the registration.

(4) Suspending or staying the disciplinary order, or portions of
it, with or without conditions.

(5) Taking other action as the council, as authorized by this
chapter or its bylaws, rules, or procedures, deems proper.

(b) The council may issue an initial registration on probation,
with specific terms and conditions, to any applicant.

(c) If a registration is suspended or revoked, the council shall
notify the Franchise Tax Board and the Internal Revenue Service.

begin delete SEC. 10. end delete
begin insert SEC. 7. end insert   

Section 22253.4 is added to the Business and
Professions Code, to read:

22253.4.  

(a) No registrant or applicant may be disciplined or
denied registration except according to procedures satisfying the
requirements of this section. A denial or discipline not in accord
with this section shall be void and without effect.

(b) Any application denial or registrant discipline shall be done
in good faith and in a fair and reasonable manner. Any procedures
that conform to the requirements of this chapter are fair and
reasonable, but a court may also find other procedures to be fair
and reasonable when the full circumstances of the application
denial or registrant discipline are considered.

(c) A procedure is fair and reasonable if all of the following
apply:

(1) It provides the giving of 15 days prior notice of the
application denial or registration discipline and the reasons
therefore.

(2) It provides an opportunity for the applicant or registrant to
be heard, either orally or in writing, not less than five days before
the effective date of the application denial or registrant discipline
by a person or body authorized to decide that the proposed
application denial or registrant discipline not take place.

(d) Any notice required under this section may be given by any
method reasonably calculated to provide actual notice. Any notice
given by mail must be given by first-class or express mail sent to
the last address of the applicant or registrant shown on the council’s
records.

(e) Any action challenging an application denial or registrant
discipline, including any claim alleging defective notice, shall be
commenced within one year after the effective date of the
application denial or registrant discipline in the superior court in
and for the county of the council’s principal place of business. If
the action is successful, the court may order any relief, including
reinstatement, that it finds equitable under the circumstances.

(f) The council may charge applicants and registrants a
reasonable regulatory fee as a condition of any hearing requested
by the applicant or registrant for the purpose of contesting denial
of a registration or discipline of a registrant. This fee shall not
exceed the reasonable cost to the council of providing the hearing.
Upon a favorable judgment for the council in any proceeding, the
council shall be entitled to recover its reasonable attorney’s fees.

(g) This section governs only the procedures for application
denial or registrant discipline and not the substantive grounds
therefore. An application denial or registrant discipline based upon
substantive grounds that violates contractual or other rights of the
applicant or registrant or is otherwise unlawful is not made valid
by compliance with this section.

begin delete SEC. 11. end delete
begin insert SEC. 8. end insert   

Section 22255 of the Business and Professions Code
is amended to read:

22255.  

(a) The council shall issue a “certificate of completion,”
as part of the education registration requirements described in
Section 22251.3, to the tax preparer when the tax preparer
demonstrates that he or she has (1) completed not less than 60
hours of instruction in basic personal income tax law, theory, and
practice by an approved curriculum provider within the previous
18 months; and (2) provides evidence of compliance with the
bonding requirement of Section 22250, including the name of the
surety company, the bond number, and the bond expiration date.
Of the required 60 hours, 45 hours shall be concerned with federal
tax curriculum and 15 hours shall be concerned with state tax
curriculum.

(b) A tax preparer shall complete on an annual basis not less
than 20 hours of continuing education, including 15 hours in federal
taxation and 5 hours in California taxation from an approved
curriculum provider. The council shall issue annually a “statement
of compliance” when the tax preparer demonstrates that he or she
has (1) completed the required 20 hours of continuing education,
and (2) provides evidence of compliance with the bonding
requirement of Section 22250, including the name of the surety
company, the bond number, and the bond expiration date.

(c) An individual who possesses a minimum of two recent years
experience in the preparation of personal income tax returns may
petition the council to review the experience and determine if it is
the equivalent of the required qualifying education described in
subdivision (a). The council may provide that individual with a
“certificate of completion” if it is determined that the experience
is the equivalent of the required hours. Tax preparation performed
in situations that violate this chapter, by an individual who is
neither registered nor exempted, may not be used toward the
qualifying experience needed for registration as a tax preparer.

begin delete

SEC. 12.  

Section 22258.1 is added to the Business and
Professions Code, to read:

22258.1.  

This chapter shall be liberally construed. If any
provision of this chapter or the application thereof to any person
or circumstance is held to be invalid, the invalidity shall not affect
other provisions or applications of the chapter that can be given
effect without the invalid provision or application, and to this end
the provisions of this chapter are severable.

end delete

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 22256 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

22256.  

(a) The superior court in and for the county in which
any person acts as a tax preparer in violation of the provisions of
this chapter, may, upon a petition by any person, issue an injunction
or other appropriate order restraining the conduct. The proceedings
under this paragraph shall be governed by Chapter 3 (commencing
with Section 525) of Title 7 of Part 2 of the Code of Civil
Procedure.

(b)  begin delete A end delete begin insert Except as provided in Section 22253.1.5, a end insert person who
violates a provision of this chapter is guilty of a misdemeanor,
which offense is punishable by a fine not exceeding one thousand
dollars ($1,000), or by imprisonment in a county jail for not more
than one year, or by both.

begin delete SEC. 13. end delete
begin insert SEC. 10. end insert   

Section 22259 of the Business and Professions Code
is amended to read:

22259.  

This chapter shall be subject to review by the
appropriate policy committees of the Legislature.

This chapter shall remain in effect only until January 1, 2015,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2015, deletes or extends that date.

begin delete

SEC. 14.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

end delete