Amended in Senate May 6, 2013

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 insert 22253, end insert 22255, 22256, and 22259 of, and to add Sections 22251.1, 22251.2, 22251.3, 22253.1.5, 22253.3, and 22253.4 begin delete , 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 failure to register a violation of the provisions governing tax preparers. 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 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, operating as a nonprofit corporation that represents, among others, tax preparers, with a membership in California of at least 200 for the last 3 years, 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, 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, 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) 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 bill would also make it a violation, but not a crime, 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.

(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.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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 begin delete and following end delete begin insert et seq. end insert ).

(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.

SEC. 4.  

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 insert

begin insert SEC. 5. end insert   

end insert

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

22253.  

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

(1) Fail to register as a tax preparer with the council.

(2) Make, or authorize 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.

(3) Obtain 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.

(4) Fail or refuse 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.

(5) Fail 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.

(6) Engage 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.

(7) Violate Section 17530.5 or 17530.6.

(8) Violate Section 7216 of Title 26 of the United States Code.

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

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

(11) 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, 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.

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

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

22253.1.5.  

(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.

begin delete

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

end delete begin delete

(3)

end delete

begin insert (2) end insert  Procuring or attempting to procure a registration by fraud,
misrepresentation, or mistake.

begin delete

(4)

end delete

begin insert (3) end insert  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.

begin delete

(5)

end delete

begin insert (4) end insert  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.

begin delete

(6)

end delete

begin insert (5) end insert  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.

begin delete

(7)

end delete

begin insert (6) end insert  Impersonating a registrant, or permitting or allowing an
unregistered person to use a registration.

begin delete

(8)

end delete

begin insert (7) end insert  Committing any fraudulent, dishonest, or corrupt act that is
substantially related to the qualifications, functions, or duties of a
registrant.

(b) A violation of begin delete this section end delete begin insert subdivision (a) end insert is not subject to
subdivision (b) of Section 22256.

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

begin delete SEC. 6. end delete
begin insert SEC. 7. 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. 7. end delete
begin insert SEC. 8. 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
begin delete therefore end delete begin insert therefor end insert .

(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
begin delete therefore end delete begin insert therefor end insert . 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. 8. end delete
begin insert SEC. 9. 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 begin delete years end delete
begin insert years’ end insert 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. 9. end delete
begin insert SEC. 10. end insert   

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

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) Except as provided in begin insert subdivision (a) of end insert Section 22253.1.5,
a 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. 10. end delete
begin insert SEC. 11. 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.