BILL ANALYSIS Ó
SB 484
Page 1
Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
SB 484 (Wyland) - As Amended: May 6, 2013
SENATE VOTE : 39-0
SUBJECT : Tax preparers.
SUMMARY : Revises the composition of the California Tax
Education Council (CTEC), authorizes CTEC to deny, suspend, or
revoke a tax preparer registration for specified violations, and
makes other related changes to the Tax Preparers Law.
Specifically, this bill :
1)Clarifies that CTEC is a 501(c)(3) nonprofit organization.
2)Revises and clarifies CTEC membership as follows:
a) There shall be no more than one representative from each
California nonprofit corporation in good standing with a
membership of at least 400 specified professionals in each
of the previous three calendars years;
b) There shall be no more than one representative from each
for-profit tax preparation corporation in good standing
with at least 400 employees or franchisees, including the
employees of a franchisee, in California during the
previous calendar year; and,
c) Six individuals who are tax preparers shall be appointed
to the board of directors of CTEC.
3)Authorizes CTEC to take any reasonable actions to carry out
the responsibilities and duties set forth in this bill,
including, but not limited to
a) Hiring staff and entering into contracts; and,
b) Adopting bylaws, rules, regulations, and procedures
necessary to effectuate the purposes of this chapter.
4)Requires CTEC to be governed by a board of directors,
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comprised as specified.
5)Requires CTEC to:
a) Issue registrations, deny applications, and discipline
registrants as specified; and,
b) 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, provided these fees do not
exceed the reasonable cost to CTEC for providing services
and carrying out its responsibilities and duties.
6)Requires CTEC to issue a registration to any applicant who
provides satisfactory evidence that he or she meets all of the
requirements and who complies with the bylaws, rules, and
procedures established by CTEC.
7)Requires an applicant to submit a written application in a
form provided by CTEC and provide CTEC with satisfactory
evidence that he or she meets the following requirements:
a) The applicant has successfully completed specified
educational requirements;
b) All fees required by CTEC have been paid; and,
c) The applicant meets all of the other requirements for
registration under the Tax Preparers Law.
8)Specifies that any registration must be renewed annually in a
manner prescribed by CTEC, and shall expire unless renewed in
that manner; and further authorizes CTEC to provide for the
late renewal of a registration.
9)Permits CTEC to deny an application for registration or
discipline a registrant for specified offenses.
10)States that it is a violation of Tax Preparers Law for a tax
preparer to do or commit, and authorizes CTEC to deny an
application or discipline a registrant that does or commits,
any of the following:
a) Unprofessional conduct, including, but not limited to,
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denial of licensure, certificate, permit, or registration,
or revocation, suspension, restriction, or any other
disciplinary action against an applicant or registrant, as
specified.
b) Procuring or attempting to procure a registration by
fraud, misrepresentation, or mistake;
c) 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 Tax
Preparers Law or any rule or bylaw adopted by CTEC;
d) Conviction of any felony or misdemeanor that is
substantially related to the qualifications, functions, or
duties of a registrant;
e) Impersonating an applicant or acting as a proxy for an
applicant in any situation or examination referred to in
the Tax Preparers Law for the issuance of a registration;
f) Impersonating a registrant, or permitting or allowing an
unregistered person to use a registration; or,
g) Committing any fraudulent, dishonest, or corrupt act
that is substantially related to the qualifications,
functions, or duties of a registrant.
h) Specifies that the above offenses shall not be guilty of
a misdemeanor, as specified.
i) Declares that each violation shall be considered a
separate offense.
11)Authorizes CTEC to discipline a registrant by any, or a
combination, of the following methods:
a) Placing a registration on probation;
b) Suspending the registration and the rights conferred by
the Tax Preparers law on a registrant for a period not to
exceed one year;
c) Revoking a registration;
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d) Suspending or staying the disciplinary order, or
portions of it, with or without conditions; or,
e) Taking other action as CTEC as authorized by the Tax
Preparers Law or its bylaws, rules, or procedures, deem
proper.
12)Permits CTEC to issue an initial registration on probation,
with specific terms and conditions, to any applicant.
13)Requires CTEC to notify the Franchise Tax Board (FTB) and the
Internal Revenue Service (IRS) if a registration is suspended
or revoked.
14)States that no registrant or applicant may be disciplined or
denied registration except according to procedures satisfying
specified requirements; and further states that a denial or
discipline not in in accord with these requirements shall be
void and without effect.
15)Requires any application denial or registrant discipline to
be done in good faith and in a fair and reasonable manner. Any
procedures that conform to the requirements of this bill 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.
a) States that a procedure is "fair and reasonable" if all
of the following apply:
i) CTEC provides 15 days prior notice of the
application denial or registration discipline and the
reasons therefor; and,
ii) CTEC 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 denial or
discipline not take place;
16)Specifies that any notice required 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
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sent to the last address of the applicant or registrant shown
on the council's records.
17)Specifies that 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.
18)Authorizes CTEC to 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.
19)Specifies that the "fair and reasonable" requirements govern
only the procedures for application denial or registrant
discipline and not the substantive grounds therefor. A denial
or 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 procedural
compliance.
20)Clarifies that a "certificate of completion" is part of the
education registration requirements, as specified.
21)States that this law shall be subject to review by the
appropriate policy committees of the Legislature.
22)Defines "registrant" to mean a tax preparer that has met all
of the requirements of Tax Preparer Law and has been issued a
registration by CTEC.
23)Declares that it is the Legislature's intent 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
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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 Tax Preparers Law.
24)Makes technical and clarifying changes.
EXISTING LAW :
1)Provides for the registration of tax preparers by CTEC, and
repeals those provisions effective January 1, 2015. (Business
and Professions Code (BPC) Section 22250 et seq.)
2)Establishes the requirements for a tax preparer including,
registering with the CTEC, obtaining a "certificate of
completion" after completing a tax education curriculum, as
specified, and maintaining a surety bond, as specified. (BPC
22250 et seq.)
3)Defines "tax preparer" to mean either:
a) A person who, for a fee or 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; or,
b) A corporation, partnership, association, or other entity
that has associated with it persons who have as part of
their responsibilities the preparation of data and ultimate
signatory authority of tax returns or that holds itself out
as offering those services or having that authority. (BPC
22251)
4)Establishes CTEC as a single organization made up of not more
than one representative from each professional society,
association, or other entity operating as a nonprofit
corporation 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 200 for the last three years, and not more than
one representative from each for-profit tax preparation
corporation that chooses to participate in the council and
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that has at least 200 employees and has been operating in
California for the last three years. (BPC 22251 (d))
5)Requires a tax preparer to provide any customer in writing
with the tax preparer's name, address, telephone number, and
evidence of compliance with the bonding requirement, including
the bond number, prior to rendering any tax preparation
services. (BPC 22252)
6)Prohibits a tax preparer from disclosing any client's
confidential information without written permission, except in
specific circumstances. (BPC 22252.1)
7)Makes it a violation for a tax preparer to fail to register
with CTEC, make fraudulent, untrue or misleading statements to
a customer, obtain a customer's signature on an incomplete
document, fail to sign a customer's tax return when payment
for services rendered has been made, fail to return a
customer's records upon request, or provide false or
misleading information to the consumer, surety company, or
CTEC. (BPC 22253)
8)Requires the FTB to notify the CTEC when it identifies an
individual who has committed a violation, and allows CTEC to
enter into an agreement with FTB to provide reimbursement for
expenses incurred. Authorizes CTEC to notify the Attorney
General, a district attorney, or a city attorney take
specified disciplinary action. (BPC 22253.2)
9)Provides that the Superior Court in and for the county where a
tax preparer violates Tax Preparer Law may, upon a petition by
any person, issue an injunction or other appropriate order
restraining the conduct. (BPC 22256 (a))
10)Provides that a person who violates Tax Preparer Law is
guilty of a misdemeanor 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. (BPC 22256 (b))
11)Provides that if a tax preparer fails to perform a duty
specifically imposed upon him or her, any person may maintain
an action for enforcement of those duties or to recover a
civil penalty in the amount of one thousand dollars ($1,000),
or for both. In an action to enforce these duties or recover
civil penalties, the prevailing plaintiff will be entitled to
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reasonable attorney's fees and costs, in addition to the civil
penalties. (BPC 22257)
12)Exempts the following from the requirement to register as a
tax preparer: certified public accountants (CPAs), enrolled
agents (EAs), attorneys, trust companies, federal or state
regulated financial institutions, or employees of exempt
persons or entities. (BPC 22258)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill. Current law establishes CTEC as the
registering body for professional tax preparers, but does not
give CTEC the authority to discipline registrants for
unprofessional conduct. This leaves consumers vulnerable to
unscrupulous practitioners, while providing insufficient
incentive for those practitioners to abide by the law. This
bill would outline a code of conduct for registered tax
preparers, and grant CTEC the authority to deny registration
to an applicant, or discipline a registrant, who is found to
be in violation of Tax Preparers Law. This bill is sponsored
by CTEC.
2)Author's statement. According to the author's office, "CTEC
provides information regarding which tax preparers are
registered and legally permitted to prepare taxes. Consumers
are able to confirm via CTEC that their tax preparer is
registered. This oversight ensures that tax preparers are held
accountable by meeting the initial educational requirements,
maintaining a $5,000 surety bond, and complying with
continuing education requirements are also met annually.
However, the CTEC does not have the authority to discipline a
registered tax preparer if they are convicted of fraud or a
similar criminal offense related to their profession. SB 484
will give CTEC the authority to actively monitor their list,
by removing individuals who have been found guilty of
professional misconduct or any other violations making them
unfit to prepare taxes."
3)Background on CTEC. The tax preparer law was established in
1996 by SB 1077 (Greene) (Chapter 1137, Statutes of 1996),
which eliminated the Tax Preparer Program within the
Department of Consumer Affairs and instead authorized a
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private organization to certify tax preparers in California.
The law provides the non-profit CTEC with the authority to
oversee and register tax preparers.
CTEC maintains a roster of over 40,000 registered tax preparers
for interested consumers to confirm that individual tax
preparers are approved practitioners, and only registered tax
preparers may prepare returns. . In addition to
registrations, CTEC approves providers of tax education,
maintains a list of approved curriculum providers, verifies
the required continued tax education, and insures that tax
preparers provide valid bond information.
Currently, CTEC is comprised of appointees from 'qualified
organizations', each of which are allowed to select one
representative. A qualified organization is generally defined
as a professional society, association, or other California
nonprofit corporation with an ongoing membership in excess of
200 people representing tax preparers, enrolled agents,
attorneys, or certified public accountants; or, a for profit
tax preparation corporation with an ongoing membership in
excess of 200 employees.
4)Tax preparer registration. Existing law requires all tax
preparers to register with CTEC before preparing tax returns
for another person for a fee. Registration requires the tax
preparer to complete an annual application and pay an
application fee, take out a bond, and complete specified
educational requirements. The professionals exempted from
this registration requirement are CPAs, EAs, attorneys who are
members of the California State Bar, trust companies, federal
or state regulated financial institutions, or employees of
exempt persons or entities.
Registered tax preparers are permitted to file individual tax
forms on behalf of their clients, and are required to use
their CTEC tax preparer identification number when doing so.
CTEC maintains an online roster of all currently registered
tax preparers, so that consumers can easily check whether an
individual tax preparer has met all of the educational and
bonding requirements and is practicing legally.
5)CTEC authority. Under existing law, CTEC does not have the
authority to discipline a registered tax preparer that is
convicted of fraud or another criminal offense related to the
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profession. The only action CTEC may take is to change a tax
preparer's registration status if he or she does not properly
register or re-register each year. CTEC does not have the
authority to discipline or revoke the registration of a
preparer found guilty of unprofessional conduct or convicted
of a criminal offense. This means that even if CTEC is aware
of registered tax preparers who are engaged in unprofessional
conduct, or other crimes related to the profession, CTEC
cannot protect consumers by revoking an individual's
registration because the law does not authorize this
disciplinary action.
SB 484 would clearly outline a code of conduct for registered
tax preparers, and give additional authority to the CTEC to
deny registration or discipline a registrant who is found
guilty of a violation.
6)Arguments in support . According to CTEC, the sponsor of this
bill, "on occasion CTEC has received documents from federal
agencies identifying tax preparers who have criminal
convictions and/or federal injunctions against them
prohibiting them from preparing federal returns. Regardless
of the related criminal convictions or the federal
injunctions, CTEC has no express authority allowing them to
unregister these individuals. CTEC is greatly concerned that
the continued registration of these individuals is harmful to
consumers. Consumers assume that "registered tax preparer"
means more than the individual has merely paid a fee,
completed education, and taken out a bond. With the passage of
the proposed legislation, "registered tax preparer" will mean
more."
7)Previous legislation. SB 1077 (Greene) Chapter 1137, Statutes
of 1996, eliminated the Tax Preparer Program in the Department
of Consumer Affairs (DCA), created CTEC to register tax
preparers, and established the Tax Preparers Law.
SB 944 (Committee on Business, Professions and Economic
Development) Chapter 432, Statutes of 2011, requires a tax
preparer to annually complete 15 hours of continuing education
in federal taxation and 5 hours in California taxation in
order to receive the "certificate of completion."
REGISTERED SUPPORT / OPPOSITION :
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Support
California Tax Education Council (sponsor)
H & R Block
Jackson Hewitt Tax Service
Opposition
None on file.
Analysis Prepared by : Angela Pontes / B.,P. & C.P. / (916)
319-3301