BILL ANALYSIS Ó SB 484 Page 1 SENATE THIRD READING SB 484 (Wyland) As Amended May 6, 2013 Majority vote SENATE VOTE :39-0 BUSINESS & PROFESSIONS 10-2 APPROPRIATIONS 13-4 ----------------------------------------------------------------- |Ayes:|Gordon, Bocanegra, |Ayes:|Gatto, Bocanegra, | | |Campos, Eggman, Hagman, | |Bradford, | | |Holden, Maienschein, | |Ian Calderon, Campos, | | |Mullin, Skinner, Ting | |Eggman, Gomez, Hall, | | | | |Holden, Linder, Pan, | | | | |Quirk, Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Jones, Wilk |Nays:|Harkey, Bigelow, | | | | |Donnelly, Wagner | ----------------------------------------------------------------- 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 SB 484 Page 2 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, 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 SB 484 Page 3 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, 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; 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; or, SB 484 Page 4 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; 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 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: SB 484 Page 5 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 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. SB 484 Page 6 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 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. FISCAL EFFECT : According to the Assembly Appropriations Committee, the costs associated with this legislation should be minor and absorbable within existing resources. 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)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 SB 484 Page 7 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. 3)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 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. This bill 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. Analysis Prepared by : Angela Pontes / B.,P. & C.P. / (916) 319-3301 FN: 0001711 SB 484 Page 8