BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 2560 Hearing Date: June 20, 2016 ----------------------------------------------------------------- |Author: |Obernolte | |----------+------------------------------------------------------| |Version: |March 18, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- Subject: Accountants: practice privileges: out-of-state individuals SUMMARY: Authorizes the California Board of Accountancy to promulgate emergency regulations if it determines, under the current Practice Privilege Program, that allowing individuals from a substantially similar state to practice in California violates its duty to protect consumers. Existing law: 1) Creates the California Board of Accountancy (CBA), within the Department of Consumer Affairs (DCA), and provides that protection of the public shall be the highest priority for the CBA in exercising its licensing, regulatory, and disciplinary functions. (Business and Professions Code (BPC) §§ 5000, 5000.1) 2) Defines "certified public accountant" (CPA) to mean any person who has received from the CBA a certificate of certified public accountant and who holds a valid permit to practice under the provisions of this chapter. (BPC § 5033) 3) Defines "public accountant" (PA) to mean any person who has registered with the CBA as a public accountant and who holds a valid permit for the practice of public accountancy. (BPC AB 2560 (Obernolte) Page 2 of ? § 5034) 4) Authorizes the CBA to revoke, suspend, issue a fine, or otherwise restrict or discipline the holder of an authorization to practice for any act that would be a violation of this code or grounds for discipline against a licensee or holder of a practice privilege, or grounds for denial of a licensee or practice privilege under this code. (BPC § 5050.2) 5) Authorizes an individual whose principal place of business is not in this state and who has a valid and current license, certificate, or permit to practice public accountancy from another state to, subject to the conditions and limitations in this article, engage in the practice of public accountancy in this state under a practice privilege without obtaining a certificate or license under this chapter if the individual satisfies one of the following: a) The individual has continually practiced public accountancy as a certified public accountant under a valid license issued by any state for at least four of the last ten years. b) The individual has a license, certificate, or permit from a state which has been determined by the CBA to have education, examination, and experience qualifications for licensure substantially equivalent to this state's qualifications under BPC Section 5093. c) The individual possesses education, examination, and experience qualifications for licensure which have been determined by the CBA to be substantially equivalent to AB 2560 (Obernolte) Page 3 of ? this state's qualifications under BPC Section 5093. (BPC § 5096) 1) Authorizes the CBA to administratively suspend the right to public accountancy in California under a practice privilege without notice or hearing. (BPC § 5096.4) 2) Provides that if the CBA determines that allowing individuals from a particular state to practice in this state violates the CBA's duty to protect the public, the CBA shall require, by regulation, out-of-state individuals licensed from that state, as a condition to exercising a practice privilege in this state, to file the notification form and pay the applicable fees. (BPC § 5096.21) 3) Requires the CBA to consider specified factors when making the determination that allowing individuals from a particular state to practice in California, violates the CBA's duty to protect the public. (BPC § 5096.21) This bill: 1) Authorizes the CBA to adopt emergency regulations if it makes a determination, in accordance with the Administrative Procedure Act, that allowing individuals from a particular state to practice in California violates the CBA's duty to protect the public. 2) Provides that the adoption of the regulations shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare. FISCAL EFFECT: This bill has been keyed "fiscal" by Legislative Counsel. According to the May 4, 2016 Assembly Appropriations Committee analysis, this bill will result in minor and AB 2560 (Obernolte) Page 4 of ? absorbable costs to the CBA. COMMENTS: 1. Purpose. The California Board of Accountancy is the Sponsor of this bill. According to the Author, this bill "would allow for a more efficient rulemaking process by authorizing the CBA to adopt emergency regulations in the event the [CBA] determines that allowing individuals from a particular state to practice in California pursuant to a practice privilege violates the [CBA's] duty to protect the public." 2. The California Board of Accountancy. The mission statement of the CBA is to protect consumers by ensuring only qualified licensees practice public accountancy in accordance with established professional standards. Created by statute in 1901, the CBA's legal mandate is to regulate the accounting profession for the public interest by establishing and maintaining entry standards of qualification and conduct within the accounting profession, primarily through its authority to license. In California, the accounting profession's licensed practitioners are the CPA and PA. The CBA currently regulates over 97,000 licensees, the largest group of licensed accounting professionals in the nation, including individuals, partnerships, and corporations. 3. Practice Privilege Act. SB 1405 (De León, Chapter 411, Statutes of 2012) was signed by Governor Brown on September 20, 2012, enacting California's "mobility law," which included the Practice Privilege Program. It applies only to the accountancy profession and allows licensees from out-of-state to practice in California without providing the state with notice or a fee, as was required by the former practice privilege program. On July 1, 2013, new statutory provisions associated with the Practice Privilege Program for out-of-state licensees took effect. Under the new law, CPAs licensed in jurisdictions recognized by the CBA as having "substantial[ly] equivalent" licensure standards may practice in California under the CBA's "practice privilege" criteria without any notice or fee requirements. Otherwise, out-of-state licensees must obtain permission from the CBA in order to practice in California if they have experienced any specific events within the prior seven years, and all AB 2560 (Obernolte) Page 5 of ? practice privilege holders practicing in California must self-report any change in conditions that disqualify them. One of the new provisions instituted a new registration requirement for out-of-state licensed accounting firms that want to perform certain specified services for California-headquartered entities. Current law states that if the CBA determines that allowing individuals from a particular state to practice in California would violate its duty to protect consumers, then the CBA may promulgate regulations that would require individuals from that particular state file notice and pay a fee with the CBA. Since the new Practice Privilege Program is a novel policy change that has not yet been widely adopted by other regulatory entities, the Author asserts it will be safest for consumers if the rulemaking process is expedited in the event that the CBA determines there is a danger presented by individuals from a "substantially equivalent" state. This bill aims to resolve this issue by authorizing the CBA to promulgate emergency regulations, should this determination be made. It is also important to note that this new Practice Privilege Program has a sunset date of January 1, 2019. 4. Arguments in Support. The California Board of Accountancy (Sponsor) writes that, "This bill proposes amendments to grant the CBA the legislative authority to adopt emergency regulations pursuant to BPC § 5096.21(a) to expedite the rulemaking process related to participation in the no notice, no fee practice privilege program." SUPPORT AND OPPOSITION: Support: The California Board of Accountancy (Sponsor) Opposition: None on file as June 14, 2016. -- END -- AB 2560 (Obernolte) Page 6 of ?