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
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          |Author:   |Obernolte                                             |
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          |Version:  |March 18, 2016                                        |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Mark Mendoza                                          |
          |:         |                                                      |
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             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  







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             § 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  








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               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  








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          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  








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             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 --
          









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