BILL ANALYSIS Ó
-----------------------------------------------------------------------
|Hearing Date:May 2, 2011 |Bill |
| |No:306 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 306Author:De Leon
As Amended:April 25, 2011 Fiscal:Yes
SUBJECT: Accountancy.
SUMMARY: Reinstates a 5-day "safe harbor" period that had previously
expired, to provide that an individual shall not be deemed to be in
violation of the practice privilege requirements solely because he or
she begins practicing as a certified public accountant in California
prior to notifying the as required, provided that notice is given to
the California Board of Accountancy within five business days.
Existing law:
1) Licenses and regulates some 40,000 certified public accountants
(CPAs) under the Accountancy Act by the California Board of
Accountancy (CBA) within the Department of Consumer Affairs (DCA).
2) Prohibits a person from engaging in the practice of public
accountancy in this state unless he or she holds either a valid
permit issued by the CBA or a practice privilege, as specified.
(Business and Professions Code (BPC) § 5096.1)
3) Provides that 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 may, subject to certain conditions and limitations, engage in
the practice of public accountancy in California under a practice
privilege without obtaining a certificate or license under from the
CBA if the individual satisfies one of the following: (BPC § 5096
(a))
SB 306
Page 2
a) Has continually practiced public accountancy as a CPA under a
valid license issued by any state for four of the last ten years.
b) Holds a license, certificate, or permit from a state which the
CBA had determined to have education, examination, and experience
qualifications for licensure substantially equivalent to
California's requirements.
c) Possesses education, examination, and experience
qualifications which the CBA has determined to be substantially
equivalent to this state's qualifications.
1) Requires, to obtain a practice privilege, an individual who meets
the requirements of Item # 3) above must: (BPC § 5096 (c))
a) Notify the CBA of the individual's intent to practice, as
specified.
b) Pay the required $100 fee.
2) Requires the CBA to extend the current "safe harbor" period
pertaining to practicing accountancy without a practice privilege
for up to 5 days prior to submitting a notification form to the
CBA, from December 31, 2007, to December 31, 2010. (BPC § 5096.14)
3) CBA regulation provides: "During the period January 1, 2006,
through December 31, 2010, an individual shall not be deemed to be
in violation of the practice privilege provisions solely because he
or she begins the practice of public accounting in California prior
to submitting the Notification Form, provided the Notification Form
is submitted within five business days of the date practice
begins." (Section 30 of Article 4 of Division 1 of Title 16 of the
California Code of Regulations)
This bill:
1) Provides that an individual shall not be deemed to be in violation
of the practice privilege requirements solely because he or she
begins practicing as a CPA in California prior to notifying the CBA
as required, provided that notice is given to the CBA within five
business days. An individual who properly notifies the CBA within
the five day period shall be deemed to have the practice privilege
from the first day of practice in California unless that individual
SB 306
Page 3
fails to submit the required fee to the CBA in a timely manner.
2) Specifies the following with regard to this provision:
a) The provision does not apply in those instances in which
prior approval by the CBA is required because the individual has
a disqualifying condition, as specified.
b) Authorizes the CBA, in addition to any other sanction, to
impose a fine for notifying the CBA more than five business days
after beginning practice in California.
3) Repeals the obsolete requirement for the CBA to amend a specified
regulation to extend the current "safe harbor" period from December
31, 2007, to December 31, 2010.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author. According to the
Author, the purpose of the bill is to establish a 5-day safe harbor
for a person practicing accountancy under a practice privilege,
subject to specified requirements. The bill would authorize the
CBA to fine an individual who notifies the CBA of his or her
practice more than 5 days after beginning practice within the
state.
2. Background. California's safe harbor provision which allowed
out-of-state CPAs five business days in which to file a Practice
Privilege Notification Form following the commencement of
practicing in California expired on December 31, 2010. As a
result, a Practice Privilege notification Form must be filed with
the CBA prior to practicing public accountancy in the state.
BPC § 5096.14 was added in 2006 by AB 1868 (Bermudez, Chapter 458,
Statutes of 2006) and was intended to give an "introductory" period
for out-of-state CPA's to gain familiarity with California's new
Practice Privilege requirements. The safe harbor period was
originally set to expire in 2007. AB 1868 required the CBA to
extend the safe harbor period to match the sunset date for the
Practice Privilege Program in conjunction with Temporary and
Incidental provisions which AB 1868 also reinstated. However, in
SB 306
Page 4
2009, the SB 819 (Yee, Chapter 308, Statutes of 2009) removed the
sunset date, yet the safe harbor period was still treated as
"introductory," and was not addressed.
The CBA has considered several alternatives to resolve the problem
about re-creating the safe harbor period, including pursing
regulatory action, adopting emergency regulations, or seeking a
statutory solution through legislation. At the CBA's March
meeting, the CBA determined it would support a legislative solution
to permanently establish the 5-day safe harbor period.
3. Related Legislation. SB 819 (Yee, Chapter 308, Statutes of 2009)
increased the education requirement to obtain a CPA license from
120 hours to 150 hours effective January 1, 2014. These provisions
were originally introduced in SB 961 (Yee) in 2009. The bill also
removed the sunset date on the practice privilege provisions.
AB 138 (Hayashi, Chapter 312, Statutes of 2009) required, until
January 1, 2014, California-licensed accounting firms to undergo a
peer review of their accounting and auditing services every three
years.
SB 542 (Price) extends the sunset date on the Board of Accountancy
from January 1, 2012 to January 1, 2016; and extends the CPA peer
review provisions to correspond with the CBA's sunset date. That
bill is set for hearing on May 2 in this Committee.
SB 1543 (Figueroa, Chapter 921, Statutes of 2004) established the
practice privilege provisions.
4. Arguments in Support. Deloitte LLP , Ernst & Young LLP , Grant
Thornton LLP , KPMG LLP , PricewaterhouseCoopers LLP support the bill
stating that existing law requires that a person practicing public
accountancy in California be licensed by the state or have obtained
a practice privilege. This bill would allow accountants seeking to
practice in California a five-day period in which to notify CBA of
their actions through the filing of a practice privilege form. By
rule, CBA has allowed a five day "safe harbor" for filing the
practice privilege form, however, the rule sunsetted on December
31, 2010. The bill now would reestablish the five- day filing safe
harbor and make these changes permanent.
SB 306
Page 5
SUPPORT AND OPPOSITION:
Support:
Deloitte LLP
Ernst & Young LLP
Grant Thornton LLP
KPMG LLP
PricewaterhouseCoopers LLP
Opposition:
None received as of April 27, 2011
Consultant:G. V. Ayers