BILL ANALYSIS Ó
SB 306
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 306 (De Leon) - As Amended: June 27, 2011
SENATE VOTE : 39-0
SUBJECT : Accountancy
SUMMARY : Reinstates a five-day "safe harbor" period that has
expired, to allow a temporary California practice privilege for
certified public accountants (CPAs) licensed in other states.
Specifically, this bill :
1)Provides that an individual holding a valid and current
license, certificate, or permit to practice public accountancy
from another state is exempt from the requirement to obtain a
permit to practice issued by the California Board of
Accountancy (CBA) or to secure a practice privilege if all of
the following conditions are satisfied:
a) The individual's client is located in another state;
b) The individual's engagement with the client relates to
work product to be delivered in another state;
c) The individual does not solicit California clients;
d) The individual does not assert or imply that he or she
is licensed to practice public accountancy in California;
e) The individual's practice of public accountancy in this
state on behalf of the client located in another state is
of a limited duration, not extending beyond the period
required to service the engagement for the client located
in another state; and,
f) The individual's practice of public accountancy in this
state relates to servicing the client located in another
state.
2)Provides that an individual shall not be deemed to be in
violation of California practice privilege requirements for
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CPAs solely because he or she begins practicing as a CPA in
California prior to notifying CBA as required under current
law, 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 a practice
privilege from the first day of practice in California unless
that individual fails to timely submit a required fee to the
CBA.
3)Specifies that this provision does not apply in instances in
which prior approval by the CBA is required because the
individual has a disqualifying condition, as specified.
4)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.
5)Repeals an 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.
EXISTING LAW
1)Licenses and regulates 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 California unless he or she holds either a
valid permit issued by the CBA or a practice privilege, as
specified.
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:
a) Has continually practiced public accountancy as a CPA
under a valid license issued by any state for four of the
last ten years;
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b) Holds a license, certificate, or permit from a state
which the CBA has determined to have education,
examination, and experience qualifications for licensure
substantially equivalent to California's requirements; or,
c) Possesses education, examination, and experience
qualifications which the CBA has determined to be
substantially equivalent to this state's qualifications.
4)To obtain a practice privilege, requires an individual who
meets the requirements of 3), above, to notify the CBA of the
individual's intent to practice, as specified, and pay a
required $100 fee.
5)Requires the CBA to extend the current "safe harbor" period
pertaining to practicing accountancy without a practice
privilege for up to five days prior to submitting a
notification form to the CBA, from December 31, 2007, to
December 31, 2010.
6)Provides, pursuant to CBA regulation, that, "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."
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "On
December 31, 2010 California's safe harbor provision, which
allowed out of state CPAs five business days to file a practice
privilege notification form following the commencement of
practice in California, expired. Since then, the CBA has
received various concerns and comments and deliberation on this
matter is pending at the regulatory level. This bill would
address this concern by re-establishing the safe harbor
provision previously in place."
Background . California's "safe harbor" provision, which allowed
out-of-state CPAs five business days to file with the Board a
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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.
The safe harbor provision was enacted 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
(Bermudez), Chapter 458, Statutes of 2006, 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 that AB 1868 also reinstated. However, 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 of 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 five-day safe harbor
period.
Technical amendments . The author has provided the following
language as technical amendments to the bill:
On page 2, line 13, after "clients" insert: ",or have his
or her principal place of business in this state"
On page 2, line 20, after "state" insert: "specifically"
On page 2, line 21, after "the" insert: "engagement for
the"
Support . Deloitte LLP, Ernst & Young LLP, Grant Thornton LLP,
KPMG LLP, and PricewaterhouseCoopers LLP write, "SB 306 would
allow accountants seeking to practice in California a five-day
period in which to notify the California Board of Accountancy
("CBA") of their actions through the filing of a practice
privilege form. By rule, the CBA has allowed a five day "safe
harbor" for filing the practice privilege form. Unfortunately,
this rule expired on December 31, 2010. SB 306 proposes to
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re-establish the five day filing safe harbor, and to make these
changes permanent.
"SB 306 also clarifies what activities in this state trigger the
requirement to obtain a practice privilege. Until January 1,
2011, Business and Professions Code Section 5050(b) provided
that a practice privilege was not necessary if an individual was
practicing temporarily in this state, incident to practice in
another state. Section 5050(b) contained a sunset provision,
which caused it to lapse at the end of last year. The lapse of
Section 5050(b) has created uncertainty concerning what
activities currently trigger the practice privilege requirement.
"SB 306 clarifies that an individual that maintains his or her
principal place of business in another state is not required to
obtain a practice privilege, under specified circumstances.
Specifically, SB 306 provides that a practice privilege is not
required if: (1) the individual's client is located in another
state; (2) the engagement relates to work product to be
delivered in another state; (3) the individual does not solicit
clients in this state; (4) the individual does not assert or
imply that he or she is licensed here; (5) the individual's
practice here is of limited duration; and (6) the individual's
activities here specifically relate to servicing the engagement
for the out of state client."
Related legislation . AB 431 (Ma) authorizes the Board to
establish a retired status license for CPAs and PAs. This bill
is pending in Senate Appropriations Committee.
SB 542 (Price) extended the sunset date on the Board and
extended CPA peer review provisions to correspond with the
Board's sunset date. This bill has been amended to address an
unrelated subject.
SB 773 (Negrete McLeod) establishes requirements for ethics
courses that CPAs must complete to gain licensure. This bill is
pending in Assembly Business, Professions and Consumer
Protection Committee.
Previous legislation . SB 819 (Yee), Chapter 308, Statutes of
2009, makes several non-controversial, minor, non-substantive
and technical changes to various provisions pertaining to DCAs
regulatory boards, including removing the sunset date on the
practice privilege program.
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AB 1868 (Bermudez), Chapter 458, Statutes of 2006, extends the
operative date of the practice privilege program.
SB 1543 (Figueroa), Chapter 921, Statutes of 2004, extends the
sunset date of the CBA and makes other changes to the
Accountancy Act, including establishing practice privilege
provisions.
REGISTERED SUPPORT / OPPOSITION :
Support
Deloitte LLP
Ernst & Young LLP
Grant Thornton LLP
KPMG LLP
PricewaterhouseCoopers LLP
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301