BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 306|
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UNFINISHED BUSINESS
Bill No: SB 306
Author: De León (D)
Amended: 8/22/11
Vote: 27 - Urgency
SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 9-0, 5/2/11
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Vargas, Walters, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 39-0, 5/23/11 (Consent)
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Hernandez,
Huff, Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal,
Negrete McLeod, Padilla, Pavley, Price, Rubio, Runner,
Simitian, Steinberg, Strickland, Vargas, Walters, Wolk,
Wright, Wyland, Yee
NO VOTE RECORDED: Harman
ASSEMBLY FLOOR : 78-0, 8/25/11 (Consent) - See last page
for vote
SUBJECT : Accountancy
SOURCE : Author
DIGEST : This bill reinstates a five-day safe harbor
period that has expired, to allow a temporary California
CONTINUED
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practice privilege for certified public accountants
licensed in other states.
Assembly Amendments provide 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 or to secure a
practice privilege if they meet all of the specified
requirements, and add an urgency clause.
ANALYSIS :
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.
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 10 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.
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C. Possesses education, examination, and experience
qualifications which the CBA has determined to be
substantially equivalent to this state's
qualifications.
4. Requires, to obtain a practice privilege, an individual
who meets the requirements of #3 above must:
A. Notify the CBA of the individual's intent to
practice, as specified.
B. Pay the 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. 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."
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 fails to submit the
required fee to the CBA in a timely manner.
2. Specifies the following with regard to this provision:
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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.
4. 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
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
or have their place of business in California.
D. The individual does not assert or imply that
he/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.
F. The individual's practice of public accountancy in
this state specifically relates to servicing the
engagement for the client located in another state.
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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.
Section 5096.14 of the Business and Professions Code 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 2009, 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
five-day safe harbor period.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Per Assembly Business, Professions and Consumer
Protection Committee analysis of 7/5/11) (Unable to
reverify)
Deloitte LLP
Ernst & Young LLP
Grant Thornton LLP
KPMG LLP
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PricewaterhouseCoopers LLP
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 allows 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. This bill
reestablishes the five- day filing safe harbor and make
these changes permanent.
ASSEMBLY FLOOR : 78-0, 8/25/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Bonilla, Gorell
JJA:mw 8/26/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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