BILL ANALYSIS Ó
SB 1405
Page 1
SENATE THIRD READING
SB 1405 (De León)
As Amended August 20, 2012
Majority vote
SENATE VOTE :37-0
BUSINESS & PROFESSIONS 9-0
APPROPRIATIONS 17-0
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|Ayes:|Hayashi, Bill Berryhill, |Ayes:|Gatto, Harkey, |
| |Allen, Butler, Eng, | |Blumenfield, Bradford, |
| |Hagman, Hill, Ma, Smyth | |Charles Calderon, Campos, |
| | | |Davis, Donnelly, Fuentes, |
| | | |Hall, Hill, Cedillo, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
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SUMMARY : Revises California's practice privilege statutes for
the practice of accountancy to allow out-of-state licensees to
practice in California with no notice or fee paid to the
California Board of Accountancy (CBA), and allows certified
public accountants (CPAs), public accountants (PAs) and public
accounting firms to have their permits placed on military
inactive status (MIS). Specifically, this bill :
1)Allows the CBA to register out-of-state accounting firms for
the purpose of allowing them to satisfy current-law
registration requirements, provided that the CPAs providing
services in California qualify for the practice privilege and
the firms satisfy all other requirements to register in this
state, as specified.
2)Repeals, beginning July 1, 2013, and ending January 1, 2019,
the requirement that a qualified individual notify the CBA of
intent to practice and pay a fee in order to obtain a practice
privilege in California, and makes conforming changes.
3)Allows, beginning July 1, 2013, and ending January 1, 2019, a
qualified individual to practice accountancy in California
under a practice privilege without notice to the CBA, a fee,
or any other requirement imposed by the CBA, and makes
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conforming changes.
4)Allows an individual qualified to practice accountancy in
California under a practice privilege to perform the following
services only through a firm of CPAs that has obtained a
registration from the CBA: an audit or review of a financial
statement for an entity headquartered in California; a
compilation of a financial statement when that person expects,
or reasonably might expect, that a third party will use the
financial statement and the compilation report does not
disclose a lack of independence for an entity headquartered in
California; or, an examination of prospective financial
information for an entity headquartered in California.
5)Maintains current law provisions subjecting those who hold a
practice privilege to the jurisdiction and disciplinary
authority of the CBA and California's courts, as specified,
and additionally requires a practice privilege holder to cease
practice, notify the CBA, and abide by additional practice
restrictions under specified conditions.
6)Provides conditions and procedures under which a practice
privilege can be revoked, which are substantially similar to
current law provisions for the denial of a practice privilege,
including disqualifying conditions.
7)Requires, beginning January 1, 2019, the CBA to consult the
Public Company Accounting Oversight Board and the United
States Securities and Exchange Commission every six months to
identify out-of-state licensees who may have disqualifying
conditions, or may be obliged to cease practice, and to
disclose whether those licensees are lawfully permitted to
exercise the practice privilege.
8)Requires CBA to adopt emergency regulations in accordance with
the Administrative Procedure Act to establish policies,
guidelines and procedures to initially implement this bill, as
specified.
9)Requires CBA to add a feature to its Web site that allows
consumers to obtain information about those operating under a
practice privilege that is at least equal to the information
that was available to consumers through the CBA Web site
before January 1, 2013, through the practice privilege form
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previously filed by out-of-state licensees, as specified.
10)Allows CBA to require, by regulation, licensees from a
particular state to file notice and pay a fee for a practice
privilege if CBA determines that allowing individuals from
that state to practice under a practice privilege violates the
CBA's duty to protect the public, as specified.
11)Requires, until July 1, 2017, CBA to report to the relevant
policy committees of the Legislature, the director of the
Department of Consumer Affairs (DCA), and the public
preliminary determinations made pursuant to 10) above, no
later than July 1, 2015. Before January 1, 2016, and
thereafter as it deems appropriate, CBA must review its
determinations to ensure that it is in compliance with this
bill's provisions, as specified.
12)Requires, by July 1, 2014, the CBA to convene a stakeholder
group consisting of members of the CBA, CBA enforcement staff,
and representatives of the accounting profession and consumer
representatives to consider whether the provisions of this
bill are consistent with CBA's duty to protect the public and
whether provisions of this bill satisfy the objectives of
California's accounting profession stakeholders, including
consumers.
13)Requires, by January 1, 2018, the CBA to prepare a report to
be provided to the relevant policy committees of the
Legislature, the director of DCA, and the public that explains
the CBA's implementation of this bill, whether its provisions
are more, less, or equivalent in the protection it affords the
public than current law, and how other state boards of
accountancy have addressed referrals to those boards from the
CBA, the timeframe in which those referrals were addressed,
and the outcome of investigations conducted by those boards.
14)Allows, beginning January 1, 2014, a holder of a permit to
practice pubic accountancy to apply to have his or her permit
placed in an MIS if the permit holder is engaged in, and
provides sufficient evidence of, active duty as a member of
the California National Guard or the U.S. Armed Forces, as
specified.
15)Makes additional conforming and technical changes.
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FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Waiving the fees for out of state CPAs who wish to practice in
California would reduce revenue by approximately $200,000 per
year. A $50,000 reduction in expenditures due to reduced
workload would partially offset the loss of revenue.
2)Costs associated with convening the workgroup and producing
the required report for the Legislature would be minor and
absorbable within existing resources.
COMMENTS : The practice privilege provisions of this bill
represent a multi-year effort on the part of the accounting
profession to facilitate cross-border practice. California's
current practice privilege program requires out-of-state CPAs to
provide notice of their intent to practice accountancy in
California to CBA by filling out a form, which can be completed
online, and paying a $100 fee. The practice privilege form is
four pages in length and requires basic professional identifying
information such as name, address, CPA certificate, nature of
the intended practice in California, etc.
This bill eliminates the requirement to submit the form and fee
to CBA beginning July 1, 2013, and ending January 1, 2019, and
instead allows out-of-state licensees to practice under a
practice privilege without any fee or notification to the CBA.
It maintains many of the consumer protection provisions that
exist in current practice privilege statutes, adds stop-practice
provisions, and adds consumer information provisions by
requiring the CBA to post information on its Web site about
out-of-state licensees operating under a practice privilege.
The bill functions as something of a pilot by enacting the
changes only until January 1, 2019, when current law will once
again be operative. The bill requires the CBA to evaluate
whether the changes the bill enacts are more, less, or
equivalent to current law in the protection they afford the
public, among other things.
This bill also allows CBA licensees to have a permit placed on
MIS.
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Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301
FN: 0005016