BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1405|
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UNFINISHED BUSINESS
Bill No: SB 1405
Author: De León (D)
Amended: 8/23/12
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 9-0,
4/16/12
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Strickland, Vargas, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 37-0, 5/14/12 (Consent)
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Vargas, Walters, Wolk, Wright, Yee
NO VOTE RECORDED: Runner, Strickland, Wyland
ASSEMBLY FLOOR : Not available
SUBJECT : Accountancy: military service: practice
privilege
SOURCE : California Certified Public Accountant
DIGEST : This bill revises California's practice
privilege statutes for the practice of accountancy to allow
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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).
Assembly Amendments add numerous provisions to the bill
related to practice privilege statutes for the practice of
accountancy in California by out-of-state licensees.
ANALYSIS :
Existing law:
1. Licenses and regulates some 80,000 CPAs and PAs under
the Accountancy Act by the CBA within the Department of
Consumer Affairs (DCA).
2. Authorizes any CBA or bureau within the DCA to
establish, by regulation, a system for an inactive
license category for persons not actively engaged in
practice, subject to certain provisions, including:
(Business and Professions Code (BPC) Section 462)
3. Establishes fees for the renewal of a CPA license. (BPC
Section 5134)
4. Requires each licensee to complete specified continuing
education requirements as condition of license renewal.
(BPC Section 5027)
5. Requires each CPA firm to undergo a peer review at least
every three years as a condition of registration
renewal. (BPC Section 5076)
6. Authorizes any licensee whose license expired while
he/she was on active duty as a member of the California
National Guard or the United States Armed Forces to
reinstate his/her license without examination or penalty
if certain requirements are met. (BPC Section 114)
7. Authorizes an individual whose principal place of
business is not in this state, and who has a valid and
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current license, certificate, or permit, to practice
public accountancy from another state, and to engage in
the practice of public accountancy in this state under a
practice privilege if a condition is satisfied. Under
existing law, if such a condition is met, the
individual, in order to obtain a practice privilege, is
required to, among other things, provide notice to the
CBA by submitting a notification form and pay fees, as
specified.
8. Provides that an individual with a practice privilege is
subject to the personal and subject matter jurisdiction
and disciplinary authority of the CBA and the state
courts and is required to comply with the accountancy
provisions applicable to licensees. Under existing law,
except as otherwise specified, a practice privilege
expires one year from the date of the notice to the CBA.
9. Authorizes the CBA to deny practice privileges using
specified procedures. Existing law prohibits an
individual with a practice privilege from signing an
attest report unless he/she meets specified experience
requirements and completes any continuing education or
other conditions as required by the CBA.
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
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the CBA, a fee, or any other requirement imposed by the
CBA, and makes 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
U.S. 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.
Disclosure of this information shall not be considered
discipline.
8. Requires CBA to adopt emergency regulations in
accordance with the Administrative Procedure Act to
establish policies, guidelines and procedures to
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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 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 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
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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.
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. This bill functions
as something of a pilot by enacting the changes only until
January 1, 2019, when existing law will once again be
operative. This bill requires the CBA to evaluate whether
the changes this bill enacts are more, less, or equivalent
to existing law in the protection they afford the public,
among other things.
This bill also allows CBA licensees to have a permit placed
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on MIS.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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.
SUPPORT : (Verified 8/28/12)
California Certified Public Accountant (source)
Deloitte LLP
Ernst & Young LLP
Grant Thornton LLP
KPMC LLP
PricewaterhouseCoopers LLP
ARGUMENTS IN SUPPORT : According to the author's office,
this bill exempts a certified public accountant or a public
accountant from the biennial renewal fee while the permit
holder is engaged in full-time training or active service
in the California National Guard, U.S. Army, Navy, Air
Force, or Marine Corps.
According to the author's office, currently CPAs or PAs are
required to pay the biennial fee for the renewal of each of
the permits to engage in the practice of public
accountancy, an amount up to $250.
The author's office states that CPAs who are engaged in
full-time training or active service in the U.S. Army,
Navy, Air Force, or Marine Corps cannot practice
accountancy and should not be burdened with the cost of
licensing when they indeed cannot practice and are actively
engaged in military service. Existing law does not provide
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exemptions for military service, and the Author states that
this bill addresses the issue.
JJA:k 8/28/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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