A successful season: CalCPA makes its presence known in the capitol.

CalCPA had a successful legislative session representing the interests of its members and the CPA profession in California.

Practice Privilege

CalCPA-sponsored AB 1868 (Bermudez), which would correct the practice privilege statute that went into effect January 2006, made it to the governor despite opposition that mistakenly thought the legislation could allow the sale or promotion of abusive tax shelters to Californians with impunity.

As proposed, AB 1868 would have allowed out-of-state CPAs to perform tax services for California taxpayer clients without obtaining a practice privilege or license from the California Board of Accountancy--as long as the CPA did not physically enter California or solicit California clients.

The exemption would have been in place through Jan. 1, 2011, so that practice privilege issues could be worked out without impacting California taxpayers. Interpretation of California's current practice privilege statute would require an out-of-state CPA to register with the CBA prior to providing tax services for a business headquartered in another state, but with a physical presence in California.

This is an overly broad interpretation which, if adopted by other states, could require CPAs to register in all states where their clients have operations.

Due to the opposition's concerns, CalCPA removed the exemption for tax services and inserted language encouraging the CBA to adopt a lower registration fee for out-of-state CPAs who want to obtain a practice privilege to provide tax services to California businesses. With the amendment, opposition was dropped and it's anticipated the governor will sign the bill.

No notification will be required of CPAs providing tax preparation services to individuals or estates as long as the estate relates to an individual who was a client at the time of death.

AB 1868 also allows CPAs to provide other services in California through practice privilege without requiring that the firm be licensed in California.

As initially written, California's practice privilege statute did not allow foreign accountants to obtain a practice privilege or provide services incidental to an engagement in another country. AB 1868 removes the obstacle for foreign accountants, who will be allowed to practice here if it's incidental to an engagement in their home country and performed under that country's standards.

CalCPA hopes reasonable regulation in California will support reasonable regulation in other states.

The AICPA has appointed a Mobility Task Force to review issues related to impediments to practice across state lines. Michael Ueltzen, CPA, former CalCPA chair and former chair of CalCPA's Government Relations Committee, is a member of that task force.

Trustee Licenses

CalCPA was successful in seeing that SB 1550 (Figueroa) related to licensing for individuals acting as conservators, guardians and/or trustees for two or more unrelated individuals or trusts was amended to exempt CPAs acting within the scope of their license from the licensing requirements. SB 1550 is awaiting action by the governor.

Special Districts Bill and Auditors

Due to opposition from CalCPA and several special districts, SB 393 (Ortiz) did not become law. The bill would have increased state regulation of special districts, including state controller quality reviews of special district auditors and new reporting requirements. The bill also would have allowed the controller to suspend firms from auditing special districts for up to three years and mandated audit partner rotation every six years.

Abusive Tax Shelter or Normal Tax Planning?

SB 747 (Machado) targeted those who plan, promote or sell abusive tax shelters and lowers the standard of proof for the FTB in proving cases against practitioners. CalCPA is strongly opposed to abusive tax shelters, but the way SB 747 was drafted, it could be used to force settlements on innocent taxpayers and practitioners. The bill was not passed.

Financial Literacy Efforts

CalCPA-sponsored ACR 120 (Niello), which designated April 2006 as Financial Literacy Month and mentioned CalCPA's Financial Literacy Summit, was passed by the Legislature and chaptered. The governor also proclaimed April Financial Literacy Month.

Niello also authored AB 2787, which would have included an understanding of personal finances as part of the history/social science curriculum. AB 2787 was not passed.

Tax Amnesty

AB 2344 (Chu) was amended to call for another tax amnesty period for the FTB and a first-time amnesty for unemployment taxes. The bill created new penalties that could be applied to all taxpayers and changed the burden of proof from "knew" to "should have known," which is an impossibly high standard and does not conform to federal law.

CalCPA opposed those sections of the bill that could have been applied to normal taxpayers and practitioners. After meetings with the bill's author and sponsor, conceptual agreement was reached that California's existing burden of proof would not be changed and the increased penalties would only apply to actual tax evasion situations.

The bill failed for reasons unrelated to CalCPA's opposition.

Mandatory Peer Review Delay Proposed and License Fee Reduction

SB 503 (Figueroa), the CBA-sponsored legislation to delay implementation of mandatory peer review and to allow for flexibility in setting licensure fees and budgeting, made it to the governor. CalCPA was neutral on the legislation.

Bruce C. Allen is CalCPA's director of government relations.