Florida court favors Amex employee in holding-out case.

An employee of American Express Tax and Business Services was granted summary judgment in the latest round in the ongoing court skirmishes between Amex and state boards of accountancy seeking to enforce their right to regulate the practice of public accounting.

Stephen Miller, a CPA employed by the Amex unit (formerly IDS Financial Services), had sued the Florida Board of Accountancy (IDS Financial Services Inc. and Miller v. Florida Board of Accountancy), in the U.S. District Court for the Northern District of Florida. He claimed that his first amendment free-speech rights were violated by Florida's statute preventing CPAS from holding out-or advertising themselves as CPAs-when performing non-attest services while employed by non-cpa-owned firms. In agreeing, the trial court reportedly based its opinion on the 1994 Ibanez case (also in Florida), in which the U.S. Supreme Court ruled that under principles of conimercial free speech, a CPA can use the CPA designation as long as he or she is licensed. The American Institute of CPAs had submitted amicus curiae briefs backing the Florida board in both the Ibanez and Miller cases and stated its position that requiring that CPAs control the firms in which they practice public accounting is in the public interest.

The Institute is "disappointed in the result reached by the district court in Florida," AICPA president Barry C. Melancon said in a statement. "We believe it is wrong because it denies the right of the Florida board to protect the public interest through restricting the type of firms in which CPAs practice in connection with nonattest services." Melancon added that the court does not appear to restrict the Florida board from regulating CPAs and CPA firms in connection with attest services. "The decision is limited to the state of Florida and does not affect the regulations of other states or the Institute's rules. We expect the Florida State Board of Accountancy will appeal this result;" the statement noted. The court left open the possibility that the Florida board could require, as part of its regulation, a disclaimer regarding the unlicensed nature of American Express.

"We understand the concern that many small practitioners have regarding a decision such as this," Melancon noted. "Rest assured that the AICPA board of directors and its special committee on regulation and structure of the profession are actively monitoring developments in this case and are involved in supporting results that are

RELATED ARTICLE: Clarification

In the article "The Choice of Organizational Form" (JofA, Dec.95, page 45), the second footnote to exhibit 4, page 50, may have confilsed some readers.

Here's an explanation of the tax status of S corporations in the three states listed:

* Michigan imposes its single business tax on S corporations. Thus, a corporation cannot avoid being taxed at the entity level by electing S status.

* New Jersey imposes a 2% tax on all corporations, including S corporations. The effect in New Jersey is similar to that in Michigan.

* Texas imposes its franchise tax on both regular and S corporations, with the effect of disregarding S status. beneficial to CPAs. The issue is far from permanently resolved."

The Texas State Board of Public Accountancy already has adopted licensing requirements that describe when the CPA designation can be used and which types of firms are qualified to register with the state board as public accounting firms; Texas requires disclaimers in some cases. (See "Texas Adopts Rules on CPA Designation; AICPA to Seek Broad Resolution," JofA, Jul.95, page 26.) And in mid-1995, the Texas board sued American Express Tax and Business Services, charging it with practicing public accountancy without a license or registration (see JofA, Nov.95, page 20). According to William Treacy, executive director of the Texas board, "The case is still in the discovery stage and we expect a decision in late February." Other state boards of accountancy have been watching developments on this thorny issue since the success of the Ibanez challenge to Florida and Texas' response.