Home > California CPA Magazine > June 2009 Index > Capitol Beat: SB 691 Marches On

Capitol Beat: SB 691 Marches On

SB 691 Marches On

150-hour legislation moves through the process.

Bruce C. Allen & Jeannie Tindel

On April 28, the Senate Business, Professions and Economic Development Committee voted 7-to-0 to pass SB 691 on to the Senate Committee on Appropriations.

The absence of any “No” votes from the committee, made a very powerful statement, given heavy opposition stemming from the Center for Public Interest Law. The Center had recruited other groups, including the California State NAACP and former Senator Liz Figueroa, who serves on the Ralph Nader-initiated Public Citizen board, to oppose SB 691, the CalCPA-sponsored measure which will bring California licensing in line with the national standards used by the vast majority of other states.

It’s critical that California get this legislation enacted so that California CPAs and their clients can participate in the national CPA reciprocity system that already has been adopted in 48 states.

California law allows two pathways to licensure:

• Pathway 1: A bachelor’s degree to sit for the Uniform CPA Exam and two years of experience prior to licensure.
• Pathway 2: A bachelor’s degree to sit for the Uniform CPA Exam and 150 total semester units, plus one year of experience prior to licensure. Only Pathway 2 meets national standard.

SB 691 will sunset Pathway 1 effective 2014 so California CPAs will be considered equivalent to CPAs from other states and allowed to represent clients’ interests in those states without facing often insurmountable hurdles. All existing CPAs and those licensed before 2014 would be grandfathered in under National Association of State Boards of Accountancy Rules of Substantial Equivalency to ensure that all California taxpayers are represented. 

It’s routine for state changes in licensing laws to grandfather in all existing licensees.

“There are 75,000 CPAs in California and most took a pathway different than the 150-hour route,” said Sacramento lobbyist Jim Gross, speaking at the hearing in favor of the bill. “Many basic functions we must perform for California resident clients require us to cross state lines. Almost every CPA in private practice encounters this daily.”

This fact is supported by many CPAs’ anecdotal accounts. In a survey of CalCPA Government Relations Committee members of the kinds of out-of-state services that CPAs performed for their California clients, the results were enlightening, as many small firms reported that they had clients with business interests in other states.

One California resident client commuted to an East Coast family business and the California CPA was providing the accounting services for the out-of-state family business. Another reported that his client (a Congressional representative who resides in California and Virginia) was still using his firm for compliance and tax advice. Yet another was involved in providing services to a small business that started in California and has since opened offices in other states. While the business is owned by the California resident, California CPAs providing services to the out-of-state offices are actually practicing in the other states.

NASBA has designated California as a substantially equivalent state only until January 2012, but some states are already denying California CPAs substantially equivalent status, saying that only those out-of-state CPAs who meet the 150-hour requirement are allowed to provide services in their states.

Ken Macias, founder of Macias Gini O’Connell, who has been a CPA for more than 30 years, spoke on behalf of his firm and the California Hispanic Chambers of Commerce.

“If we don’t get this passed, we will lose our young talent to other states,” he said.

Macias also related a story about losing $40,000 on an account when he was unable to co-sign an audit in Hawaii because he was a California CPA and unable to obtain a Hawaii license in time to sign off on the audit.

“Since California does not have the 150-hour requirement and Hawaii does, the client gave $40,000 of my work to a Hawaiian firm,” he said.

Patti Bowers, executive officer of the California Board of Accountancy, and Manuel Ramirez, CBA vice president, answered committee member questions about the legislation and the fact that more than two-thirds of California candidates already choose to become licensed under Pathway 2.

The room was full of students, CPA candidates and CPAs who showed their support for the bill and, while not everyone was allowed to speak, all were asked to stand up for the committee to see the diverse group in support of the bill.

Those attending included Jose Pacheco, Richell Scogin, Melanie Mouldenhauer, Daniel Maychen, Heidi Stevens, Jennifer Nielsen, Joseph Heisdorf, Raquel Perez, Irina Berkon, Anton Gladnikov, Bankole Fatunla, Inderpal Johal, Lydia Chan, Charlie Mao, Alice Turner, Lucy Arbuckle, Lisa Naga and Cathy Dyer, Osvaldo Lopez and Wendy Chang. Tom Dalton, professor at the University of San Diego, and Michael Ueltzen, a Sacramento CPA, attended and were prepared to testify in support of the measure. Due to a last-minute change in hearing rules to expedite the process, supporters and opponents were limited to two speakers each.

Thank you to all the candidates, students and CPAs who appeared to support SB 691, and the firms that encouraged them to take the time to provide visible support for this important bill.

Bruce C. Allen is CalCPA’s director of government relations. Jeannie Tindel is CalCPA’s director of legislation.