Capitol Beat: Legislative Success

California CPA October 2009

By Bruce C. Allen and Jeannie Tindel
When the signing of AB 117, CPAs with inactive licenses are required—effective Jan. 1, 2010—to disclose their inactive status when they use the designation. The legislation, authored by CPA Assembly members Roger Niello and Fiona Ma, was introduced at CalCPA’s request and shepherded through the legislative process without receiving a single “No” vote because legislators share CalCPA’s belief in increased transparency.

The bill allows California to join the majority of other states that require CPAs using the designation to either comply with continuing education requirements to renew as active CPAs or disclose the fact that their license is inactive. The Uniform Accountancy Act requires CPAs using the designation to comply with continuing education regardless of how they practice—setting continuing education as the hallmark of a professional. The public, employers, banks and others assume that those who use the designation “CPA” in a business setting are able to practice public accountancy at any time.

“As a former CPA, I am aware that a distinction exists between CPAs who actively maintain their licenses through continuing education and those who do not,” said Niello. “This is an important measure to end misrepresentation and ensure appropriate disclosure so clients know exactly who they’re dealing with when making investment and employment decisions. I have enjoyed working with CalCPA and my co-author, fellow CPA and Assemblywoman Fiona Ma, on this necessary measure to enhance consumer protection.”

Many CPAs in business or industry prepare financial statements that are reviewed by CPAs in public practice. And in July 2004, the California Board of Accountancy indicated that only 15,000 of the then almost 65,000 licensed California CPAs were inactive—meaning that they had not completed continuing education equal to that of active licensees.

It is vital that those involved in providing accounting services to public companies, nonprofits and governments are current on standards and understand their role as professionals maintaining the integrity of the financial marketplace and assisting the gatekeepers. Most businesses in the United States are small businesses that provide livelihoods for a majority of American families. A well-trained CPA with current knowledge of financial markets, reporting standards and industry developments is an invaluable resource to these businesses.

Recognizing that there are situations where the completion of continuing education is not necessary or practical, the legislation will allow CPAs who do not maintain currency of knowledge to use the designation “CPA” as long as it is followed by the word “Inactive.”

CPAs who do not plan to activate their licenses prior to Jan. 1, 2010 should revise their business cards and signature lines to comply with the new law. More information on continuing education requirements is available on CalCPA's website.

California Substantial Equivalent
SB 819 meets the UAA mandates to sunset California’s nonconforming Pathway 1 (bachelor’s degree with 24 semester units in accounting and 24 units in business) Jan. 1, 2014. After that date all California CPA candidates still will be able to sit for the Uniform CPA Exam after meeting those requirements, but candidates for licensing will be required to also meet an ethics education requirement and take additional concentrated education related to increasing the competence of practitioners as part of the total 150-hour requirement.

CPAs licensed prior to 2014 will be grandfathered in as substantially equivalent.

More than 70 percent of California’s candidates are already licensed under the 150-hour pathway. SB 819 will ensure that all California CPAs will be able to participate more fully in the national economy.

With this change, California’s licensing requirements should be considered substantially equivalent and California CPAs will be better positioned to provide services outside California on behalf of California taxpayers.

The legislation was negotiated with the major opposition and legislative leaders. Because of procedural issues, the language was amended into SB 819, the Legislature’s omnibus measure dealing with a number of Department of Consumer Affairs licensing issues.

Advisory committees will be appointed to develop guidelines and recommendations for the implementation of the legislation, and we anticipate that the accounting education community will be actively involved. All parties have agreed that, as we go forward, clean-up legislation may be necessary.

The enactment of SB 819 (Yee, Niello, Ma) will assist California CPAs in bringing resources to California by removing outdated barriers to their practices that placed them at a competitive disadvantage in the national marketplace. In exchange for getting the ability of California CPAs to participate in the new mobility provisions being enacted by other states, it was agreed that CalCPA would not pursue changes to the practice privilege requirements that apply to out-of-state CPAs providing services in California unless agreement is reached on the need and appropriateness of any changes.

Also receiving the governor’s approval were CalCPA-sponsored AB 129 (Ma) to reinstate taxpayer privilege for CPAs and enrolled agents, and CalCPA-supported AB 138 (Hayashi) to require mandatory peer reviews of firms providing audits, reviews and compilations.   
Bruce C. Allen is CalCPA’s director of government relations. Jeannie Tindel is CalCPA’s director of legislation.