CalCPA CPA Day at the Capitol Briefing

1. CalCPA CPA Day at the CapitolBriefing Your participation makes the difference.

2. AB 2473 (Niello/Ma) • Mobility legislation authored by the two CPAs in the Legislature—Roger Niello (R-Sacramento) and Fiona Ma (D-San Francisco). • Sponsored by the California Board of Accountancy, which unanimously endorses the mobility concept contained in the legislation. • AB 2473 parallels the mobility sections of the Uniform Accountancy Act developed by the American Institute of CPAs and the National Association of State Boards of Accountancy (NASBA). NASBA is composed of the state boards of accountancy in all U.S. jurisdictions.

3. AB 2473 (Niello/Ma) • Mobility will allow out-of-state CPAs to represent California taxpayers and allow California CPAs to represent their clients in other states. • Mobility has been passed by 20 states without any controversy and by the end of the year it should be passed in at least 10 more.

4. AB 2473 • CPAs are required to follow the laws of the state where they are providing service and may be subject to discipline by the states where they provide services and the state where they are licensed. • No CPA may open an office in another state without a license in that state. • Audit a California-headquartered company—you must register with California Board of Accountancy.

5. AB 2473 • For California CPAs to be able to serve their clients’ interests outside California, California must conform with the national 150-hour licensing standard. • Under AB 2473, all new licensees must conform to the 150-hour standard by 2012. • Upon enactment of the new licensing standard, all current California CPAs will be grandfathered in and become substantially equivalent.

6. AB 2473 • Allowing businesses and consumers to choose their service providers for work performed inside and outside of California is critical to remaining competitive in a global marketplace. • Uniformity eliminates a patchwork of conflicting and confusing requirements and allows consumers and businesses to choose the experts they want to represent all their financial interests.

7. AB 2473 Status • AB 2473 was scheduled for hearing in the Assembly Business and Professions Committee April 9, but it was removed from the agenda at the profession’s request because further education needed to take place with legislators. AB 2473 will need a “rule waiver” to move forward. • While AB 2473 was pulled off calendar because it wasn't the right time,this is an issue that has begged for remedy for a number of years, and it is an issue that other states have dealt with, are dealing with or will deal with.  • Your job on CPA Day is to help educate legislators and to ask them to support a rule waiver when the time comes.

8. AB 2473 • Tell the story in your own words but follow the concepts here. • This is a real problem that demands a real solution. • Opponents are raising objections unrelated to reality. It is important that you understand what the objections are and what the truth is. Refer to the myth/fact background piece and then return to your talking points and why this is important for California consumers and businesses. • Who is opposing? The major opposition comes form the Center for Public Interest Law a group affiliated with the University of San Diego Law School. That position is not supported by the University itself and, in fact, the University of San Diego accounting faculty support AB 2473. • CPIL has motivated others to oppose AB 2473 including Consumer Attorneys of California; various labor unions; Bill Lockyer, California treasurer; Consumers Union and former Senator Liz Figueroa.

9. Myths vs. FACTS • Myth: Opponents make wild claims that AB 2473 would somehow allow “fake” CPAs, criminals and those under investigation for malpractice to provide services in California. • FACT: Current law bars felons and those under investigation for malpractice or any other misdeeds from practice in California and AB 2473 would continue that prohibition.

10. Myths vs. FACTS • Myth: Opponents allege AB 2473 will imperil the fiscal lives of California families and small businesses because California consumers will not have access to information about the credentials or background of the out-of-state CPAs they choose or “Google.” • FACT: If California consumers require the services of a licensed CPA from another state, they can visit that CPA’s state board website or call the board directly to check the person’s background. Every state discloses background and any disciplinary actions either online or by phone. • FACT: CPAs are generally chosen by their clients based on knowledge of the CPA gained either through referral or personal relationships. The scenario the opponents portray is unlikely, but even if pursued, consumers have the ability to check.

11. Myths vs. FACTS • Myth: Consumers are currently protected by the fact that the California Board of Accountancy website lists the names of out-of-state CPAs who have registered with the state. • FACT: The CBA lists the names of out-of-state CPAs who register in California, but any background checks on these individuals is done well after their registration. The current system could actually give a consumer a false sense of comfort that those listed are vetted and “approved.” • FACT: “Fake” CPAs or “bad actors” would not register in the first place.

12. Myths vs. FACTS • Myth: Filing out a four page form and paying a fee is a simple request of out-of-state CPAs who want to practice in California and there is no proof that this process causes a burden. • FACT: The California Legislature and CBA received complaints from thousands of CPAs from throughout the country when the notification requirement was put into place. Notification has caused many problems, including hindering CPAs ability to quickly address taxpayer matters (through conference calls, e-mails), placing an undue financial burden on CPAs (and thus their taxpaying clients) who must register and pay fees in multiple states, and causing confusion for CPAs and taxpayers as California law is not consistent with other states. • FACT: 20 other states do not require or have recently passed legislation to remove notification requirements—in most cases with no formal opposition.

13. Myths vs. Facts • Myth: Opponents say the CBA has not studied other state licensing and enforcement practices enough to ensure consumer protection. • FACT: Under AB 2473 the CBA will be able to directly discipline out-of-state CPAs if needed. It can fine, impose cost recovery, bar from further practice in California and refer CPAs to their own states for additional discipline. AB 2473 is part of the national effort to increase regulation of the CPA profession and every state board of accountancy has expressed its intention of cooperating and assisting in discipline.

14. Myths vs. Facts • Myth: Opponents claim that AB 2473 is an attempt to get around California licensing requirements for CPAs who conduct audits. • FACT: AB 2473 will require out-of-state CPAs performing audits of entities headquartered in California to register with the CBA. Current law allows out-of-state CPAs to sign attest reports if they are legally allowed to sign reports in their home states.

15. Supporters AB 2473 • California Board of Accountancy • National Association of State Boards of Accountancy • American Institute of CPAs • Latino Business Professionals (Silicon Valley and San Francisco Chapters) • California Chamber of Commerce • Greater Los Angeles African American Chamber of Commerce • National Association of Black Accountants Division of Firms • Ascend Pan Asian Leaders in Finance and Accounting San Francisco Bay Area Chapter • Small Business Action Committee • First Republic Bank • Union Bank of California • Arnerich and Massena Associates, Inc. • Various State CPA Societies • CalCPA and others

16. Why AB 2473? • AB 2473 will allow California CPAs to represent their taxpayer clients in other states where they have interests. • The door is closing on California CPAs, without 150 hours of education, to represent taxpayer clients in other states. After 2012 most states will slam the door unless the state changes its laws to require that all future licensees obtain the 150 hours of education prior to licensure. • California businesses operate across the nation and California’s CPAs need to be able to follow their taxpaying clients. • AB 2473 would allow California CPAs to represent their taxpaying clients as other states change their laws to accommodate California CPAs, California needs to change to accommodate other state’s CPAs

17. Mobility Progress 2007 & 2008 Mobility 20 Passed Legislature 5 Passed First House 4 WA VT ME MT ND MN OR NH ID WI SD MA NY WY MI CT RI IA PA NV NE NJ UT OH DE IL IN CO CA WV MD KS VA MO KY DC NC AZ TN OK AR SC NM AL GA MS AK TX LA FL Votes for Passage Lower House 2,213 – 19 Upper House 883 - 13 HI Pre-2007 No notice mobility states (MO, OH, VA, WI) May 1, 2008

18. 150 Hour Education Enacted Yellow States WA VT ME MT ND MN OR NH ID WI SD MA NY WY MI CT RI IA PA NV NE NJ UT OH DE IL IN CO CA WV MD KS VA MO KY DC NC AZ TN OK AR SC NM AL GA MS AK TX LA FL HI

19. The ASK • Explain the issues • Ask if there are any questions • Ask for a commitment • Will you support AB 2473? • Will you support a rule waiver? • Thank the legislator

20. Tax on Professional Services • Sales tax on services discriminates against small and emerging businesses. • Small companies are forced to use outside services. • Siphoning monies into additional taxes limits the growth of small companies. • Large employers typically have accounting and legal professionals on staff and will likely avoid paying a professional services tax.

21. Tax on Professional Services • Imposing a sales tax on tax preparation (accounting) services places a tax on consumers who are mandated by law to file the tax return. • Tax laws are very complex and most people need to turn to a tax professional to make sure they are complying with the law. • Most accounting services are provided to comply with government mandates.

22. Tax on Professional Services • This tax will impose a new administrative burden on legal and accounting firms in the form of compliance costs and increase the cost to government since additional businesses will be sending tax collections to Sacramento. • Under this kind of system, the potential for goods and services being taxed several times exists, resulting in higher consumer costs.

23. Tax on Professional Services • States with service taxes are at a competitive disadvantage compared to states that do not tax services. Not only does it discourage the use of services, but it discourages companies seeking to relocate or expand.

24. Tax Services Ask • Will you oppose a tax on professional services? • What do you think will happen? • When will the budget be passed?

25. Follow Up • Let CalCPA know—Complete the feedback form. • Send a thank you follow-up letter.