Mobility stability: California's practice privilege struggles leading to reforms.

• Author: Allen, Bruce C.
• Position: Governmentrelations

You are a California CPA who never leaves the state. You may prepare some tax returns for clients who have interests in other states and provide them with tax advice on those interests. You may do some consulting with CPAs in your firm or association, dealing with their client issues or an audit of a company that has holdings in some other states. So, why should you care about mobility?

Simply put, you may be breaking the accounting laws in another state without even knowing it. While you may not consider yourself holding out in another state, or practicing public accounting in that state, the state regulators may think differently.

How Can This Be?

Each state has a slightly different way of interpreting the Uniform Accountancy Act. Further, each state has interpreted Sec. 23 of the Uniform Accountancy Act, which was designed to facilitate mobility, in a way that is hampering mobility.

Sec. 23 was conceived as a method whereby CPAs from other states could provide public accounting services across state lines without obtaining a license from each state where those services are provided. Business doesn't respect geographic boundaries, and financial information and services flow across state and international lines.

Simple Concept?

The UAA concept was simple: States would eliminate the existing "temporary and incidental" provisions that allowed the CPA profession to serve clients for 100 years virtually unhampered throughout the country and replace it with a standardized practice privilege that would be similar to a driver's license.

Similar to driving a car across state lines, accountants agree to obey the laws of the state in which they are temporarily providing services, and if something happens in that state, regulatory force can be brought to bear.

With a driver's license, there is no requirement to stop at the border and notify the state that you are entering if you are a nonresident of that state. The UAA requires that CPAs obtain a license wherever their principal place of business is located.

Impact of California Law

California's adoption of one of the most far-reaching practice privilege statutes in the nation, coupled with an intention to enforce the law, created a national stir even though at least 31 states already had adopted some version of practice privilege. In addition to increasing the difficulty of practicing within the state, the inadvertent impacts of California's law provided no additional consumer protection and had...