Practice privilege: out-of-state CPAs must register with CBA as of Jan. 1, 2006.

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

In January 2006, a new law goes into effect in California that requires out-of-state CPAs who want to provide services to California residents to file for a practice privilege permit with the California Board of Accountancy and pay a registration fee of $100 for the one-year permit.

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The permit will be available online at www.dca.ca.gov/cba. The registration form is required of any out-of-state CPA prior to rendering services in California. Additionally, the CBA also is requiring that CPAs who prepare business tax returns for California residents file with them prior to undertaking the assignment.

Recent legislation will exempt CPAs, who prepare a small number of personal or estate tax returns, from the registration requirement.

Easier, Not Harder

In taking this action, California becomes one of 23 states that already have adopted a registration requirement for out-of-state CPAs providing services to their residents. As originally envisioned, the practice privilege notification requirement was designed to provide for ease of transition among states by allowing out-of-state CPAs to provide seamless services across state lines without obtaining a full license in all of the states where they have clients.

California's practice privilege requirement will replace a section of California's Accountancy Act that allowed out-of-state CPAs to provide non-attest services to California clients as long as they were incidental to the practice of accountancy in another state. The CBA found that this old statute was inadequate and difficult to enforce since practitioners' definitions of "incidental" varied tremendously.

The new practice privilege will provide the CBA with increased opportunity to protect California consumers by letting them know who is practicing in California and provide them with an expedited method of bringing discipline against out-of-state CPAs who may run afoul of the law. Those applying for a practice privilege permit have to agree to abide by California's rules for professional services and to the CBA's authority.

Exemption for Some

Recent legislation, SB 229 (Figueroa), gives the CBA authority to exempt CPAs who file a small number of personal or estate state tax returns from the requirement to obtain a practice privilege. The exact number of personal and estate tax returns is to be determined by the CBA during the regulatory process.

The CBA has repeatedly refused to exempt tax practice from the notification...