A successful season: CalCPA makes its presence known in the capitol.

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

CalCPA had a successful legislative session representing the interests of its members and the CPA profession in California.

Practice Privilege

CalCPA-sponsored AB 1868 (Bermudez), which would correct the practice privilege statute that went into effect January 2006, made it to the governor despite opposition that mistakenly thought the legislation could allow the sale or promotion of abusive tax shelters to Californians with impunity.

As proposed, AB 1868 would have allowed out-of-state CPAs to perform tax services for California taxpayer clients without obtaining a practice privilege or license from the California Board of Accountancy--as long as the CPA did not physically enter California or solicit California clients.

The exemption would have been in place through Jan. 1, 2011, so that practice privilege issues could be worked out without impacting California taxpayers. Interpretation of California's current practice privilege statute would require an out-of-state CPA to register with the CBA prior to providing tax services for a business headquartered in another state, but with a physical presence in California.

This is an overly broad interpretation which, if adopted by other states, could require CPAs to register in all states where their clients have operations.

Due to the opposition's concerns, CalCPA removed the exemption for tax services and inserted language encouraging the CBA to adopt a lower registration fee for out-of-state CPAs who want to obtain a practice privilege to provide tax services to California businesses. With the amendment, opposition was dropped and it's anticipated the governor will sign the bill.

No notification will be required of CPAs providing tax preparation services to individuals or estates as long as the estate relates to an individual who was a client at the time of death.

AB 1868 also allows CPAs to provide other services in California through practice privilege without requiring that the firm be licensed in California.

As initially written, California's practice privilege statute did not allow foreign accountants to obtain a practice privilege or provide services incidental to an engagement in another country. AB 1868 removes the obstacle for foreign accountants, who will be allowed to practice here if it's incidental to an engagement in their home country and performed under that country's standards.

CalCPA hopes reasonable regulation in California will support reasonable regulation in other states.

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