Legislature(2021 - 2022)GRUENBERG 120
03/16/2021 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB44 | |
| HB106 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 44 | TELECONFERENCED | |
| += | HB 106 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 44-PRACTICE OF ACCOUNTING; LICENSURE
3:04:05 PM
CHAIR KREISS-TOMKINS announced that the first order of business
would be HOUSE BILL NO. 44, "An Act relating to the practice of
accounting." [Before the committee, adopted as a working
document on 3/9/21, was the proposed committee substitute (CS)
for HB 44, labeled 32-LS0302\B, Fisher, 3/8/21 ("Version B").]
3:04:54 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, as
prime sponsor of HB 44, Version B, directed attention to the
legal opinion on the subject of "may" and "shall," dated 3/15/21
[included in the committee packet].
CHAIR KREISS-TOMKINS announced the committee would hear invited
testimony.
3:05:59 PM
KAREN BREWER-TARVER, Alaska Society of Certified Public
Accountants (ASCPA), informed the committee that she is a
certified public accountant (CPA) with the Juneau-based firm,
Elgee Rehfeld and former chair of the Alaska Board of Public
Accountancy. She recounted that several years ago, the concept
for this legislation started as a project of the board in
collaboration with the American Institute of Certified Public
Accountants (AICPA), the National Association of State Boards of
Accountancy (NASBA), and the Alaska Society of Certified Public
Accountants (CPAs). She explained that the Uniform Accountancy
Act is a model licensing law created by AICPA and NASBA to
provide a uniform approach to the regulation of the accounting
profession. She said it is used as a template by the 50-plus
licensing jurisdictions and modified as needed. She reported
that the Alaska Board of Public Accountancy worked with James
Cox, AICPA, to facilitate a complete review of Alaska's
accounting statutes and regulations in comparison to the Act.
She noted that the board reviewed each identified difference in
detail over the last several years. Furthermore, licensees were
involved in the review process through focus groups held in
Fairbanks, Girdwood, and Anchorage. She said the feedback from
focus groups helped the board identify the licensee's concerns,
which were resolved through further education and evaluations on
the impact of the proposed changes. She offered her
understanding that there are no existing objections to the
proposed changes. She stated that the board narrowed down the
recommended changes to three primary issues: revision of the
out-of-state exemption to reduce barriers to entry by providing
services across state boarders while imparting the board with
increased oversite to out-of-state firms; adoption of the term
"firm" to streamline the statutes by removing several pages of
duplicative wording that was previously included for each
business type; and replacement of the outdated "quality review"
terminology with "peer review". Additionally, she noted that
the bill would update and add definitions for several
accountancy terms to increase clarity.
CHAIR KREISS-TOMKINS asked whether Ms. Brewer-Tarver had stated
that she is unaware of any objections from licensees to the
current language under HB 44, Version B.
MS. BREWER-TARVER confirmed that is correct.
3:09:35 PM
REPRESENTATIVE STORY questioned how the Alaska Board of Public
Accountancy reached out to firms and grew awareness of the
proposed revisions.
MS. BREWER-TARVER restated that focus groups were offered in
Fairbanks, Girdwood, and Anchorage. Additionally, the Alaska
Society of CPAs shared the information to its members via
newsletter. She said disseminating the information about the
proposed changes was a coordinated effort. She reiterated that
she is unaware of any objections that had not been previously
addressed in the focus groups or by the board.
3:11:59 PM
LESLIE SCHMITZ, Chair, Alaska Board of Public Accountancy,
endorsed the information shared by Ms. Brewer-Tarver. She said
the board worked diligently to provide transparency and clarity
to both licensees and the public. She offered her belief that
the bill closely follows the language of the Act to enhance
public protection and to modernize terminology referenced in the
law. She noted that despite the large appearance, the bill
focuses on [three] main topics, which Ms. Brewer-Tarver outlined
in her testimony.
3:14:04 PM
THOMAS NEILL, Chair, Uniform Accountancy Act Committee, American
Institute of Certified Public Accountants, expressed support for
HB 44, Version B, which would modernize Alaska's accountancy
statute. He reiterated that the Uniform Accountancy Act is a
model act with the goal of providing the 55 U.S. licensing
jurisdictions a consistent framework for regulating the
profession. He conveyed that the accounting profession had
faced a number of challenges over the past few years, which
impacted the ability of businesses to access needed professional
services. He noted that "firm mobility" - a major concept in
the bill - addresses one of these challenges. He explained that
when the concept of mobility was first contemplated more than 20
years ago, there was concern that licensed CPA firms might lose
business to out-of-state firms; however, from his first-hand
experience in Washington, he suggested that this does not occur.
He added that his firm had received more requests to provide
services in the last three years than ever before, many from
out-of-state businesses that had to extend their reach to find a
service provider. Furthermore, he stated that concerns over the
perceived loss of revenue to the state were expressed, which he
refuted. He said that when a firm crosses a state line it may
have to file and pay business, occupation, corporate, and
individual taxes, as applicable, for the revenue that's earned
there depending on state tax regulations, as well as state
payroll taxes for the time staff spends in that state.
Currently, he said, there are 30 states with enacted firm
mobility statutes. He offered his belief that a key advantage
of firm mobility is that Alaska businesses would have access to
more professional services. He related that the proposed
legislation was well-crafted to mirror the Act and to position
Alaska CPAs to move forward and serve businesses.
3:16:48 PM
DON RULIEN, Alaska Society of Certified Public Accountants,
National Association of State Boards of Accountancy, informed
the committee that he completed his second four-year term on the
Alaska Board of Public Accountancy in March 2021. He said he
worked diligently on the proposed changes that are present in
this legislation while serving as chair of the board. He
further noted that he is currently on the Uniform Accountancy
Act Committee for NASBA. He relayed that the board, in concert
with AICPA, NASBA, and the Alaska Society of CPAs,
conscientiously evaluated every change to ensure that they met
all the necessary requirements to move the profession into the
future while continuing to protect the public's interest.
3:18:32 PM
CHAIR KREISS-TOMKINS opened public testimony on HB 44. After
ascertaining that no one wished to testify, he closed public
testimony.
3:19:04 PM
REPRESENTATIVE CLAMAN inquired about the practice of using "may"
and "shall" in statute with regard to other [licensing]
professions.
3:19:54 PM
SANDON FISHER, Attorney, Legislative Legal Services, Legislative
Affairs Agency, offered his understanding that the use of the
words "may" and "shall" could be different depending on the
intention of the legislature at that time. He offered to follow
up with further information on how often the words are used in
other professional licensing statutes.
REPRESENTATIVE CLAMAN requested a sample of 6-10 different
professions to understand how they approach the use of "may"
versus "shall".
CHAIR KREISS-TOMKINS agreed.
3:23:51 PM
REPRESENTATIVE EASTMAN directed attention to page 11, line 29,
of HB 44, Version B and asked why the financial statement
framing is being removed in this section [Section 26], as well
as Section 40.
3:24:48 PM
LYNETTE BERGH, Staff, Representative Steve Thompson, Alaska
State Legislature, on behalf of Representative Thompson, prime
sponsor of HB 44, Version B, deferred to a member of the Alaska
Board of Public Accountancy.
MS. BREWER-TARVER explained that the "financial statement"
language is being removed from accountancy statutes because the
industry has moved beyond issuing reports solely on financial
statements. She said if that language were left in the bill, it
would exclude a service that's currently provided by CPAs.
3:26:14 PM
REPRESENTATIVE EASTMAN questioned whether Section 26 and Section
40 would change the number of people required to have a license.
Additionally, he expressed concern that the removal of the term
"financial statement" would make those sections overly broad.
He asked if, with the removal of that language, there would be a
way to narrow the context to accountancy.
3:28:12 PM
MR. FISHER acknowledged that in Section 40, the practice of
public accounting is updated such that the language "on
financial statements" is removed from reports, thus broadening
the term. He surmised that reports would still need to relate
to accounting or auditing skills, because on page 18, line 18,
the bill states that the practice of public accounting requires
the use of "accounting or auditing skills". He pointed out that
Section 41 further defines the meaning of the term "report" and
in reference to page 18, line 24, he suggested that the
committee could provide additional clarification on the
functions they serve.
REPRESENTATIVE EASTMAN pointed out that Section 41 defines
"report" when used with reference to an attest function or
compilation service. He asked if that definition pertains to
Section 26, which references the issuance of reports on page 11,
lines 27-30.
MR. FISHER replied that if the report is made without reference
to an attest function, [Section 41] would not apply.
Nonetheless, the "practice of public accounting" in Section 40
would still pertain to Section 26; therefore, the report would
need to relate to an accounting or auditing skill. To the
extent that there's not an attest function, he said, the term
"report" could be more ambiguous. He reiterated that if it is
the will of the committee, the bill could be amended to further
clarify the types of accounting work that would constitute a
report.
3:31:31 PM
REPRESENTATIVE EASTMAN sought further clarification on why the
report on page 11, line 29, is limited in its scope.
MR. FISHER explained that page 11, lines 27-31, refer to a
person who holds a valid license, practice privilege, or permit
in Alaska. He offered his belief that the context of [Section
26] would require that the term "report" be related to an
accounting or auditing function, per Section 40. He
acknowledged that depending on whether the report relates to an
attest function, Section 41 may not provide clarification on the
definition of a report.
3:33:21 PM
CHAIR KREISS-TOMKINS asked if there is material reason for the
modified and slightly broadened definition of "report".
3:33:43 PM
MS. BREWER-TARVER explained that within the accountancy
profession, CPAs issue reports only when used with reference to
an attest function or compilation service. She noted that
audits and reviews were the two services that fell under the
attest function, both of which were previously limited to
financial statements. She stated that now, the attest function
has been expanded to include a new service, which provides an
opinion on the system and organization controls (SOC) of an
entity, also called an "attest report."
CHAIR KREISS-TOMKINS surmised that SOC signify how an
organization is functioning. He asked if that is correct.
MS. BREWER-TARVER explained that when a CPA is engaged to
perform an SOC report, he/she is opining on the internal
controls of an entity.
3:35:52 PM
CHAIR KREISS-TOMKINS questioned whether Ms. Hondolero is aware
of an instance in which the Alaska Board of Public Accountancy
declined to issue a certificate to someone who met the statutory
criteria.
3:36:25 PM
CORI HONDOLERO, Executive Administrator, Alaska Board of Public
Accountancy, stated that she had not witnessed a board or
program staff decline to renew a license when all requirements
were met.
CHAIR KREISS-TOMKINS asked whether there is value in granting
the board discretionary authority versus specifying that the
board "shall" issue a certificate if all the legal criteria are
satisfied by the applicant.
MS. HONDOLERO deferred to the chair of the Alaska Board of
Public Accountancy. She noted that throughout Alaska's
[accountancy] statutes, there are instances of both "may" and
"shall" being used. Further, she offered her belief that the
statutory language for other professions is similar. She
posited that the use of "shall" instead of "may" would not
prohibit the board.
CHAIR KREISS-TOMKINS asked Ms. Schmitz if the board should
retain discretionary authority versus opting for the use of the
word "shall".
3:38:10 PM
MS. SCHMITZ said in her nearly eight years of experience, she
has never seen the board deny licensure if the licensee or
applicant met all the statutory requirements.
CHAIR KREISS-TOMKINS asked for Ms. Schmitz' opinion on whether
there is value in the board retaining or foregoing discretionary
authority.
MS. SCHMITZ remarked:
I think ... it could be "shall" rather than "may", but
I guess you're always thinking about the one situation
where the board may need to have some discretion on
that. Although, we do fall back to: If they've met
all the statutory requirements, then we would issue
them a license.
3:39:57 PM
CHAIR KREISS-TOMKINS asked Mr. Neil to address the merits of
"may" versus "shall" in HB 44, Version B.
MR. NEILL recalled when the State of Washington's Board of
Accountancy had to consider an applicant's "worthiness" due to
an issue unrelated to meeting the legal requirements, such as a
character issue, a pending issue, or a peer-review issue. He
explained that other states use "may" to grant the board
discretion on the off chance an applicant/licensee needs to be
denied.
REPRESENTATIVE CLAMAN asked for an example of an issue unrelated
to the statutory criteria, which might cause the board to wait
for the matter to be resolved before issuing a license.
MR. NEILL recalled a situation in Washington in which a firm met
the legal requirements; however, there was a pending complaint
against one of the partners in the firm, which depending on the
outcome, could have impacted the board's ability to issue a
license. He stated his belief that discretion on the part of a
well-meaning board grants them the ability to "hit the pause
button" instead of being required to "blindly follow forward."
REPRESENTATIVE CLAMAN questioned how the situation in Washington
was resolved.
MR. NEILL explained that the complaint against the partner was
quickly resolved, which allowed the board to proceed with
licensure. He noted that there are rarely outstanding issues
that preclude a firm's licensure. Nonetheless, he maintained
that [the use of "may"] would grant the board discretionary
authority when needed.
3:44:02 PM
REPRESENTATIVE VANCE highlighted the use of "may" and "shall" on
page 3, such that "may" is used in reference to license renewal
in Sections 3 and 4 and "shall" is used when granting a permit
in Section 5. She further noted that Section 7, subsection (g),
states that the board "shall" renew a permit. She inquired
about the discrepancy between "may renew" and "shall renew" in
Sections 3 and 4 versus Section 7.
MR. FISHER pointed out that the bill amends different licenses
and permits; primarily, licenses issued to individual CPAs and
permits issued to firms. He stated that the terms "may" and
"shall" in Sections 3 and 4 were already in statute prior to the
bill. Similarly, Section 7, subsection (g), uses "shall"
because the term is used consistently throughout the statute
being amended, which is AS 08.04.240.
[HB 44 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 44 Legal Services Memo 3-15-2021.pdf |
HL&C 5/3/2021 3:15:00 PM HL&C 5/12/2021 3:15:00 PM HSTA 3/16/2021 3:00:00 PM |
HB 44 |
| HB 106 Additional Info - Missing Persons under 21 Statistics.pdf |
HHSS 5/13/2021 3:00:00 PM HSTA 3/16/2021 3:00:00 PM |
HB 106 |