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 was CSHB 44(STA).]
3:04:54 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, prime
sponsor of CSHB 44(STA), 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 opened invited testimony.
3:05:59 PM
KAREN BREWER-TARVER, Alaska Society of Certified Public
Accountants, 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 ("the board"). She recounted that several years
ago, CSHB 44(STA) started as a project of the Alaska Board of
Public Accountancy 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 (UAA) is a model
licensing law created by the AICPA and NASBA to provide a unform
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
board worked with James Cox, AICPA, to facilitate a complete
review of Alaska's accounting statutes and regulations in
comparison to the UAA. 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," which streamlines the
statutes by removing several pages of duplicative wording that
was previously included for each business type; and replacing
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 in CSHB 44(STA).
MS. BREWER-TARVER confirmed.
3:09:35 PM
REPRESENTATIVE STORY questioned how the board 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 UAA language 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, Unform Accountancy Act Committee, American
Institute of Certified Public Accountants, expressed support for
CSHB 44(STA), which would modernize Alaska's accountancy
statute. He reiterated that the UAA 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 loss 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 Alaskan businesses would have access to
more professional services. He related that [CSHB 44(STA)] was
well-crafted to mirror the UAA 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 Unform 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. 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,
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 CSHB 44(STA), 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.
With the removal of that language, he asked if there is 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, as the bill states that the
practice of public accounting requires the use of "accounting or
auditing skills" on page 18, line 18. 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 said 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 this
section [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 only issue reports 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 [System and Organization
Controls (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 a 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 board 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's 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 this legislation.
MR. NEILL recalled when Washington's state 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 continued to note 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 |