01/25/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB242 | |
| HB274 | |
| HB373 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 242 | TELECONFERENCED | |
| *+ | HB 274 | TELECONFERENCED | |
| *+ | HB 373 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 25, 2006
3:26 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 242
"An Act relating to the deposit of certain penalties collected
under the unemployment insurance program; requiring an employing
unit with a change in ownership, management, or control to
notify the Department of Labor and Workforce Development of the
ownership change; regarding the unemployment contribution rate
of an employing unit; and defining 'business' for purposes of
statutes setting unemployment contribution rates; establishing
the crime of obtaining an unemployment rate by deception; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 274
"An Act relating to the practice of accounting; and providing
for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 373
"An Act relating to the manufacture and transportation of
alcoholic beverages; relating to forfeitures of property for
violations of alcoholic beverage laws; and relating to
violations of alcoholic beverage laws."
- MOVED HB 373 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 242
SHORT TITLE: UNEMPLOYMENT INSURANCE FUND & TAXES
SPONSOR(s): REPRESENTATIVE(s) CRAWFORD
04/01/05 (H) READ THE FIRST TIME - REFERRALS
04/01/05 (H) L&C, JUD, FIN
01/25/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 274
SHORT TITLE: PUBLIC ACCOUNTANTS
SPONSOR(s): REPRESENTATIVE(s) HAWKER
04/18/05 (H) READ THE FIRST TIME - REFERRALS
04/18/05 (H) L&C, FIN
01/11/06 (H) SPONSOR SUBSTITUTE INTRODUCED
01/11/06 (H) READ THE FIRST TIME - REFERRALS
01/11/06 (H) L&C, FIN
01/25/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 373
SHORT TITLE: ALCOHOL:TRANSPORT MANUFACTURE; FORFEITURE
SPONSOR(s): REPRESENTATIVE(s) MEYER
01/17/06 (H) READ THE FIRST TIME - REFERRALS
01/17/06 (H) L&C, JUD
01/25/06 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
PAT SHIER, Acting Deputy Director/Employment Security Tax
Division of Employment Security
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Related the need for HB 242 and answered
questions.
REPRESENTATIVE MIKE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SSHB 274.
LISA ROGERS, CPA
Alaska Society of CPAs
Anchorage, Alaska
POSITION STATEMENT: During hearing of SSHB 274, answered
questions.
JEANETTE JAMES
Alaska Society of Independent Accountants (ASIA)
North Pole, Alaska
POSITION STATEMENT: Expressed the need to be sure that SSHB 274
doesn't impact independent accountants.
BERNADETTE KOPPY, Vice President
Alaska Society of independent Accountants (ASIA)
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with SSHB 274 and what
it may mean for independent accountants.
DON RULIEN, President
Alaska Society of Certified Public Accountants (ASCPA)
Fairbanks, Alaska
POSITION STATEMENT: Testified that SSHB 274 doesn't take away
any of the independent accountants' ability to continue their
livelihood.
DAN KENNEDY, CPA
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SSHB 274.
REPRESENTATIVE KEVIN MEYER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 373.
MIKE PAWLOWSKI, Staff
to Representative Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis of HB 373 and
answered questions.
ANNE CARPENETI, Assistant Attorney General
Legal Services Section - Juneau
Criminal Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 373, answered
questions.
ED HARRINGTON, Captain/Commander
Alaska Bureau of Alcohol & Drug Enforcement
N Detachment
Division of Alaska State Troopers
Department of Public Safety
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 373.
ACTION NARRATIVE
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:26:00 PM. Representatives
Anderson, Kott, LeDoux, Rokeberg, Crawford, and Guttenberg were
present at the call to order. Representative Lynn arrived as
the meeting was in progress.
HB 242-UNEMPLOYMENT INSURANCE FUND & TAXES
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 242, "An Act relating to the deposit of
certain penalties collected under the unemployment insurance
program; requiring an employing unit with a change in ownership,
management, or control to notify the Department of Labor and
Workforce Development of the ownership change; regarding the
unemployment contribution rate of an employing unit; and
defining 'business' for purposes of statutes setting
unemployment contribution rates; establishing the crime of
obtaining an unemployment rate by deception; and providing for
an effective date."
[Due to technical difficulties the recording begins at this
point.]
CHAIR ANDERSON, upon hearing no objection, announced that CSHB
242, Version 24-LS0821\F, Wayne, 1/20/06, is the working
document.
3:28:27 PM
REPRESENTATIVE CRAWFORD, speaking as the sponsor of HB 242,
clarified that HB 242 doesn't raise anyone's taxes. He
characterized HB 242 as a "sunshine bill" in that it informs the
state as to "who's doing the employing and gives them a better
idea of how much UI [unemployment insurance] taxes they owe."
This legislation needs to be passed or Alaska won't be able to
access the federal funds for UI, he related.
3:29:30 PM
PAT SHIER, Acting Deputy Director/Employment Security Tax,
Division of Employment Security, Department of Labor & Workforce
Development (DLWD), explained that HB 242 is required by federal
language that [requires] the placement of additional penalties
in state statute. Such penalties would discourage the practice
of willfully hiding facts that would win an employer an
artificially low rate. The aforementioned occurs when an
employer changes entity or when an employer, in an attempt to
reduce their UI rate, "gobbles up" a company with a lower rate
and presents themselves as if they were the low rate employer.
Currently, Alaska has laws and regulations in place to detect
the aforementioned. This legislation would simply adopt the
federal requirements for those who willfully misstate the facts
in an attempt to illegally obtain an artificially low rate.
3:31:18 PM
CHAIR ANDERSON pointed out that page 2, lines 9-10, refer to 42
U.S.C. 503(k), the SUTA [State Unemployment Tax Act] Dumping
Prevention Act of 2004. He asked if HB 242 is essentially
adopting the national standard.
MR. SHIER replied yes.
CHAIR ANDERSON, noting that he is the chair of the National
Conference of State Legislatures' Committee on Labor & Workforce
Development, related that the aforementioned committee has
adopted the SUTA Dumping Prevention Act of 2004 and urged all
states to do so.
3:32:08 PM
REPRESENTATIVE ROKEBERG asked if current Alaska Statute requires
reporting between the business and DLWD when there is a change
in ownership, management, or control.
MR. SHIER clarified that current statute isn't all-inclusive.
Current statute requires reporting when there is a change in
ownership or entity. However, nationally it has been discovered
that there are business models based on simply changing the
management of the company in order to [utilize another company's
lower UI rate]. The language being proposed is based on the
federal language and is designed to notify the department of the
possibility of a company attempting to "hijack" a lower UI rate.
REPRESENTATIVE ROKEBERG characterized this federal law as
onerous and anti-business if it requires that businesses report
to the government when they alienate, transfer, or change
management of the business. He expressed the need to see the
federal statute that HB 242 mirrors.
3:34:06 PM
MR. SHIER explained that when the [federal] statute was passed,
it contained requirements for businesses to report certain
changes in management. The intent was to ensure that the DLWD
had sufficient information to affect collection against those
employers who decided they no longer had to pay taxes or wanted
to leave the state. He explained that it's already a
requirement to report a change in corporate officers.
Therefore, HB 242 simply expands the requirement to include
management. Mr. Shier opined that it's not unusual for DLWD to
review who is really running a business and who is really
responsible for the debts and filing the reports.
3:36:42 PM
MR. SHIER, in response to Representative Guttenberg, explained
that notifying the department about a change in management or
ownership ensures that the DLWD is assessing the proper
individuals.
REPRESENTATIVE LEDOUX posed a situation in which an owner of a
business has a general manager and later decides to hire another
manager. She asked if, under current law or HB 242, the owners
would have to notify DLWD of the newly hired manager.
3:39:23 PM
MR. SHIER answered that it's important to know the
responsibilities of the general manager, which is why the
statute specifies that [the department needs to be notified of
those who are] given the authority to sign checks and file
periodic reports. When an individual files a registration form
with DLWD that allows the individual to specify the obligations
of the manager. The aforementioned is well understood by the
business community, and if not the department's staff help to
sort it out. In further response to Representative LeDoux, Mr.
Shier confirmed that [an owner would have to notify DLWD of
management changes] if the owner had designated a responsible
party other than himself/herself. If the owner retains that
responsibility, the owner could change managers as often as
he/she wants. The aforementioned is the current reporting
requirement and is what is included in HB 242. Mr. Shier
clarified, "We are not changing our level of rigor, in terms of
reporting; that will remain the same." However, the term
"manager" is a new term that's required by the federal template.
The department's interpretation of a "manager" is a "responsible
party," he related.
3:42:09 PM
REPRESENTATIVE LEDOUX asked if the legislation reflects that
interpretation in order to avoid confusion.
MR. SHIER said that he didn't see a definition of "management"
[in HB 242]. However, he pointed out that the legislation,
throughout, refers to an individual who "knowingly or
recklessly" violates [the reporting requirement]. The burden of
proof to show that an individual knowingly took the steps
[violate the requirement] lays with the department. He opined
that the burden of proof on the department is very high.
Furthermore, he didn't believe the department, by adopting this
language, is putting a large number of individuals in the state
at great risk.
3:43:36 PM
REPRESENTATIVE ROKEBERG noted that the committee members should
have a copy of the federal law. After reading it, he said that
he couldn't see the necessity of Section 1 of HB 242 and the
term "management." The term "management" in federal law relates
to "the substantial common ownership or management or control in
the unemployment experience attributed to the transfer of
business shall also be transferred." Therefore, he surmised
that it only comes into play if there's an experience level.
However, HB 242 specifies that any time a business transfers its
ownership or even a portion of it, it must make a report.
3:44:34 PM
MR. SHIER said that the federal law was primarily drafted to
require reporting for changes in ownership and transfers of
management in order to trap schemes in which individuals tried
to capture another business to capture its lower rate.
REPRESENTATIVE ROKEBERG emphasized that he agreed with the
aforementioned and characterized it as laudable public policy.
However, he said he didn't believe the intent was to file a form
with DLWD every time management or a portion of it is
transferred.
3:45:34 PM
CHAIR ANDERSON announced that he would like to hold HB 242 until
Friday in order to have time to determine if HB 242 is
commiserate with other state legislation.
3:46:26 PM
REPRESENTATIVE GUTTENBERG turned attention to Section 1 in which
it refers to "employing unit's trade" and inquired as to what it
means.
MR. SHIER explained that in Alaska there is a common
misconception that when an employee is laid off, that act
penalizes the employer immediately. However, Alaska is unique
in that an employer's rate is based on fluctuations in the
employer's payroll whether due to terminations for cause or to
lay off. Therefore, a seasonal business may seek to bid on a
construction project. The seasonal rate for that business may
be 3.5-4.5 percent. That business may attempt to purchase a
secretarial firm with stable payroll experience and a rate of
perhaps 1.5 percent and transfer the construction payroll to the
secretarial firm and adopt the lower rate. The business might
then unfairly bid on a construction project with a 3 percent
automatic advantage. Therefore, this reporting merely notifies
the department of a change in entity, as is the case now. This
reporting allows DLWD to be aware of the changes that may have
happened as in the aforementioned example. The language in
question makes it explicit that DLWD is reviewing this
information for rating purposes and to notify the employer that
if information is concealed in an attempt to obtain a lower rate
than the business would otherwise qualify, there are penalties.
The federal law requires this, he said.
3:49:21 PM
REPRESENTATIVE KOTT pointed out that the committee packet
includes a letter dated December 7, 2006, from the U.S.
Department of Labor. However, he said he didn't see a response
letter.
MR. SHIER said that there have been a number of letters between
DLWD and the U.S. Department of Labor. The letters all convey
the importance of Alaska moving in this direction and the dire
consequences if the state does not.
3:50:57 PM
REPRESENTATIVE KOTT highlighted that the last paragraph of the
aforementioned letter, which says: "Please provide this
assurance before January 1, 2006, that Alaska will enact the
required legislation expeditiously in the next legislative
session." He asked if that assurance has been provided.
MR. SHIER related that Commissioner O'Claray did sign a letter
assuring that legislation would be passed this [session] and the
department would do what it could while acknowledging that the
legislature passes legislation not the department.
REPRESENTATIVE KOTT expressed concern with the part of HB 242
that deals with the ex post facto law. He pointed out that
those who fall within the scope of HB 242 could be subject to a
class C felony upon its adoption. He inquired as to how that
would work with the ex post facto law.
3:52:43 PM
MR. SHIER agreed that it's a concern and has been a matter under
discussion with the US Department of Labor.
REPRESENTATIVE KOTT asked if there was any discussion regarding
moving that date to the effective date.
MR. SHIER pointed out that Section 7 specifies the various
sections of HB 242 that are to take effect on July 1, 2006,
while Section 8 specifies that Sections 5 and 6 take effect
immediately. However, "immediately" is subject to the laws in
Alaska that impact how legislation takes effect, which he opined
would satisfy the concern regarding reaching back in time and
holding someone to the new requirement. Mr. Shier related his
interpretation that any actions taken after the effective date
of this legislation would come under this legislation whereas
those actions prior to the enactment of HB 242 would be
attempted or successful.
MR. SHIER noted that Alaska has been very aware as to the
importance of individual rating, such that AS 23.21.080 requires
separate reporting for that purpose. He recalled the 1960s when
the trust fund went broke and the state had to borrow money from
the federal trust fund and employers were saddled with regular
taxes plus the repayment of that debt and interest. The new
rating scheme was designed to prevent that from ever happening
again. That rating system, he highlighted, contemplated
individual reporting. Therefore, Mr. Shier related the
department's confidence that the statutes and regulations have
identified these transfers fairly successfully and thus it seems
that federal law is catching up with Alaska.
3:55:52 PM
REPRESENTATIVE LYNN opined that the [intent] of HB 242 seems
good as it seems to simply protect against fraud.
MR. SHIER agreed, specifying that the language in HB 242
addresses those who knowingly attempt to circumvent existing
statute.
REPRESENTATIVE LYNN expressed concern that the commissioner, in
response to the letter from the U.S. Department of Labor, would
pass legislation before the legislation is even assigned to a
committee. Representative Lynn highlighted the separation of
powers.
MR. SHIER clarified that the commissioner's response was that
the department would do all that it can to bring the matter
before the legislature and facilitate its passage.
3:57:33 PM
REPRESENTATIVE CRAWFORD said that he would work with
Representative Rokeberg and the department to craft language to
achieve a comfort level that moves the legislation on its way.
CHAIR ANDERSON announced that HB 242 would be held over.
HB 274-PUBLIC ACCOUNTANTS
3:58:07 PM
CHAIR ANDERSON announced that the next order of business would
be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 274, "An Act relating
to the practice of accounting; and providing for an effective
date."
3:58:53 PM
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, sponsor of
SSHB 274, explained that this legislation is the product of work
that began in 2001 when the Alaska Society of CPAs [certified
public accountants] and the Board of Public Accountancy
identified the direction the state should take in regulating
CPAs. He related that in the last 50 years the practice of
public accountancy has evolved and thus the statutes regulating
the profession should as well. Representative Hawker stated
that the nationwide guiding principle of public accountancy is
to promote uniformity and consistency among the states.
Ultimately, public accountancy is consumer protection. The
industry has a central think-tank body, the American Institute
of CPAs (AICPA), that promulgates rules and national standards
for accounting and reporting. One of the standards the AICPA
has developed, in cooperation with the National Association of
State Boards of Accountancy, is the Uniform Accountancy Act.
The aforementioned Act is model legislation to promote
uniformity amongst the states. Representative Hawker pointed
out that much of SSHB 274 is simply about eliminating ambiguity
and modernizing existing language. In fact, throughout the
legislation the term "accountancy" is replaced with
"accounting." This legislation also clarifies the distinction
between "certificate" and "license" because a certificate means
that the holder has met the qualifications, although it isn't a
license to practice.
REPRESENTATIVE HAWKER recalled the debacle with Enron
Corporation, and noted that since that states and the
accountancy industry have been looking to increase and provide a
stronger and more definitive regulation of CPAs who are
performing audits. Therefore, the legislation proposes
improvements to the quality control with accountants and moves
toward the consistency embodied in the Uniform Accountancy Act
such that the portability of licenses is increased. The ability
of a CPA to work in another state is increasingly important in
light of the fact that only one of the approximately eight
international accountancy firms that were in the state in 1979
remain. Although there are some extremely competent accountants
and firms in the state, as Alaska looks to the future with an
expanding economy and possibly a gas line there is the need to
facilitate the participation of nationally qualified
[accountancy] firms. He reminded the committee that SSHB 274 is
the work product of the Board of Accountancy, the Alaska Society
of CPAs, and the accounting industry.
REPRESENTATIVE HAWKER then reviewed the process by which the
sponsor substitute before the committee today was ultimately
developed. He related that as the legislation went through the
process, some of the traditional accountants had concerns with
regard to the aggressiveness of the original proposals embodied
in HB 274. Although the sponsor substitute pulls back on some
of the more aggressive stances of the original legislation, the
sponsor substitute leaves the ability for the [Alaska Public
Accountancy Board] to develop the regulations that would
facilitate the next step of actually moving some of the
statutory changes. He specified that the regulatory authority
was left in the legislation, although the actual policy change
was not in order that the accounting and business community can
review and evaluate the proposed regulations.
4:11:54 PM
REPRESENTATIVE LYNN inquired as to the difference between a CPA,
a public accountant, and a bookkeeper.
REPRESENTATIVE HAWKER deferred to Ms. Rogers.
4:12:35 PM
LISA ROGERS, CPA, Alaska Society of CPAs, explained that there
used to be a license for what was referred to as a public
accountant, which is no longer issued. In fact, it hasn't been
issued for some time, and therefore she could make a
distinction. There are certified public accountants (CPAs),
which are the only individuals licensed to opine on financial
statements, that is, perform an audit and certify that financial
statements are fairly presented in accordance with generally
accepted accounting principles. She noted that CPAs perform
reviewed financial statements, which are a lesser level of
assurance. Also CPAs perform compiled financial statements,
which includes doing tax returns, expert witness work, and a
variety of other services. With regard to a bookkeeper, Ms.
Rogers stated that there is no statutory definition of such and
thus anyone can call themselves a bookkeeper. In further
response to Representative Lynn, Ms. Rogers said that nothing in
SSHB 274 pits CPAs against bookkeepers, although she noted that
there are concerns.
4:17:16 PM
JEANETTE JAMES, Alaska Society of Independent Accountants
(ASIA), related that she isn't a CPA and what she mostly does at
this time is training small businesses with regard to what
information needs to be presented to the individuals doing their
CPA work. Ms. James expressed the need to be sure that this
legislation doesn't impact those who refer to themselves as
independent accountants. She mentioned that the lobbyist for
ASIA is present with the changes in which [ASIA] is interested
in being considered.
4:19:19 PM
REPRESENTATIVE GUTTENBERG inquired as to what Ms. James viewed
SSHB 274 as achieving in so far as independent accountants are
concerned.
MS. JAMES expressed concern with the change from the term
"prepared" to the term "compiled" because the information given
to an [independent accountant] is prepared by the client.
Furthermore, the regulations that may be drafted are of concern.
Ms. James concluded by stressing that independent accountants
want to be able to stay in business.
4:20:35 PM
REPRESENTATIVE HAWKER highlighted the purpose section of the
establishment of the Board of Public Accountancy, specifically
AS 08.04.005(4): "the use of titles relating to the practice of
public accountancy that are likely to mislead the public as to
the status or competence of the persons using these titles
should be prohibited." The aforementioned provides protection
for the public. With regard to promulgating regulations, he
emphasized that there is a lengthy public process requiring
public disclosure and testimony. Furthermore, the
Administrative Regulation Review Committee also has a role in
protecting the public interest.
4:22:44 PM
CHAIR ANDERSON surmised that Ms. James was questioning whether
SSHB 274 is legislation that would put independent accountants
out of work.
MS. JAMES specified that she makes the changes at the end of the
year and prints a financial statement at the end of the year,
although she doesn't attest to its accuracy or audit it because
it's based on the information provided by the client. If such
an attestment/audit is necessary, she said that she sends her
work to a CPA for completion. Ms. James, noting that she has
worked in Washington and Oregon, recalled that in Washington one
can't be referred to as an accountant unless he/she is a CPA.
She said she didn't want the aforementioned to happen in Alaska.
4:24:06 PM
REPRESENTATIVE HAWKER emphasized that there is no intent with
SSHB 274 to interfere with the conduct of business of someone
who is not a public accountant, outside of the existing statute
that addresses the consumer protection aspects of regulating
CPAs. Therefore, there are things that those who aren't CPAs
can't do. "In the best of my absolute knowledge," he said,
"we're not in any way changing that relationship with this
legislation, from what it exists today."
4:25:00 PM
REPRESENTATIVE LEDOUX compared paragraph (4) of Section 2 with
Section 7, and asked whether there is the possibility of the
[Board of Public Accountancy] developing regulations that outlaw
the use of the term accountant for anyone other than someone who
is a CPA.
REPRESENTATIVE HAWKER indicated that although it would be a
possibility, he didn't envision such a degree of transgression.
Should the Board of Public Accountancy attempt to do something
like that, the public process and regulatory review process
would mitigate such. However, the CPA community does want to
develop regulations regarding the attest functions, which is
encompassed in Section 7. He said that SSHB 274 is tightening
the regulations on CPAs. The provisions allowing regulatory
development are effective immediately while the remainder of
SSHB 274 isn't effective until 2008 in order to be cautious with
any changes.
4:27:55 PM
REPRESENTATIVE LEDOUX asked if the Board of Public Accountancy
has any members who are independent accountants.
MS. ROGERS said that the Board of Public Accountancy consists of
seven members of which five are CPAs and two are public members.
The two public members can't be CPAs nor can they work for CPAs.
REPRESENTATIVE LEDOUX said that the aforementioned makeup
doesn't necessarily assure that [independent accountants] would
have a seat on the Board of Public Accountancy.
4:29:03 PM
CHAIR ANDERSON, posing an analogous situation, pointed out that
there isn't a physician's assistant on a governing board of
physicians. He said he didn't know why a physician's assistant
would sit on a governing board of physicians, which should be
made up of physicians and perhaps individuals who aren't in the
medical industry.
4:30:01 PM
REPRESENTATIVE HAWKER said that [the relationship between
independent accountants or bookkeepers and CPAS] is symbiotic.
Although he didn't believe that any members of ASIA have wanted
to sit on the Board of Public Accountancy in recent years, he
related his belief that an ASIA liaison attends the board
meetings.
4:31:07 PM
REPRESENTATIVE ROKEBERG opined that Section 53, which relates to
Section 50, allows the board to develop regulations prior to the
effective date of the statute. He explained that he recommends
such provisions because the legislature has found itself in
situations in which the proper effective dates weren't in place
and the implementing regulations had to wait until the statute
was in effect. He reminded the committee that under Title 8,
the law mandates that these entities establish regulations.
Therefore, Sections 50 and 53 merely reiterate current statute
and thus the Board of Public Accountancy already has the power
to establish regulations and Ms. James' concerns are unrelated
to SSHB 274. Although some have held up Section 7 as a
provision that the Board of Public Accountancy could use to
outlaw [independent accountants], Representative Rokeberg said
he didn't believe that to be the case.
4:34:19 PM
BERNADETTE KOPPY, Vice President, Alaska Society of Independent
Accountants (ASIA), began by informing the committee that she is
an enrolled agent with the Department of Treasury and an
accredited business accountant and tax advisor by the
Accreditation Council for Accountancy and Taxation, which is an
independent accreditation agency affiliated with the National
Society of Accountants. She provided the following testimony:
On behalf of ASIA I would like to state the following.
ASIA is a professional organization of independent
accountants in private practice that was established
in 1972 and affiliated with the National Society of
Accountants. ASIA is dedicated to developing,
improving, and extending the standards and practices
of independent accountants across Alaska. We have a
membership body composed of approximately 150 members
that operate as independent accountants statewide ....
Please note that in addition to the independent
accountants that are represented by the ASIA
membership, there are many other independent
accountants that are not represented by this
membership body.
To state what we do, the independent accountant offers
and performs all of the same business services that a
licensed CPA performs other than reporting on reviewed
and audited financial statements. These attest
functions are reserved for the licensed accountants.
Within our ASIA membership alone we estimate that the
independent accountant represents the accounting,
payroll, and tax preparation needs in a cost effective
manner of approximately 60,000 Alaskan individuals and
small businesses across the state of Alaska. We are
unable to estimate the constituency that is served by
the independent accountants that are not within our
membership body. Speaking on behalf of myself, I am
an owner and practitioner of Interior Accountant
Service, Inc., which has approximately 1,500 clients.
I have been serving my clients from Fairbanks to Healy
since 1975.
Regarding Amendment A, I compile financial statements
for my clients on behalf of their banking and business
needs. I do not prepare them, and subsequently I will
not report on them stating as such. I also would not
inaccurately state that I have prepared accompanying
financial statements due to liability issues and
concerns regarding coverage from errors and omissions
insurance. Since Alaska law does not prohibit me, as
an independent accountant, from performing compilation
services to my fellow Alaskans and clients, it is
accordingly in my clients' best interest for me to be
able to complete their financial statement
presentation in a professional manner, using statutory
safe harbor language that references the compiled
financial statement. I am concerned that my clients'
financial statements will be rejected by the banks and
bonding companies if I cannot use the word compiled.
If that happens, my practice is in jeopardy and my
clients will be faced with higher costs.
Regarding Amendment B, in the interest of serving
Alaskans and meeting their financial needs in a
professional manner, without interruption, I ask that
Section 7, page 3, lines 22-26, be deleted. It is my
position that the attest function activities should be
identified by law, not by regulation.
4:37:47 PM
REPRESENTATIVE ROKEBERG asked if independent accountants
undertake any of the attest functions currently.
MS. KOPPY replied no.
4:38:17 PM
DON RULIEN, President, Alaska Society of Certified Public
Accountants (ASCPA), informed the committee that he has been
working with Ms. Rogers on these changes for almost two years.
He stated that there was never any intent to eliminate the
ability of noncertified accountants to prepare or compile
financial information that doesn't require an attest function.
In fact, Mr. Rulien opined that [those working on this matter]
have tried to work with the members of ASIA and other
independent groups to provide this information months in
advance. He recalled that each time the information was shared,
[ASIA] said it looked fine. No adverse reactions were ever
relayed until January 6, 2006, when the [sponsor substitute] was
ready to be introduced. Mr. Rulien said, "We think we haven't
done anything to jeopardize their ability to prepare financial
statements for banks, for any other entity that may require them
of their clients." He said that [ASCPA] understands that there
will always be a need for nonlicensed accountants to prepare
financial statements. He opined that SSHB 274 doesn't take away
any of the independent accountants' ability to continue their
livelihood.
4:41:11 PM
DAN KENNEDY, CPA, informed the committee that he has been a
licensed CPA in Alaska for 24 years. He urged the committee to
pass SSHB 274 as it is written. He noted that he is a former
member of the Board of Public Accountancy and recalled that the
main priority of it was to make Alaska's statutes consistent
with at least 43 other states [that have adopted] the Uniform
Accountancy Act. In regard to the concerns of ASIA, Mr. Kennedy
related that every quarterly meeting of the board there was a
representative from ASIA who was allowed to fully participate.
He emphasized that there's no intention to prevent accountants
from participating and making a livelihood.
MR. KENNEDY recalled his involvement with reaching a compromise
on the language in SSHB 274. He related his belief that the
experience requirement should've been one year rather than two
years, which is what is included in SSHB 274. Alaska is the
only jurisdiction that would require two years of experience.
He noted that last year he spoke with over a thousand eighth
graders to urge them to pursue careers in business, accounting,
and specifically certified public accounting because there is so
much work for both CPAs and independent accountants. He
reiterated the need to make Alaska's statutes consistent with
the rest of the nation [such that the statutes] are
substantially equivalent to the Uniform Accountancy Act. Mr.
Kennedy concluded by urging the committee to pass SSHB 274.
4:44:52 PM
CHAIR ANDERSON, upon determining no one else wished to testify,
closed the public testimony. Chair Anderson said that he
supports SSHB 274.
4:45:47 PM
REPRESENTATIVE HAWKER, in responding to the concerns mentioned,
turned attention to the definition section located on pages 26-
27, which he opined is the crux of the concerns today. In the
CPA industry the term "compilation," which is a term of art,
defines a specific scope of work that a CPA has performed to a
set of financial statements. He explained that the compilation
level is the lowest level of work, and basically puts the
[financial records] into a set of financial statements. The
concern expressed by ASIA, he surmised, is that they want to
also be able to use the term compile. Representative Hawker
specified, "We want to make certain that the independents, the
nonaccountants, can do work -- they can put financial statements
together, but that clearly, we don't use the same operative verb
as is defined in the public accountancy world [and] that is
'compiled.'" He noted that the National Society of Accountants
(NSA) uses the term "prepared" rather than "complied" and thus
the distinction between noncertified accountants and CPAs is
maintained.
4:50:24 PM
MS. ROGERS referred to the October 8, 2005, document entitled,
"Tax Accounting Guidelines for Small Business," which was
published by the NSA. She quoted from the first section of the
document as follows:
Tax accounting guidelines for small business (TAGSB)
are designed to provide guidance to accountants for
the preparation of financial statements presented in
conformity with the principles of accounting used in
the preparation of tax returns.
MS. ROGERS explained that the aforementioned are [guidelines]
used by some non-CPAs to prepare financial statements. She then
referred to the definitions sections of the aforementioned
document, and quoted the following definition of compilation:
For purposes of these guidelines, the terms
"compilation" and "preparation" are interchangeable.
However, in many jurisdictions, local law places
certain restrictions on the use of the term
"compilation" and the accountant must follow the local
law requirements.
4:53:00 PM
CHAIR ANDERSON surmised then that the distinction between
"preparation" and "compilation" isn't an anomaly as it's
referenced in the guidelines Ms. Rogers quoted above.
4:53:39 PM
REPRESENTATIVE LEDOUX asked then if under SSHB 274, independent
accountants would no longer be able to use the term
"compilation."
REPRESENTATIVE HAWKER replied no because it's associated with a
nationally accepted standard of work performed by CPAs. The
safe harbor language is for use by nonlicensees. The
legislation creates a legal distinction to ensure that the work
of licensees versus nonlicensees isn't confused.
4:54:52 PM
REPRESENTATIVE CRAWFORD asked then if a CPA would be required to
"compile" forms. The aforementioned is of concern, particularly
in light of the expense.
REPRESENTATIVE HAWKER directed attention to the safe harbor
language that exists in current statute, which specifies that "a
report doesn't include compilation of financial statement
language that does not express or imply assurance or special
knowledge or competence." He reiterated that the term
"compiled" is a specific term and is defined as such.
4:58:46 PM
REPRESENTATIVE CRAWFORD pointed out that the term "compilation"
will be defined in regulation. Therefore, he questioned whether
the term of art would be used such that the Board of Public
Accountancy could say that only CPAs can perform compilation.
Representative Crawford expressed the need to see what the
regulation is and then it can be placed in statute.
5:00:29 PM
REPRESENTATIVE HAWKER, in response to Representative Crawford,
said that he didn't believe this is something about which anyone
should be concerned. He informed the committee that he has a
book defining the term "compilation." He reminded the committee
that the notion is defining attest functions and the
"compilation" function is a not an attest function. He then
reminded the committee that the term "compilation" isn't new and
has been defined by the national regulatory authority. Again,
he reiterated that he didn't see any risk in a nonlicensed
accountant to "put up a financial statement." Again, the desire
is to ensure that nonlicensed accountants don't say that they
"compile" because it's a specific report noted in national
standards to be done only by CPAs.
5:03:44 PM
REPRESENTATIVE LEDOUX noted that her mother is a CPA. She then
related her understanding that to "prepare" and to "compile" are
the same [activities] and that independent accountants in Alaska
have traditionally used the term "compile" to refer to their
activities. Therefore, she questioned why CPAs feel that they
should have a monopoly in regard to the use of the term
"compile."
REPRESENTATIVE HAWKER reiterated that SSHB 274 is consumer
protection legislation [and specifying the use of "compile"]
ensures that consumers know what services one receives from what
profession. He pointed out that existing statute specifies that
those who aren't licensees cannot use language that expresses or
implies assurance, special knowledge, or competence. Therefore,
the use of the term "compiled" by a nonlicensee implies that the
individual is a CPA with that level of competence. The language
from the National Society of Accountants acknowledges the
aforementioned and that the term "prepared" is acceptable
terminology.
5:06:17 PM
CHAIR ANDERSON indicated his understanding that there is a
difference between "compiled" and "prepared."
REPRESENTATIVE LEDOUX reiterated her understanding that the
terms are the same, save that the term "compile" means that the
work was performed by a CPA.
REPRESENTATIVE CRAWFORD inquired as to who decides what is a
compilation versus a preparation.
REPRESENTATIVE HAWKER answered that it's what [SSHB 274] is
defining in statute. Representative Hawker clarified that
independent accountants don't have a universal body, and
therefore he wanted to be sure that folks understood that ASIA
is the Alaska entity of which some subscribe to the small
business tax accounting guidelines mentioned earlier.
5:08:53 PM
REPRESENTATIVE ROKEBERG noted the difficulty he is having
reading the existing law under the definitions section and
understanding the double negative. He emphasized that the
bright distinction isn't achieved with the proposed language
either. He related his understanding that from the existing
statute specified on page 27, lines 9-18, independent
accountants believe they can perform compilations. However, the
proposed language seems to imply that the disclaimer statements
are optional. If compiling is currently performed and allowed
by independent accountants, then that should be clarified, he
stressed.
5:11:04 PM
CHAIR ANDERSON, acknowledging the various concerns stated,
inquired as to how the sponsor wanted to quell those concerns.
5:11:48 PM
REPRESENTATIVE HAWKER, speaking on behalf of the Alaska Society
of CPAs and the Board of Accountancy, stated that both
organizations feel strongly that the proposed language is
appropriate. The language in ASIA's proposed amendment would
establish, in statute, opinion language on tax reports that has
no promulgated authoritative basis, he said. Representative
Hawker suggested that if ASIA wanted to bring forward language
from an association of national accountants to be recognized in
Alaska for independent accountants, then it should be brought
forward in a stand-alone bill. Representative Hawker said that
although he had hoped that SSHB 274 would've moved forward to
the House Finance Committee, he suggested that if it doesn't
there are enough accountants from [the Alaska Society of CPAs
and the Board of Accountancy] to meet with individual
legislators.
5:13:35 PM
MS. ROGERS related her belief that the language in SSHB 274 is
appropriate. In fact, she said that until January 6th she had
thought that ASIA was okay with the proposed language because it
was taken from the Uniform Accountancy Act. She offered to meet
with or leave information with members to explain the definition
of compilation for CPAs versus that definition for non-CPAs.
Two different parties, she explained, are using a word and
defining it differently.
5:14:32 PM
REPRESENTATIVE GUTTENBERG recalled that SSHB 274 has been touted
as consumer protection. However, he questioned whether there is
any consumer protection if no non-CPAs are involved. He then
turned attention to page 4 and the language referring to
"quality review requirements," and inquired as to its definition
and how it would impact independent accountants.
5:16:53 PM
REPRESENTATIVE HAWKER agreed that he would be happy to provide
information on this matter on Friday.
REPRESENTATIVE ROKEBERG commented that a rewrite of an entire
statute deserves a thorough review by the committee. He
restated his earlier question regarding whether independent
accountants are confusing the term "compilation" under existing
law and have been doing compilations. Therefore, SSHB 274 would
change the practice of independent accountants and the impact of
such is unknown.
5:18:12 PM
REPRESENTATIVE LYNN suggested that it might be appropriate to
include the definitions of both "compile" and "prepare."
REPRESENTATIVE HAWKER said that SSHB 274 does define "prepare."
He said he wasn't sure that the term "compile" should be defined
because it's subject to change as the AICPA, and the industry,
evolves and changes its rules, which is why the state adopts the
standards of the AICPA by reference.
REPRESENTATIVE LYNN, referring to the amount of debate on the
definitions of these terms, expressed the need be as specific as
possible.
5:19:57 PM
CHAIR ANDERSON indicated his agreement and announced that SSHB
274 would be held over.
HB 373-ALCOHOL:TRANSPORT MANUFACTURE; FORFEITURE
5:20:30 PM
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 373, "An Act relating to the manufacture and
transportation of alcoholic beverages; relating to forfeitures
of property for violations of alcoholic beverage laws; and
relating to violations of alcoholic beverage laws."
5:20:53 PM
REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, speaking
as the sponsor of HB 373, noted that many communities have
adopted local options to control the importation of alcohol. In
fact, in 2001 the U.S. Congress established the Alaska Rural
Justice And Law Enforcement Commission ("commission") to study
the challenges facing rural Alaska. This summer the commission
released a draft interim report, which contains several
recommended changes to Alaska's statutes. Upon reviewing the
recommendations, Representative Meyer said he focused on those
that he viewed as good. Therefore, HB 373 proposes, upon the
recommendation of the report, to change the forfeiture statutes
to allow the state to seize alcohol that's transported in
violation of the local option, to seize property purchased with
the proceeds of alcohol sold in violation of the local option,
and firearms carried or visible during the furtherance of the
violation could also be seized. The legislation also changes
the allowable quantities of alcohol such that a package store
may not ship more than 10.5 liters of distilled spirits in a
calendar month to an individual in a community with a local
option. Representative Meyer opined, "This bill represents
reasonable changes to the statute that will strengthen the hand
of law enforcement and communities in their effort to fight
against alcohol in their communities."
5:24:08 PM
MIKE PAWLOWSKI, Staff to Representative Kevin Meyer, Alaska
State Legislature, explained that Section 1 reduces the amount
of distilled spirits from 12 liters to 10.5 liters in terms of
presumption of guilt in a violation of Title 4. Section 2 adds
alcoholic beverages transported in violation of the common
carrier provisions to what can be seized by the state, including
items of value purchased from the proceeds of the sale of
alcoholic beverages and firearms that are visible or were
carried during the furtherance of a violation to the forfeiture
provisions. Section 3 establishes a procedure that the
Department of Public Safety must go through to determine whether
the [seized] property can be kept. Section 4 is merely a
conforming amendment. Section 5, he noted, adds a definition of
"manufacture" because there was no definition in statute,
although the manufacture of alcohol in a community that had
adopted a local option is illegal.
5:25:48 PM
REPRESENTATIVE GUTTENBERG inquired as to the result of inserting
the term "or" on page 2, lines 7 and 15.
MR. PAWLOWSKI deferred to the Department of Law (DOL).
5:26:09 PM
REPRESENTATIVE ROKEBERG inquired as to why seven jugs rather
than eight jugs.
MR. PAWLOWSKI pointed out that the statute being adjusted is AS
04.11.150, which refers to package store licenses. Those
statutes refer to 10.5 liters as the standard amount of alcohol
that can be delivered. For the presumption of a violation, it
was made consistent with what was allowed under the other
statutes. In further response to Representative Rokeberg, Mr.
Pawlowski related his understanding that when a person is
involved in a criminal prosecution for a violation and the
person is in possession of 14-15 jugs of alcohol, it's presumed
that those were being offered for sale rather than for personal
use.
5:27:25 PM
REPRESENTATIVE ROKEBERG turned attention to Section 3, which
only allows 30 days for response from someone with an interest
in an object being forfeited. He highlighted that most of the
violations occur in rural Alaska where [30 days] would seem to
be a tight time frame since folks may be out fishing or doing
other activities/work that take them out of town.
MR. PAWLOWSKI deferred to DOL.
5:28:04 PM
REPRESENTATIVE LYNN noted his support of HB 373.
5:28:32 PM
REPRESENTATIVE CRAWFORD referred to the language on page 3, line
3: "or items of value purchased from the proceeds". The
language "items of value" could refer to many different things.
he noted. Therefore, he inquired as to whether one could lose
his/her house if a mortgage payment was made with some of the
proceeds [of an activity prohibited under AS 04.11.010 or a
violation of a local option under AS 04.11.491].
MR. PAWLOWSKI related his understanding that the intent is to
mirror the drug statutes as closely as possible, but he deferred
to DOL for specifics.
5:29:35 PM
ANNE CARPENETI, Assistant Attorney General, Legal Services
Section - Juneau, Criminal Division, Department of Law, related
her belief that the insertion of "or" on page 2, lines 7 and 15
is a cleanup by Legislative Legal. With regard to the concern
that someone with an interest in an object being forfeited only
has 30 days [to make a claim], Ms. Carpeneti highlighted that
the forfeiture occurs 30 days after the department has made
reasonable efforts to [ascertain the identity and whereabouts of
a person with an interest in the forfeited object].
5:31:41 PM
REPRESENTATIVE ROKEBERG surmised then that there is a 60-day
window for someone with a title or claim on an item.
MS. CARPENETI replied yes, clarifying that it would be 30 days
after the service of publication.
5:32:06 PM
REPRESENTATIVE LEDOUX referred to existing statute as specified
on page 3, line 13 of HB 373. She asked if there is any
language specifying that the notification has to be in a
specific form such as certified mail.
MS. CARPENETI answered that she believes there is in the regular
civil procedure rules, and she offered to get back with the
committee in regard to the specifics.
5:33:01 PM
REPRESENTATIVE CRAWFORD returned attention to his question
regarding the language, "or items of value purchased from the
proceeds" located on page 3, line 3.
MS. CARPENETI related her understanding that in order to seize
an item purchased by money received from bootlegging activities,
a significant interest has to be shown. She opined that the
[state] wouldn't seize a house unless the house was purchased
only with money received from bootlegging activities.
5:34:41 PM
ED HARRINGTON, Captain/Commander, Alaska Bureau of Alcohol &
Drug Enforcement, N Detachment, Division of Alaska State
Troopers, Department of Public Safety (DPS), informed the
committee that he was also a member of the subcommittee on the
Alaska Rural Justice and Law Enforcement Commission. Mr.
Harrington explained that DPS supports HB 373 because it
enhances enforcement efforts related to the local option in
rural Alaska. With regard to forfeiture of property, Mr.
Harrington opined that it's probably the single best deterrent
of importers of alcohol in rural Alaska. For the most part, the
property that is seized are conveyances such as snow machines,
four wheelers, and boats. Generally, those properties are
forfeited through the court and most commonly during sentencing.
Mr. Harrington related that generally real property isn't
forfeited, although that's not to say that it wouldn't/couldn't
happen.
5:36:54 PM
REPRESENTATIVE CRAWFORD acknowledged Mr. Harrington's intent,
but indicated concern that he doesn't know the intent of future
DPS staff.
5:37:16 PM
REPRESENTATIVE ROKEBERG inquired as to why the [allowable
quantities of alcohol] has been lowered and made consistent with
the importation allowance.
MR. HARRINGTON explained that the current statute is somewhat
confusing in that one can possess up to 12 liters if one sells
alcohol, but only 10.5 if one is shipping. He pointed out that
this is merely a reduction by 1.5 liters. Therefore, the change
proposed in HB 373 simplifies the law by making 10.5 liters the
"common denominator."
5:39:02 PM
CHAIR ANDERSON, upon determining no one else wished to testify,
closed public testimony.
5:39:17 PM
REPRESENTATIVE LYNN moved to report HB 373 out of committee with
individual recommendations and the accompanying zero fiscal
note. There being no objection, it was so ordered.
5:39:54 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:40 p.m.
| Document Name | Date/Time | Subjects |
|---|