01/19/2022 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB44 | |
| HB85 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 44 | TELECONFERENCED | |
| *+ | HB 85 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 19, 2022
1:30 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Joshua Revak, Vice Chair
Senator Gary Stevens
Senator Elvi Gray-Jackson
MEMBERS ABSENT
Senator Peter Micciche
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 44(STA)
"An Act relating to the practice of accounting."
- MOVED SCS CSHB 44(L&C) OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 85(L&C)
"An Act relating to the Alaska Banking Code; relating to mutual
savings banks; relating to interstate state banks and
international banks; relating to the pledging of bank assets as
collateral security to tribal organizations; relating to the
pledging of bank assets for interest swap agreements; relating
to state business licenses; relating to persons who make loans
secured by interests in vessels or facilities; relating to
liability for the release or threatened release of hazardous
substances; relating to the Model Foreign Bank Loan Act; and
providing for an effective date."
- MOVED SCS CSHB 85(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 44
SHORT TITLE: PRACTICE OF ACCOUNTING; LICENSURE
SPONSOR(s): REPRESENTATIVE(s) THOMPSON
02/18/21 (H) PREFILE RELEASED 1/8/21
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) STA, L&C
03/11/21 (H) STA AT 3:00 PM GRUENBERG 120
03/11/21 (H) Heard & Held
03/11/21 (H) MINUTE(STA)
03/16/21 (H) STA AT 3:00 PM GRUENBERG 120
03/16/21 (H) Heard & Held
03/16/21 (H) MINUTE(STA)
03/23/21 (H) STA AT 3:00 PM GRUENBERG 120
03/23/21 (H) Moved CSHB 44(STA) Out of Committee
03/23/21 (H) MINUTE(STA)
03/24/21 (H) STA RPT CS(STA) 6DP 1AM
03/24/21 (H) DP: CLAMAN, STORY, KAUFMAN, VANCE,
TARR, KREISS-TOMKINS
03/24/21 (H) AM: EASTMAN
05/03/21 (H) L&C AT 3:15 PM BARNES 124
05/03/21 (H) Heard & Held
05/03/21 (H) MINUTE(L&C)
05/07/21 (H) L&C AT 8:00 AM GRUENBERG 120
05/07/21 (H) Heard & Held
05/07/21 (H) MINUTE(L&C)
05/12/21 (H) L&C AT 3:15 PM BARNES 124
05/12/21 (H) Moved HB 44 Out of Committee
05/12/21 (H) MINUTE(L&C)
05/13/21 (H) L&C RPT CS(STA) 6DP 1NR
05/13/21 (H) DP: KAUFMAN, SCHRAGE, MCCARTY, SNYDER,
NELSON, FIELDS
05/13/21 (H) NR: SPOHNHOLZ
05/19/21 (H) LIMIT ALL DEBATE TO 2 MIN EACH Y23 N16
E1
05/19/21 (H) TRANSMITTED TO (S)
05/19/21 (H) VERSION: CSHB 44(STA)
05/19/21 (S) READ THE FIRST TIME - REFERRALS
05/19/21 (S) L&C
01/19/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: HB 85
SHORT TITLE: FINANCIAL INSTITUTIONS; LIABILITY
SPONSOR(s): REPRESENTATIVE(s) LEBON BY REQUEST
02/18/21 (H) READ THE FIRST TIME - REFERRALS
02/18/21 (H) L&C, FIN
04/07/21 (H) L&C AT 3:15 PM BARNES 124
04/07/21 (H) Heard & Held
04/07/21 (H) MINUTE(L&C)
04/19/21 (H) L&C AT 3:15 PM BARNES 124
04/19/21 (H) Heard & Held
04/19/21 (H) MINUTE(L&C)
04/21/21 (H) L&C AT 3:15 PM BARNES 124
04/21/21 (H) Moved CSHB 85(L&C) Out of Committee
04/21/21 (H) MINUTE(L&C)
04/22/21 (H) L&C RPT CS(L&C) 5DP 1NR
04/22/21 (H) DP: SCHRAGE, MCCARTY, SNYDER, FIELDS,
SPOHNHOLZ
04/22/21 (H) NR: KAUFMAN
05/06/21 (H) FIN AT 9:00 AM ADAMS 519
05/06/21 (H) Heard & Held
05/06/21 (H) MINUTE(FIN)
05/13/21 (H) FIN RPT CS(L&C) 6DP 4NR
05/13/21 (H) DP: ORTIZ, LEBON, THOMPSON, JOHNSON,
RASMUSSEN, MERRICK
05/13/21 (H) NR: CARPENTER, WOOL, JOSEPHSON, FOSTER
05/13/21 (H) FIN AT 9:00 AM ADAMS 519
05/13/21 (H) Moved CSHB 85(L&C) Out of Committee
05/13/21 (H) MINUTE(FIN)
05/14/21 (H) TRANSMITTED TO (S)
05/14/21 (H) VERSION: CSHB 85(L&C)
05/14/21 (H) FIN AT 9:00 AM ADAMS 519
05/14/21 (H) <Bill Hearing Canceled>
05/17/21 (S) READ THE FIRST TIME - REFERRALS
05/17/21 (S) L&C, FIN
01/19/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
REPRESENTATIVE STEVE THOMPSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 44.
LYNETTE BERGH, Staff
Representative Steve Thompson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for HB 44
on behalf of the sponsor.
CRISTA BURSON, President and CEO
Alaska Society of CPAs (AKCPA)
Anchorage, Alaska
POSITION STATEMENT: Provided testimony on HB 44 by invitation.
KAREN BREWER-TARVER, Member
Alaska Society of CPAs
Juneau, Alaska
POSITION STATEMENT: Provided explanations and supporting
testimony for HB 44.
THOMAS G. NEILL, Chair
Uniform Accountancy Act Committee of the American Institute of
Certified Public Accountants
POSITION STATEMENT: Testified in support of HB 44.
LESLIE SCHMITZ, Member and past Chair
Alaska Board of Public Accountancy
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided supporting testimony for HB 44.
REPRESENTATIVE BART LEBON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 85.
JOSEPH BYRNES, Staff
Representative Bart LeBon
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for HB 85
on behalf of the sponsor:
JOE SCHIERHORN, Chair, President, and
Chief Executive Officer (CEO)
Northrim Bank
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 85.
DAVID DURHAM, Executive Vice President and
Chief Credit Administrator
Mt. McKinley Bank
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 85.
ROBERT SCHMIDT, Director
Division of Banking and Securities
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 85.
ACTION NARRATIVE
1:30:09 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:30 p.m. Present at the call to
order were Senators Gray-Jackson, Stevens, and Chair Costello.
Senator Revak arrived soon thereafter.
HB 44-PRACTICE OF ACCOUNTING; LICENSURE
1:30:47 PM
CHAIR COSTELLO announced the consideration of CS FOR HOUSE BILL
NO. 44(STA) "An Act relating to the practice of accounting."
[CSHB 44(STA) was before the committee.]
She noted that there was an amendment for the committee to
consider and following that she would look to the will of the
committee.
1:31:55 PM
SENATOR REVAK joined the committee.
1:32:26 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, Juneau,
Alaska, Sponsor of HB 44. explained that he introduced the bill
after members of the Alaska Board of Public Accountancy
contacted his office to share that the National Association of
the State Boards of Accountancy (NASBA) and the American
Institute of Certified Public Accountants (AICPA) had reached
out to ask them to work to update Alaska statutes to meet the
standards of the Uniform Accountancy Act (UAA) and the Institute
of CPA's Code of Professional Conduct. The national
organizations provided the Board of Public Accountancy with a
summary of areas where Alaska's statutes do not meet the
national standards. The board reviewed those statutes over the
past several years and developed a rough draft of a bill to
address the issues.
REPRESENTATIVE THOMPSON stated that HB 44 incorporates these
changes and would update the public accountancy statutes to
bring Alaska more in line with national standards while
continuing to protect the public interest by ensuring that only
qualified persons are licensed, and that appropriate standards
of competency and practice are established and enforced.
He listed the individuals who were available to answer
questions, deferred to Ms. Bergh to provide a sectional
analysis, and mentioned an amendment he would like the committee
to consider.
CHAIR COSTELLO made a motion to clarify that the bill version
that passed the House was before the committee.
SENATOR STEVENS commented that HB 44 appears to simply align
Alaska statutes with national standards.
REPRESENTATIVE THOMPSON agreed.
CHAIR COSTELLO offered her understanding that the bill removes
current regulations that are beyond what the federal law
requires. She asked what impact this would have to the public.
REPRESENTATIVE THOMPSON deferred to one of the subject matter
experts who were available online.
CHAIR COSTELLO asked Ms. Bergh to walk through the sectional
analysis.
1:37:23 PM
LYNETTE BERGH, Staff, Representative Steve Thompson, Alaska
State Legislature, Juneau, Alaska, stated that many of the
changes in the bill are redundant to replace antiquated
accountancy terminology, which makes the sectional lengthy. She
asked if the committee would prefer a summary rather than the
complete sectional.
CHAIR COSTELLO conveyed her preference to hear the complete
sectional.
1:38:21 PM
MS. BERGH provided the following sectional analysis for HB 44:
[Original punctuation provided.]
Section 1. AS 08.04.020(b)
Appointment and qualifications of board. Revises the
qualifications for public members for board
appointments by deleting "out-of-state exemption'
license holders.
Section 2.
AS 08.04.100 Certificate granted. Eliminates "out-of-
state exemption" and "practice privilege" from those
certificate holders who are not authorized to engage
in the practice of public accounting without a current
license or permit.
Section 3. Amends AS 08.04.105 (b)
License for individual to practice as a public
accountant. The individual requirements for the board
to renew a license granted in this section are amended
by deleting reference to repealed statutes [AS
08.04.360-AS 08.04.380] and inserts statutes [AS
08.04.360 and AS 08.04.370]. Substitutes the word
"peer" review for "quality" review.
Section 4. AS 08.04.195(d)
Reciprocity with other states. Deletes references to
repealed statutes [AS 08.04.360-AS 08.04.380] and
inserts revised statutes [AS 08.04.360 and AS
08.04.370].
Section 5. AS 08.04.240(a)(1-4)
Application of partnerships, limited liability
companies, corporations, and other legal entities for
permits. Replaces the phrase "as a partnership to a
partnership" to "a firm with an office in the state".
Replaces the term "partnership" with the term "firm".
The term "partner" is replaced with the term "owner"
as relates to the board or an individual who is
engaged in the practice of public accounting.
Section 6. AS 08.04.240(f)
References a new subsection (k) to the list in which
initial permits can be issued and deletes subsections
(b), (d), and (e).
Section 7. AS 08.04.240(g)
References subsection (k) and deletes (b), (d), or (e)
for a permit renewal. Deletes references to repealed
statutes [AS 08.04.360-AS 08.04.380] and inserts
revised statutes [AS 08.04.360 and AS 08.04.370].
Substitutes the term "peer" for "quality" review and
deletes specific competency requirements.
1:41:50 PM
Section 8. AS 08.04.240(i)
Replaces the terms "partnership, corporation, limited
liability company or other legal entity" with the term
"firm".
Section 9. AS 08.04.240.(j)
Replaces the terms "partnership, corporation, limited
liability company or other legal entity" with the term
"firm".
Section 10. AS 08.04.240
Adds a new subsection (k) that mandates that the board
shall grant a permit to engage in the practice of
public accounting to a firm that does not have an
office in the state but offers or provides attest
functions in the state. The permit shall be granted If
the firm applies to the board as a firm of certified
public accountants and meets the requirements as set
out in AS 08.04.240(k)(1-4).
Section 11. AS 08.04.360 Supervision required.
Deletes the requirement of "in residence" for an
individual who holds a license as a supervisor.
Deletes the phrase "practice privilege" and inserts
the phrase a license "issued under this chapter". Adds
that a 3 supervisor may serve for each office in the
state that is maintained by a firm.
Section 12. AS 08.04.370 Use of title "certified
public accountant" by office of "firm".
Replaces the term "legal entity" with the term "firm".
Deletes "out-of-state exemption" as a permit holder.
Section 13. AS 08.04.420(a) Practice privileges.
Deletes subsection (b) as an exception to the
requirements for licensure (repealed).
Section 14. AS 08.04.420(c) Practice privileges.
Deletes subsection (b) as a requirement for engaging
in the practice of public accounting in this state
(repealed).
Section 15. AS 08.04.422 Conditions of Practice
Privileges.
Deletes "out-of-state permits and out-of-state
exemptions" as conditions for practice privileges.
Substitutes the term "firm" for "legal entity".
Removes the phrases "exemption under AS 08.04.421, and
"under the permit exemption" as that statute is
repealed.
Section 16. AS 08.04.426(a) Quality review.
Adds that the board may require that an applicant who
is seeking a license renewal or permit "provide
evidence of enrollment in" a peer review program
approved by the board by regulation. Deletes the term
"quality" review and inserts the term "peer" review.
Substitutes the phrase "program approved" for the
phrase "conducted as required".
1:45:00 PM
Section 17. AS 08.04.426(c) Quality review.
References new subsection "(f)" which directs that the
Board shall require a peer review of a firm that has
in its employ an applicant scheduled for renewal of a
permit in that firm. *[See Section 19. New subsection
on (f)].
Section 18. AS 08.04.426(d) Quality review.
References new subsection "(f)" for the Board's
quality review regulations. Amends Section AS.
08.04.426(d)(1-3) by replacing the term "quality"
review with the term "peer" review. Deletes the phrase
"quality reviews" and inserts the phrase
"administration of a peer review". The term
"oversight" replaces the term "supervision". 4 Deletes
the term "operated" and replaces it with "performed".
Amends Section 08.04.426(d)(4) by striking current
text and replacing it with text to clarify that
organizations who administer peer review programs must
provide information requested by the board.
Section 19. AS 08.04.426 Quality review.
Adds a new subsection (f). This subsection sets the
guidelines that the board must follow to conduct peer
reviews by regulation.
Section 20. AS 08.04.440 Effect of failure to obtain
license or permit.
Deletes the terms "partnership", "limited liability
company", "corporation", "or other legal entity" and
replaces them with the term "firm". Deletes the
paragraph that defines the calculated fee for penalty
of an untimely renewal of license with the phrase "the
department shall determine" the fee.
Section 21. AS 08.04.450(a) Revocation or suspension
of license, practice privilege permit.
Eliminates the "out-of-state exemption" license holder
status. Adds a clause that the board may require peer
reviews or continuing education courses. Cleans up the
language in this section by substituting "comply with
the peer" review for the phrase "satisfactorily
complete a quality" review. Deletes the word
"committing" an act and replaces with "commission of"
an act. Adds subsections (12-15) as additional board
findings for possible revocation or suspension of
licenses.
Section 22. AS 08.04.450(c) Revocation or suspension
of license, practice privilege permit.
Adds a new subsection (c) that states that the board
may hold a disciplined license holder to bear the
costs of any disciplinary proceedings.
1:47:55 PM
Section 23. AS 08.04.470 Revocation of "firm" permit.
Deletes the terms "of partnership", "limited liability
company", "corporation", "or other legal entity", and
"it" and replaces the terms with the word "firm".
Section 24. AS 08.04.480 Grounds for censure of, or
the revocation, suspension, or refusal to renew a
permit for a "firm".
Uses the term "firm" to replace the terms "of
partnership", "limited liability company",
"corporation", "or other legal entity". Amends AS
08.04.480(1) by adding the "refusal to renew" as 5 an
additional cause for suspension or revocation.
Replaces the terms "a partner", "a member", "a
shareholder", "or if the permittee is a legal entity
other than a partnership, corporation or limited
liability company", "an owner of the permittee" with
the phrase ""an owner of the firm in this state or in
another state". AS 08.04.480(3) adds refusal to renew
the "permit or authority of the firm" to replace the
terms cited above.
Section 25. AS 08.04.500(a) Individual posing as a
certified public accountant.
Delineates the statutes required to be met to use the
CPA title. Specifically, AS 08.04.360 and AS
08.04.370.
1:49:32 PM
Section 26. AS 08.04.505 Issuance of reports. Deletes
the term "out-of-state exemption".
Replaces the term "financial statements" with on
"behalf" of. Replaces the terms "sole proprietorship",
"partnership", "corporation", "limited liability
company", "or other legal entity" with the term
"firm".
Section 27. AS 08.04.510(a) Partnership, limited
liability company, corporation, or other legal entity
posing as a certified public accountant.
Uses the term "firm" to replace "partnership",
"corporation", "limited liability company", "or other
legal entity".
Section 28. AS 08.04.520 Individual posing as a public
accountant.
Delineates the statutes that are required to be met to
use the title of public accountant. Those statutes are
AS 08.04.360 and AS 08.04.370. Deletes AS 08.04.380.
Section 29.
AS 08.04.530 "Firm" posing as a public accountant.
Replaces the terms "partnership", "corporation",
"limited liability company", "or other legal entity"
with the term "firm".
1:50:59 PM
Section 30. AS 08.04.540 Use of deceptive title or
abbreviation. Replaces the terms "partnership",
"corporation", "limited liability company", "or other
legal entity" with the term "firm".
Deletes the phrase "out-of-state exemption".
Delineates the statutes that are required to be met
and maintained by individuals or firms whose offices
are in this state. If requirements are met, they may
use the titles public accountant or auditor. Those
statutes are AS 08.04.360 and AS 08.04.370.
Section 31.
AS 08.04.560 Individual may not assume title. Deletes
the phrase "on any accounting or financial statement"
as it relates to reports. Deletes the phrase that
refers to individual's offices in this state for the
practice of public accounting. 6
Section 32.
AS 08.04.565 Prohibited acts. Replaces the terms
"partnership", "corporation", "limited liability
company", "or other business entity" with the term
"firm".
Section 33. AS 08.04.600 Disclosure of lack of license
or permit. Replaces the terms "partnership",
"corporation", "limited liability company", "or other
entity" with the term "firm".
Deletes "or a current out-of-state exemption" from the
list of individuals or firms holding licenses,
practice privileges or permits.
1:52:28 PM
Section 34. AS 08.04.610 Deceptive use of title or
designation by "firm". Replaces the terms
"partnership", "corporation", "limited liability
company", "or other legal entity" with the term
"firm".
Deletes "or a current out-of-state exemption" as a
holder of a permit.
Section 35. AS 08.04.620(1) Exceptions. Replaces terms
"partnership", "corporation", "limited liability
company", "or other legal entity" with the term
"firm".
Deletes the phrase "or a current out-of-state
exemption so long as". Amends AS 08.04.620(3) by
inserting new language to describe the requirements
that entitles a holder to a certificate, license, or
degree from a foreign country. Deletes previous
language used.
Section 36. AS 08.04.662(a) Confidential
communications. Deletes "(an) out-of-state exemption
holder".
Replaces the term "quality" review with "peer" review.
1:53:41 PM
Section 37. AS 08.04.680(1)(E) Definitions.
Adds a qualifier under the definition of attest
function that clarifies accepted examinations.
Section 38. AS 08.04.680(4) Definitions.
Clarifies the definition of "compilation service".
Deletes the subsection in AS 08.04.680(4)(B).
Section 39. AS 08.04.680(14) Definitions.
Delineates AS 08.04.240 as the sole statute to issue a
permit under; thereby deleting AS 08.04.421(a).
Section 40. AS 08.04.680(15) Definitions.
Deletes the phrase "on financial statements" as
pertains to issuing reports.
Section 41. AS 08.04.680(19) Definitions. Updates the
definition of "report" to include an "attest
function".
Amends AS 08.04.680(19)(A)(i) by adding the phrase
"the attested information or compiled" to describe the
financial statements. Amends AS 08.04.680(19)(B)(ii)
by deleting "or an out-of-state exemption". 7
Section 42. AS 08.04.680(20) Definitions.
Adds clarifying language, "Commonwealth of the"
Northern Mariana Islands.
Section 43. AS 08.04.680 Definitions.
Adds new definitions for (21) "firm", (22) "peer
review" and (23) "preparation of financial
statements".
Section 44.
Repeals statutes
1:56:31 PM
CHAIR COSTELLO observed that the bill appears to remove the out-
of-state exemption to practice accountancy in Alaska and instead
allows a person to practice in an Alaskan firm if an Alaska
certified manager oversees the CPAs. She asked the sponsor if
that was accurate.
REPRESENTATIVE THOMPSON said he believes so but he would defer
to the subject matter experts for clarification.
CHAIR COSTELLO asked if HB 44 allows anyone to practice public
accountancy without either Alaska certification or under the
oversight of a certified accountant with an office in Alaska.
REPRESENTATIVE THOMPSON deferred the question to either Ms.
Bergh or one of the subject matter experts who were online.
CHAIR COSTELLO said her final question related to Section 14,
page 6, line 10. It is amended to remove reference to AS
08.04.420(b) for those individuals who may engage in the
practice of public accountancy. Then it says those individuals
are not required to provide notice to the board. She asked why
that language is included and how onerous it might be for
somebody to have to notify the board that they are practicing
accountancy in Alaska.
1:58:34 PM
SENATOR GRAY-JACKSON said the chair articulated the questions
she had related to out-of-state exemptions.
SENATOR STEVENS asked when these statutes were last amended.
REPRESENTATIVE THOMPSON said he did not know.
SENATOR STEVENS said he would like someone to provide an answer.
1:59:29 PM
MS. BERGH explained that the accountancy statutes were modified
in 2006 when Representative Hawker carried the bill in the 24th
legislature. That bill changed the language to talk about
practice privilege for out-of-state applicants and had
regulations relating to the test function and licenses for
individuals to practice as public accountants. Some definitions
were also changed.
The statutes were revisited again in 2010 in the 26th
legislature when Representative Kurt Olsen carried the bill.
That bill addressed the concept of mobility for accountants,
out-of-state exemptions, and practice privileges.
The statutes were visited again in 2018 in the 30th legislature
when Representative Steve Thompson carried the bill. That bill
addressed the national standards in the first half of the
accountancy statutes and HB 44 addresses the second part of that
effort.
2:01:18 PM
CHAIR COSTELLO turned to invited testimony and asked the
individuals to respond to the questions that were asked earlier
in the hearing.
2:01:37 PM
CRISTA BURSON, President and CEO, Alaska Society of CPAs
(AKCPA), Anchorage, Alaska, stated that AKCPA has worked
collaboratively with the State Board of Public Accountancy on
the changes proposed in HB 44. On behalf of the more than 600
AKCPA members in public and private practice, educators, and
students she was speaking in support of HB 44.
2:02:54 PM
At ease
2:03:20 PM
CHAIR COSTELLO reconvened the meeting and asked the individuals
invited to testify to talk about whether or not HB 44 addresses
the out-of-state exemption that is being removed.
2:03:55 PM
KAREN BREWER-TARVER, Member, Alaska Society of CPAs, Juneau,
Alaska, stated that she is a CPA and partner at the Juneau-based
accounting firm Elgee Rehfled LLC, and in 2020 she completed
eight years on the Board of Accountancy. In 2018, the board
reviewed the accountancy statutes and HB 44 reflects the
subsequent four-year review the board worked on in collaboration
with NASBA and AICPA.
Responding to earlier questions, she said the board compared the
Alaska statutes to the model licensing law in the Uniform
Accountancy Act (UAA) that provides a uniform approach to the
regulation of the accounting profession. That model law is
modified as needed for each jurisdiction.
MR. BREWER-TARVER addressed the out-of-state exemption. She
explained that current statute requires a firm that does not
have an office in Alaska but wants to provide services to a
client in Alaska to obtain a firm permit. HB 44 eliminates that
requirement if the out-of-state firm meets certain statutory
criteria and understands that the board has oversight of their
work when they are serving an Alaska-based business. If the out-
of-state firm does not meet the criteria they would be required
to apply for a firm permit.
CHAIR COSTELLO referenced the list of criteria in Section 10 and
the language in Section 14 that says an individual who may
practice public accounting in the state is not required to
provide notice to the board. She asked how the board would be
aware that an individual has met the criteria and is practicing.
MS. TARVER replied that an out-of-state firm that meets the
criteria does not have to apply for a permit or provide notice.
Board oversight only occurs if an issue is brought to the board
or investigator's attention.
2:08:09 PM
THOMAS G. NEILL, Chair, Uniform Accountancy Act Committee of the
American Institute of Certified Public Accountants, stated that
he is speaking in support of HB 44, which modernizes the Alaska
accountancy statutes. He explained that UAA is model legislation
whose goal is to provide the 55 licensing jurisdictions in the
United States a consistent framework for regulation of the CPA
profession. He relayed that the accounting profession has faced
challenges the last few years that has affected businesses'
access to needed professional services. The mobility provision
in HB 44 addresses this challenge. He explained that when the
concept of mobility was first contemplated 20 years ago, a
concern was that businesses licensed in Alaska would lose work
to out-of-state firms. That has not proved to be the case in
either Alaska or other states. Another concern related to the
potential loss of revenue but that, too, has not been the case.
When a firm crosses a state line it may have to file and pay
occupation and individual taxes or taxes for staff that worked
in that state. To date, 31 states have enacted mobility statutes
and two others, and Alaska, are in the process. He reported
having received no negative feedback from states, firms, or
clients. A key advantage to firm mobility is that Alaska
businesses will have more access to these professional services,
which may help them grow and thrive.
2:11:03 PM
LESLIE SCHMITZ, Member and past Chair, Alaska Board of Public
Accountancy, Anchorage, Alaska, stated that the board has been
working on this legislation for several years and is in full
support. She explained that the board worked with the State
Society of CPAs (AKCPA) to assure a transparent process. They
sought assistance from the American Institute of CPAs (AICPA) to
help with the technical edits to bring Alaska practices and
terminology to current industry standards. The board also
reached out to interested parties throughout the process. She
related that the Uniform Accountancy Act is an "evergreen" model
licensing law developed to provide a uniform approach to
regulation of the accounting profession. The board believes HB
44 will enhance public protection and modernize terminology
referenced in the law. Despite the length, she advised that HB
44 addresses just a few main topics. These include updates in
the definition of "firm," updated terminology from "quality
review" to "peer review," and updating the law to allow firm
mobility.
SENATOR STEVENS asked if she could say that this in no way harms
Alaska CPAs and businesses.
MS. SCHMITZ replied the bill will provide mobility for Alaska
CPAs to do business in other states, which will open new
markets. Thus, she did not believe it would harm Alaska CPAs or
businesses. She deferred further comment to Mr. Neill.
SENATOR STEVENS said it makes sense but he would like to hear
from Mr. Neill as well.
2:14:17 PM
MR. NEILL explained that HB 44 allows Alaska accountancy firms
to work in Washington and other states and firms from Washington
and other states to work in Alaska. He offered his belief that
the bill would not harm Alaska CPAs or Alaska accountancy
businesses.
CHAIR COSTELLO noted that Sara Chambers was available to answer
questions about licensing.
SENATOR GRAY-JACKSON asked if out-of-state accountants need a
sponsor to work in Alaska.
2:15:51 PM
MR. NEILL answered that sponsorship would not be required. For
example, as a Washington accountant he could serve a client in
Alaska through the mobility statute. His main concern would be
to ensure compliance with any taxation laws that might apply.
2:16:36 PM
CHAIR COSTELLO opened public testimony for HB 44; finding none,
she closed public testimony.
She noted that she worked with the sponsor on a [conceptual]
amendment.
2:17:10 PM
SENATOR STEVENS moved Conceptual Amendment 1 to HB 44.
CONCEPTUAL AMENDMENT 1
Page 4, lines 23-24:
Delete: applies to the board as a firm of certified
public accountants and
CHAIR COSTELLO objected for discussion purposes. She related
that she worked with the sponsor on the amendment. The intent of
the legislation is that a firm will not apply to the board, but
instead meet certain requirements. The amendment aligns with the
intent. She asked the sponsor to comment.
REPRESENTATIVE THOMPSON agreed with the characterization. The
board identified this language as a problem and requested the
committee pass the amendment.
CHAIR COSTELLO read Conceptual Amendment for the listening
public.
2:18:53 PM
CHAIR COSTELLO removed her objection. Seeing no further
objection, Conceptual Amendment 1 to HB 44 passed. She asked the
will of the committee.
2:19:14 PM
SENATOR REVAK moved to report CSHB 44, work order 32-LS0302\I,
as amended, from committee with individual recommendations and
attached fiscal note(s).
CHAIR COSTELLO found no objection and SCS CSHB 44(L&C) was
reported from the Senate Labor and Commerce Standing Committee.
SENATOR STEVENS offered his assumption that this was the only
committee of referral.
REPRESENTATIVE THOMPSON said he believed that was accurate.
2:20:35 PM
At ease
HB 85-FINANCIAL INSTITUTIONS; LIABILITY
2:22:58 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of CS FOR HOUSE BILL NO. 85(L&C) "An Act relating
to the Alaska Banking Code; relating to mutual savings banks;
relating to interstate state banks and international banks;
relating to the pledging of bank assets as collateral security
to tribal organizations; relating to the pledging of bank assets
for interest swap agreements; relating to state business
licenses; relating to persons who make loans secured by
interests in vessels or facilities; relating to liability for
the release or threatened release of hazardous substances;
relating to the Model Foreign Bank Loan Act; and providing for
an effective date."
2:23:16 PM
REPRESENTATIVE BART LEBON, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 85, stated that HB 85 seeks to achieve
parity and level the competitive playing field between state
chartered banks and national chartered banks. Alaska has seven
commercial banks, three of which are nationally chartered and
four that are state chartered. The bill also has language that
levels the playing field between a mutual bank, of which there
is one in Alaska, and state stock-owned banks. He noted that
the sectional analysis references mutual banks.
REPRESENTATIVE LEBON related that he was previously employed at
Mount McKinley Bank in Fairbanks, which is a mutual bank, and at
the National Bank of Alaska that is now Wells Fargo.
He related that he worked with the Alaska Bankers Association
and the state Division of Banking and Securities to update state
banking statutes to ensure that all banks have an equal
opportunity to offer Alaskans and businesses banking services.
HB 85 is the result, and all seven commercial banks and the
Division of Banking and Securities support HB 85.
2:25:45 PM
SENATOR STEVENS asked for the difference between national and
state chartered banks.
REPRESENTATIVE LEBON provided a personal experience to respond
to the question. When he worked on commercial loans at the
National Bank of Alaska, national banking law allowed him to
loan at 80 percent of the value of the asset, whereas state law
allowed state chartered banks to loan at just 75 percent of the
value of the asset. That is a competitive disadvantage to state
chartered banks.
SENATOR STEVENS asked how HB 85 fixes that issue.
REPRESENTATIVE LEBON explained that it would align loans to
value, types and dollar amounts of loans, management of banks'
deposit base, and investment and loan portfolio management.
SENATOR REVAK made a motion to clarify that the committee was
considering CSHB 85(L&C), which was the version that passed the
House.
CHAIR COSTELLO asked Joseph Byrnes to walk through the sectional
analysis for HB 85.
2:27:54 PM
JOSEPH BYRNES, Staff, Representative Bart LeBon, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for HB 85 on behalf of the sponsor, which read as follows:
[Original punctuation provided with some formatting changes.]
Sec. 1. AS 06.05.005(a)
Conforming language to changes made under Section 10
to provide Alaska chartered banks parity with credit
unions when establishing a bank branch.
Sec. 2. AS 06.05.005
Prohibits the Department from placing a regulatory
limitation on a credit card that a state bank issues
to an officer of a state bank, the statutory authority
for which is amended in Section 5 and the regulation
(3 AAC 02.121) annulled in Section 24. Prohibits the
Department from adopting regulations relating to the
setting of time limits on the disposal of real and
personal property, the statutory authority for which
is amended in Section 6 and the regulation (3 AAC
02.135) annulled in Section 24.
Sec. 3. AS 06.05.050
Publication of reports: Adds the option for posting
notices of publication of bank reports on a bank's
internet website vs. physical posting in the bank
lobby.
MR. BYRNES added that the requirement that a copy of the report
of condition be supplied upon request at no cost is unchanged,
but it makes state law more consistent with federal regulations
for nationally chartered banks that do not have the requirement
to post notices of financial reports.
Sec. 4. AS 06.05.166(c)
Defines the timeframe not later than 15 days for
which a bank must notify the Department after an
emergency non-opening or closing of the bank.
Sec. 5. AS 06.05.210(a)
Increases the amount a director or executive officer
of a state bank may borrow to $500,000 (from $100K or
$250K for a primary residence).
MR. BYRNES explained that this changes aligns with the barring
limit for national banks
Sec. 6. AS 06.05.245
Disposition of property not needed in the conduct of a
banking business: Removes the Department's authority
to set a time limit on the disposal of real and
personal property. Instead, the carrying value and
write-down will be dictated by Generally Accepted
Accounting Principles (GAAP).
MR. BYRNES explained that this is consistent with federal
regulations governing nationally chartered banks.
2:31:43 PM
Sec. 7. AS 06.05.260
Allows a state bank to pledge bank assets as
collateral security to secure funds deposited by
consortiums of federally recognized tribes.
Sec. 8. AS 06.05.260
Adds a new subsection to replace the Division of
Banking's Parity Orders 12-B (3- 6) regarding the
pledging of assets for interest rate swaps.
Adds a new subsection to define:
? "federally recognized tribe" as an Indian tribe
under the Federally Recognized Indian Tribe List Act
of 1994; and
? "interest rate swap agreement" as a stream of future
interest payments that are exchanged for another
stream of future interest payments.
MR. BYRNES explained that this achieves parity by authorizing
state chartered banks to pledge assets for interest rate swaps
the same as for nationally chartered banks. National banks are
regulated by Section 610 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act.
Sec. 9. AS 06.05.355(a)
Requires all banks to become a member of the FDIC as a
condition for receiving a Certificate of Authority;
Intended to maintain trust and level the playing field
for the banking industry.
MR. BYRNES noted that federal regulation requires all nationally
chartered banks to be FDIC insured and all banks in Alaska are
so insured.
Sec. 10. AS 06.05.399
Changes of location; branch banks. Provides Alaska
chartered banks parity with credit unions when
establishing a bank branch. Banks are currently
subject to stricter bank branch application
requirements under 3 AAC 02.215. The Division would
establish in regulations similar requirements of
credit unions as in 3 AAC 03.260. [This is the same as
Section 19 for state chartered mutual banks.]
Sec. 11. AS 06.05.438(a)
Reduces the number of required meetings of a bank's
board from 10 to 4 per calendar year.
MR. BYRNES stated that this brings parity with nationally
chartered banks that do not have a required number of board
meetings.
Sec. 12. AS 06.05.555(a) Conforming language to
changes made under Section 10 to provide Alaska
chartered banks parity with credit unions when
establishing a bank branch.
2:35:06 PM
Sec. 13. AS 06.05.990(4)
Removes "remote service unit" (ATM, etc.) from the
definition of "branch bank" and defines "remote
service unit" directly under this section.
Sec. 14. AS 06.15.180
Allowing mutual banks to have similar borrowing
options as state banks.
MR. BYRNES explained that this raises the amount that may be
borrowed from a mutual bank from five percent to no more than 15
percent of assets.
Sec. 15. AS 06.15.190
Expands the deposits that mutual banks can accept.
MR. BYRNES noted that Sec. 15 allows state mutual banks to
accept the same deposits as nationally chartered mutual banks,
which received expanded authority to accept deposits under the
federal Depositary Institutions Deregulation and Monetary
Control Act of 1980.
Sec. 16. AS 06.15.220
Allows trustees to delegate their authority to approve
interest on deposits.
Sec. 17. AS 06.15.240
Provides mutual banks with the same investment
opportunities as state banks under AS 06.05.270.
Sec. 18. AS 06.15.250
Providing mutual banks with the same lending
opportunities as state banks.
Sec. 19. AS 06.15.290
Changes of location; branch banks. Provides mutual
banks parity with state banks and credit unions when
establishing a bank branch. Alaska chartered banks are
currently subject to stricter bank branch application
requirements under 3 AAC 02.215. The Division would
establish in regulations similar requirements of
credit unions as in 3 AAC 03.260.
Sec. 20. AS 43.70.105(a)
Exempts depository institutions (banks and credit
unions) from the requirement to obtain business
licenses for all headquarter and branch locations.
Currently, state-chartered institutions receive a
Certificate of Authority through the Division of
Banking and Securities. Until each institution
receives this certificate, they may not transact
business. This change would eliminate duplicate
licensing, thus reducing regulatory burden.
Sec. 21. AS 46.03.822(a)
Adds reference to the new language in Section 22.
2:39:05 PM
Sec. 22. AS 46.03.822
Conforms state law to the Comprehensive, Environmental
Response, Compensation, and Liability Act (CERCLA)
standard for lender liability. CERCLA Section 101(20)
contains a secured creditor exemption that eliminates
owner or operator liability for lenders who hold
ownership in a CERCLA facility primarily to protect
their security interest in that facility, provided
they do not "participate in the management of the
facility." Generally, participation in the management
applies if a bank exercises decision-making control
over a property's environmental compliance, or
exercises control at a level similar to a manager of
the facility or property. Participation in management
does not include actions such as conducting property
inspections, requiring a response action to address
contamination, providing financial advice or
renegotiating or restructuring the terms of the
security interest. The secured creditor exemption also
provides that foreclosure on a property does not
result in liability for a bank, provided the bank
takes "reasonable steps" to divest itself of the
property "at the earliest practicable, commercially
reasonable time, on commercially reasonable terms."
Generally, a bank can maintain business activities and
close down operations at a property as long as the
property is listed for sale shortly after the
foreclosure date or at the earliest practicable,
commercially reasonable time.
2:40:38 PM
Sec. 23. Repealed Sections
? Repeals AS 06.05.265 Liability of directors for
certain loans. Overbroad and unnecessary.
? Repeals AS 06.10.010-050 Model Foreign Bank Loan
Act. The Act exempts out-of-state banks from Alaska
taxation for certain business types and became
obsolete in 1984 due to other tax measures. The Act
is an unnecessary administrative burden.
? Repeals AS 06.15.150, 160 & 170 Surplus
requirements, additions and limitations. Repealing
these statutes would provide parity and allow a
mutual savings bank to follow AS 06.05.305 for
capital requirements.
? Repeals AS 06.15.230 Withdrawal of Deposits:
Language no longer relevant after deregulation of
Thrifts and Savings and Loans.
Sec. 24. Annulled Regulations
? Annuls 3 AAC 02.121 Credit cards for officers:
Removes the regulation limiting uncollateralized
credit card balances up to $10,000 for an officer of
a state bank. See Sections 2 and 5.
? Annuls 3 AAC 02.135 Disposition of property not
needed for banking business. The carrying value and
write-down of property will instead be dictated by
Generally Accepted Accounting Principles (GAAP). See
Sections 2 and 6.
Sec. 25. Applicability Uncodified law for Sections 3,
4, 6, 9, 10, 12, 16, 18, and 19.
Cites definition locations for "branch bank",
"department", "international bank", "interstate state
bank", "mutual bank" and "state bank".
2:42:36 PM
Sec. 26. Transition
Provides a transition period relating to Sections 1,
10, 12, and 19; provides the Department time to
promulgate regulations for changes of bank locations
and establishing branch banks.
Sec. 27.
Delayed Effective Date Sets a delayed effective date
for Sections 1, 10, 12, and 19 to provide the
Department time to promulgate regulations for changes
of bank locations and establishing branch banks.
MR. BYRNES stated that the effective date currently is set to
January 2022 but the sponsor would like the committee to
conceptually amend that date to January 2023.
Sec. 28. Immediate Effective Date
MR. BYRNES explained that the immediate effective date would
apply to all but those sections listed in Section 27.
2:44:34 PM
At ease
2:46:37 PM
CHAIR COSTELLO reconvened the meeting and turned to invited
testimony.
2:46:54 PM
JOE SCHIERHORN, Chair, President, and Chief Executive Officer
(CEO), Northrim Bank, Anchorage, Alaska, stated that he is a
member and past president of the Alaska Bankers Association,
which represents the seven banks that operate in Alaska. These
include: the state chartered Denali State Bank, Mt. McKinley
Bank, 1st Bank of Ketchikan, and Northrim Bank, as well as
KeyBank, Wells Fargo, and First National Bank Alaska, which are
national banks chartered by the Office of the Comptroller of the
Currency. He reported that all seven banks support HB 85, and
the four state chartered banks have submitted letters that are
in the bill packets.
MR. SCHIERHORN stated that the Alaska Bankers Association has
worked in concert with the Division of Banking and Securities on
HB 85, the provision of which will provide meaningful updates to
the banking code. He expressed gratitude to the sponsor for
introducing the bill which is essential to better serve bank
customers in Alaska; create parity between laws and regulations
governing the various types of financial institutions that
operate in Alaska; keep Alaska chartered banks competitive with
other financial institutions; keep pace with the technology
advances in banking; and enable efficient operations.
2:50:39 PM
DAVID DURHAM, Executive Vice President and Chief Credit
Administrator, Mt. McKinley Bank, Fairbanks, Alaska, stated that
he is also the secretary-treasurer for the Alaska Bankers
Association. He related that Mt. McKinley Bank is Alaska's only
mutual bank. It is owned by its depositors and its structure
lies between a commercial bank and credit union. The focus is to
provide customer service to local communities rather than
generating dividends for shareholders. He shared that Mt.
McKinley Bank recently earned another outstanding CRA rating
from the FDIC, demonstrating its commitment to serving the
banking and commercial needs of communities.
MR. DURHAM opined that HB 85 will modernize banking regulations
in Alaska and provide parity for Alaska banks chartered under AS
06.05 with national banks. It also modernizes and gives parity
to the state's home and mutual banks regulated under AS 06.15,
which still contains provisions for mutual banks that became
obsolete when savings and loans were deregulated in 1980. HB 85
seeks to update banking regulations to take advantage of new
technology and accounting standards, and levels the playing
field. He said Alaska's banks have always enjoyed a friendly
competitive environment, but today the competition has grown to
include numerous online financial institutions that have
captured a significant share of the Alaska market. HB 85 also
brings parity between commercial banks and mutual banks for
lending, investing, and borrowing.
MR. DURHAM said HB 85 repeals AS 06.15.180 and allows mutual
banks the same borrowing capacity as commercial banks. It also
removes antiquated provisions of AS 06.15.150 - .170, which
required mutual banks to sequester up to 10 percent of its
annual net earnings into a surplus reserve account that may only
be used to meet losses. Since 1970, all financial institutions
have been required to reserve for losses under the Financial
Accounting Standards Board (FASB) regulation FAS 5 and FAS 114.
AS 06.15.150 - .170 require that mutual banks duplicate the
reserve requirement. HB 85 repeals these sections and brings
parity to both state and national banks.
Finally, he said HB 85 adds provisions to AS 06.03 that mirror
the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA). These regulations protect lenders from
environmental liability when they foreclose on contaminated
properties. CERCLA requires that lenders cannot participate in
the management of the property and must take reasonable steps to
divest the property in the earliest practicable and
environmentally reasonable manner to avoid liability. This
provision gives Alaska lenders the same protections available to
lenders in other states and allows continued lending to local
businesses vital to the health of Alaska communities.
2:54:45 PM
SENATOR STEVENS asked why credit unions are not members of the
Alaska Bankers Association and if they have the parity afforded
to federal, state, and mutual banks.
MR. DURHAM offered that credit unions already enjoy advantages
not available to banks. They are not regulated by the Community
Reinvestment Act and do not pay tax on their income.
SENATOR STEVENS asked the sponsor to supplement the response.
REPRESENTATIVE LEBON explained that federal banking laws require
banks to offer loans to all parts of the community from which
they collect deposits, whereas credit unions are not required to
do so. The bill seeks to level the playing field by extending
banks the advantages credit unions currently enjoy. He added
that he has not heard credit unions in Alaska raise concerns
about the bill.
SENATOR STEVENS asked if he is saying that the bill bring parity
for state, national, and mutual banks to the credit union
position.
REPRESENTATIVE LEBON clarified that HB 85 seeks to address the
major differences between state chartered and federally
chartered banks.
2:59:06 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development
(DCCED), Anchorage, Alaska, stated that the division serves as
the primary regulator of the four state chartered banks in
Alaska, following the Alaska banking statutes. The nationally
chartered banks have had the advantage of broader powers from
updated federal laws, which has created a disparity between the
two banking systems. There has been a collaborative effort
between the Alaska Bankers Association and the division to
bridge the gap between the state and federal law. HB 85
modernizes Alaska's banking law to bring parity between state
and national banks and level the playing field. HB 85 will help
banks to become competitive with modern best practices and the
evolution of the financial services they provide. The Division
of Banking and Securities supports HB 85.
3:00:17 PM
CHAIR COSTELLO opened public testimony for HB 85; finding none,
she closed it.
3:00:38 PM
SENATOR GRAY-JACKSON moved Conceptual Amendment 1 to HB 85.
CONCEPTUAL AMENDMENT 1
Page 12, line 6:
Delete: "2022"
Insert "2023"
3:01:03 PM
CHAIR COSTELLO found no objection and Conceptual Amendment 1 was
adopted.
3:01:09 PM
SENATOR REVAK moved to report the [Senate CS] for CSHB 85, work
order 32-LS0371\G, as amended, from committee with individual
recommendations and attached fiscal note(s).
3:01:31 PM
CHAIR COSTELLO found no objection and SCS CSHB 85(L&C) was
reported from the Senate Labor and Commerce Standing Committee.
3:02:19 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CSHB 44 (STA) Sectional Analysis version I - 01.19.21.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| HB 44 Fiscal Note 2360 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| CSHB 44 (HSTA) Conceptual Amendment 1 - 1.19.22.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| HB 85 Fiscal Note 2360 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| HB 85 Fiscal Note 2808 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| HB 85 Fiscal Note 3094 - DEC.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| CSHB 85 (HL&C) Conceptual Amendment 1 - 1.19.22.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |