05/03/2021 03:15 PM House LABOR & COMMERCE

            HB 44-PRACTICE OF ACCOUNTING; LICENSURE                                                                         
                                                                                                                                
3:22:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SPOHNHOLZ announced  that the  first order  of business                                                               
would be HOUSE  BILL NO. 44, "An Act relating  to the practice of                                                               
accounting."                                                                                                                    
                                                                                                                                
[Before the committee was CSHB 44(STA).]                                                                                        
                                                                                                                                
3:23:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STEVE  THOMPSON,  Alaska  State  Legislature,  as                                                               
prime sponsor, introduced HB 44.   He explained that the National                                                               
Association of  the State Boards  of Accountancy (NASBA)  and the                                                               
American  Institute  of   Certified  Public  Accountants  (AICPA)                                                               
provided  Alaska's   Board  of   Public  Accountancy   under  the                                                               
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED) with  a summary of  areas in which Alaska's  statutes and                                                               
regulations   for  public   accountancy   and  certified   public                                                               
accountants (CPAs) differ from the  Uniform Accountancy Act (UAA)                                                               
and  AICPA's Code  of Professional  Conduct.   He  said that  the                                                               
statute changes  under HB  44 would  align Alaska's  statutes and                                                               
regulations   for   public    accountancy   with   the   national                                                               
organizations while  continuing to protect the  public's interest                                                               
by ensuring  that only qualified professionals  are licensed, and                                                               
that  appropriate standards  of  competency  are established  and                                                               
enforced.                                                                                                                       
                                                                                                                                
3:25:45 PM                                                                                                                    
                                                                                                                                
LYNETTE  BERGH,  Staff,  Representative  Steve  Thompson,  Alaska                                                               
State Legislature,  on behalf  of Representative  Thompson, prime                                                               
sponsor,  read  the  explanation  of  changes  [included  in  the                                                               
committee packet]  in the proposed committee  substitute (CS) for                                                               
HB 44, which read as follows [original punctuation provided]:                                                                   
                                                                                                                                
     There  are three  minor  changes  between the  original                                                                    
     bill HB 44  version A and the blank CS  of HB44 version                                                                    
     B.                                                                                                                         
                                                                                                                                
     Section 19; Line 4- delete the phrase "or compilation"                                                                     
                                                                                                                                
     Section  20, Line  28- Delete  "the  board" and  insert                                                                    
     "the department"                                                                                                           
                                                                                                                                
     Section 43, Line 5- Delete "or compilation reports                                                                         
                                                                                                                                
MS. BERGH  pointed out  that the  sectional analysis  includes 44                                                               
sections, many of  which are redundant.  She  presented a summary                                                               
of  the sectional  analysis [included  in the  committee packet],                                                               
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     The changes  in CSHB  44 are  intended to  better align                                                                    
     Alaska  accountancy statutes  with national  standards,                                                                    
     using the  Uniform Accountancy Act  (UAA) as  a guiding                                                                    
     document.  These changes  will  help  ensure a  uniform                                                                    
     approach to regulation of  the accounting profession in                                                                    
     Alaska.  Throughout the  current accountancy  statutes,                                                                    
     there are antiquated industry terms and definitions.                                                                       
                                                                                                                                
     CSHB 44 updates the following terms:                                                                                       
                                                                                                                                
     ?  "out-of-state  exemption"  is  removed  entirely  to                                                                    
     allow for firm mobility                                                                                                    
                                                                                                                                
     ?    "Partnership,     limited    liability    company,                                                                    
     corporation, or  other legal entity" are  replaced with                                                                    
     the term  "firm"; the updated  definition of  firm will                                                                    
     now include sole proprietors                                                                                               
                                                                                                                                
     ? "quality review" is replaced with "peer review"                                                                          
                                                                                                                                
     ? Sections 37-43 updates/adds new definitions for the                                                                      
     following accountancy terms:                                                                                               
          o "attest function"                                                                                                   
          o "compilation service"                                                                                               
          o "permit"                                                                                                            
          o "practice of public accounting"                                                                                     
          o "report"                                                                                                            
          o "state"                                                                                                             
          o "preparation of financial statements"                                                                               
                                                                                                                                
3:29:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SCHRAGE  asked  whether an  out-of-state  company                                                               
could provide remote service to  Alaska businesses without having                                                               
a physical presence within the state.                                                                                           
                                                                                                                                
MS. BERGH deferred to Ms. Schmitz.                                                                                              
                                                                                                                                
3:30:11 PM                                                                                                                    
                                                                                                                                
LESLIE  SCHMITZ,   CPA,  Chair,  Board  of   Public  Accountancy,                                                               
Division  of Corporations,  Business, and  Professional Licensing                                                               
(CBPL),   Department  of   Commerce,   Community,  and   Economic                                                               
Development  (DCCED),  responded   that  out-of-state  firms  are                                                               
currently allowed to perform services  in Alaska after undergoing                                                               
an application  process.  She  expressed that the removal  of the                                                               
out-of-state exemption  and the  move toward firm  mobility would                                                               
give  the  board more  jurisdiction  over  accounting firms  that                                                               
provide services in  Alaska.  Under UAA, she said,  the firms are                                                               
governed  by  the regulations  in  their  own states;  under  the                                                               
proposed  legislation,  an  Alaska  consumer  who  experiences  a                                                               
problem  with work  performed in  Alaska could  file a  complaint                                                               
with the  State of Alaska as  well as with the  accountant's home                                                               
state.                                                                                                                          
                                                                                                                                
3:31:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MCCARTY  asked   whether  those  firms  currently                                                               
licensed in Alaska  are required to pay for both  a "license" and                                                               
a "corporate business license."                                                                                                 
                                                                                                                                
MS. SCHMITZ  replied that  her understanding is  that there  is a                                                               
professional licensing  fee.   She deferred  to Ms.  Hondolero on                                                               
the question of business licensing.                                                                                             
                                                                                                                                
3:32:38 PM                                                                                                                    
                                                                                                                                
CORI   HONDOLERO,  Executive   Administrator,  Board   of  Public                                                               
Accountancy,    Division   of    Corporations,   Business,    and                                                               
Professional   Licensing   (CBPL),    Department   of   Commerce,                                                               
Community, and  Economic Development  (DCCED), responded  that an                                                               
out-of-state firm is  currently required to be  licensed and also                                                               
to  obtain  an  out-of-state  permit.   She  said  this  proposed                                                               
legislation would change that process.                                                                                          
                                                                                                                                
REPRESENTATIVE  MCCARTY  asked   whether  individual  accountants                                                               
working  at a  licensed firm  are currently  also required  to be                                                               
licensed in Alaska.                                                                                                             
                                                                                                                                
MS.  HONDOLERO replied,  "Currently,  yes."   She clarified  that                                                               
individual  accountants   have  their   own  licenses,   and  the                                                               
accounting firms are also licensed.                                                                                             
                                                                                                                                
REPRESENTATIVE  MCCARTY   asked  whether  the   requirement  also                                                               
pertains to  anyone doing business  "with the state"  who resides                                                               
outside of the state.                                                                                                           
                                                                                                                                
MS.  HONDOLERO   responded  that  there  is   already  individual                                                               
mobility in Alaska, so this  proposed legislation would allow for                                                               
firm mobility.                                                                                                                  
                                                                                                                                
REPRESENTATIVE MCCARTY clarified his question.                                                                                  
                                                                                                                                
MS. HONDOLERO deferred to Mr. Neill.                                                                                            
                                                                                                                                
3:34:26 PM                                                                                                                    
                                                                                                                                
THOMAS  NEILL, CPA,  Chair,  Uniform  Accountancy Act  Committee,                                                               
American  Institute of  Certified  Public Accountants,  explained                                                               
that  firm mobility  would  allow firms  from  outside Alaska  to                                                               
perform  services   within  the   state.    Under   the  mobility                                                               
construct, he said,  the firm would not be required  to acquire a                                                               
license  from  the  state, nor  would  the  individual  certified                                                               
public accountants (CPAs) be required  to get individual licenses                                                               
in Alaska.  Depending on state  tax statutes, he said, a business                                                               
license may be  required.  He said that if  he enters Alaska with                                                               
a staff to do an attest  service for an Alaska business, he needs                                                               
to register with the state for  payroll taxes as well as file any                                                               
required  Alaska business,  occupation, or  corporate taxes.   He                                                               
said that the mobility construct  doesn't relieve a firm from its                                                               
tax burden, it just relieves the licensure requirement.                                                                         
                                                                                                                                
3:35:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   SPOHNHOLZ  asked   Ms.   Hondolero  whether   business                                                               
licensing is  an effective way  to track  non-resident accounting                                                               
firms and individual accountants practicing in Alaska.                                                                          
                                                                                                                                
MS.  HONDOLERO  expressed  that it's  her  understanding  that  a                                                               
business license  is required,  but that  she would  research the                                                               
question.                                                                                                                       
                                                                                                                                
3:36:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCARTY  expressed concern  at the  possibility of                                                               
not being able to track who is doing business within the state.                                                                 
                                                                                                                                
3:37:10 PM                                                                                                                    
                                                                                                                                
MR. NEILL offered that, in the  case of a complaint filed against                                                               
an  out-of-state business  or individual  who entered  Washington                                                               
physically  or  electronically  to do  business,  Washington  may                                                               
pursue the licensee in whatever  state the individual is licensed                                                               
in.   As a result, he  said, Washington doesn't lose  the ability                                                               
to discipline the individual or firm.   He added that there is no                                                               
escape from the disciplinary process,  either by the individual's                                                               
home state or the state they're doing business in.                                                                              
                                                                                                                                
3:38:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCARTY  noted that  in Alaska,  any investigative                                                               
fees incurred by professional boards  are borne by those licensed                                                               
by that board.                                                                                                                  
                                                                                                                                
CO-CHAIR SPOHNHOLZ added  that Washington is often  the source of                                                               
professionals practicing  in other states, while  Alaska is often                                                               
the recipient of such services.                                                                                                 
                                                                                                                                
3:39:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NELSON   asked  when  Alaska  last   adapted  its                                                               
accountancy statutes to reflect national standards.                                                                             
                                                                                                                                
REPRESENTATIVE  THOMPSON responded  that  he  believes it's  been                                                               
several years.  He then deferred to Ms. Schmitz.                                                                                
                                                                                                                                
3:40:03 PM                                                                                                                    
                                                                                                                                
MS.  SCHMITZ expressed  agreement  with Representative  Thompson.                                                               
She said  that the one of  the larger issues is  that of "quality                                                               
review," which UAA has now termed "peer review."                                                                                
                                                                                                                                
3:41:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SPOHNHOLZ  clarified that UAA means  Uniform Accountancy                                                               
Act and not University of Alaska Anchorage.                                                                                     
                                                                                                                                
MS. SCHMITZ answered yes.                                                                                                       
                                                                                                                                
CO-CHAIR  SPOHNHOLZ asked  Ms. Schmitz  to research  the year  of                                                               
Alaska's last statutory updates.                                                                                                
                                                                                                                                
MS. SCHMITZ said that she would  have the information at the next                                                               
hearing.                                                                                                                        
                                                                                                                                
3:41:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NELSON  asked  whether the  most  recent  changes                                                               
dealt with issues similar to those in the proposed legislation.                                                                 
                                                                                                                                
REPRESENTATIVE THOMPSON  responded yes.   He said that  there are                                                               
continuing regulation  changes, but changes in  statute only take                                                               
place every few years.                                                                                                          
                                                                                                                                
REPRESENTATIVE NELSON expressed his intent to support HB 44.                                                                    
                                                                                                                                
3:42:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON disclosed  that his wife owns  a CPA firm                                                               
and has served on the Board of Public Accountancy.                                                                              
                                                                                                                                
REPRESENTATIVE SCHRAGE made the same disclosure.                                                                                
                                                                                                                                
3:43:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON  noted that his invited  testifiers would                                                               
like to comment.                                                                                                                
                                                                                                                                
3:44:00 PM                                                                                                                    
                                                                                                                                
LESLIE  SCHMITZ, CPA,  Board of  Public Accountancy,  Division of                                                               
Corporations, Business,  and Public Licensing  (CBPL), Department                                                               
of Commerce, Community, and  Economic Development (DCCED), shared                                                               
that she is  an Anchorage-based CPA and is serving  in her eighth                                                               
and final year on the board.   She stated the board's support for                                                               
HB  44 and  pointed out  that the  board worked  with the  Alaska                                                               
Society of  Certified Public Accountants to  assure a transparent                                                               
process  in  the  proposed legislation,  sought  assistance  with                                                               
technical edits  from the American Institute  of Certified Public                                                               
Accountants, and  reached out to  licensees and  stakeholders for                                                               
feedback.  She said that the  Uniform Accountancy Act (UAA) is an                                                               
"evergreen" model  licensing law  developed to provide  a uniform                                                               
approach  to   regulation  of  the  accounting   profession;  the                                                               
proposed legislation,  which closely follows UAA  language, would                                                               
enhance public protection and modernize terminology.                                                                            
                                                                                                                                
3:46:17 PM                                                                                                                    
                                                                                                                                
THOMAS  NEILL, CPA,  Chair,  Uniform  Accountancy Act  Committee,                                                               
American  Institute  of  Certified  Public  Accountants  (AICPA),                                                               
stated AICPA's  support for  the proposed  legislation.   He said                                                               
UAA is  a model act with  the goal of providing  the 55 licensing                                                               
jurisdictions  in  the  U.S.  with  a  consistent  framework  for                                                               
regulation  of  the CPA  profession.    He  said that  when  firm                                                               
mobility  was first  contemplated  more than  20  years ago,  the                                                               
concern  was that  firms already  licensed within  a state  would                                                               
lose business  to out-of-state firms;  experience has  shown that                                                               
this did  not occur.   The concerns  regarding potential  loss of                                                               
revenue  to the  state  were also  groundless,  he said,  because                                                               
firms are  required to follow state  statutes regarding business,                                                               
occupation, corporate, and individual  taxes for both the revenue                                                               
earned within the  state and payroll taxes for the  time the firm                                                               
spent  operating in  the  state.   He said  that  30 states  have                                                               
enacted mobility statutes  and that, in his role as  chair of the                                                               
UAA  committee, he  has  not  heard any  negative  feedback.   He                                                               
pointed out that  one of the key advantages of  firm mobility for                                                               
Alaska  businesses   would  be  having  access   to  professional                                                               
services.                                                                                                                       
                                                                                                                                
3:48:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SPOHNHOLZ  asked whether Washington's sales  tax applies                                                               
to professional services.                                                                                                       
                                                                                                                                
MR. NEILL  said that sales tax  does not apply, but  business and                                                               
occupation taxes do.                                                                                                            
                                                                                                                                
CO-CHAIR SPOHNHOLZ asked  whether there are payroll  taxes in the                                                               
State of Washington.                                                                                                            
                                                                                                                                
MR. NEILL responded  yes.  For example, he  said, his Washington-                                                               
based firm  is registered  with the  Oregon Secretary  of State's                                                               
office and pays  corporate income taxes and  individual taxes for                                                               
work performed  in Oregon;  his employees,  who then  have Oregon                                                               
wages,  file Oregon  income tax.   The  same types  of provisions                                                               
exist in Alaska, he said.                                                                                                       
                                                                                                                                
3:50:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SPOHNHOLZ announced that HB 44 was held over.