HB 315-PUBLIC ACCOUNTING  3:22:03 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 315, "An Act relating to public accounting; and providing for an effective date." 3:22:12 PM JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State Legislature, stated that HB 315 bill relates to public accounting. This bill was drafted with the assistance of the state Board of Public Accountancy (BPA) and the Alaska Society of Certified Public Accountants (ASCPA) and is supported by the board and the society. This bill is widely supported and she was unaware of any opposition. She reported that 45 states have passed some version of this bill, which will bring Alaska up to date and keep Alaskan certified public accountants (CPAs) and Alaskan accounting firms competitive nationally. MS. SENETTE explained that HB 315 does three things: First, it would provide CPAs mobility, which would allow a licensee to gain practice privilege outside their principal jurisdiction without additional licensing or fees. It would allow licensed CPAs and CPA firms in Alaska to practice across state jurisdictions with greater ease, which is the key to keeping CPAs and CPA firms nationally competitive. Secondly, the bill alters the ownership requirements for accounting firms. The bill would provide for simple majority ownership. Under current law, an Alaskan accounting firm must be owned 100 percent by CPAs. The accounting profession has evolved, and many firms consist of more than just CPAs and many non-CPAs, such as attorneys and information technology professionals enhance the firm's ability to serve its clients. Under current law, non-CPA professionals are barred from ownership. This bill "dials down" these stringent requirements. Most states allow non-CPAs to have minority ownership in CPA firms. This provision is aimed to help CPA firms attract and retain talent. Finally, the bill would enhance the board's ability to protect the public. This provision would provide the board jurisdictional authority over any CPA practicing in the state. Basically, all CPAs providing public accountancy services in Alaska would fall under the jurisdiction of the Alaska Board of Public Accountancy to address any violations of the professional standards. She restated that 45 states have passed some version of this legislation, which provides for mobility, simple majority ownership of CPA firms, and enhanced CPA board authority over CPAs licensed in other jurisdictions practicing in Alaska to protect the public. 3:26:29 PM MAX MERTZ, Member, Alaska Board of Public Accountancy (BPA), stated he has been a member of the Alaska BPA for six years, and the chair for four years ending in 2009. He related that the Alaska BPA worked on the issues addressed in the bill. The Alaska BPA takes its mission seriously, which is regulating the accounting profession in Alaska and protecting the public interest. One main challenge the BPA has faced is to effectively pursue out-of-state practitioners who do not properly serve their clients. In the electronic age, out-of- state practitioners have become commonplace since CPAs can serve clients without ever speaking to them on the phone. The mobility initiative commenced after a thorough study by the American Institute of CPAs and National Association of State Boards of Accountancy found that each state had its own rules for out-of-state licensees to provide services in other states. Additionally, each state had its own enforcement rules, which resulted in an inefficient system that is difficult to navigate. Further, compliance and enforcement has been nearly impossible due to the multiple cumbersome processes and disparity in requirements in various states. MR. MERTZ stated that with mobility, the Alaska BPA will gain automatic jurisdiction over all CPAs practicing in the state. This will enable Alaska to discipline out-of-state licensees, whether they are registered and licensed in the state or not. The mobility bill can be likened to drivers' licensing laws, which will provide CPAs with mobility to practice in other states while strengthening our BPA's board to protect public interest. The effectiveness of mobility laws is contingent upon passage by all states. Currently, five states remain and three have pending legislation, including Alaska. The Alaska BPA unanimously passed a resolution in support of this bill. He said that he has presented to several society members and groups and is not aware of any opposition. He asked for the committee's support for HB 315. 3:29:10 PM REPRESENTATIVE BUCH asked whether the main thrust of HB 315 is to authorize reciprocity. He also asked about the term, "practice privilege," and asked for clarification of the standard of practice. MR. MERTZ explained that "practice privilege" is the ability for those CPAs who are licensed in another state to practice in Alaska with a permit. The permit applies primarily to firms but also for individuals, primarily for temporary purposes. Typically, it would be used by an out-of-state CPA who does not have an office in Alaska and is not primarily providing services in Alaska. REPRESENTATIVE BUCH asked whether this practice is something that is standard adopted by other states and the industry for those CPAs in the process of obtaining certification. MR. MERTZ answered yes. He related a scenario in which an out- of-state firm has a client who is doing business in Alaska, and the practice privilege allows the out-of-state accountant to perform the services. Under mobility, the out-of-state CPA can provide the services without going through the process of obtaining a practice permit. Thus, the out-of-state CPA would provide the services in Alaska and be subject to our laws and the jurisdiction of the BPA. 3:32:03 PM REPRESENTATIVE BUCH related his understanding that the standards for CPAs are uniform standards and HB 315 would update Alaska with the national standards. MR. MERTZ agreed. 3:32:20 PM REPRESENTATIVE T. WILSON asked whether more people will practice in Alaska and create additional competition. MR. MERTZ stated that the bill would bring Alaska's statute into the 21st century. The services are already being provided by Alaskan CPAs to out-of-state clients and vice versa. This bill will not necessarily change the groundwork or competitive environment, but it will change the licensing environment to "bring it up to speed" with current practice. REPRESENTATIVE T. WILSON understood that basically CPAs are breaking the rules now and this will bring them into compliance. MR. MERTZ agreed that to some degree her statement is accurate. The American Institute of Certified Public Accountants (AICPA) study found that of the 54 jurisdictions, 54 different laws applied. This was confusing and complicated for accountants. This law makes the requirements uniform. 3:33:37 PM REPRESENTATIVE T. WILSON asked who would oversee any violations. MR. MERTZ answered that the BPA oversees violations. In instances in which a licensee from another jurisdiction practices without a permit in Alaska and violates state law, the BPA's ability to prosecute the person is limited and cumbersome. This bill will make enforcement actions much easier. 3:34:37 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 315. 3:34:52 PM REPRESENTATIVE LYNN moved to report HB 315 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 315 was reported from the House Labor and Commerce Standing Committee. 3:35:26 PM The committee took an at-ease from 3:35 p.m. to 3:39 p.m.