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.