HB 44-PRACTICE OF ACCOUNTING; LICENSURE  8:05:42 AM CO-CHAIR FIELDS announced that the next order of business would be HOUSE BILL NO. 44, "An Act relating to the practice of accounting." [Before the committee was CSHB 44(STA).] 8:05:58 AM REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, as prime sponsor, shared that the proposed legislation would update Alaska's public accountancy statutes to bring Alaska more in line with national standards. The updates would help ensure a uniform approach to the regulation of accounting in Alaska, he said, which would protect the public's interest. 8:07:30 AM REPRESENTATIVE MCCARTY referred to the term "mobility model," which would allow business entities outside the state to provide services within the state. He asked whether those out-of-state professions currently pay professional license fees as well as a business license fee. REPRESENTATIVE THOMPSON deferred to Ms. Chambers. 8:08:40 AM SARA CHAMBERS, Director, Division of Corporations, Business, and Professional Licensing (CBPL), Department of Commerce, Community, and Economic Development (DCCED), shared that other states that have implemented mobility measures have not experienced a meaningful increase in investigative expenses targeting out-of-state practitioners. She noted that only those out-of-state practitioners performing non-attestation functions would be able to practice without a license; anyone performing the higher-level attestation functions would be required to have a license within the state. She compared the proposed legislation to the Nurse Licensure Compact and said that of the 35 states that have adopted the compact, there have not been any reports of legitimate, demonstrable problems for the jurisdiction. REPRESENTATIVE MCCARTY asked Ms. Chambers to clarify whether a professional licensed in another state could provide services in Alaska without paying licensing fees. MS. CHAMBERS said, "Yes, that's what this bill is proposing under certain circumstances." She explained that not all out- of-state firms or individuals would be able to practice in Alaska without a license, but there are some practices that could take place with a business license but not a professional license. REPRESENTATIVE MCCARTY asked whether Alaska would waive the fees for in-state licensees. MS. CHAMBERS responded, "That is not my understanding." She explained that a professional's home state bears the responsibility for due diligence and ensuring public protection. A professional with an unencumbered license who meets the other standards within HB 44, she said, could practice within Alaska. She said the question of equity is addressed by allowing Alaskan licensees the privilege of practicing in other states. REPRESENTATIVE MCCARTY wondered whether there is an agreement between Washington and Alaska regarding mobility. MS. CHAMBERS responded that under a compact, like the Nurse Licensure Compact, there's a standard agreement adopted by the legislatures. Under the less formal "mobility model," she said, states which meet the national standards for requirements independently adopt the standards. 8:15:18 AM REPRESENTATIVE THOMPSON reminded committee members that the purpose of the proposed legislation is to bring Alaska's statutes up-to-date in order to operate under the same national standards as other licensing jurisdictions. 8:15:44 AM KAREN TARVER, CPA, Elgee Rehfeld, LLC, explained that the American Institute of Certified Public Accountants introduced the practice of "firm mobility" in 2014; since then, 30 of the 55 licensing jurisdictions have adopted it. She said that the model provides greater oversight by the jurisdictional licensing boards because a professional is subject to the regulations and statutes in the state in which the professional is providing services. REPRESENTATIVE MCCARTY expressed the view that losing accreditation does not mean that an individual is no longer able to practice their profession. He then asked, "Where is the equitableness of this, and ... where's the arm of enforcement upon this?" MS. TARVER responded, "The equity through firm mobility is that I, as an Alaska CPA, could provide services outside the state as well [as] in a state that has firm mobility without having to get a permit in that state." The regulatory oversight, she said, is ultimately held by the licensee's home state; Alaska retains the ability to sanction an out-of-state licensee under Alaska's statutes and regulations. She added that there is a national database of CPAs, which facilitates a smooth process of information sharing. REPRESENTATIVE MCCARTY expressed understanding of the equitable nature of the mobility model. 8:22:11 AM CO-CHAIR SPOHNHOLZ asked for clarification on the enforcement mechanism. 8:23:30 AM MS. CHAMBERS explained that the proposed legislation would provide explicit language stating that the board has the ability to relieve a practitioner of the right to practice within the state; the prohibition would be communicated through the national database to the licensee's home state. CO-CHAIR SPOHNHOLZ asked Ms. Chambers to clarify whether Alaska would "rely on a national database to protect Alaskans from bad actors." MS. CHAMBERS responded that the national database would let all of the other licensing jurisdictions know of the complaints against the individual. Alaska's licensing board would undertake a regular investigation. CO-CHAIR SPOHNHOLZ stated that professional licensing is the enforcement mechanism in the state. She said that she doesn't understand what the enforcement mechanism is if, as a result of the proposed legislation, the state no longer requires licensing of accountants. MS. CHAMBERS replied that there is a section in the proposed legislation that would specifically authorize the Board of Public Accountancy to prohibit someone with an out-of-state license from being able to practice in Alaska. CO-CHAIR SPOHNHOLZ said, "We are, in fact, asking another state to enforce ... Alaskan licensing practice standards, by adopting this." MS. CHAMBERS replied that the Board of Public Accountancy would be enforcing Alaska's practice standards by prohibiting the out- of-state individual from practicing within Alaska. She said that this prohibition would then be communicated to other states in a manner similar to what is currently done by other state licensing boards; in the health care profession, she said, a licensee who is disciplined is reported to the national database, and other states in which the practitioner is licensed may investigate the licensee for similar issues. She said that Alaska would be similarly reliant on other states to determine whether an accountant is qualified. CO-CHAIR SPOHNHOLZ said that all healthcare practitioners are currently required to be licensed in Alaska, and that the state licensing board may revoke their license at any time. She suggested that the proposed legislation could mean that Alaska's licensees would be paying for enforcement against practitioners in another state. She expressed the belief that the proposed legislation would give other states control over Alaska licensing regulations. 8:31:55 AM CO-CHAIR FIELDS asked for an example of an out-of-state practitioner being disciplined within their home state. MS. CHAMBERS replied that the mechanism has been working for many years in other states that have adopted the firm mobility language. 8:33:34 AM LYNETTE BERGH, Staff, Representative Steve Thompson, Alaska State Legislature, pointed out that Mr. Neill previously discussed a case in Washington. He also testified that the mobility method works, because other licensing jurisdictions are made aware of any disciplinary actions against a licensee. CO-CHAIR FIELDS asked who operates the national database. MS. CHAMBERS deferred to Ms. Hondolero. 8:35:21 AM CORI HONDOLERO, Executive Administrator, Board of Public Accountancy, Divisions of Corporations, Business, and Professional Licensing, Department of Commerce, Community, and Economic Development, said that the National Association of State Boards of Accountancy runs the Accountancy Licensee Database (ALD), which 55 licensing jurisdictions participate in. She said that the investigator for Alaska's Board of Public Accountancy has access to the database. CO-CHAIR FIELDS said, "I have no confidence that a state like Alabama would ever be capable of overseeing this or, frankly, any other, program." He hypothesized about a situation in which an Alabama licensee failed to live up to standards, and Alabama subsequently declined to discipline the licensee. He asked what recourse the Board of Public Accountancy would have. MS. HONDOLERO replied that Alaska could issue a cease and desist order prohibiting the out-of-state practitioner from operating in Alaska. CO-CHAIR FIELDS asked what legal threshold would need to be crossed in order to issue a cease and desist order if there is no proof of misbehavior in the licensee's home state. 8:37:30 AM MS. CHAMBERS pointed out that the Board of Public Accountancy is constantly in the process of determining whether an individual should be allowed to practice in Alaska. In Representative Fields' example, she said, the board would independently determine whether the out-of-state practitioner was allowed to practice in Alaska. She said that, through use of the database, Alaska's board can be aware of any issues in other states and prohibit any individual from practicing within Alaska. She said that while a licensee's home state could act on the individual's license, Alaska's board would not be waiting for the other state to act and could issue a cease and desist order with no other information. CO-CHAIR FIELDS asked whether there would be a mechanism to require that out-of-state licensees to pay a fee to stay in the system. 8:40:33 AM REPRESENTATIVE THOMPSON said that those licensed in Alaska don't have to pay fees to practice in Washington. 8:40:47 AM MS. CHAMBERS reminded committee members that license fees cover the costs of operation for all professional boards in Alaska. She said that in any program, whenever there's an unlicensed practice concern, the licensees have to cover that cost. The bigger pictures, she said, is that there's no mechanism to recover costs, which is something that has been brought before the legislature in the past. She said that HB 44 contains a provision that the board may require that disciplinary costs against an out-of-state licensee be covered by the defendant, but other mechanisms would need to be included for the board to have the ability to receive funding. She stressed that licensees pay the costs of all investigations, whether or not the individual is licensed. She said the proposed legislation would give the board more authority than that which is specified under current law, allowing the "good actors" to face less bureaucracy, along with stronger language and oversight for the "bad actors." 8:43:48 AM REPRESENTATIVE KAUFMAN asked how many states are aligned in similar processes. MS. CHAMBERS pointed out that Ms. Tarver testified that 30 states are already part of the network. REPRESENTATIVE KAUFMAN asked, "In the 30 other states that are operating under this model, do we have indications of serious problems - upon adopting this, have they spun out of control?" MS. CHAMBERS responded that other states have reported that they have not had any problems out of the ordinary. They have reported, she said, that the model reduces bureaucracy without forgoing jurisdictional authority. REPRESENTATIVE KAUFMAN asked Ms. Chambers what she thinks of the proposed legislation in its current form. MS. CHAMBERS responded that the proposed legislation would be a good move for Alaska and would help keep Alaska, and Alaskan firms, competitive with firms in other states. 8:47:30 AM REPRESENTATIVE SNYDER asked for documentation on the lack of problems experienced by other states. MS. CHAMBERS responded that CBPL will work with AICPA on documentation. 8:48:18 AM REPRESENTATIVE SCHRAGE asked for more discussion on the issue of enforcement costs being paid for by license fees. MS. CHAMBERS explained that CBPL oversees 43 licensing programs and 21 boards, and that each program and board is funded by fees from its licensees. She stressed that when someone is practicing without a license, the licensees cover the costs of investigations. She said that investigations and appeals, which can go all the way through the court system, sometimes cost as much as $100,000, which must be covered by licensees. She said, "When you hear complaints about licensing fees ... if the fees go up, that's often because there is a very expensive investigation and disciplinary action and appeal of that, that licensees are required by state law to cover - not the bad actor." She said that CPBL would enjoy the opportunity to look at legislation to make the system fairer to those licensees who are practicing in accordance with their licenses. REPRESENTATIVE SCHRAGE discussed the possibility of legislation allowing boards to recoup investigation fees from defendants who are found guilty. He expressed that the national database would provide transparency in the case of a "bad actor" who moves from state to state. MS. CHAMBERS stated her agreement with his comment about the national database, pointing out that the database currently exists and is utilized by the State Board of Accountancy. 8:52:42 AM CO-CHAIR FIELDS asked Ms. Chambers to talk about enforcement of the provisions under HB 44. MS. CHAMBERS said: "We don't feel the bill needs any enforcement augmentation, just the fee recovery model, and if we're able to accomplish that with this bill, that would be great ... we currently don't have a problem, don't see a problem, and are not hearing from other jurisdictions that this is a problem." CO-CHAIR FIELDS asked whether Ms. Chambers was referring to fee recovery when she mentioned possible additions to the proposed legislation. MS. CHAMBERS said yes. 8:53:47 AM CO-CHAIR FIELDS suggested looking at the possibility of an addition to the proposed legislation to address fee recovery. 8:55:12 AM CO-CHAIR FIELDS opened public testimony on HB 44. 8:55:30 AM SPACIA STRALEY, CPA, stated her support for HB 44 as the owner of a small accounting firm in Alaska. 8:56:08 AM KELLY WARD, CPA, Robinson and Ward, stated her support of HB 44. 8:56:44 AM KAREN TARVER, CPA, Elgee Rehfeld, LLC, stated that she "wholly supports" HB 44, and she shared her appreciation for committee members who are working to ensure that the proposed legislation "gets it right." She pointed out that AICPA has a website that addresses firm mobility and contains resources regarding the experience of other states. 8:57:40 AM CO-CHAIR FIELDS, after ascertaining that no one else wished to testify, closed public testimony on HB 44. [HB 44 was held over.]