SENATE LABOR AND COMMERCE COMMITTEE February 11, 1997 1:32 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly Senator Lyman Hoffman MEMBERS ABSENT Senator Mike Miller COMMITTEE CALENDAR SENATE BILL NO. 75 "An Act relating to the regulation of accountants; and providing for an effective date." MOVED CSSB 75 FROM COMMITTEE SENATE BILL NO. 49 "An Act repealing certain filing statements and bonds for enforcement and collection of certain taxes and license fees; relating to service of process on nonresident taxpayers; and providing for an effective date." MOVED SB 49 FROM COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 75 - No previous action to consider. SB 49 - No previous action to consider. WITNESS REGISTER Mr. Tim Benintendi, Staff Senator Tim Kelly State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on SB 75. Ms. Catherine Reardon, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, AK 99811-0806 POSITION STATEMENT: Supported SB 75. Mr. Charles Griffin, CPA P.O. Box 670 Palmer, AK 99645 POSITION STATEMENT: Supported SB 75. Mr. Bob Bartholomew, Deputy Director Income and Excise Audit Division P.O. Box 110420 Juneau, AK 99811-0420 POSITION STATEMENT: Supported SB 49. ACTION NARRATIVE TAPE 97-5, SIDE A Number 001 SB 75 REGULATION OF ACCOUNTANTS  CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:32 p.m. and announced SB 75 to be up for consideration. MR. TIM BENINTENDI, Staff to Senator Tim Kelly, explained that SB 75 changes the application requirements for taking the Alaska CPA exam. It requires an additional academic course in college-level accounting work or a one-year minimum direct accounting experience in the field under the supervision of a CPA. It does not alter the test, itself, or the licensing procedure. He explained the reason for the bill is that Alaska has experienced an unusually large increase in applicants for the exam which is given twice a year and most of those are foreigners. They are people, most of whom, do not tend to practice or even get licensure in the State of Alaska. He said the impact on the Division of Occupational Licensing and the security of the exam, itself, are considerable. The state of Montana has recently, through Emergency Orders, addressed this same problem and Alaska is now the easiest State to take the CPA exam in. MR. BENINTENDI said that Section 2 addresses another issue which has to be in statute and that is to make the designation of EA (Enrolled Agents) official. Enrolled agents are unlicensed accountants or tax practitioners that are certified by the IRS to practice tax preparation. It is a commonly recognized designation in the business community and they want to make it official. Section 3 provides for an immediate effective date. CHAIRMAN LEMAN asked if the reason for the immediate effect date was for the exam scheduled in May. MR. BENINTENDI replied yes. SENATOR KELLY asked if it was intended to affect just the May test. MS. CATHERINE REARDON, Director, Division of Occupational Licensing, answered that she didn't anticipate the bill would make it into law before May and the next exam is in October which she anticipates it will affect. SENATOR KELLY said it might be unfair for all those people planning to take it in May to all-of-a-sudden jerk it out from them and asked if the Department could survive another large test. MS. REARDON replied that they have prepared for the May exam already and yes, they could survive it. SENATOR LEMAN commented that if there was no effective date, it would just become law 90 days after the Governor's signature which would still be in time for the October exam. SENATOR KELLY asked when they would start taking applications for the October examination. MS. REARDON replied that some people have already had their application approved by the Board and have postponed taking the test. She said she had talked with the Assistant Attorney General about what the State's obligations may be towards people who have already qualified and the advice was that they should write to people and tell them they might need to reapply and may not qualify. SENATOR KELLY said he just wondered how fair that is. SENATOR MACKIE was concerned that if this bill doesn't pass until the end of session, it might affect the October exam and suggested using a July 1 effective date, if not the immediate date. Number 131 MR. CHARLES GRIFFIN, a Palmer CPA, said he had been practicing for 24 years. He has also served on the State Board of Public Accountancy for about seven years. He said the bill before them has the unanimous endorsement of the Board because of the overwhelming number of foreign candidates. He supported Mr. Benintendi's testimony. He said they do not seek to increase the licensing or certificate requirements, but they want to add either a little bit of accounting education or accounting experience to qualify the exam applicants. They are unable to tie anything to a residency or a need to sit for the exam, such as live, work, or attend school, in Alaska. So this excludes most of the foreign candidates who have no connection with accounting or Alaska and only seek to pass the exam for credentialling purposes. They believe all their Alaskan candidates will qualify. They purposely did not require an accounting major or put the hours of accounting requirements at the top of the list because they didn't want to disenfranchise any Alaskan candidates. The Board requested an immediate effective date not anticipating to make the change for the May examination for which there is a prior 60-day application deadline which would be about March 5. He said it was the Board's intent that the requirements in effect on the application deadline would determine the criteria for eligibility to take the exam. MR. GRIFFIN said the second change in Section 2 relative to EA is because that abbreviation is already in statute and this allows the people who are enrolled to practice before the Internal Revenue Service to technically use the title EA without statutory change. Number 182 SENATOR KELLY asked how important it is to try to eliminate the May applicants. MR. GRIFFIN said he thought that was the Board's intent, but they recognize that they qualified a number of people last fall for the May exam. So they fully intend to have the change go into effect for the November 1997 examination with as much notice as possible. SENATOR KELLY said they might have even more people show up in May to get in under the wire. MR. GRIFFIN said that the application deadline is 60-days prior to that and they are coming in fast now. Number 220 SENATOR KELLY asked how much it costs to take the exam. MR. GRIFFIN replied that there's a $50 application fee to qualify to sit for the exam and $100 for each taking of the exam. MS. REARDON added that the $50 application fee is to cover their processing fee. The $100 covers the price of the actual exam itself. SENATOR KELLY asked if the Board sets its own fees or is it done by statute. MS. REARDON replied that it is a Department regulation. SENATOR MACKIE wanted to know if Brad Shaffer in Sitka had reviewed the legislation and supported it. Number 283 MR. BRAD SHAFFER said he has been on the Alaska State Licensing Board for 17 years. He said it has been one of his weekend projects to draft what is in front of the committee now. He feels it is in the best interests principally from the security point of view because there were three instances of cheating during the November exam. During this exam he found one in a group of 30. He said security is very demanding in a room with about 200 people. They are also having problems dealing with large volumes of people. In Southeast the exam is in Ketchikan. In Anchorage the exam would normally be held in one location, but they are going to have to get another location. With shuffling around there can be inconsistent exam conditions - like desk space, for instance. SENATOR LEMAN asked if people seat themselves during an exam or does he seat them at random. MR. SHAFFER explained that there are some very strict controls. Everything is identified by candidate number. The standard group the exam comes in is 30. He said they check identification and even escort candidates to the restroom. SENATOR KELLY asked if the committee changed the immediate effective date to June 1, would that take care of the following test applicants. MS. REARDON replied yes; and said that they might just hold all the applications they receive in June. Number 314 SENATOR KELLY moved to change the immediate effective date to June 1. There were no objections and it was so ordered. SENATOR MACKIE moved to pass CSSB 75 from committee with individual recommendations with the accompanying fiscal note. There were no objections and it was so ordered. SB 49 SERVICE OF PROCESS ON NONRES TAXPAYERS  CHAIRMAN LEMAN announced SB 49 to be up for consideration. MR. BOB BARTHOLOMEW, Deputy Director, Income and Excise Division, explained that SB 49 asks the legislature to repeal a current tax bond program that's on statute that requires non-resident businesses or individuals to file a bond and fill out an affidavit to secure payment of their taxes to the State. Since that time it has been determined that the program just isn't worth the 800 hours and the paper the Department of Revenue staff are processing it on. Alaska is the only state that still has the requirement and staff at Department of Revenue can't remember having to ever go against the bond or affidavit to secure a tax payment. They have other tools that they can use like securing bank accounts, etc. MR. BARTHOLOMEW said they are asking to be allowed to redirect the 800 hours into more compliance efforts that will get the State more money. Number 356 CHAIRMAN LEMAN said he should bring up their request for the redirection of funds in the Finance subcommittee for Revenue. SENATOR MACKIE said he agreed with Mr. Bartholomew's testimony regarding the redirection of staff time. SENATOR MACKIE moved to pass SB 49 from committee with individual recommendations. There were no objections and it was so ordered. CHAIRMAN LEMAN adjourned the meeting at 2:00 p.m.