The California Board of Accountancy has agreed to ease adopted practice privilege requirements in the state that went into effect Jan. 1.

In a letter to its members, the California Society of CPAs said that at the state board's Feb. 22-23 meeting, the CBA acknowledged the new requirements could have unintended consequences. The board said that it would take several steps to provide relief to out-of-state CPAs who have experienced difficulty complying with California's new law.

The state board had created the practice privilege requirement to enhance consumer protection and allow for greater mobility for out-of-state CPAs who provide services in California.

The practice privilege program will stay in place, but amendments changing the language of the requirements will be added to legislation already being considered by the state.

The letter from CalCPA chief operating officer Loretta Doon said that the temporary provisions of the amendment -- which would remain in effect until Jan. 1, 2011 -- will allow out-of-state CPAs to:

  • Provide tax services to California clients without a practice privilege (provided the CPA doesn't solicit California clients, physically enter California and imply they are registered with the CBA);
  • Obtain a practice privilege without requiring that the firm register with the CBA, the California Secretary of State or the California Franchise Tax Board; and,
  • Create a limited temporary practice without registration as long as the practice is incidental to practice in another state.

Unregistered individuals and firms providing accounting services will still be subject to the CBA's authority.Underscoring the CalCPA in arguing against the change was the American Institute of CPAs' president and chief executive, Barry Melancon, and chairwoman Leslie Murphy, who said in a Feb. 15 letter that the institute had already received a significant number of calls complaining about the changes.
"The implementation of California's new requirement coupled with other provisions within the California law are creating new and unintended difficulties for mobility ... ," Melancon and Murphy wrote in a joint letter to the CBA. "We believe that in many instances, especially where business tax preparation is involved, this is a burdensome and unnecessary requirement."

As an example, the two said that firms providing services are required to register with the California Board of Accountancy, and if a firm is a corporation or an LLP, the firm must also register with the Secretary of State and Franchise Tax Board. Firm registration then also triggers the requirement that at least one partner be fully licensed in California.

The existing practice privilege requirements are online at the CBA's Web site, www.dca.ca.gov/cba/ .

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access