A07841 Summary:

BILL NO    A07841 

SAME AS    No same as 

SPONSOR    Wright

COSPNSR    

MLTSPNSR   

Amd S7408, Ed L

Relates to certified public accountants.
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A07841 Actions:

BILL NO    A07841 

06/06/2013 referred to higher education
01/08/2014 referred to higher education
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A07841 Votes:

There are no votes for this bill in this legislative session.
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A07841 Memo:

BILL NUMBER:A7841

TITLE OF BILL:  An act to amend the education law, in relation to
certified public accountants

PURPOSE OR GENERAL IDEA OF BILL:

This bill would amend the education law to allow non-CPAs to be
minority owners of CPA firms, consistent with 49 other states and
jurisdictions.

SUMMARY OF SPECIFIC PROVISIONS:

Section 7408 of the Education Law is amended as follows: Licensed CPAs
must hold up to a simple majority of the ownership; A licensed CPA or
CPA with practice privileges must be responsible for registration of
the firm; The partner/owner in charge of attest services must be a
licensed CPA; All non-CPA owners must be actively engaged in working
for the firm or an affiliated entity; and Passive ownership is not
permitted.

JUSTIFICATION:

By enacting this legislation, New York would be joining 49 other
states and jurisdictions in allowing for non-CPA ownership of firms.
In 2012, Connecticut enacted similar legislation, leaving New York as
the last state in the region without this proposal in law. The
provisions of the legislation are consistent with and modeled after
sections provided in the Uniform Accountancy Act (UAA).

This legislation is needed so that New York CPA firms can better serve
New York clients. As global competition, the complexity of business
structures and rapid technological breakthroughs continue to redefine
commerce, accounting firms of all sizes, use the services of non-CPAs
to help them navigate the dynamic terrain of today's business
environment. These non-CPA professionals are critically important to
the effective-ness of a CPA practice. In today's world, firms want to
provide the best quality audits and this very often requires the
skills of non-CPAs, such as systems engineers and other IT
professionals, valuation specialists, actuaries, industry experts and
others. Clients have come to expect that these specialists will
participate in the CPA firm's work and the audit work product is
better because of it.

CPA firm work, however, remains just that, the work of a CPA firm.
This legislation limits the percentage of allowed non-CPA firm owners,
ensuring that non-licensees can only ever have a minority interest in
the firm. Further, enacting this legislation will even the playing
field so that New York CPA firms will be permitted to have the same
options to diversity their firm resources as firms in neighboring
states that come in to New York to practice under mobility. In
addition, smaller CPA firms will find it easier to have a succession
plan as they transition to the next generation.

Many clients now expect that a CPA firm will employ non-CPAs with
significant expertise in specialized areas such as information
technology. Therefore, CPA firms have a real need to attract and


retain "the best and brightest" in these areas and to incorporate
these individuals into the firm's culture. The vast majority of states
and jurisdictions have recognized this need and have implemented one
method of doing this which is to give an individual an ownership stake
in the firm so that all of these individuals have a shared interest in
the lone-term viability of the firm. This bill will benefit firms, the
profession and the state by attracting additional business and job
opportunities.

PRIOR LEGISLATIVE HISTORY:

This is a new bill,however, current State Education Department
regulations already allow for profit sharing with non-CPA in a CPA
firm of up to 35%.

FISCAL IMPLICATIONS:

None

EFFECTIVE DATE:

Immediately.
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A07841 Text:

                           S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________

                                         7841

                              2013-2014 Regular Sessions

                                 I N  A S S E M B L Y

                                     June 6, 2013
                                      ___________

       Introduced by M. of A. WRIGHT -- read once and referred to the Committee
         on Higher Education

       AN  ACT  to  amend  the  education  law, in relation to certified public
         accountants

         THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
       BLY, DO ENACT AS FOLLOWS:

    1    Section  1.  Subdivision  2  of  section 7408 of the education law, as
    2  amended by chapter 651 of the laws  of  2008,  is  amended  to  read  as
    3  follows:
    4    2.  A.  No  firm  shall use the words "certified public accountant" or
    5  "certified public  accountants"  or  the  letters  "CPA"  or  "CPAs"  in
    6  connection with its name unless the sole proprietor of such firm or each
    7  partner  of  a partnership or limited liability partnership, member of a
    8  limited liability company  or  shareholder  of  a  professional  service
    9  corporation  engaged  within the United States in the practice of public
   10  accountancy is in good standing as a certified public accountant of  one
   11  or  more  of the states of the United States.  NOTWITHSTANDING ANY OTHER
   12  PROVISIONS OF LAW TO THE CONTRARY, AN APPLICANT FOR INITIAL ISSUANCE  OR
   13  RENEWAL  OF  A  FIRM  PERMIT  TO  PRACTICE  UNDER  THIS SECTION SHALL BE
   14  REQUIRED TO SHOW (1) THAT A SIMPLE MAJORITY  OF  THE  OWNERSHIP  OF  THE
   15  FIRM,  IN  TERMS  OF  FINANCIAL  INTERESTS AND VOTING RIGHTS HELD BY THE
   16  FIRM'S OWNERS,  BELONGS  TO  INDIVIDUALS  LICENSED  TO  PRACTICE  PUBLIC
   17  ACCOUNTANCY IN SOME STATE, AND (2) THAT ALL PARTNERS OF A PARTNERSHIP OR
   18  LIMITED  LIABILITY PARTNERSHIP, OR MEMBERS OF A LIMITED LIABILITY COMPA-
   19  NY, OR SHAREHOLDERS OF A PROFESSIONAL SERVICE CORPORATION WHOSE  PRINCI-
   20  PAL PLACE OF BUSINESS IS IN THIS STATE, AND WHO ARE ENGAGED IN THE PRAC-
   21  TICE  OF  PUBLIC  ACCOUNTANCY IN THIS STATE, HOLD A VALID LICENSE ISSUED
   22  UNDER SECTION SEVENTY-FOUR HUNDRED FOUR OF THIS ARTICLE  OR  ARE  PUBLIC
   23  ACCOUNTANTS  LICENSED  UNDER  SECTION  SEVENTY-FOUR HUNDRED FIVE OF THIS
   24  ARTICLE. ALTHOUGH FIRMS MAY INCLUDE NON-LICENSEE OWNERS,  THE  FIRM  AND
   25  ITS  OWNERS  MUST  COMPLY  WITH RULES PROMULGATED BY THE BOARD. NOTWITH-

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD10267-01-3
       A. 7841                             2

    1  STANDING THE FOREGOING, A FIRM REGISTERED UNDER  THIS  SECTION  MAY  NOT
    2  HAVE  NON-LICENSEE  OWNERS IF THE FIRM'S NAME INCLUDES THE WORDS "CERTI-
    3  FIED PUBLIC ACCOUNTANT,"  OR  "CERTIFIED  PUBLIC  ACCOUNTANTS,"  OR  THE
    4  ABBREVIATIONS "CPA" OR "CPAS."
    5    B.  EACH  NON-LICENSEE  OWNER  OF A FIRM THAT IS REGISTERED UNDER THIS
    6  SECTION SHALL BE (1) A NATURAL PERSON WHO ACTIVELY PARTICIPATES  IN  THE
    7  BUSINESS  OF  THE  FIRM  OR  ITS  AFFILIATED ENTITIES, OR (2) AN ENTITY,
    8  INCLUDING, BUT NOT LIMITED TO,  A  PARTNERSHIP  OR  PROFESSIONAL  CORPO-
    9  RATION,  PROVIDED  EACH  BENEFICIAL  OWNER OF AN EQUITY INTEREST IN SUCH
   10  ENTITY IS A NATURAL PERSON WHO ACTIVELY  PARTICIPATES  IN  THE  BUSINESS
   11  CONDUCTED  BY THE FIRM OR ITS AFFILIATED ENTITIES.  FOR PURPOSES OF THIS
   12  SUBDIVISION, "ACTIVELY PARTICIPATE" MEANS TO PROVIDE SERVICES TO CLIENTS
   13  OR TO OTHERWISE INDIVIDUALLY TAKE PART IN  THE  DAY-TO-DAY  BUSINESS  OR
   14  MANAGEMENT OF THE FIRM.
   15    S 2. This act shall take effect immediately.
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