Accounting Industry Loses Bid to Relax Rule

In what some watchdog groups are calling a victory for California consumers, the accounting industry and its legislative allies have abandoned an attempt to roll back protections put in place after the collapse of Enron Corp.

State Sen. Liz Figueroa (D-Fremont) said Tuesday that a bill that had been moving swiftly through the Legislature would be stripped of a provision that would have opened the door for out-of-state accountants to offer tax shelters and practice in California without the oversight now required.

Figueroa is chairwoman of the Business, Professions and Economic Development Committee, which was to hold a hearing on the bill Monday. That hearing was canceled so that both sides could settle their differences -- a negotiation that ended Tuesday morning.

“It’s dead,” Figueroa said of the proposal. “I explained to them [proponents of the bill] that this was not acceptable. I would not allow that to come out of my committee.”

Until recently, the bill, sponsored by a trade group that represents California accountants, appeared a lock for passage. The Assembly approved it last month by a vote of 68 to 4.

As first put forward, the bill would have allowed out-of-state accountants to practice or provide unspecified tax services without a permit or any kind of notice to California regulators.

It was supported by the Board of Accountancy, a state panel that licenses and regulates California’s 75,000 accountants. A plurality of the board’s 15 members are appointees of Gov. Arnold Schwarzenegger.

Watchdog groups contend that the board has been steadily undoing consumer protections enacted after Enron’s 2001 collapse -- partly caused by questionable accounting practices -- while taking positions favorable to the industry it oversees.

The bill’s author, Assemblyman Rudy Bermudez (D-Norwalk), said he did not intend to jeopardize consumer protections.

“It’s a work in progress,” he said. “We’ve worked very hard to carve out a piece of legislation that helps consumers, helps the industry and provides greater services for Californians overall.”

Julie D’Angelo Fellmeth, administrative director of the Center for Public Interest Law at the University of San Diego’s law school, said she was pleased that the provision had been dropped.

“Obviously I’m delighted,” Fellmeth said. “But for the life of me, I still cannot understand why the Board of Accountancy, whose paramount priority is public protection, would support this rollback of basic protections without scrutinizing it more carefully.”

Under the agreement reached Tuesday, out-of-state accountants would be required to apply for a permit if they wanted to practice in California.

That means they would need to fill out a four-page form in which they must reveal whether they had been convicted of a crime, investigated or disciplined for their conduct in their home state.

The revised bill will also instruct the accounting board to examine whether the state’s $100 permit fee is too high.

The legislation is to go before Figueroa’s committee for a hearing next week.