BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:April 28, 2014 |Bill No:SB | | |1243 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Ted W. Lieu, Chair Bill No: SB 1243Author:Lieu As Amended:April 21, 2014 Fiscal: Yes SUBJECT: Professions and vocations. SUMMARY: Extends until January 1, 2017, the provisions establishing the Veterinary Medical Board and the term of the executive officer of the Board, and extends the Certified Common Interest Development Manager program and the Tax Preparer program to January 1, 2019. Existing law: Veterinary Medical Board 1)Provides for the licensing and regulation of approximately 9,800 veterinarians and 4,300 registered veterinary technicians by the Veterinary Medical Board (VMB) within the Department of Consumer Affairs (DCA). (Business and Professions Code (BPC) § 4800 et seq.) 2)Provides that the VMB shall remain in effect only until January 1, 2016, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2016, deletes of extends that date, and that prior to repeal of the VMB, it shall be reviewed by the appropriate policy committees of the Legislature, but that the review shall be limited to those issues as identified by the respective committees and VMB shall not be required to submit a sunset review document or evaluative questionnaire. (BPC § 4800) Certified Common Interest Development Manager 1) Establishes a scheme for the regulation of common interest developments, including condominiums, planned unit developments, stock operatives, and community apartments under SB 1243 Page 2 the Davis-Sterling Common Interest Development Act. (Civil Code § 4000 et seq.) 2) Defines a "common interest development manager" (CID manager) as an individual, or as a partner or other business entity, who for compensation or in expectation of compensation provides or contracts to provide management or financial services to a community association. (BPC § 11501) 3) Establishes requirements for a voluntary CID manager certification program to be administered by a professional association for CID managers. (Id.) 4) Requires that, in order to be "certified," a CID manager complete a minimum of 30 hours of coursework, as specified, and pass an examination relating to CID law and management. (Id.) 5) Requires that a CID manager make specific disclosures to a condominium association, or other association as specified, including whether the CID manager is certified by a professional association. (BPC § 11504) 6) Provides that it is an unfair business practice for a CID manager to hold themselves out as a "certified" CID manager without meeting the requirements of the certification program. (BPC § 11505) 7) Sunsets the certified CID manager program on January 1, 2015. (BPC § 11506) Tax Preparers 1) Provides for the registration of tax preparers by the California Tax Education Council (CTEC), and repeals (sunsets) those provisions of law effective January 1, 2015. (BPC § 22250 et. seq.) 2) Defines a "tax preparer" as a person who, for a fee or for other consideration, assists with or prepares tax returns for another person or who assumes final responsibility for completed work on a return on which preliminary work has been done by another person, or who holds himself or herself out as offering those services. (BPC § 22251) 3) Defines a "tax preparer" to also mean a corporation , partnership , association , or other entity that has persons associated with it SB 1243 Page 3 who have as part of their responsibilities the preparation of data and ultimate signatory authority of tax returns or that holds itself out as offering those services or having that authority. (Id.) 4) Specifies that a "tax preparer" does not include an employee who, as part of the regular clerical duties of employment, prepares his or her employer's income, sales or payroll tax returns. (Id.) 5) Establishes the California Tax Education Council (CTEC) as a single organization that is made up of not more than one representative from each specified entity operating as a nonprofit corporation that represents, among others, tax preparers with a membership in California of at least 200 for the last 3 years and not more than one representative from each for-profit tax preparation corporation that has at least 200 employees and has been operating in California for the last 3 years. (BPC § 22251 (d)) 6) Establishes various requirements for tax preparers including obligations to: register with the CTEC; obtain a "certificate of completion" based on completing a tax education curriculum as specified; maintain a surety bond of $5,000 payable to State of California. The bond shall be for the benefit of any person or persons damaged by any fraud, dishonesty, misstatement, misrepresentation, deceit, or any unlawful acts or omissions by the tax preparer. (BPC § 22250) 7)Requires CTEC to issue a "certificate of completion" when a tax preparer demonstrates completion of not less than 60 hours of specified educational requirements. (BPC § 22255) This bill: Veterinary Medical Board 1)Extends the repeal date (sunset) of the VMB and its executive officer to January 1, 2017. Certified Common Interest Development Manager 1)Extends the repeal date (sunset) of the certified CID manager program to January 1, 2019. Tax Preparers SB 1243 Page 4 1)Extends the repeal date (sunset) of the Tax Prepares program to January 1, 2019. FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by Legislative Counsel. COMMENTS: 1.Purpose. This bill is one of six "sunset review bills" authored by the Chair of this Committee. Unless legislation is carried this year to extend the sunset dates of the Certified CID Manager program and Tax Preparer program, they will both be repealed on January 1, 2015. The repeal date for the VMB and its executive officer has been extended for one year, to January 1, 2017, to allow sufficient time for the VMB to address issues which have been identified by this Committee. 2.Oversight Hearings and Sunset Review of Licensing Boards and Commission of DCA. In 2014, the Senate Business and Professions Committee and the Assembly Business, Professions and Consumer Protection Committee (Committees) conducted joint oversight hearings to review 9 regulatory entities: Bureau of Automotive Repair; Bureau of Home Furnishings and Thermal Insulation; Bureau for Private Postsecondary Education (BPPE); California Massage Therapy Certification program; California Board of Acupuncture; California Tax Preparers Program; Dental Hygiene Committee of California; Professional Fiduciaries Bureau; and Structural Pest Control Board. This Committee also reviewed the performance and effectiveness of the Community Interest Development Manager's Certification Program. The Committees began their review of the aforementioned licensing agencies in March and conducted two days of hearings and then more recently held a hearing on the BPPE. This bill, and the accompanying sunset bills, are intended to implement legislative changes as recommended by staff of the Committee's and which are reflected in the Background Papers prepared by Committee staff for each agency and program reviewed by the Committees for this year. 3.Review of the Certified CID Manager Program. There were no issues raised regarding this Program and the two professional associations which provide certification did not have any recommended changes to this Program. The only statutory change considered necessary was SB 1243 Page 5 the extension of this Program's sunset date for four years, to January 1, 2019. 4.Review of the Tax Preparer Program, Issues Identified and Recommended Changes. There were few issues raised regarding this Program and the CTEC had no recommended statutory changes at this time; therefore, the only statutory change considered necessary was the possible extension of this Program's sunset date for four years, to January 1, 2019. a) Issue : Continued Regulation by the CTEC. Background : The responsibility for approving tax schools and certifying the education of tax preparers was transferred from the California State Tax Preparer Program, under the Department of Consumer Affairs, to CTEC by the Governor and the Legislature effective July 1, 1997. Since taking over this responsibility, CTEC has continued to be more efficient and effective and has provided better value, service and response to the profession of tax preparers than the prior state run program. For example, a survey was conducted in 2006 by CTEC with 2,063 CTEC registered tax preparers responding to see how tax preparers viewed CTEC. Questions ranged from "how to reach CTEC" to "how effective is CTEC in protecting taxpayers from fraudulent tax preparers." The following is a compilation of the information gathered from the survey. Communications and Services: 80% of respondents were satisfied with the various methods of communicating with CTEC-toll-free telephone and fax lines, email, and regular mail. Of those surveyed, 88% indicated that the services provided by CTEC were about right. Some of the services provided preparers include: newsletters, brochures, online registration and access to education providers. 82% of survey respondents rated the overall service provided by CTEC as either good or excellent. Providers : 95% of those surveyed indicated they had adequate access to continuing education providers with 56% wanting more courses offered online. Consumer Protection : 62% of respondents indicated that CTEC registration protects consumers from fraudulent or incompetent tax preparers and that the existing protections are sufficient. 70% indicated that the bond requirement protects the public. SB 1243 Page 6 CTEC indicates that one of its main responsibilities is to educate the public regarding illegal tax preparers. 88% of survey respondents indicated that they were aware of all or some of the resources CTEC had available to educate the public about the risks of hiring unregistered tax preparers. Respondents overwhelmingly indicated that regulation of tax preparers benefit the public, with 77% of those surveyed indicating CTEC registration is necessary. In 2013, CTEC conducted another survey of its registered tax preparers. In this survey, as in the previous one, questions regarding CTEC services were asked, with a bit more emphasis on educational requirements. The CTEC survey was conducted with 1,211 CTEC registered tax preparers responding. The following is a compilation of the information gathered from the survey. Communications and Services : Since CTEC's last survey in 2006, the number of survey respondents rating the services provided by CTEC, either good or excellent, increased from 88% to 96%. 88% of survey respondents indicated that for the services provided, CTEC's $25 registration fee was about right. Providers : Over 96% of respondents indicated they had adequate access to continuing education providers, an increase from the 2006 survey. Almost 80% of respondents indicated they would obtain continuing education without the registration requirement. Consumer Protection : Almost 80% of respondents indicated CTEC registration protects consumers from fraudulent or incompetent tax preparers. This is an increase of almost 20% from the 2006 survey. Over 83% of respondents indicated the bond requirement protects the public, an increase of 13% from the 2006 survey. Only 34% of respondents would prefer errors and omissions insurance as a CTEC requirement rather than the surety bond requirement. Over 80% of respondents indicated that CTEC registration improves tax preparer ability to prepare tax returns and 72% indicated they were more competent tax preparers due to CTEC registration requirements. Both surveys would seem to indicate strong support of CTEC by tax preparers. SB 1243 Page 7 CTEC has also been very responsive to the recommendations of this Committee and that of the prior JLSRC. As discussed earlier, all the recommendations made to CTEC by the JLSRC in 2001 were fully addressed and appropriate action taken. With the assistance of the JLSRC and Legislature, CTEC was able to successfully achieve the results recommended by the Joint Committee and has continued to show improvement in its overall operation. Recommendation : Committee staff recommended that the registration of tax preparers by CTEC be continued and the profession be regulated by the current Council membership in order to protect the interests of the public and consumers in seeking the assistance of tax preparers and that CTEC be reviewed by this Committee once again in six years. [ The current language in this measure reflects this recommended change .] 1.Extension of the Sunset Date for VBM for One Year. When the VBM was reviewed by the Committees in 2013, there were concerns raised about issues which the VBM was not addressing or delaying action to resolve. To assure that the VBM would move ahead more expeditiously to implement these necessary changes and address important issues, it was decided by the Committees to only extend the sunset date of the VBM for two years until such time as both Committees were confident that these outstanding issues would be addressed. Recently, the Committees met with the new Executive Officer of the VBM and with DCA to discuss these outstanding issues. It was decided that because some of the changes necessary would require regulations and a response from the VBM would have to be made to the Committees in just a few months, it would be appropriate to allow at least one more year for the VBM to complete the regulatory process and to resolve some of the more important issues by 2016. 2.Current Related Legislation. SB 1242 (Lieu, 2014) amends the Automotive Repair Act and updates the sunset provisions for the Bureau of Automotive Repair. ( Status : This bill will also be heard before the BP&ED Committee during today's hearing.) SB 1244 (Lieu, 2014) Extends until January 1, 2019 the term of the Structural Pest Control Board which provides for the licensing and regulation of individuals and business involved in the structural pest control industry in California. The bill also extends the term of the board's executive officer and subjects the board to be reviewed by the appropriate policy committees of the Legislature. ( Status : This bill will also be heard before the BP&ED Committee SB 1243 Page 8 during today's hearing.) SB 1245 (Lieu, 2014) Extends until January 1, 2019 the term of the Dental Hygiene Committee of California which provides for the licensing and regulation of dental hygienists. The bill also extends the term of the committee's executive officer and subjects the committee to be reviewed by the appropriate policy committees of the Legislature. ( Status : This bill will also be heard before the BP&ED Committee during today's hearing.) SB 1246 (Lieu, 2014) Extends until January 1, 2019 the term of the Acupuncture Board which provides for the licensing and regulation of doctors of acupuncture under the Acupuncture Licensure Act and subjects the board to be reviewed by the appropriate policy committees of the Legislature. ( Status : This bill will also be heard before the BP&ED Committee during today's hearing.) SB 1247 (Lieu, 2014) Extends until January 1, 2019 the term of the California Private Postsecondary Education Act of 2009, which provides for the regulation of private postsecondary educational institutions by the Bureau for Private Postsecondary Education in the Department of Consumer Affairs. The bill also extends the term of the Student Tuition Recovery Fund under the administration of the bureau, and subjects the bureau to review by the appropriate policy committees of the Legislature. ( Status : This bill will also be heard before the BP&ED Committee during today's hearing.) SUPPORT AND OPPOSITION: Support: None on file as of April 23, 2014. Opposition: None on file as of April 23, 2014. Consultant:Bill Gage