BILL ANALYSIS                                                                                                                                                                                                    







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        |Hearing Date:April 28, 2014        |Bill No:SB                         |
        |                                   |1243                               |
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                      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          2016, and as of that date is repealed, unless a later enacted  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  





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           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  





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           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
         





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        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  





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          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.





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             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. 






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             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  





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          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