WSR 12-23-068

PROPOSED RULES

BOARD OF ACCOUNTANCY


[ Filed November 20, 2012, 7:46 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 12-19-057.

Title of Rule and Other Identifying Information: 1. WAC 4-30-050 What are the requirements concerning records and clients confidential information?

2. WAC 4-30-134 What are the CPE requirements for individuals?

Hearing Location(s): The Doubletree Hotel Seattle Airport, Cascade 12 Room, 18740 International Boulevard, SeaTac, WA, on January 22, 2013, at 9:00 a.m.

Date of Intended Adoption: January 22, 2013.

Submit Written Comments to: Richard C. Sweeney, Executive Director, P.O. Box 9131, Olympia, WA 98507-9131, e-mail info@cpaboard.wa.gov, fax (360) 664-9190, by January 15, 2013.

Assistance for Persons with Disabilities: Contact Cheryl Sexton by January 15, 2013, TTY (800) 833-6388 or (800) 833-6385 (Telebraille).

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: 1. WAC 4-30-050, to correct an error in subsection (3) and to clarify that licensees who prepare federal income tax returns in accordance with IRS rules do not violate client confidentiality.

2. WAC 4-30-134, to allow CPAs, CPA inactive certificate holders, and resident nonlicensee CPA firm owners with the option of taking an AICPA based ethics course, the current Washington rules ethics course, or other professionally based ethics courses on subsequent license renewals.

Reasons Supporting Proposal: 1. IRS regulations require registered domestic partners residing in community property states such as Washington state to report half of the community income on each partner's federal tax return. This requires CPA tax preparers to disclose each partner's personal information on the other's tax return. RCW 18.04.405, WAC 4-30-050 and internal revenue code prohibit CPA preparers of tax returns from disclosing tax return information without the consent of the client. This proposal clarifies that CPAs may disclose the tax information if required by federal or state tax laws provided each client provides the CPA with specific consent and the intended recipients are specifically and fully identified.

2. Every three years, CPAs, CPA-inactive certificate holders, and nonlicensee CPA firm owners must complete four hours of board approved continuing professional education (CPE) in ethics and regulation with specific application to the practice of public accounting in Washington state. Not all of these credentialed persons are employed in public practice and the rules do not change that often. More and more CPE sponsors are providing ethics in the individual's required workplace competencies. This proposal will provide the credentialed person with flexibility to obtain ethics CPE that is the most beneficial to them. Other changes in the proposal are for clarity. The board is not proposing to change the basic CPE requirements.

Statutory Authority for Adoption: 1. RCW 18.04.055(2), 18.04.405(1). 2. RCW 18.04.055 (7), (14), 18.04.215(5).

Statute Being Implemented: 1. RCW 18.04.055(2), 18.04.405(1). 2. RCW 18.04.055 (7) (14), 18.04.215(5).

Rule is necessary because of federal law, Office of Chief Counsel Memorandum # 201021050 and IRS Publication 555.

Name of Proponent: The Washington state board of accountancy.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Richard C. Sweeney, CPA, 711 Capitol Way South, Suite 400, Olympia, WA, (360) 586-0163.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rules will not have more than minor economic impact on business.

A cost-benefit analysis is not required under RCW 34.05.328. The board of accountancy is not one of the agencies required to submit to the requirements of RCW 34.05.328 (5)(a).

November 19, 2012

Richard C. Sweeney

Executive Director

OTS-5134.2


AMENDATORY SECTION(Amending WSR 11-06-062, filed 3/2/11, effective 4/2/11)

WAC 4-30-050   What are the requirements concerning records and clients confidential information?   (1) Client: The term "client" as used throughout WAC 4-30-050 and 4-30-051 includes former and current clients. For purposes of this section, a client relationship has been formed when confidential information has been disclosed by a prospective client in an initial interview to obtain or provide professional services.

(2) Sale or transfer of client records: No statement, record, schedule, working paper, or memorandum, including electronic records, may be sold, transferred, or bequeathed without the consent of the client or his or her personal representative or assignee, to anyone other than one or more surviving partners, shareholders, or new partners or new shareholders of the licensee, partnership, limited liability company, or corporation, or any combined or merged partnership, limited liability company, or corporation, or successor in interest.

(3) Confidential client communication or information: Licensees, CPA-Inactive certificate holders, nonlicensee firm owners and employees of such persons must not without the specific consent of the client or the heirs, successors, or authorized representatives ((or employee)) of the client disclose any confidential communication or information pertaining to the client obtained in the course of performing professional services.

This rule applies to confidential communications and information obtained in the course of professional tax compliance services unless state or federal tax laws or regulations require or permit use or disclosure of such information.

Consents may include those requirements of Treasury Circular 230 and IRC Sec. 7216 for purposes of this rule, provided the intended recipients are specifically and fully identified by full name, address, and other unique identifiers.

(4) This rule does not:

(a) Affect in any way the obligation of those persons to comply with a lawfully issued subpoena or summons;

(b) Prohibit disclosures in the course of a quality review of a licensee's attest, compilation, or other reporting services governed by professional standards;

(c) Preclude those persons from responding to any inquiry made by the board or any investigative or disciplinary body established by local, state, or federal law or recognized by the board as a professional association; or

(d) Preclude a review of client information in conjunction with a prospective purchase, sale, or merger of all or part of the professional practice of public accounting of any such persons.

[Statutory Authority: RCW 18.04.055(2), 18.04.390 (4)(b), and 18.04.405(1). 11-06-062, amended and recodified as 4-30-050, filed 3/2/11, effective 4/2/11; 08-18-016, 4-25-640, filed 8/25/08, effective 9/25/08; 05-01-137, 4-25-640, filed 12/16/04, effective 1/31/05; 03-24-033, 4-25-640, filed 11/25/03, effective 12/31/03. Statutory Authority: RCW 18.04.055(2). 02-22-082, 4-25-640, filed 11/5/02, effective 12/31/02. Statutory Authority: RCW 18.40.055 [18.04.055]. 93-22-046, 4-25-640, filed 10/28/93, effective 11/28/93.]

OTS-5135.2


AMENDATORY SECTION(Amending WSR 11-07-070, filed 3/22/11, effective 4/22/11)

WAC 4-30-134   What are the continuing professional education (CPE) requirements for individuals?   (1) ((The following)) Qualifying continuing professional education (CPE) must contribute to the professional competency in the individual's area(s) of professional practice or relative to the individual's current work place job functions.

(2) Qualifying CPE is required ((for)) to be completed by individuals during ((the three calendar year period prior to renewal:)) any board specified CPE reporting period.

(3) A CPE reporting period is a calendar year time period beginning in the calendar year a credential is first issued by this board and ending on December 31st of the subsequent third calendar year; for example, if your license was issued any time during calendar year one (2012), the CPE reporting period ends on December 31st of calendar year three (2014).

(4) General CPE requirements for renewal of valid credentials:

(a) ((An individual licensed to practice in this state)) A licensee must complete a total of 120 CPE hours, including 4 CPE credit hours in ((an approved Washington)) ethics ((and regulations course)) meeting the requirements of subsection (((3))) (6)(b) of this section. The total 120 CPE hours requirement is limited to no more than 24 CPE credit hours in nontechnical subject areas. ((All qualifying CPE hours must be taken after the date your initial CPA license was issued;))

(b) A CPA-Inactive certificate holder or a resident nonlicensee firm owner must complete 4 CPE credit hours in ethics meeting the requirements of subsection (((3))) (6)(b) of this section((; and)).

(c) Individuals ((holding)) eligible to exercise practice privileges are exempt from the CPE requirements of this section.

(((2) CPE requirements for renewal of a license that was issued less than three years before the end of a CPA-Inactive certificate renewal cycle: When you convert your status from a CPA-Inactive certificate holder to a licensee, your CPE reporting period (the three calendar year period prior to renewal) and renewal cycle will remain the same. The CPE requirements for renewal are as follows:

(a))) (5) Exceptions to the general CPE requirements:

(a) The initial CPE renewal period after conversion of a CPA-Inactive certificate to a Washington state license:

(i) If your license was issued during the first calendar year of your CPE reporting period, you must have completed 80 CPE credit hours which is limited to 16 CPE credit hours in nontechnical subject areas and must include 4 CPE credit hours in ethics meeting the requirements of subsection (((3))) (6)(a) of this section prior to December 31st of the calendar year following the calendar year in which your license was initially issued.

(((b))) (ii) If your license was issued during the second calendar year of your CPE reporting period, you must have completed 40 CPE credit hours which is limited to 8 CPE credit hours in nontechnical subject areas and must include 4 CPE credit hours in ethics meeting the requirements of subsection (((3))) (6)(a) of this section.

(((c))) (iii) If your license was issued during the third calendar year of your CPE reporting period, you must have completed 4 CPE credit hours in ethics meeting the requirements of subsection (((3))) (6)(a) of this section.

(((3))) (b) For the following circumstances, you must have completed the requirements of subsection (4)(a) of this section within the thirty-six-month period immediately preceding the date an application is submitted to the board; however, the 4 CPE hours in ethics meeting the requirements of subsection (6)(a) of this section must be completed within the six-month period immediately preceding the date your application and the CPE documentation is submitted to the board:

(i) You are applying to reactivate a license out of retirement; or

(ii) You are a CPA-Inactive certificate holder applying for a license or you want to return to your previously held status as a licensee; or

(iii) You are applying for reinstatement of a lapsed, suspended, or revoked license.

(c) For the following circumstances, you must have completed the 4 CPE hours in ethics meeting the requirements of subsection (6)(a) of this section within the six-month period immediately preceding the date your application and the CPE documentation is submitted to the board:

(i) You are applying to reactivate a CPA-Inactive certificate out of retirement; or

(ii) You are applying to reinstate a lapsed, suspended, or revoked CPA-Inactive certificate, or registration as a resident nonlicensee firm owner.

(6) CPE in ethics and regulation((s applicable to practice in Washington state)):

(a) During ((each)) the first CPE reporting period after initial licensing all individuals initially licensed in this state, ((individual CPA-Inactive certificate holders in this state, and)) including nonresident and foreign individuals receiving initial licenses by reciprocity, and individuals initially recognized as resident nonlicensee firm owners are required to complete 4 qualifying CPE credit hours in approved ethics and regulations ((with specific application to the practice of public accounting)) in Washington state. ((In order to be approved by the board,)) The content of this initially required 4 CPE credit hours must be specific to the laws and rules applicable to the practice of public accounting in Washington state including the requirements for the initial and continued use of restricted titles in this state.

All CPE sponsors ((or instructor)) must submit ((documentation associated with the ethics and regulations CPE)) course materials for this initially required 4 CPE credit hours to the executive director of the board for approval ((and the sponsor or instructor must obtain written approval from the board)) prior to delivery of the content for credit. The ethics and regulations ((CPE)) course materials must cover all of the following topics, and ((the ethics and regulations CPE)) instructors of approved courses must substantially address these topics in their presentations:

(((a))) (i) Chapter 18.04 RCW and TITLE 4 WAC. The CPE must include general level information on the Public Accountancy Act, the board's rules, policies, and the rule-making process.

(((b))) (ii) WAC 4-30-026 How can I contact the board?

(((c))) (iii) WAC 4-30-032 Do I need to notify the board if I change my address?

(((d))) (iv) WAC 4-30-034 Must I respond to inquiries from the board?

(((e))) (v) WAC 4-30-040 through 4-30-048 Ethics and prohibited practices. The CPE must include detailed information on each rule and all related board policies.

(((f))) (vi) WAC ((4-30-103)) 4-30-130 Series -- Continuing competency. The CPE must include detailed information on each rule and all related board policies.

(((g))) (vii) WAC 4-30-142 What are the bases for the board to impose discipline?

(((h))) (viii) AICPA Code of Conduct: The CPE must include general level information on the AICPA Code of Conduct.

(((i))) (ix) Variances or key differences between Washington state law (chapter 18.04 RCW), this board's rules (TITLE 4 WAC) and the AICPA Code of Conduct.

(((j))) (x) Other topics or information as defined by board policy.

(((4) CPE requirements to renew a license or CPA-Inactive certificate out of retirement:

(a) In order to renew a license out of retirement, you must meet the CPE requirements of subsection (1)(a) of this section within the thirty-six month period immediately preceding the date the renewal application is submitted to the board; however, the four CPE hours in ethics meeting the requirements of subsection (3) of this section must be completed within the six-month period immediately preceding the date your renewal application is submitted to the board.

(b) In order to renew a CPA-Inactive certificate out of retirement, you must meet the CPE requirements of subsection (1)(b) of this section within the six-month period immediately preceding the date your renewal application is submitted to the board.

(5) CPE requirements for a CPA-Inactive certificate holder to either qualify to apply for a license or return to their previously held status as a licensee: If you hold a valid CPA-Inactive certificate and you wish to apply for a license or you want to return to your previously held status as a licensee, you must meet the CPE requirements of subsection (1)(a) of this section within the thirty-six month period immediately preceding the date your application is submitted to the board.

(6) Reinstatement of a lapsed, suspended, or revoked license, certificate, or registration as resident nonlicensee firm owner:

(a) If you seek to reinstate a lapsed, suspended, or revoked license, you must satisfy the requirements of subsection (1)(a) of this section within the thirty-six month period immediately preceding the date the application for reinstatement is submitted to the board; however, the four CPE hours in ethics meeting the requirements of subsection (3) of this section must be completed within the six-month period immediately preceding the date your application for reinstatement is submitted to the board.

(b) If you seek to reinstate a lapsed, suspended, or revoked CPA-Inactive certificate, or registration as a resident nonlicensee firm owner, you must satisfy the requirements of subsection (1)(b) of this section within the six-month period immediately preceding the date your application for reinstatement is submitted to the board.

(7) Reciprocity: If you are applying for an initial Washington state CPA license under the reciprocity provisions of the act, you must satisfy the requirements in subsection (1)(a) of this section, after you were licensed as a CPA and within the thirty-six month period immediately preceding the date your application is submitted to the board. For purposes of initial licensure, you do not need to satisfy the ethics requirements of subsection (1)(a) of this section. Thereafter, in order to renew your Washington state license, you must comply with all the renewal requirements in subsection (1)(a) of this section.

(8))) (b) During the CPE reporting periods subsequent to the first CPE reporting period, all individuals licensed in this state, including those licensees who obtained their initial license through this state's reciprocity provisions, individual CPA-Inactive certificate holders in this state, and resident nonlicensee firm owners are required to complete 4 qualifying CPE credit hours in ethics applicable to the individual's required competencies in the workplace.

Examples of course content include the following or any combination thereof accumulating to the required 4 hours:

(i) Washington state specific CPE in ethics and regulation described in (a) of this subsection;

(ii) Courses covering the AICPA Code of Professional Conduct;

(iii) Courses covering international codes of conduct applicable to your practice environment;

(iv) Courses covering the ethical codes of conduct prescribed by other volunteer professional organizations applicable to the individual's competencies including, but not limited to, organizations such as the Institute of Internal Auditors (IIA), the Institute of Management Accountants (IMA), or the Association of Government Accountants (AGA);

(v) Courses covering the ethical standards established by other state or federal agencies, including state specific courses required by other state boards of accountancy provided that the content is substantially equivalent to Washington state's law, rules, and policies; or

(vi) Courses specifically addressing the ethical and regulatory issues and challenges faced by licensees, CPA-Inactive certificate holders or the equivalent, and/or resident nonlicensee firm owners. This type of course would be expected to also include responsible and practical solutions to ethical and regulatory issues, including those related to compliance with the laws and rules of Washington state.

(7) CPE extension requests: In order to renew your license, CPA-Inactive certificate, or registration as a resident nonlicensee firm owner, you must complete the required CPE by ((the end of the CPE reporting period)) December 31st of the calendar year preceding the calendar year of your renewal unless you can demonstrate your failure to meet the CPE requirements was due to reasonable cause.

The board may provide limited extensions to the CPE requirements for reasons of individual hardship including, but not limited to, financial hardship, critical illness, or active military deployment. You must request such an extension in writing by ((the end of the CPE reporting period)) December 31st of the calendar year preceding the calendar year of your renewal. The request must include justification for the request and identify the specific CPE you plan to obtain to correct your CPE deficiency.

A form useful for this purpose is available from the board's web site or will be provided to you upon request.

(8) Self-reported deficiencies: If you fail to file a timely request for extension but you self-report a CPE deficiency to the board during the renewal period January 1st through June 30th of the renewal year, you will be permitted to continue to use the restricted title during the renewal period provided you:

(a) Submit to the board, in writing, the specific CPE plan to obtain to correct the CPE deficiency on or before June 30th of the renewal period;

(b) Timely complete the CPE sufficient to correct the deficiency;

(c) Timely submit certificates of completion for the subject CPE taken to the board; and

(d) Pay the fee for reinstatement of a lapsed credential on or before June 30th of the renewal year.

CPE deficiencies taken by June 30th of the renewal year under this subsection will be carried back to the reporting period ending on December 31st of the preceding calendar year and be subject to CPE audit in the next renewal period to ensure that inadvertent double counting does not occur.

[Statutory Authority: RCW 18.04.055(7), 18.04.215(5). 11-07-070, 4-30-134, filed 3/22/11, effective 4/22/11; 10-24-009, amended and recodified as 4-30-134, filed 11/18/10, effective 12/19/10. Statutory Authority: RCW 18.04.055(7) and 18.04.215. 09-17-044, 4-25-830, filed 8/11/09, effective 9/11/09. Statutory Authority: RCW 18.04.055(7), 18.04.215(5). 08-18-016, 4-25-830, filed 8/25/08, effective 9/25/08; 05-01-137, 4-25-830, filed 12/16/04, effective 1/31/05; 02-04-064, 4-25-830, filed 1/31/02, effective 3/15/02. Statutory Authority: RCW 18.04.055(7), 18.04.104(8), 18.04.215(4). 00-11-077, 4-25-830, filed 5/15/00, effective 6/30/00. Statutory Authority: RCW 18.04.055(7), 18.04.215(4) and 18.04.105(8). 99-23-045, 4-25-830, filed 11/15/99, effective 1/1/00.]