Relates to certified public accountants

Summary of provisions

Section 7408 of the education law is amended to permit firms established pursuant to the business corporation, partnership and limited liability company laws to register with the State Education Department.

Section 1503 of the business corporation law is amended to authorize non-CPA ownership of a firm provided:

*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.

Section 1507 of the business corporation law is amended to permit the issuance of shares provided at least 51 percent of the outstanding shares of stock of the corporation are owned by certified public accountants, at least 51 percent of the directors and officers are CPAs, and the president, chairperson of the board and CEO are CPAs.

Section 1508 of the business corporation law is amended to permit non-licensees to be directors and officers of firms.

Section 1509 of the business corporation law is amended to clarify provisions regarding the disqualification of shareholders, directors, officers and employees in a professional service corporation incorporated to allow non-CPA ownership.

Section 1511 of the business corporation law is amended to require the redemption or purchase of shares within 30 days in the event that a non-licensed professional shareholder is terminated, unless such shares are transferred or sold to another employee within the corporation.

Section 1512 of the business corporation law is amended to provide that the name of the accounting firms established as professional

service corporations may only contain words which could be used in the name of a partnership practicing accounting at the time of incorporation.

Section 1514 is amended to require that firms established as professional service corporations furnish statements to the State Education Department with relevant information for each shareholder, director and officer.

Section 1525 of the business corporation law is amended to authorize the incorporation of accounting firms with non-CPA owners as foreign professional service corporations.

Section 121-1500 of the partnership law is amended to allow non-CPAs to become partners in a limited liability partnership formed to provide accountancy services.

Section 121-1502 of the partnership law is amended to allow non-CPAs to become partners in a foreign limited liability partnership formed to provide accountancy services.

Section 121-101 of the partnership law is amended to allow non-CPAs to become partners in a limited partnership or domestic limited partnership formed to provide accountancy services.

Section 1207 of the limited liability company law is amended to allow non-CPAs to become members of a professional service limited liability company formed to provide accountancy services.

Section 1301 of the limited liability company law is amended to allow non-CPAs to become members of a foreign professional services limited liability company formed to provide accountancy services.

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 effectiveness 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 who 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 long-term viability of the firm. This bill will benefit firms, the profession and the state by attracting additional business and job opportunities.

Legislative history

2013-14 S.4596B/A.9771B

Fiscal implications

None.

Effective date

Immediately.