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CALIFORNIA SOCIETY OF CPAs JUNE 2020
Financial Recovery
Considerations for Establishing Business Losses
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californiacpa.calcpa.org Volume 88, No. 10, June 2020 California Society of Certified Public Accountants Communications Advisory Committee Dalton Sweaney, Mary Kay Foss, Karly McCroskey, Matthew Martin, Adam Blitz, Karen Goodfriend, Rhett Gagon, Scott Donnelly, Cory Stigile, Chrislynn Freed, Stuart Harden, Mitch Freedman, Timothy Gillihan, Diana Turnacliff, Dan Morris, Ed Melia and Gregg Wind.
Vice President, Marketing & Communications Matthew Koontz matthew.koontz@calcpa.org Associate Director, Communications Aldo Maragoni aldo.maragoni@calcpa.org Managing Editor Damien B.M. English damien.english@calcpa.org Marketing Designer Elizabeth Everson elizabeth.everson@calcpa.org Art Direction & Design Lynn LaRocca-Low lynnlarocca@gmail.com Cover Photography Richard Morgenstein richard@morgenstein.com Offices 1710 Gilbreth Road; Burlingame, CA 94010, (800) 922-5272 330 N. Brand, Suite 1170, Glendale CA 91203, (800) 922-5272 1201 K St., Suite 1000, Sacramento, CA 95814 Fax: (650) 522-3009 • www.calcpa.org
California CPA (ISSN 1530-4035) is published monthly except for February and April by the California Society of Certified Public Accountants, 1710 Gilbreth Road, Burlingame, CA 94010. Periodicals Postage Paid at Burlingame, CA and at additional mailing offices. Members receive California CPA regularly. Nonmember subscription rate: $75 per year, or $8.50 per issue; foreign rate: $110 per year. Remit U.S. funds only. © 2020 California Society of Certified Public Accountants. All correspondence pertaining to advertising or nonmember subscriptions should be addressed to the Advertising Department; POSTMASTER: Send address changes to: California CPA; Customer Services; California Society of CPAs; 1710 Gilbreth Road, Burlingame, CA 94010.
contents
10 13 23
10 Loss Assessment
COVID-19 has had a profound impact on the global economy. After addressing concerns such as employee safety and short-term liquidity, many companies are now evaluating options for recovering financial losses.
4 In My Opinion
Developing and evaluating a claim for business losses goes beyond typical financial and accounting analysis.
www.calcpa.org
ANTHONY PUGLIESE, CPA
12 Qualified Retirement Plans
The Coronavirus Aid, Relief and Economic Security (CARES) Act, P.L. 116-136, enacted March 27 contains many provisions. Our federal tax expert walks you through selected highlights. STUART R. JOSEPHS, CPA
june
Publication of an advertisement in California CPA does not constitute endorsement of the product or service by California CPA or the California Society of Certified Public Accountants. Items published in California CPA, unless otherwise specified, represent the views of the authors and individuals quoted.
CalCPA
While CalCPA supports members through every stage of recovery, we also must adapt to new regulations and public health guidance affecting how we can best serve our members. Here’s how we plan to move forward.
13 Budget Crisis
What a difference a few months makes. In January, Gov. Newsom proposed a $222 billion budget that was projected to have a surplus and a healthy rainy-day fund. By May, the administration was projecting a $54 billion deficit. JASON FOX
22 TechTalk: All Virtual
Government and health guidelines are showing signs of loosening, which means people will likely return to their firms’ office spaces. But we will not go back to our old processes. ADAM BLITZ, CPA
news&resources 14 23
Special Section: CalCPA Bylaws A Cautionary Tale
JUNE 2020
C A L I F O R N I A C PA
3
InMyOpinion by Anthony Pugliese, CPA, CGMA, CITP
You’re Our Priority meeting venues that comply with current guidelines and requirements; the needs of our members, staff and stakeholders; office constraints surrounding an extended tax season; and, of course, everyone’s comfort level with returning to group settings.
L
Like you, CalCPA is adjusting to ever-
evolving conditions related to COVID-19 and the responses by federal, state and local representatives. Our profession, and this organization, will continue to provide essential services as we work through current conditions and look ahead to recovery efforts. While CalCPA supports members through every stage of recovery, we also must adapt to new regulations and public health guidance affecting how we can best serve you as members. I’d like to share with you CalCPA’s plans as we move forward. Your Health & Safety Are Our Priorities CalCPA continues to assess the effects of the pandemic on our member services and operations. Know that CalCPA will do all that we can to ensure the safety of members, staff, instructors, partners and stakeholders. We all must adhere to the new regulations, restrictions and best practices promoted by our state and local authorities. Within those guidelines, CalCPA will continue to make decisions with the best interests of our members and stakeholders in mind. We always have been about member services; the prosperity and well being of every member of the CalCPA family is the core of who we are. We continuously review multiple sources and factors to inform our practices. These include the latest guidance from the WHO, CDC and health experts; data trends on community spread of COVID-19; criteria for and compliance with state and local requirements (e.g., cleaning procedures, physical distancing); the availability of 4 C A L I F O R N I A C P A JUNE 2020
CalCPA’s Plan for In-Person Meetings & Events CalCPA planned to offer virtual events until July 1. However, updated projections and guidance from state and local authorities clearly indicate that we must extend this practice. To serve and protect you, our staff and others, CalCPA will convert all in-person chapter, state committee and education programs to virtual formats in most cases, and delay or cancel a small number of others. CalCPA has embraced virtual meetings for more than a decade, so this transition will be a smooth one. As a result of this temporary shift, CalCPA will refrain from contracting with venues or services for in-person events until conditions improve. We also will refrain from in-person chapter board meetings, state committee meetings, planning sessions and scholarship meetings. As circumstances evolve in the weeks ahead, we will evaluate our practices and update them accordingly. Given current restrictions and guidelines from state officials, chapters and state committees will refrain from offering CPE for virtual events due to requirements associated with monitoring and tracking attendance. CalCPA’s Member Competency & Learning team will continue to offer an expanded portfolio of virtual programs (calcpa.org/ education) that offer CPE to members and nonmembers. This portfolio includes free webcasts and resources, as well as scheduled online courses and virtual conferences. Regionalized Approach to Recovery and Response California is wonderfully vast and diverse, and the effects of COVID-19 vary by region. We know that local guidance and restrictions within our state’s 58 counties can differ widely. The state has established a County Variance website (covid19.ca.gov/roadmap-counties) to tailor regional guidance based on local trend
data. At the same time, CalCPA is committed to adjusting our in-person gathering practices to maximize opportunities for the continuous growth of every member and chapter. CalCPA staff and the board of directors will remain in close contact with chapter leadership to tailor member service options as local conditions permit. The Path Forward CalCPA recognizes the high value that in-person meetings, conferences and events provide members. The governor’s office recently announced a four-stage plan and industry guidance for returning to regular business operations as quickly and safely as possible. As I write this column, California is in stage two of the plan. CalCPA will, of course, adhere to the state’s guidance and use the roadmap as a guide to inform how and when we plan for and hosts in-person events. In the current version of the plan, CalCPA’s in-person meetings and events will be permitted beginning in stage three. Staff is already working in anticipation of when the state reaches that threshold so CalCPA will be ready to relaunch our popular in-person programs and events for members. Resources and Continuous Engagement As the pandemic and recovery efforts unfold, CalCPA will continue to provide timely, relevant resources on our dedicated COVID-19 resource webpage: (calcpa.org/ covid19). There you will find links to free webcasts and other helpful information. Additionally, CalCPA will continue to innovate and offer “coffee and conversation” virtual chats and other online social events for members to talk about important topics. CalCPA chapters also are beginning to host virtual roundtable discussions. COVID-19 has touched all of our lives in profound ways. You can be assured that CalCPA will be there to support you and the accounting profession throughout this historic event. As always, please let us know how else we can help. Stay well and take care.
www.calcpa.org
nt news&trends
the numbers
$22B
“We are working hard to continue delivering these payments to Americans who need them. The vast majority of payments have been delivered in record time, and millions more are on the way every week.” —IRS Commissioner and CalCPA Member Chuck Rettig
Amount of Economic Impact Payments received in California. —IRS
34%
Number of public companies that say they have begun to implement FASB’s mandatory cloud computing accounting standard. —Deloitte
$61B
The amount of global VC investment in Q1 20.
Not the Same Ol’ Office? How do office workers feel life will change once workplaces reopen?
—KPMG
$5,102
The amount the average household spends per month.
74% Would like to work remotely more frequently than before the outbreak. 72% Will rethink shaking hands with business contacts. 72% Plan to schedule fewer in-person meetings. 61% Anticipate spending less time in common areas in the office. 56% Worry about being in proximity to colleagues.
—The Ascent
36M+
The number of Americans who have found themselves temporarily or permanently out of a job since March 16.
—Robert Half
—WalletHub
GASB Creates Emergency Toolbox in COVID-19’s Wake The Governmental Accounting Standards Board (GASB) has posted an Emergency Toolbox (calcpa.org/ GASBCOVIDToolbook) to the COVID-19 Response page meant to provide a starting point for stakeholders to address accounting and financial reporting issues that may arise during this uncertain period.
www.calcpa.org
JUNE 2020
C A L I F O R N I A C PA
5
FTB FT TB
news
California Conformity with Federal CARES Act The FTB is analyzing and considering the impact of the Federal Coronavirus Aid, Relief and Economic Security (CARES) Act on California taxpayers and will be releasing more information at the conclusion of that analysis. The following, preliminary information regarding conformity to the CARES Act has been offered in response to questions the FTB has received. California generally conforms to the pension-related items such as early withdrawal penalty, minimum distribution rule changes, etc. However, California does not have automatic conformity to the changes made with regard to loans from a qualified retirement account. California does not conform to some of the other changes made by the CARES Act, including those related to: • Loan forgiveness related to the Paycheck Protection Program; • NOL carrybacks; • Charitable contributions; • Student loan forgiveness; • Business interest limitations; • Prior year alternative minimum tax liability (corporations); and • Health-savings accounts changes (California does not conform to health-savings account rules generally speaking).
6 C A L I F O R N I A C P A JUNE 2020
COVID-19
CalCPA and CAMICO COVID-19 Resources As news surrounding COVID-19 changes daily, CalCPA is monitoring developments and collecting information and resource links for our members, partners and the public. Visit our general resources page at calcpa.org/covid19; state and federal regulatory updates at calcpa.org/covid19regulatory and COVID-19 related courses at calcpa.org/ covid19courses, as well as information from CalCPA Health at calcpahealth.com/ covid-19/). For current and updated risk management guidance, tools and resources related to the COVID-19 outbreak from CAMICO, visit camico.com/blog/ coronavirus-resources.
Government Industry Alert: COVID-19 and Financial Reporting The CalCPA Governmental Accounting and Auditing Committee and California Committee on Municipal Accounting recently released a Government Industry Alert: calcpa.org/GAAIndustryAlert. In it, the committees provide recommendations and best practices on how state and local government agencies should disclose the COVID-19 pandemic on financial statements and audit considerations they should keep in mind for fiscal year 2020 audits.
www.calcpa.org
CAMICO Insurance
tip
Member Alert
of the Month
Updated Notice of Annual Members’ Meeting
Loss Prevention Best Practices Apply appropriate safeguards to address the added risk. Some best practices to consider: • Meet principal(s) face to face to assist in determining integrity. • Perform background checks on all principals. • Insist that clients have ongoing legal representation. • Obtain written consent annually to interact with the client’s attorney. • Document: Have a signed and detailed annual engagement letter clearly articulating scope and limits as well as enhanced “protective clauses”; document all planning, work, consultations and communications (internal and external); and obtain a management representation letter annually (regardless of type of service) that affirmatively confirms the client’s understanding of, and compliance with, state laws and regulations. • Only provide the traditional scopes of services. • If performing financial statement services, make clear in your engagement letter that the financial statements will include a “going concern” modification due to the possibility of the federal government altering its enforcement policy. For more, visit camico.com.
The 2020 CalCPA Annual Members’ Business Meeting will take place virtually on July 30 via Zoom. The meeting will include a membership vote on CalCPA bylaw changes and 2019 meeting minutes. If there is a contested officer or director seat, voting procedures with a list of candidates will be provided to members by email in advance of the meeting. For additional meeting information, contact Cheryl Smith at Cheryl. Smith@calcpa.org.
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GASB
18-month delay
States, Cities Get 18-month Reprieve on Lease Accounting
SASs 134-140
U.S. cities and states will have an extra 18 months to prepare for a major change in lease accounting, according to the Governmental Accounting Standards Board (calcpa.org/GASBLeaseAccounting). The government-accounting rulemaker also delayed by a year the effective dates for eight other accounting rule changes, including those for fiduciary activities, conduit debt obligations and major equity interests. Municipal and state governments were set to adopt the new lease accounting rules this year, and government accountants sought the relief because their work has been hampered by stay-at-home orders during the coronavirus pandemic. Under the new lease rules—known as Statement No. 87—cities, counties and states must list the value of leased assets and total liabilities on their financial statements, to include vehicles, office space and equipment. Public companies adopted similar rules in 2019. GASB also delayed the effective date of guidance related to the accounting change, Guide No. 2019-3, Leases.
Standards Board Agrees to Defer SASs 134-140 Due to Coronavirus The AICPA Auditing Standards Board agreed to defer implementation of seven recently issued statements on auditing standards (SASs) due to the pandemic. These standards, SAS Nos. 134-140, will be deferred one year and are now generally effective for audits of calendar year-end 2021 financial statements. Learn more at calcpa.org/ AICPASASDeferral.
mm membermilestones
ACCOMPLISHMENTS
Rachel Knapp, Bryan Lew and Chase Ronderos were among the winners of the 2019 Elijah Watt Sells Award, which recognizes top 2019 CPA Exam performers who obtain a cumulative average score above 95.50 across all four sections of the Uniform CPA Examination.
8 C A L I F O R N I A C P A JUNE 2020
MEMBERS IN THE NEWS
TaxNotes quoted Larry Pon and Harlan Levinson April 12 about the 2020 tax season … AccountingToday quoted Michael Eisenberg and Doug Radtke in an April 20 article on mistakes clients are making this season … Globe St. quoted Blake Christian in an April 22 article on how opportunity zones can give shelter to CRE investors during the coronavirus
… AccountingToday quoted Rob Seltzer, Mike Eisenberg and Doug Radtke in a May 5 article on whether the second season of the TCJA has been easier … FinancialAdvisor quoted Shashi Mirpuri, tax partner at Squar Milner, in a May 11 article on the effects of the CARES Act on individual taxes.
www.calcpa.org
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assessing
COVID-19 Losses
B Y J O H N T I R A , C PA & T I M Z I M M E R M A N
Considerations to Establish Business Losses
The coronavirus (COVID-19) pandemic has had a
profound impact on the global economy. The disease’s impact has been far reaching with many businesses shuttering, while others have significantly reduced operations. After successfully addressing immediate concerns, such as employee safety and short-term liquidity, many companies are evaluating options for recovering financial losses from government agencies and insurance carriers. If a business is eligible to make a claim for its financial losses, it’s crucial that it accurately assesses the direct impact of the pandemic and provides reasoned and supportable calculations of related losses. This article summarizes some of the key considerations needed to establish business losses, both in claim preparation and claim review. Although our discussion uses concepts associated with an insurance related submission, these same guidelines can apply to other types of recovery mediums—such as submissions for government relief or litigation proceedings. Understanding the Claims Process Developing and evaluating a claim for business losses and additional costs goes beyond typical financial and accounting analysis. This exercise requires an accountant familiar with coverage considerations, knowledgeable about the claims process and experienced in effectively measuring and evaluating the support and causal connection of the losses to the peril. 10 C A L I F O R N I A C P A JUNE 2020
Experienced accountants who have worked on behalf of policyholders, governmental agencies and insurance carriers understand the issues faced by parties on both sides of the table. Those individuals can bring an appreciation of each party’s objectives, as well as a thoughtful, reasoned approach to determining the relevant types of analyses and information necessary for a balanced and objective analysis. In our experience, the following procedures represent the foundational considerations that an accountant should address when preparing or evaluating a claim: • Review the insurance policy form and coverage to determine the appropriate measure of recovery for the claim (profits, earnings, business income) and the relevant definitions of insured perils, exclusions and limits. Note: Opinions regarding coverage (through insurance or otherwise) are typically reserved for attorneys rather than accountants. • Identify the appropriate limit of insurance based on the nature of the loss, such as “actual loss sustained” or a “stated amount” of insurance, and understanding when/how co-insurance may apply. • Analyze saved expenses, continuing expenses and non-continuing expenses. • Evaluate gross profit metrics by analyzing fixed, semi-variable and variable expenses. • Consider additional operating expenses that were incurred to www.calcpa.org
mitigate the loss and identifying extra expenses that may be insured by the policy. • Review historical financial performance, current business plans and future forecasts to estimate projected sales absent/but for the event. • Identify and quantify the actual or expected financial performance during the loss period. While the basic framework of business loss calculations may be similar, understanding the nuances of measuring sales, production, expenses and profit in conformity with a policy or government relief program is critical to validate an accurate and supportable claim. In a COVID-19 environment, many factors may cause business losses— such as supply chain disruptions, employee availability, orders from civil authorities and the loss of market for a business. We recognize that many different policies and types of coverage exist, and government recovery programs will have their own evolving requirements. The unique facts and circumstances of each situation will determine what types of supporting documentation, financial and accounting analysis, loss measurements, and reporting structures are needed to prepare a complete and effective claim. Key Information Sources To effectively prepare a claim submission, businesses need to compile and analyze key information to document losses stemming from a loss event, including COVID-19. The nature and extent of the documentation needed will depend on the type of claim filed and where it is filed (e.g., in an insurance context, in connection with a government fund, etc.). An accountant can provide valuable assistance in determining what documents are needed, which questions should be answered and what information will be necessary to support a claim. This process typically involves detailed analyses of the following: • Insurance policy in force at the date of the loss—including all extensions, endorsements and declarations pages, and details of government recovery program eligibility and requirements; • Descriptions (in narrative form) of the loss event and how the business has been affected to date, which may include third party reports from claims professionals; • Financial, accounting and operational information for two to three years before the loss event, and ongoing for the duration of the loss period including: • Organization charts and employee roles and responsibilities; • Tax returns, financial statements and internal/managementprepared financial statements; • Monthly sales, profit margin reports, payroll data, and expense budgets/details; and • Customer and vendor agreements/contracts. • Details of any mitigation efforts to reduce losses and supporting documentation for any loss-related expenses. In addition to the above information, other items may be relevant and necessary to evaluate the business and the industry in which it operates (e.g., production schedules for the manufacturing industry).
information. Communication should be ongoing and consistent between all parties, including claimants, carriers, accountants, attorneys and brokers. Collaboration: Accountants should effectively work with their clients to support the claims process, recognizing that not all claimants and carriers operate the same way. In addition, accountants often work collaboratively with other professionals and stakeholders to help complete their clients’ objectives. Confidentiality and discretion: Client information should be treated confidentially and made available only to those who directly participate in the work, and who need the information to complete required analyses. The claims process may reveal highly sensitive information, and an accountant should be cognizant of the risks of information leakage when working for claimant or carrier. Information gathering: Firsthand knowledge from written reports is often supplemented through interviews and meetings to fully understand issues, to develop an understanding of facts and timelines, and to gather documentation. In a COVID-19 environment, these interactions may happen over the phone or online rather than in person. Forensic accounting: Understanding the differences between routine business accounting and accounting used to prepare claims, and applying that knowledge to analyze and present financial information are critically important to successful claims. Accountants can offer relevant analytical approaches, scenario testing and other procedures to measure and quantify losses. An accountant is often required to critically analyze general ledger detail and assess accounting entries and related support. Documentation and reporting: Accountants can support their clients in identifying, compiling and analyzing comprehensive documentation and the data necessary to support or evaluate claims. Further, communicating findings in concise, yet comprehensive written or oral reports (as required by the type of claim or recovery sought) that focus on the relevant issues and include supporting analysis, opinions and recommendations will be an important component of each engagement.
The most
important advice
simply may be to approach this entire pandemic period proactively.
The Accountant’s Role in the Claims Process Based on our experience with claimants and insurers, we suggest the following actions to provide for a successful claims process. Communication: Frequent and informed communication is important to structure the analysis and to identify and obtain relevant www.calcpa.org
Concluding Observations The COVID-19 environment is having a significant economic impact on individuals, companies and industries in the short-term and foreseeable future. Clients across a range of markets, both domestic and international, are likely to experience significant losses. While many insurance policies or government programs may offer potential sources of recovery, the applicability and potential relief associated with these will depend on the situation and the findings of professionals, clients, the coverage providers or even the courts. A proactive, ongoing dialogue between the client and its financial and legal advisers should facilitate management of the short- and long-term implications of the challenges facing businesses. The most important advice simply may be to approach this entire pandemic period proactively, seeking informed advice and assistance as losses are tracked, documented and submitted for potential recovery. John Tira, CPA, CFE, CFF (CalCPA Forensic Services Section member) and Tim Zimmerman, CBV, CFE, ABV are forensic accountants at RSM. You can reach them at john.tira@rsmus.com and timothy.zimmerman@rsmcanada.com, respectively. Joe Decilveo, Rick Contorno and Dave Bart of RSM contributed to this article. JUNE 2020
C A L I F O R N I A C PA
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FedTax by Stuart R. Josephs, CPA
Tax Relief
New Rules for Qualified Retirement Plans
distributed within five years, under CARES, this five-year period is determined without regard to 2020. For example, for an account for an individual who died in 2018, the fiveyear period ends in 2024, not 2023.
T
The Coronavirus Aid, Relief and
Economic Security (CARES) Act, P.L. 116136, enacted March 27, 2020, contains many provisions. Selected highlights follow. Required Minimum Distributions Required Minimum Distributions (RMDs) are not required for 2020 from IRAs or employer-provided plans that are defined contributions plans, employee retirement annuities, tax-sheltered annuities or plans maintained by governmental employers. The next RMDs will be for 2021. For an individual whose required beginning date was April 1, 2020 (e.g., the individual attained age 70.5 in 2019), CARES waives the RMD for a distribution that would have been required in 2020 if the distribution was not made in 2019. For an individual whose required beginning date will be April 1, 2021 (e.g., the individual attains age 72 in 2020), the first year for an RMD would be 2020. However, under CARES, no distribution is required for 2020. Therefore, no distribution will be required by April 1, 2021. But CARES does not change this individual’s required beginning date to determine RMDs after 2020. Thus, for an individual whose required beginning date will be April 1, 2021, the 2021 RMD must be made by Dec. 31, 2021. If that individual dies after March 31, 2021, the RMD for the individual’s beneficiary will be determined using the rule for death on or after the individual’s required beginning date. In the case of an individual who dies and whose interest must be
12 C A L I F O R N I A C P A JUNE 2020
Coronavirus-related Distributions and Recontributions CARES exempts from the 10-percent early withdrawal tax a “coronavirus-related distribution” from an IRA, a qualified retirement plan, Sec. 403(a) annuity plan or Sec. 403(b) plan. This tax does not apply to Sec. 457 plans. CARES also allows taxpayers to include income attributable to these distributions ratably over three years, unless elected otherwise, and to recontribute a distribution as a rollover (excludable from income) to a rollover-eligible retirement plan within three years, beginning the day after the date the distribution was received. A “coronavirus-related distribution” is any distribution after Dec. 31, 2019, and before Dec. 31, 2020, from an IRA, a qualified retirement plan, Sec. 403(b) plan or governmental plan. The distribution must be made to an individual: (1) Who was diagnosed with the virus SARS-COV-2 or with coronavirus disease 2019 (COVID 19) by a test approved by the Centers for Disease Control and Prevention; (2) Whose spouse or dependent is similarly diagnosed; or (3) Due to this virus or disease, who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced; being unable to work due to lack of child care, closing or reducing hours of a business owned or operated by the individual; or other factors determined by the IRS. The plan’s administrator may rely on the individual’s certification that the conditions described in (1), (2) or (3) above are satisfied in determining whether any distribution is
a coronavirus-related distribution, which is subject to income tax withholding unless the recipient elects otherwise. A plan is not treated as violating any IRC requirement because it treats a distribution as a coronavirus-related distribution if the aggregate amount of these distributions from plans maintained by the employer and members of the employer’s controlled group or affiliated service group does not exceed $100,000. Hence, a plan is not treated as violating any IRC requirement merely because an individual might receive total distribution exceeding $100,000, considering distributions from other employers’ plans or IRAs. Loans CARES modifies rules for loans from qualified employer plans [defined in Sec. 72(p)(4)], providing that for a qualified individual (under coronavirus-related distribution rules above), to avoid the loan to be treated as a distribution, the maximum amount during the 180-day period beginning March 27, 2020 is the lesser of $100,000 or the present value of the employee’s nonforfeitable accrued benefit under the plan. For a qualified individual with an outstanding loan from a qualified employer plan after March 26, 2020, CARES delays by one year the due date for any repayment—if the repayment due date otherwise would fall between March 27 through Dec. 31, 2020. The delay is disregarded for the requirement that a loan be repaid within five years. Stuart R. Josephs, CPA has a San Diego-based Tax Assistance Practice that specializes in assisting practitioners in resolving their clients’ tax questions and problems. Josephs, chair of the Federal Subcommittee of CalCPA’s Committee on Taxation, can be reached at (619) 469-6999 or stuartrjosephs@yahoo.com.
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CapitolBeat by Jason Fox
Budget Crisis
Pandemic’s Economic Impact Hits California
W
What a difference a few months
makes. In January, Gov. Newsom proposed a $222 billion budget that projected a surplus and a healthy rainy-day fund. By May, the administration was projecting a $54 billion deficit with deep cuts to many programs. The budget crisis that stemmed from the economic impacts of the COVID-19 pandemic will be the focal point of policy leaders over the next few months. As part of the May revised budget, the governor projected to bridge the budget gap by canceling planned program expansions, borrowing from internal special funds, generating new revenues from adjustments to tax laws and banking on additional federal support. Absent additional funds from the federal government, the proposal calls for $14 billion in cuts to education, social services and state worker compensation. On the revenue side, the two tax adjustments outlined in the proposed budget include suspending net operating losses for 2020, 2021 and 2022, as well as limiting business incentive tax credits by offsetting more than $5 million of tax liability for 2020, 2021 and 2022. In the Legislature, Senate Democrats also released a plan and intend to avoid ongoing budget cuts and middle class tax increases. Similarly, the plan relies heavily on expected federal dollars to backfill lost revenue and added costs that resulted from mitigating the COVID crisis. The proposal also outlined two other unique options to respond to the economic impacts of the crisis. 1. The Renter/Landlord Stabilization plan would allow for a three-party
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agreement between renters, landlords and the state to resolve unpaid rents over a limited time period. The state would provide tax credits to landlords for unpaid rent. Landlords could use the transferable tax credits for future tax liabilities or sell them to third-party investors for immediate cash. Renters would commit to repay past rents to the state over a 10-year period. 2. The $25 Billion Economic Recovery Fund outlines a plan for taxpayers to voluntarily pre-pay income taxes to provide a short-term influx of revenue. Taxpayers can prepay income tax in years 2024 to 2033 and receive a California Recovery Tax Voucher at a reduced amount to incentivize participation. The vouchers will be fully transferable and can be sold to third parties to get cash benefit at any time. There are lots of questions related to the governor’s and Senate’s proposals, but all ideas are being considered as policy leaders wrestle with the budget crisis. CalCPA will be following these discussions and work with policy leaders throughout the process. Licensure During COVID Pandemic With stay-at-home orders and the impacts of the COVID-19 pandemic continuing to disrupt personal and professional lives, CalCPA is working to support our members and ensure they’re in a position to continue to serve clients seamlessly. These efforts include frequent communications with the CBA on accommodations for applicants and licensees due to the COVID-19 pandemic. While the CBA offices have been temporarily closed, CBA staff continue to work remotely and make every effort to continue core licensing and oversight functions. The CBA also has taken steps to be as flexible as possible when working to accommodate requests for extensions of certain exam, license or renewal related requirements. Impacted members are encouraged to review important guidance
and FAQs on the CBA’s website (cba.ca.gov) and contact the CBA directly with any requests for accommodation. For license renewal requirements, the CBA is advising licensees to pay renewal fees online and submit their renewal application, continuing education documentation and most forms online or via email. Related to continuing education requirements, Gov. Newsom signed an executive order that, among other things, waives deadlines for satisfying continuing education requirements for 60 days. This temporary waiver allows licensees additional time to meet their continuing education requirements. However, it does not relieve licensees from timely complying with any other renewal requirements, including completing and submitting the required renewal forms and fees. If a licensee does need to request an extension for other license renewal-related requirements—including continuing education beyond the 60 days, peer review or other requirements—they can submit a request and the CBA will review them on a case-by-case basis. For CPA Exam and initial licensure, candidates can submit most documents to the CBA electronically by emailing the appropriate CBA unit. Candidates also can request an extension related to Uniform CPA Exam scheduling, examination or initial licensure related extensions by submitting a request via email. The CBA and National Association of State Boards of Accountancy have extended the expiration date of any Notices to Schedule or Uniform CPA Exam credit until Jan. 1, 2021. Prometric has opened some testing sites on May 1, including California sites. CalCPA will continue to work closely with the CBA on licensure related issues during this time and keep you informed. Jason Fox is CalCPA’s vice president of government relations. You can reach him at jason.fox@calcpa.org.
JUNE 2020 C A L I F O R N I A C P A
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BYLAWS
s p ec ials e cti on
MEMO Date: To: From: Re:
June 1, 2020 CalCPA Members Gregory M. Burke, CPA Chair, CalCPA Bylaws Committee Approval of CalCPA Bylaw Amendments
Background The CalCPA Bylaws Committee conducted its work throughout the summer and fall of 2019. The proposed updates and changes were approved by the CalCPA Board of Directors at its December 2019 meeting, and by CalCPA Council at its January 2020 meeting. Prior to these revisions, the most recent CalCPA bylaw updates and changes were approved in June 2017. For your consideration, on the following pages is a redline version of CalCPA’s bylaws, with updates and changes proposed by the Board of Directors and Membership Committee, reviewed by the CalCPA Bylaws Committee and approved by the Board of Directors and Council. Bylaws changes affecting member rights have to be approved by the members. Proposed Updates and Changes The revisions fall into three categories: • Updates to reflect policy changes enacted by Council; • Changes that conform the bylaws to current organizational procedures that do not conflict with existing policies; and • Administrative changes such as clarifying and using consistent nomenclature throughout the document. This memo will not address all of the changes individually, but the Bylaws Committee believes it important to point out changes affecting member rights, which follow. Changes Affecting Member Rights Article II (2) is revised to provide for an expanded and more inclusive voting membership category. • This change came from the CalCPA Membership Committee in response to the changing nature of how accounting graduates are pursuing careers in public accounting, as well as in industry and academia. • It allows voting privileges to members who were once licensed CPAs, but who no longer hold a license (for other than disciplinary reasons), and members who have never held a license, but who 14 C A L I F O R N I A C P A JUNE 2020
meet the Uniform Accountancy Act requirements for licensure as of the date of application to join CalCPA. • It makes clear that only voting members can vote at meetings of the membership, serve on Council or the Board of Directors, hold office and serve on the CalCPA Nominations Committee. • Follows similar policies adopted by the AICPA and a number of other state societies. Article II (6) is added to incorporate into the bylaws the existing authority Council has to adopt policies with respect to the payment of dues and other benefits, specifically related to life membership. • This change was also brought by the CalCPA Membership Committee requesting the bylaws expressly authorize Council to adopt policies defining this category of membership and determining what benefits life members may receive. • It also clarifies that only dues paying members may qualify for life membership. Article XII (1) is changed to enable the Board of Directors the ability to make operational business decisions related to state committees and sections, and is expanded to include information on the process for creating, designating and dissolving state committees and sections. • This change comes from the Board of Directors with the concurrence of the CalCPA Chair. It removes the CalCPA Chair from this provision and adds the Board of Directors or its designee(s). • It also clarifies the process by which members may propose the creation of a committee or section. The remaining updates and changes to the bylaws are administrative or procedural in nature, ensuring consistency and conformity throughout, and do not affect member rights. Council provided final approval for those revisions. Upcoming Deliverables During this process, two additional aspects were discussed. The Board of Directors requested a legal review of the bylaws, which took place in March 2020. From a legal standpoint, CalCPA’s bylaws are in compliance with state law. However, there were recommended best practice changes that will be thoroughly reviewed and discussed in the coming months, after current revisions are adopted, and brought to the appropriate governance groups for consideration. Additionally, to conform with CalCPA’s bylaws and address other necessary administrative changes, a review and update of all chapter bylaws will take place during the 2020-21 fiscal year. Proposed
changes to chapter bylaws only need to be approved by CalCPA Council, and not the full membership. Conclusion Please take the time to read and consider these changes. A redline version of CalCPA’s bylaws are available on CalCPA’s website at calcpa.org/who-we-are/calcpa. The members of the Bylaws Committee would like to express their appreciation for the opportunity to provide you with the proposed changes to the CalCPA bylaws contained in the accompanying redlined document. Members of CalCPA’s Bylaws Committee: • Chair: Greg Burke, Sacramento Chapter • Vanessa Hill, East Bay Chapter • Chris Raymer, Central Coast Chapter • Cory Stigile, Los Angeles Chapter • Ben Towne, Silicon Valley/San Jose Chapter • Jill Gorman, CalCPA Staff Liaison
CalCPA
bylaws
Califor�ia Society of Certified Public Accountants
ARTICLE I—NAME AND PURPOSE (1) Name. The name of this organization is California Society of Certified Public Accountants, a nonprofit mutual benefit corporation, hereinafter called CalCPA. (2) Purposes. CalCPA is established to advance the profession of accountancy in the state of California; to encourage the maintenance of high professional standards for the certified public accountant; to cultivate a cordial relationship among practicing accountants; to promote a better lay understanding of the services rendered by certified public accountants; and to act in a representative capacity for the profession. ARTICLE II—MEMBERSHIP (1) Classes of Members. Membership in CalCPA shall consist of four classes, namely, CPA voting members, student and candidate members, and honorary members. In addition, the CalCPA Council may, (a) pursuant to Section (5) of this Article II, the CalCPA Council may create a class of persons associated with CalCPA who shall hold the title of associate member, and www.calcpa.org
(a)(b) pursuant to Section (6) of this Article II, create a class of persons who shall hold the title of life member. (2) CPA Voting Members. (a) Any person meeting one of the following criteria is eligible for CalCPA membership as a voting member: (1) Any person holding a certificate license from the State of California as a Certified Public Accountant, or (2) Any person who is a resident of California and holds a license or similar document as a Certified Public Accountant of another state or political subdivision of the United States, or (3) Any person who is a resident of California and at any time in the past held a CPA license from the State of California or any other state or political subdivision of the United States, as long as that license was not suspended, surrendered or revoked in connection with, or as the result of a disciplinary action by a licensing body, or (4) Any person meeting the requirements for licensure from the state of California as a Certified Public Accountant, in accordance with the final version of the Uniform Accountancy Act as of the date of the person’s application for membership, but who has not obtained a license as a Certified Public Accountant and is not a candidate for licensure as a Certified Public Accountant. (b) and any person who is a resident of California and who holds a certificate or similar document as a Certified Public Accountant of another state or political subdivision of the United States is eligible for CalCPA membership. Such applicant shall be admitted to membership in CalCPA upon receipt of a completed membership application and verification that the candidate has satisfactorily met all qualifications for membership as described in these bylaws. (b)(c) Only persons meeting the requirements of this section shall be allowed to vote in accordance with Article V, serve as a member of CalCPA Council pursuant to Article VI, serve as a member of the CalCPA Board of Directors pursuant to Article VII, hold office pursuant to Article VIII, or serve as a member of the Nominations Committee in accordance with Article XIV of these bylaws. (2)(3) Student and Candidate Members. Any student, or CPA candidate, may be admitted to membership in CalCPA. Such student/ candidate members shall be required to pay dues, as established by the CalCPA Council, and they shall not be eligible to hold office or to vote on any matters, but all other privileges of CalCPA shall be extended to them. The CalCPA Council may establish policy for communication of this class of membership to the general public and acceptance and use of those standards shall
be a requirement of membership. (3)(4) Honorary Members. Any person, who in the opinion of the CalCPA Council is distinguished in the profession of accountancy, but who is not eligible for membership, may, upon unanimous vote of the council members duly assembled at a meeting pursuant to the bylaws, be elected as an honorary member. Such honorary members shall not be required to pay initiation fees or other dues, nor shall they be eligible to hold office or to vote on any matters, but all other privileges of CalCPA shall be extended to them. (5) Associate Members. The CalCPA Council may, by resolution, create and establish criteria for a class of persons associated with CalCPA who shall be “associate members” of CalCPA. Such associate members may not be members within the meaning of “members” of this Article II and shall not be eligible to hold office or to vote on any matters, but all other privileges of CalCPA shall be extended to them. The CalCPA Council shall have the right to establish the public description and rights of such associate members and the dues or other consideration to be paid by such associate members. The CalCPA Council may establish policy for the communication of the rights of associate members to the general public and acceptance and adherence to those standards shall be a requirement for a person to be granted the title of associate member. (4)(6) Life Members. The CalCPA Council may, by resolution, create and establish a class of persons who are either voting members in accordance with Section (2) or associated with CalCPA in accordance with Section (5) of this Article, who may be designated as life members.
of dues, assessments or other indebtedness, may be reinstated upon payment of said dues, assessments or other indebtedness. (8)(10)Resignation. The resignation of a member shall be in writing or electronic communication, or as prescribed by the CalCPA Council and sent to a CalCPA office or staff person whose responsibilities include accepting a member resignation. (9)(11)Resignation, Suspension and Reinstatement of Members under Charges or Complaints. A person whose resignation was accepted, or whose suspension became effective when the member was under investigation by the California Board of Accountancy (CBA), or was the object of a complaint under the bylaws or the Code of Professional Conduct of either CalCPA or CBA, will not be eligible for reinstatement until the case is resolved. (10)(12)Complaint Against Member. Whenever a member of CalCPA shall be alleged to have violated these CalCPA Bylaws, the California Board of Accountancy rules, or similar rules or regulations of any state in which such member is licensed, or the CalCPA Code of Professional Conduct, such complaint shall be processed in accordance with policies and procedures adopted by the CalCPA Council. The Committee on Professional Conduct of CalCPA is hereby empowered to carry out these policies and procedures unless the CalCPA Council makes an alternative determination.
(6)(8) Nonpayment of Dues. If a CPA member who is required to pay dues in accordance with the policies established by CalCPA Council neglects to pay such dues, student or candidate member, or associate member shall neglect to pay any dues, assessments or indebtedness to CalCPA or a chapter, notification of such delinquency shall be given to such CPA member, student or candidate member, or associate member by the chair of the CalCPA Council, or their designee, 30 days after said dues, assessments or other indebtedness shall be payable. If a person in any of the membership classes, except honorary members, does not pay the delinquent dues 90 days after said dues shall be payable, the person’s membership shall be suspended. If a person in any of the membership classes, except honorary members, does not pay the delinquent dues by the last day of the fiscal year in which dues were payable, the person’s membership shall be terminated.
(11)(13)Disciplinary Suspension and Termination of Membership. Membership in CalCPA shall be suspended should there be filed with the secretary/treasurer of CalCPA a judgment of conviction imposed upon any member for: (a) A crime defined as a felony (or its equivalent) under the law of the conviction jurisdiction; (b) The willful failure to file any income tax return which the member, as an individual taxpayer, is required by law to file; (c) The filing of a false or fraudulent income tax return on the member’s or a client’s behalf; or (d) The willful aiding in the preparation and presentation of a false and fraudulent income tax return of a client. Such membership shall be terminated upon the similar filing of a final judgment or conviction. Membership in CalCPA shall be suspended should a member’s certificate as a Certified Public Accountant, or license, or permit to practice as such, or to practice public accounting be suspended as a disciplinary measure by a state board of accountancy, or its equivalent, but such suspension of membership in CalCPA shall terminate upon reinstatement of the certificate. Membership in CalCPA shall be terminated should such certificate, license, or permit be revoked, withdrawn as a disciplinary measure or be canceled by the said state board of accountancy.
(7)(9) Reinstatement. Any person whose membership in any of the membership classes, except honorary members, has been suspended or terminated for nonpayment
(12)(14)Sanctions Against Members for Other Reasons. Any member renders himself or herself liable to expulsion, suspension or lesser sanctions if the member:
(5)(7) Requirements for Retention of Membership. Membership classes other than honorary members of CalCPA shall pay dues as established by the CalCPA Council and comply with these bylaws and the Rules of the CalCPA Code of Professional Conduct.
bylaws
www.calcpa.org
JUNE 2020
C A L I F O R N I A C PA
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BYLAWS
sp e cia lse c ti o n
BYLAWS
s p ec ials e cti on (a) Infringes or violates any of these bylaws or the CalCPA Code of Professional Conduct or similar rules or regulations of any state in which such member is licensed or knowingly aids or abets any other persons in any transgression thereof; (b) Is declared by court of competent jurisdiction to have committed any fraud; or (c) Is declared by a competent court to be insane or otherwise incompetent; or (d) Has a certificate as a Certified Public Accountant revoked or withdrawn for cause by authority of any state or territory of the United States or the District of Columbia. (13)(15)Enforcement Procedures. Pursuant to the bylaws and the rules of CalCPA Code of Professional Conduct, the CalCPA Council will establish policies and procedures by which complaints against members shall be investigated. Persons belonging to any class of membership may request copies of CalCPA’s Bylaws and Code of Professional Conduct, or membership policies and procedures from CalCPA’s headquarters office. (14)(16)Certificate of Membership. The CalCPA Council shall cause a certificate of membership, in such form as it may prescribe, to be issued as a matter of course to each person admitted to membership. Membership certificates issued by CalCPA shall state on the certificate that CalCPA is a nonprofit mutual benefit corporation, which may not make distributions to its members except upon dissolution. Upon termination of any member for disciplinary reasons or by resignation of any member under charges or complaints, the certificate of membership shall be returned to CalCPA for cancellation. (15)(17)Termination of Membership. A member who ceases to be a member of a chapter shall thereupon cease to be a member of CalCPA. ARTICLE III—FEES, DUES & ASSESSMENTS (1) Dues. (Annual) Annual dues shall be paid to CalCPA. The CalCPA Council shall determine, by at least an affirmative majority vote of those present, the annual dues which shall be paid by each member in accordance with such classifications as it determines appropriate, and may require dues of a different amount for each class so created. (2) Dues. (Payments in Advance) Any member who shall have attained the age of 55, and shall pay to CalCPA the amount of 10 years’ dues in advance, shall be relieved of further payment of dues. Any member who shall have attained the age of 60, and shall pay to CalCPA the amount of five years’ dues in advance, shall be relieved of further payment of dues. The payments referred to in this paragraph shall be computed at the highest rate of annual dues in effect at the time of payment.
fee, if any, which applicants for membership shall pay. (5) Dues. (Member Resigning) If any member shall have registered a resignation, and if said resignation shall not have been accepted by CalCPA prior to the beginning of the fiscal period next succeeding the date of presentation of the said resignation, such member shall not be liable for any dues beginning with such succeeding fiscal period unless, after the commencement of such fiscal period, the resignation shall have been withdrawn, in which instance, the dues shall become due and payable in the same manner as if the resignation had not been requested. This provision shall not be a waiver of any dues that may have become due and payable in accordance with these bylaws. (6) Dues. (Disciplinary Suspension) Any CPA member holding a license as a Certified Public Accountant, suspended under Article II, Section (10), (11), (12), or (13) or (14) shall not be liable for the payment of dues accruing during the period of such suspension. (7) Assessments. (Proposed) The CalCPA Council shall have the right to propose assessments, provided such action shall not be taken unless notice thereof shall have been incorporated in the notice for the meeting at which the assessment is proposed. If such proposal is approved by the majority of the voting members present, the secretary/treasurer of CalCPA, or designee, shall send a notice to that effect to the president of each chapter, who shall thereupon call a meeting of the chapter over which the president presides, setting forth the proposed action of CalCPA. The votes cast for and against the proposal by the voting members present at such meetings shall be forwarded to the secretary/treasurer of CalCPA, or designee, of CalCPA within 30 days of notice to the chapters. Alternatively, the CalCPA Council may conduct a written ballot of the entire voting membership of the chapters, under rules established by the CalCPA Council. The CalCPA Council shall then be governed by the majority of votes reported by the chapters, and if carried, such assessments shall thereupon be levied and collected by CalCPA. Honorary members and voting members who have been relieved of further payment of dues pursuant to Section (2) of this Article shall be exempt from the payment of any assessment. Nothing herein shall restrict the power of a chapter to levy assessments for its particular use, provided notice is given to the voting members of the chapter of such proposed action to be taken at a chapter meeting.
may be formed in any city or area within the state of California whenever there are 100 or more members of CalCPA, or 100 or more Certified Public Accountants eligible for membership eligible voting member resident in such area, or who have their principal offices in such area. Prior to the date of granting a chapter charter, the CalCPA Council shall require the proposed chapter to function successfully for two years as an area group related to a chapter already chartered. The organization and function of an area group shall be in accord with procedures adopted by the CalCPA Council. Upon compliance with all the requirements under these bylaws, CalCPA may grant a chapter charter to such area group. (2) Membership in Specific Chapter. Each member of CalCPA shall belong to a primary chapter. A member may belong to multiple secondary chapters. For the purposes of the chapter membership count for determining chapter representatives to council, a member will be counted only in their primary chapter. Leadership opportunities for secondary chapter membership shall be determined by each chapter. A member may change his or her primary chapter membership. (3) Revocation of Chapter Charter. If at any time the number of voting members in a chapter shall fall below the required number of voting members as provided elsewhere in this article, and such number of voting members in the chapter shall not be brought up to such required number within six months after written notice thereof to its secretary/ treasurer by the secretary/treasurer of CalCPA, or designee, of CalCPA, then such chapter may be subject to suspension or revocation of its charter as the CalCPA Council may determine. Upon suspension or revocation of its charter, all rights and privileges of the chapter shall cease. Members of a chapter whose charter has been revoked or suspended shall transfer to other chapters in accordance with the provisions of Section (2) of this Article. (4) Reinstatement of Charter. A chapter thus having been deprived of its charter may be reinstated by the CalCPA Council upon compliance with the requirements of these bylaws. (5) Limitation of Chapter Communication. No chapter or chapter committee, except by express written permission of the chair of the CalCPA Council, shall communicate with, (a) any federal or state governmental body, bureau, commission, or unit, concerning matters affecting the profession in California as a whole, or (b) any national or state professional society, except in matters relating to the dissemination of general information to the public pursuant to plans by such national or state professional society, and except in general routine matters.
bylaws (3) Fiscal Year. The fiscal year of CalCPA shall begin on May 1 and shall end April 30 of the succeeding calendar year. Membership dues are payable May 1.
(4) Initiation Fees, Administrative Fees or Other Fees. The Council shall prescribe the amount of initiation fee, administrative fee or other
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(8) Refunds. Any member who shall have resigned shall not be entitled to a refund of any dues paid except dues which may have been paid for a fiscal period succeeding the period in which such resignation shall have been presented.
(9) Cancellations. In meritorious individual cases, the CalCPA Council shall establish policies and procedures to order cancellation of any dues, assessments or other indebtedness of the member, including any dues, assessments or other indebtedness of a member seeking reinstatement after termination of membership. ARTICLE IV—CHAPTERS (1) Formation of Chapters. Chapters of CalCPA
(6) Chapter Bylaws. Each chapter shall be self-governing, but no chapter may have or adopt bylaws which are in conflict with the bylaws of CalCPA. Chapter bylaws and any amendments thereto or changes therein shall not be effective unless and until ratified by the CalCPA Council. Any bylaws of a chapter inconsistent with these bylaws shall be declared void by the CalCPA Council.
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ARTICLE V—MEETINGS OF THE MEMBERSHIP OF CALCPA (1) Annual Meeting. There shall be an Annual Meeting of CalCPA held within 120 days after fiscal year end on such day and at such place, or places, as the CalCPA Council shall designate. (2) Special Meetings. Special meetings may be called at any time by the chair of the CalCPA Council, by a majority of the CalCPA Council, or shall be called by the secretary/treasurer of CalCPA, or designee, of CalCPA upon written request of not less than 125 members of CalCPA entitled to vote, to be held at such place as CalCPA shall designate. Any such special meeting shall be held at a time fixed by the CalCPA Council not less than 30 days or more than 90 days after receipt of the request for the meeting. At such special meeting, no business shall be transacted except such as shall be specified in the call thereof. (3) Quorum. At any meeting of the membership of CalCPA, the presence of 50 voting members in person, or by such other means as determined by CalCPA Council, constitutes a quorum. If no quorum shall be present within 30 minutes after the time appointed for a meeting, such meeting shall be considered adjourned. (4) Adjournment. The voting members present may adjourn the meeting to be reconvened at a specified date, and the secretary/treasurer of CalCPA, or designee, is required to send to all members of CalCPA notice of such adjournment and said new meeting date. (5) Notice of Meetings. Written notice of all meetings of the members of CalCPA shall be sent to every member at the member’s registered address not less than 30 or more than 90 days prior to the date of the meeting. The notice shall state the matters to be voted upon at the meeting. CalCPA shall determine how notice is to be given to members consistent with applicable legal requirements. (6) Record Date. The CalCPA Council shall determine the record date for the purpose of determining the members entitled to notice of, and to vote at a meeting as provided by law. (7) Voting. A vote shall be taken on each motion or resolution at each meeting. The voting members present at any meeting of the CalCPA Council or the CalCPA Board of Directors, may direct that a motion or resolution be submitted by mail, or by such other method as may be established by the CalCPA Board of Directors in conformity with applicable law to each member entitled to vote thereon, and that such vote thereon be taken in lieu of a vote at a meeting of CalCPA, as provided in Section (11) of this Article V. An affirmative majority of the votes cast shall be sufficient for the adoption of any motion or resolution, except as otherwise provided in these bylaws. (8) Proxies. All voting members of CalCPA shall be entitled to vote by proxy at any meeting of the membership. A member may vote by proxy by appointing another member of CalCPA or the secretary/ treasurer of CalCPA, or designee, to act as www.calcpa.org
the member’s proxy. All proxies must be in writing and must contain a statement which sets forth the name of the member to whom the proxy is given. No member may vote more than 10 such proxies, except as specified in (a) (1) of this section. (a) Directed Proxy. A voting member may direct exactly how their vote shall be cast and shall specify in the proxy exactly how said member’s vote shall be cast by the individual who is assigned to cast their vote by proxy. (1) A voting member may assign their proxy to the secretary/treasurer of CalCPA, or designee, to cast their vote. The proxy form must be received by CalCPA at such location, date, and time as stated on the proxy form. There shall be no limit to the number of directed proxies the secretary/treasurer of CalCPA, or designee, may cast. (2) A voting member may assign their proxy to another member of CalCPA to cast their vote, subject to the 10 proxy limit. (b) Undirected Proxy. A voting member may assign their voting rights to another voting member giving them full power and authority to exercise all voting rights in the sole and absolute discretion of the individual who is so appointed to vote the proxy. (9) Suspended Members. A CPA member holding a license as a Certified Public Accountant suspended for any cause shall not be qualified to vote on any matter of CalCPA. (10) Inspectors of Election. The presiding officer at the Annual Meeting or at any meeting at which a member of the CalCPA Council is to be chosen or an officer elected shall appoint three inspectors, none of whom shall be an officer of CalCPA or member of the CalCPA Council or nominee as officer or member of the CalCPA Council. The inspectors of election shall determine the number of voting memberships outstanding, and the voting power of each, the number represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all members. The candidate for office, or the candidates for membership on the CalCPA Council receiving the highest number of votes for the respective offices, as specified in Article VII and for the respective memberships on the CalCPA Council, as specified in Article VI (1) shall thereupon be declared elected by the presiding officer. (11) Action Without Meeting. In addition to the procedures set forth in Section (7) of this Article, any action which may be taken at the Annual Meeting or at a special meeting of CalCPA members may be taken without a meeting if the CalCPA Council distributes a written ballot to every CPA member entitled to vote on the matter, in accordance with applicable law. Approval by written ballot pursuant to this section shall be valid only
when the number of votes cast by ballot within 30 days of submission of the ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required to approve at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot. ARTICLE VI—CALCPA COUNCIL (1) Representation on CalCPA Council. The governing body of CalCPA shall be the CalCPA Council. For purposes of the Corporations Code of the State of California (the “Code”) and other applicable law, the CalCPA Council shall be deemed to be, and shall have all of the authority, power, rights and obligations of, a “Board” (as defined in Section 5038 of the Code), and the members of the CalCPA Council shall have all of the rights and obligations of members of such Board. The members of the CalCPA Council shall be set by the CalCPA Council as follows: (a) Chapter representatives are to be determined by the following rules: (1) Each chapter shall be entitled to two CalCPA Council members, and one additional CalCPA Council member for every full 1000 CPA membersfull 1,000 voting members (as described in Article II of these bylaws), elected for one-year or staggered two-year terms, as specified in the chapter’s bylaws. (2) The determination of the number of voting members in each chapter and the total number of elected CalCPA Council members under this paragraph shall be made as of April 30 of the year immediately preceding the year of election. (3) Chapter vacancies in the CalCPA Council, determined by the application of the above rules, shall be filled in accordance with chapter bylaws and no later than May 1 of each year. Positions authorized but not filled by this process, and subsequent vacancies in the year, shall be filled by appropriate chapter nomination in accordance with chapter bylaws and a vote of the Council at any regular meeting. (b) Six CalCPA Council members elected at large for staggered two-year terms by the voting members of CalCPA without regard to the chapter to which they belong, but with considerations for achieving diversity. (c) The following officers of CalCPA Council shall automatically serve on the CalCPA Council so long as they serve in such position: chair of the CalCPA Council, first vice-chair, the four vicechairs and the secretary/treasurer. (d) The immediate past chair of the CalCPA Council shall automatically serve on the CalCPA Council so long as he/she serves in such position. (e) The president of the California Certified Public Accountants Education Foundation shall automatically serve on the CalCPA Council so long as he/she serves in such position. (f) State committee and section chairs shall automatically serve on the CalCPA Council so long as they serve in such position, subject to a six consecutive JUNE 2020
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s p ec ials e cti on years term limit as any state committee or section chair. (g) The ten past chairs of the CalCPA Council who served most recently shall automatically serve on the CalCPA Council. (h) All voting members of the CalCPA board shall also be members of the CalCPA Council. (i) The Chief Executive Officer (CEO) of CalCPA shall serve as a non-voting member of Council. (2) Non-voting Invited Guests. Non-voting invited guests at each regular CalCPA Council meeting shall be past chairs of the CalCPA Council who do not serve on the CalCPA Council, members of AICPA Council, speakers, active task force chairs, presenters and others who shall be invited to attend CalCPA Council meetings from time to time. Such invited guests shall not be eligible to vote but may be permitted to speak and participate in the CalCPA Council meetings they attend. (3) Service. No CalCPA Council members except for officers, past chairs of the CalCPA Council and state committee or section chairs may serve more than six consecutive years without at least a 365 consecutive day break in service. Service for more than 6 months in a term shall constitute a full year. (Effective July 2001) (4) Vacancy. If a vacancy occurs due to death, resignation or removal of a CalCPA Council member, or for any other reason, the CalCPA Council shall appoint a voting member of CalCPA to fill the vacancy for the unexpired term; provided, however, that if the CalCPA Council position vacated is that of a voting member who holds office pursuant to Section (1)(a) of this Article, then the voting member appointed to fill the vacancy shall be from the same chapter with respect to which such vacancy exits. (5) Removal from Office. Any CalCPA Council member who holds office pursuant to Section (1)(a) of this Article and who has missed two consecutive CalCPA Council meetings may be removed from office by his or her chapter in accordance with procedures determined by CalCPA Council. Any CalCPA Council member who holds office pursuant to Section (1)(b) of this Article and who has missed two consecutive CalCPA Council meetings may be removed from office at any duly held CalCPA Council meeting, provided that the action is documented in the notice of the meeting. Removal of a CalCPA Council member requires an affirmative majority vote of the voting members of the CalCPA Council present at a duly held meeting (not counting for this purpose the member who is the subject of the removal vote). (6) Responsibilities of Council. The responsibilities of the CalCPA Council shall focus on strategic planning and policy making on behalf of the membership. Specifically, the CalCPA Council: (a) Shall have the authority to establish policies and procedures of CalCPA and to enact resolutions binding upon the CalCPA Board of Directors, officers, state committees, sections and staff; (b) Shall determine the desired outcomes 18 C A L I F O R N I A C P A JUNE 2020
(c) (d)
(e) (f)
for the success of CalCPA, including strategic planning, annual budgeting and promoting CalCPA to the public; Shall carry out CalCPA’s mission in accordance with these bylaws; May delegate any of its responsibilities to the CalCPA Board of Directors except the appointment of a member to fill a vacancy on the CalCPA Council and except as may otherwise be provided by applicable law; Shall determine the role of the CEO; and Shall not alter, amend or rescind any resolution or motion duly adopted at any properly assembled meeting of the CalCPA membership in accordance with the bylaws.
(7) Conduct of Meetings. (a) The CalCPA Council shall adopt rules and procedures for the conduct and transaction of its business at its meetings. A record shall be kept of all of the proceedings of each CalCPA Council meeting, in the form of minutes. The record of each meeting shall be available for inspection by any member of CalCPA at all reasonable times after it is compiled. The record of each CalCPA Council meeting shall also be posted to a CalCPA web site, which is available to all classes of membership of CalCPA only. The secretary/treasurer of CalCPA, or designee, of CalCPA shall timely distribute copies of the minutes of each CalCPA Council meeting to the members of the CalCPA Council. (b) A majority of the members of CalCPA Council shall constitute a quorum for the transaction of the business of the CalCPA Council. (c) A meeting may be adjourned and rescheduled to another time or place by vote of a majority of the CalCPA Council members present whether or not a quorum is present. If the postponement is for more than 24 hours, then notice of the new time or place shall be given to all members of the CalCPA Council, including those not present at the time of adjournment. (d) Members of the CalCPA Council do not need to be physically present to participate in a meeting. The CalCPA Council shall establish rules for holding a duly noticed CalCPA Council meeting from site(s) remote from the main location. Members of the CalCPA Council participating from a remote site in accordance with such rules shall constitute presence. However, the remote meeting site must minimally provide that all participants are able to hear one another. Since there are limitations inherent in tallying and verifying votes at a remote site, unless otherwise determined by the CalCPA Council, each remote site shall be staffed by a member of CalCPA Council or staff. (e) The CalCPA Council shall hold at least two regular meetings each year. (8) Call for Meetings. The chair of the CalCPA Council or 15 members of the CalCPA Council acting as one may call a meeting of the CalCPA Council. The time and place of the meeting shall be specified in the call,
which time shall be seven days or more after the notice is given. Notice shall be given to all members of the CalCPA Council using a method established by the CalCPA Council. The CalCPA Council may fix the time and place of regular meetings, and such meetings may be held at the time and place so fixed without further notice or call. (9) Written Opinion of Members. The CalCPA Council, at any meeting of the CalCPA Council, may request a written opinion of the voting members of CalCPA. (a) The secretary/treasurer of CalCPA, or designee, shall have CalCPA staff prepare the canvass to be sent out to members using procedures for delivery and return of the canvass that have been established by the CalCPA Council. (b) The results of the canvas shall not be binding on the CalCPA Council. (10) Removal. Council shall have the authority to remove any officer or member of the board by a two-thirds vote of the Council. Such removal may occur at a duly held meeting of the Council. ARTICLE VII—CALCPA BOARD OF DIRECTORS (1) Role and Responsibilities of the CalCPA Board of Directors. CalCPA shall have a Board of Directors, but for the purposes of the Code and other applicable law, the CalCPA Board of Directors shall be deemed to be an executive committee of the CalCPA Council (rather than a “Board” within the meaning of Section 5038 of the Code). The CalCPA Board of Directors shall work at an operational level to carry out the strategies and policies set by the CalCPA Council and the membership. Specifically, and except for those matters that are exclusively reserved to the CalCPA Council as a “Board” within the meaning of Section 5038 of the Code, the CalCPA Board of Directors: (a) Shall direct the activities of CalCPA; (b) Shall act as the Executive Committee of the CalCPA Council and shall take whatever action it deems desirable, including the establishment of procedures to implement the policies set by Council relating to the conduct of the affairs of CalCPA, consistent with the provisions of these bylaws, motions and resolutions of the membership, or actions of the CalCPA Council; (c) Shall supervise the financial management of CalCPA and ensure accountability, including the responsibility for the hiring, firing, compensation and review of the CEO; (d) Shall ensure appropriate communication, notice, and working relationships with the CalCPA Council; (e) Shall assist with the work of the CalCPA Council and its work groups (i.e., committees and task forces); (f) Shall report the actions of the CalCPA Board of Directors to the CalCPA Council at the regular meetings of the CalCPA Council; and (g) Shall have the authority to delegate decision making to the chair of the CalCPA Council, first vice- chair of CalCPA Council, immediate past chair of the CalCPA Council, the secretary/ treasurer and the CEO, in the event of www.calcpa.org
situations that may arise from time to time and require immediate attention or action on decisions between regularly scheduled meetings of the CalCPA Board of Directors. Such decisions and actions shall be reported to the CalCPA Board of Directors for ratification at its next scheduled meeting. (2) Conduct of Meetings. The CalCPA Board of Directors shall meet at least three times per year. (a) The CalCPA Board of Directors may fix the time and place of regular meetings, which may be held at the time and place so fixed without further notice or call. The CalCPA Board of Directors may call a special meeting as required from time to time. Notice of regular or special meetings of the CalCPA Board of Directors shall be given at least four days’ notice by mail, or 48 hours delivered personally, by telephone, fax or email. (b) Meetings shall be held in person or as established by the CalCPA Board of Directors as long as proper notice has been given. The CalCPA Board shall establish rules for holding a duly noticed CalCPA Board meeting. Members of the CalCPA Board participating from a remote site in accordance with such rules shall constitute presence. (3) Quorum. At any meeting of the CalCPA Board of Directors, the presence of the majority of members of the CalCPA Board of Directors shall constitute a quorum. (4) Composition of the CalCPA Board of Directors. The CalCPA Board of Directors shall have not less than 8 and no more than 15 members. (a) Members of the CalCPA Board of Directors shall be: (1) Chair of the CalCPA Council; (2) First vice-chair of the CalCPA Council; (3) Four vice-chairs who serve for staggered two-year terms; (4) Secretary/treasurer; (5) Immediate past chair of the CalCPA Board; (6) President of the California Certified Public Accountants Education Foundation; (7) Four representatives from the CalCPA Council who shall be nominated and elected by CalCPA Council to the CalCPA Board of Directors for staggered two-year terms; (8) Two at-large representatives from the voting membership appointed by the chair of the CalCPA Board for staggered two-year terms and such representatives also shall serve on the CalCPA Council according to Article VI, Section (1)(h). (b) The CEO shall serve as a non-voting member of the CalCPA Board. (5)
present and voting at a duly held meeting (not counting for this purpose the director who is the subject of the removal vote). ARTICLE VIII —OFFICERS (1) Officers. The officers of CalCPA shall be the chair of the CalCPA Council, the first vice-chair of the CalCPA Council, four vicechairs of the CalCPA Council and a secretary/ treasurer all of whom shall be CPA voting members of CalCPA. No person shall hold more than one office at a time. No trustee of the California Certified Public Accountants Education Foundation shall be eligible to concurrently serve as a CalCPA officer, nor as a member of the CalCPA Board of Directors, with the exception of the chair of the CalCPA Council and the president of the California Certified Public Accountants Education Foundation Board of Trustees.
Council and any of the vice-chairs of the CalCPA Board to preside at any meeting, the members of the CalCPA Council shall select one of its members to preside. (6)
Duties of First Vice-Chair. Pursuant to paragraph (5) above, the first vice-chair shall take the chair’s place and perform the chair’s duties, in the event the chair is unable to serve. The first vice-chair shall also spend the term as first vice-chair learning the role and function of the chair and shall perform other duties as assigned by the chair.
(7)
Duties of Secretary/Treasurer. The secretary/treasurer shall be responsible for: (a) Giving required notice of all meetings of CalCPA members and of the CalCPA Council and the CalCPA Board of Directors; (b) Keeping a record of the proceedings to all such meetings to be made and of all matters of which a record shall be ordered; (c) Keeping custody of the corporate seal and affixing the seal to papers and documents when required; (d) Keeping a register of the name, residence and business addresses of each person admitted to membership; (e) The notification of members elect; (f) Recording the number of voting members at each annual or special meeting of members: (1) Who are present at such meeting, and (2) Who are represented by proxy, or (3) Who have submitted ballots, as reported by the election inspectors. (g) The oversight of the financial activities and transactions of CalCPA; (h) Chairing of the Finance Committee; (1) Reporting to the CalCPA Council and the CalCPA Board of Directors at each of their regular meeting. The said report shall contain such information as may be specified by the CalCPA Council or the CalCPA Board; and (2) Furnishing the auditors, as elsewhere provided in the bylaws, copies of the secretary/ treasurer’s annual report. (i) Performing all other duties delegated to them by the CalCPA Board of Directors. (j) The secretary/treasurer may delegate any or all of their duties outlined in items (a) – (f) above to the CEO of CalCPA.
(2) Election. The officers with the exception of the continuing vice-chairs, shall be elected at the Annual Meeting of the membership of CalCPA except as provided for in Article XIII, (6), in each year concurrently with the election of the at-large members of the CalCPA Council and shall hold office until the next Annual Meeting of the membership, or until the election and qualification of their respective successors. The vice-chairs shall hold office for two years and shall have staggered terms, with two vice-chairs being nominated and elected each year at the Annual Meeting of the membership. (3) Vacancy. If any vacancy shall occur in an office by reason of death, resignation, removal or for any other reason, the chair of CalCPA shall appoint a replacement, subject to approval by the CalCPA Board, to fill the vacancy until the next Annual Meeting of the membership. (4) Duties of the Chair of the CalCPA Council. In addition to the duties and prerogatives prescribed elsewhere in these bylaws, the chair of the CalCPA Council: (a) Shall preside at all meetings of CalCPA, CalCPA Council, and the CalCPA Board; (b) Shall enforce the bylaws of CalCPA; (c) Shall be a member “ex officio” of every committee except the Audit Committee and the Nominations Committee; (d) May conduct such correspondence as the chair of the CalCPA Council considered to be in the best interests of CalCPA; and (e) Shall perform all executive and other duties ordinarily appertaining to the office of chair of the CalCPA Council.
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Removal of a Member of the CalCPA Board of Directors from Office. The CalCPA Board of Directors shall have the authority to remove any director who holds such positions pursuant to Section(4) (a)(8) of this Article. Such removal of a director requires an affirmative majority vote of the directors
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(5)
Absence of Chair of the CalCPA Council. In the event of the absence, disability or refusal of the chair of the CalCPA Council to act, the first vice-chair of the CalCPA Council shall act in the chair of the CalCPA Council’s stead. In the further event of the absence, disability or refusal of the chair of the CalCPA Council and the first vice-chair of the CalCPA Council to act, the CalCPA Council shall designate one of the other vice-chairs to act. In the further event of the absence, disability or refusal of the chair of the CalCPA Council, the first vice-chair of the CalCPA
(8)
Annual Reports. The chair of the CalCPA Council and the secretary/treasurer shall render an annual report at the Annual Meeting of the membership.
ARTICLE IX—SEAL (1) Form. The seal shall consist of a circular die, with two concentric circles, between which shall be the words “California Society of Certified Public Accountants,” and in the center of the die, the words “Incorporated September 27, 1909.” ARTICLE X—BUDGET (1) Annual Budget. The CalCPA Board of Directors, with the assistance of the chief JUNE 2020
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s p ec ials e cti on executive officer no later than the first day of each fiscal year, shall prepare for the approval of and adoption by CalCPA an annual budget, including budgets from each chapter, showing all amounts to be appropriated for the purposes of CalCPA and estimating all revenues for the current fiscal year. The CalCPA Board of Directors may amend the budget from time to time during the year, subject to approval and adoption by the CalCPA Council. Unexpended appropriations shall lapse at the end of each fiscal year and shall not be carried forward. ARTICLE XI—Amendments (1) Proposals for Amendments by CPA Voting Members. Every proposal by CPA voting members to adopt, amend or rescind bylaws or the CalCPA Code of Professional Conduct shall be in writing and shall set forth the nature of the proposal. Such proposals shall be initiated, signed and presented to the secretary/treasurer of CalCPA, or designee, of CalCPA by 3% or more CPA voting members or by the CalCPA Council and may be voted upon at the Annual Meeting of the membership, a special meeting of the CalCPA members or by ballot, as determined by the CalCPA Council. (2)
(3)
(4)
Voting on Amendments at Annual Meeting or Special Meeting. Unless the CalCPA Council orders a written ballot or by other means as established by rules set by the CalCPA Council, the secretary/treasurer of CalCPA, or designee, shall include in the call of the Annual Meeting or a special meeting of CalCPA members all properly presented proposals by CalCPA voting members to adopt, amend or rescind bylaws or the CalCPA Code of Professional Conduct. A majority affirmative vote of the CalCPA members voting at such Annual Meeting of the membership or special meeting is required to adopt, amend or rescind bylaws or the CalCPA Code of Professional Conduct. Voting on Amendments by Ballot. When the CalCPA Council orders a written ballot or a ballot by other means as established by rules set by the CalCPA Council, the secretary/ treasurer of CalCPA, or designee, shall forthwith submit the proposal to CalCPA members in such manner. Approval by ballot shall be valid only when the number of votes cast by ballot within the time specified by the CalCPA Council, which shall not be less than 30 days after the date the ballot is submitted to members, equals or exceeds 10% of CPA voting members, and the number of approvals constitutes a majority affirmative vote of the votes cast by ballot. Amendment by CalCPA Council. Except to the extent CPA voting member approval is required pursuant to Section 7150 of the California Corporations Code, bylaws and the CalCPA Code of Professional Conduct may be adopted, amended, or repealed by the CalCPA Council without member approval.
ARTICLE XII – COMMITTEES AND SECTIONS OF CALCPA (1) State Committees and Sections. The voting members of CalCPA at any time, or the CalCPA Council, or the chair of the CalCPA Council CalCPA Board of Directors, may designate or dissolve such 20 C A L I F O R N I A C P A JUNE 2020
committees and sections as may seem desirable from time to time to create and carry out the purposes of CalCPA. They or the chair of the CalCPA Council may Unless specified by the voting members of CalCPA or CalCPA Council, for any committee or section designated, the CalCPA Board of Directors or their designee/s shall specify the number of members to compose each such committee and sections and the duties thereof. (a) Every proposal for the creation of a committee or section by the voting members shall be in writing and set forth the nature of the proposal. Such proposals shall be initiated, signed and presented to the secretary/treasurer of the CalCPA Council by at least 25 voting members of CalCPA and may be voted upon at the Annual Meeting of membership, a special meeting of the CalCPA voting members or by ballot, as determined by the CalCPA Council. (2)
Appointments by Incoming Chair of the CalCPA Council. The incoming chair of the CalCPA Council shall annually designate the personnel of every committee, except the Audit Committee, see Article XIII, the Nominations Committee, see Article XIV, Section (3), and the CalCPA Board of Directors, see Article VII, Section (4), and at the time of appointment of a committee shall designate the chair of the committee. The chair of the CalCPA Council shall be a member “ex-officio” of every committee except the Audit Committee and Nominations Committee. (a) The incoming chair of the CalCPA Council shall be the person nominated to serve as chair by the Nominations Committee pursuant to Article XIV(1) (b) for the coming fiscal year.
ARTICLE XIII—AUDIT COMMITTEE AND AUDITORS (1) Appointment of Audit Committee. The CalCPA Council will annually appoint an audit committee. The appointment shall occur at the first meeting of the council year. (2) Composition. The audit committee may include persons who are not members of the CalCPA Council. The audit committee cannot include staff members, the chair, secretary/treasurer, CEO, or CFO of the organization. Members of the finance committee may serve on the audit committee, but cannot comprise 50 percent or more of the audit committee. (3) Auditors. The audit committee, under the supervision of CalCPA Council, is responsible for making recommendations to the council on the hiring and firing of independent certified public accountants (CPAs). The audit committee can negotiate the independent CPA’s compensation. The Audit Committee shall recommend and the CalCPA Council shall appoint the auditors. The auditors shall have access to the books and records of the secretary/treasurer, or designee, at all reasonable times throughout the fiscal year. They shall render an opinion on the financial statements included in the annual report of the treasurer and shall furnish one copy each thereof to the officers. Facsimiles of such financial statements and
the auditors’ opinion shall be distributed to the membership annually. (4) The audit committee must: (a) Confer with the auditor to satisfy committee members that the financial affairs of CalCPA are in order; (b) Review the audit and decide whether to accept it; and (c) Approve non-audit services by the auditors, and ensure such services conform to standards in the Yellow Book issued by the U.S. Comptroller General. ARTICLE XIV - NOMINATIONS COMMITTEE (1) Responsibilities of the Nominations Committee. The responsibilities of the Nominations Committee shall be to: (a) Collect and process the candidate applications for officers of CalCPA and at-large members of the CalCPA Council; (b) Nominate officers and at-large members of the CalCPA Council by either of the following methods, as determined by the Nominations Committee: (1) An affirmative vote of at least a majority of the members of the Nominations Committee at a meeting at which a quorum is present or; (2) An affirmative vote by ballot of at least a majority of the members of the Nominations Committee, who vote by ballot, provided that the number of votes cast by ballot within the time specified by the Nominations Committee equals or exceeds three-fourths of the number of members of the Nominations Committee. Three-fourths of the Nominations Committee shall constitute a quorum. The report of the Nominations Committee shall be filed with the secretary/treasurer of CalCPA, or designee, not later than the first day of the last month of each fiscal year; (2)
Composition of Committee. The Nominations Committee shall be composed of: (a) The past-chair of the CalCPA Council twice removed, who shall serve as chair; (b) The past-chair of the CalCPA Council once removed, who shall serve as vicechair; (c) One committee member designated by the president of each of the CalCPA chapters, who shall serve staggered two-year terms; (d) Five at large members of the CalCPA Council who shall be elected by the CalCPA Council and shall serve staggered two year two-year terms. (e) Those not eligible to serve on the Nominations Committee are, elected officers, appointed Board members, and candidates for CalCPA officer or Council at large positions. (f) Term Limit. Members of the Nominations Committee, with the exception of those serving in an exwww.calcpa.org
(g)
officio capacity as identified in item (3) (a) & (b) of this article, may not serve more than 4 consecutive years, without a 365-day break in service. Should the past-chair of the CalCPA Council designated in (a) or (b) above not be able to serve, then the next preceding past-chair available shall serve in that capacity.
(3)
Consent. The consent of nominees proposed by the Nominations Committee or by other voting members, as provided herein, shall be obtained before the forwarding of such nomination to the secretary/treasurer of CalCPA, or designee.
(4)
Close of Nominations. Notice of nominations for officers and at-large members to the CalCPA Council shall close not later than the first day of the first month of each fiscal year. In accordance with California Corporations Code 7522 (d), if after the close of nominations, the number of nominees is not more than the number of positions to be elected, CalCPA may without further action, declare that those nominated and qualified to be elected have been elected.
(5)
Notice. Notice of nominations for officers and at large members to the CalCPA Council shall be made by the Nominations Committee and filed with the secretary/ treasurer of CalCPA, or designee, and shall be provided to members of CalCPA, under rules established by the CalCPA Council, not later than the fifteenth day of the first month of each fiscal year.
(6)
Nominations by Members. One hundred or more CPA voting members may nominate a candidate for officer or at large member to CalCPA Council. Such nominations must be filed with the secretary/treasurer of CalCPA, or designee, not later than the first day of the first month of the fiscal year, the close of nominations.
(7)
Secretary/Treasurer’s Report. In the event that there are nominees in addition to those nominated by the Nominations Committee, the secretary/treasurer of CalCPA, or designee, shall send to the voting members a report containing the names of all nominees, whether nominated by the Nominations Committee or otherwise. Such report shall be given not later than 15 days before the Annual Meeting of the membership. Election of Petition Nominees. If a petition nominee is presented for a director or atlarge member of Council, the election shall
(8)
occur at CalCPA’s Annual Meeting of the membership. ARTICLE XV - APPOINTMENT AND NOMINATION OF AICPA REPRESENTATIVES (1) Representatives. The bylaws of the AICPA provide for representation of CalCPA and AICPA members residing in California on AICPA Council. Those bylaws set forth the process for AICPA Council designations and nominations. To the extent that rights are granted by AICPA to CalCPA with respect to this process, this article shall govern the exercise of such rights. (a) State Society Representative to AICPA Council. The AICPA bylaws provide that the executive director of state societies (CEO of CalCPA) will be requested to provide the name of their designated representative to AICPA Council. That representative will be the chair of CalCPA unless the chair is already serving as an AICPA Council member. If the chair of CalCPA is already serving on AICPA Council, the chair, after such consultation as the chair deems appropriate, shall provide the name of an eligible CalCPA member to the AICPA as the CalCPA representative. (b) California AICPA Member Positions on AICPA Council. The AICPA bylaws provide for the process by which societies of certified public accountants in each state are to provide the names of suggested candidates to fill AICPA Council vacancies that may arise in the coming year. Nominations from CalCPA shall be administered by the CalCPA Nominations Committee utilizing the same process used for nomination of at large members of CalCPA Council. Nominations from the CalCPA Nominations Committee shall be provided to the AICPA without further CalCPA review. (1) Applicant not a Member of CalCPA. If an applicant is an AICPA member, but not a CalCPA member, the Nominations Committee shall expand its process to incorporate the applicant, using measures they deem appropriate. ARTICLE XVI—MISCELLANEOUS (1) Parliamentary Procedure. The rules contained in the current edition of “Robert’s Rules of Order Newly Revised” shall govern CalCPA in all cases to which they are applicable and in which they are not inconsistent with these bylaws and any
special rules of order CalCPA may adopt. (2)
Location of Offices. The offices of CalCPA shall be maintained at such location or locations as the CalCPA Council may designate from time to time.
(3)
Right of Indemnity. To the full extent permitted by law, CalCPA shall indemnify its members of the CalCPA Council, members of the CalCPA Board of Directors, officers, employees, and other persons described in Subsection 7237 (a) of the California Corporations Code, including persons formerly occupying such positions (collectively, “agents”), against all expenses, judgments, fines, settlements and other amounts actually and reasonably incurred by them in connection with any “proceeding” as that term is used in such subsection by reason of the fact that such person is or was a person described in such subsection. The term “expenses” as used in these Bylaws, shall have the same meaning as in Subsection 7237 (a) of the California Corporations Code.
(4)
Approval of Indemnity. Upon written request to the CalCPA Board of Directors by any person seeking indemnity under Subsection 7237 (b) or (c) of the California Corporations Code, the CalCPA Board of Directors shall promptly determine whether such person has met the applicable standards of conduct set forth in such subsections.
(5)
Advancement of Expenses. To the full extent permitted by law, and except as shall otherwise be determined by the CalCPA Board of Directors in the specific instance, expenses incurred by a person seeking indemnity under these bylaws in defending any proceeding covered by these bylaws shall be advanced by CalCPA prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall be determined ultimately that such person is entitled to be indemnified by CalCPA therefore.
(6)
Non-Exclusivity. Nothing herein shall be deemed to diminish or otherwise restrict any rights to which any person indemnified under these bylaws may be entitled under CalCPA’s Articles of Incorporation, these bylaws, any contract, any vote of CPA voting members or disinterested directors, or under the laws of the state of California.
Amended June 1997 – CalCPA Annual Members Business Meeting; Amended July 20, 2001 - CalCPA Annual Members Business Meeting; Amended January 10, 2003 - CalCPA Council Meeting; Amended May 1, 2003 – CalCPA Member Petition and Membership Vote; Amended January 9, 2004 - CalCPA Council Meeting; Amended July 16, 2004 - CalCPA Annual Members Business Meeting; Amended January 22, 2005 – CalCPA Council Meeting; Amended July 22, 2005 – CalCPA Council Meeting; Amended January 20, 2006 – CalCPA Council Meeting; Amended January 20, 2007 – CalCPA Council Meeting; Amended January 30, 2017 – CalCPA Council Meeting; Last Amended June 29, 2017 – CalCPA Annual Members Business Meeting Amendments in Progress – December 2019 Board of Directors Meeting, January 2020 Council Meeting
www.calcpa.org
JUNE 2020
C A L I F O R N I A C PA
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BYLAWS
sp e cia lse c ti o n
TechTalk By Adam Blitz, CPA
It’s Done
Your Firm Is Virtual … Like It or Not
which costs you less and reduces firm time on the project.
I
I wrote an article for California CPA in August 2019 called “Remotely Close.” The purpose of the that article was to bring to light the opportunities and accessibility of working remotely, while highlighting the inefficiencies and complexity of being away from the office. As we sit here in May 2020, I’m assuming you and most of your colleagues are working remotely. While I hope your firm has been able to transition as smoothly as possible to a remote workforce, I would guess that each firm is facing its own challenges. Last year I explored the problems (real financial cost and time inefficiencies) caused by working remotely; today, I want to highlight the permanent technology changes that I expect to change the way the profession operates. As we move forward, firms will identify that much of what was perceived as value in the past has no worth anymore. So, too, there will be costs associated with a virtual firm that you previously were able to minimize with a one location firm. So here is a brief review of some “sacred cows” that held our firms from going completely virtual. We Must Give Our Clients Paper Copies Remember when you gave your client a hard copy of their tax return? In the new world, that paper copy has been touched by too many people with too many germs. And, guess what? The time and effort it takes to package that paper copy (not just the hard cost of the paper and folders) can be reduced. Now your clients value the electronic copy—
22 C A L I F O R N I A C P A JUNE 2020
Our IT Security Is Fool Proof This may be true in your office, but what about your staff who lives in the 10-story apartment complex and uses the “free” apartment wifi. Going virtual is not free or easy. New challenges arrive and one of those is ensuring each firm has secure IT infrastructure for all of its network users. Now is the time to make sure your IT team educates and installs the firm’s preferred networking solutions at all of your company’s locations (including staff homes).
In the future,
our firms will likely return to our office spaces, but we will not go back to our old processes. Staff Must Be Able to Drive to the Office Congratulations! If your firm was struggling to find talent in your local area, your firm can now easily hire wherever the talent is. Since your firm is now virtual, your talent has no need to be close to your office. As accountants, we typically complete our work independently and therefore should be able to work from wherever we want to live. Shameless plug for Fresno: YOU can afford to buy a house here! You Need to Shake Your Clients’ Hands or Clients Want to See Our Office Remember the days when you and your staff would drive or travel to meet your clients. Well, expect your travel budget to go straight to zero. Awesome, another increase to your firm’s bottom line! Once the pandemic is over, clients and staff alike will be used to
ZOOM and telephone conference calls. It’s not that we don’t want to see our clients, but we would rather reduce the cost and increase the productivity to our bottom line. While we discuss clients, I should mention that, historically, 95 percent of your clientele is headquartered in your geographic area. Well, guess what? It doesn’t matter where your clients are anymore because you never have to shake their hand! Clients moving forward will be more willing to build an online accounting relationship then ever before. To further this point, clients may be driven to remote CPA firms in a bid to remove the natural instinct of meeting and shaking another person’s hand. It’s Not Our Job to Install New Technology for Clients The last couple months have brought a lot of changes and challenges to the ways our firms and out clients operate. If you have not implemented new accounting technology solutions into a service your firm can provide to your clients, now is the time to do so. If you were looking for a simple way to boost your firms revenues as some of your clients go out of business, this is a new service that many of your clients will seek out with open arms. In the future, our firms will likely return to our office spaces, but we will not go back to our old processes. Clients will phase out, new clients will replace those old clients. Staff will move, but that doesnt mean they have to leave your firms. The quicker you can adapt to the new reality the more successful you will be! Please keep yourself, your families, colleagues and friends healthy and safe. Be patient as we will persevere through these challenges—as well as the challenges that lie ahead. Adam Blitz, CPA is the owner at StreamlineCPA. You can reach him at adam@streamlinecpas.com.
www.calcpa.org
personalfinancialplanning
A Cautionary Tale
i
’m writing this piece without affixing
my name, not because I feel I’ve done anything wrong, but to avoid any possible scrutiny by regulators nearly two decades after the fact. More than 25 years ago the AICPA amended its Rule 503 to permit CPAs to accept commissions for the referral of a financial product or service if the CPA did not perform an audit or other attest services. In due course, California also permitted CPAs to accept commissions in similar circumstances, with more onerous disclosure requirements to clients than those of the AICPA. There was a surge in interest in personal financial planning in California when CPAs were permitted to accept commissions—along with an obstacle that CPAs would have to overcome if they wanted to perform services in that space: The regulators said if one were to provide services or even hold out as a financial planner or investment adviser, that person would have to become a Registered Investment Advisor (RIA) with the state or the SEC and licensed by the Financial Industry Regulatory Authority (FINRA). This requirement deterred many CPAs from engaging in these services. It was my opinion that it wasn’t necessary to register as an RIA based upon the definition of accountancy in California Accountancy Act (CAA), as long as such services were “incidental to the practice of accountancy.” While I’m not an attorney, it was clear to me, pursuant to Article 5051(h) of the CAA, that it was part of accountancy if the CPA “prepares personal financial or investment plans or provides to clients products or services of others in implementation of personal financial or investment plans.” CPAs thus had a license to perform those services and both the SEC and California provided that such services performed, incidental to the practice of accountancy, exempted the CPA from the registration requirement. www.calcpa.org
A CPA’s Journey Toward Registration as an Investment Adviser fortunate to be recognized by a widely read and respected personal finance periodical as “one of the best financial advisers” in the country for several consecutive years. In one of the years a profile was published about my firm and me. What an honor! The national visibility resulted in a large number of prospective clients knocking at my door. I was sitting pretty and darned proud of myself.
Clear as day, right? Perhaps clear as mud.
And Then … One day, while participating on a panel for a conference along with another CPA and two prominent securities attorneys, I continued advocating against the need to register as an RIA. After our session, one of the attorneys, with whom I had become quite chummy over the years, and I were chatting at the hotel bar and he said to me, “Congratulations on the profile that was written about you and your firm. It was a nice picture too. That’s really terrific. I’ll bet that will be good for your business.” He went on, “I’m concerned that the regulators might come knocking on your door due to your recent visibility as well as your writings on the subject.” He continued, “The regulators are looking for unregistered advisers to make examples of them, so that all will register.” I replied by asking, “So, what will they do if they ‘catch’ me? Slap me on the wrist and tell me that I must register as an RIA?” The attorney responded, “How about five years disgorgement of fees?” My reply was a terse, “Where do I sign up to become an RIA?” I hired that attorney to be my securities lawyer, set up a new company and registered
Yes, it all required discipline and attention to detail. But as a trained CPA, I was accustomed to
CPA as RIA Flash forward several years. Over time I had become an outspoken advocate for CPAs to perform financial advisory services. I also openly spoke at CPA events that it wasn’t necessary for a CPA to register as an RIA—as long as the work was performed within the CPA firm. If it was performed outside the CPA firm, then that registration was necessary because it wasn’t incidental to the practice of accountancy—it was a separate business. I spoke, appeared on panels and wrote on the subject and I felt secure in my opinion, even though some of my peers and securities attorneys argued that registration as an RIA was required. I was going on my merry way performing financial planning and investment advisory services within my CPA firm without registering as an RIA. In the early ’90s I was
discipline and detail.
JUNE 2020
C A L I F O R N I A C PA
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A Cautionary Tale
it and myself as RIAs. Why did I set up a separate company? My CPA firm was already regulated by the CBA and I didn’t want another regulator involved with the same company. So I ended up with two companies, each with its own regulators. My securities lawyer also advised me that I had to be careful the way I did business and to make certain that I didn’t create an unregistered CPA firm that was preparing financial plans and giving investment advice. Likewise, I had to make sure that my RIA firm was not performing accounting services while not being a licensed CPA firm. This required a balancing act: I signed communications from my CPA firm with the title “CPA” and communications from my RIA firm with “President.” We had to make sure that files were properly segregated for each firm and only personnel who were authorized to perform services for clients of each firm had access to the files.
Yes, it all required discipline and attention to detail. But as a trained CPA, I was accustomed to discipline and detail. Lessons Learned? If you’ve read this far you may be wondering why I’m sharing this journey with you. The reason is that each year a greater number of CPAs are moving into the financial services space and some, perhaps many, are afraid of the process of registering as an RIA. The process isn’t that difficult and I encourage you not to let the registration issue deter you. Yes, there’s a body of knowledge that must be obtained, but we as CPAs have a tenet and ethic of lifelong learning. We’re totally capable of obtaining that expertise and experience. My advice to you is to go for it. Being a personal financial planner, investment adviser and wealth manager is a personally and financially rewarding profession. If you take all of the above into account and still decide not to provide financial
We can provide clients with plans, advice,
comfort, discipline and a
knowledge that we will all get to the other side.
planning services, consider creating an alliance with one or more CPAs who do perform such services. CPAs with the PFS credential are located throughout the state and are ready to partner with you to provide personal financial planning and investment advisory services for you and your clients. It’s during challenging times such as now—with the COVID-19 pandemic and clients’ lives filled with anxiety, stress, uncertainty and, yes, fear because of the loss of jobs and reduction in income or wealth— that we can truly make a difference and bring value to our clients’ lives. It’s when we are at our best. We can provide clients with plans, advice, comfort, discipline and a knowledge that we will all get to the other side of this problem and they will be able to successfully navigate their financial lives and achieve their personal and financial goals.
wantmore?
This is one CPA’s journey into personal financial planning. The CalCPA PFP Committee encourages you to learn from this CPA’s experience and avoid a potential regulatory disaster. For more info on PFP issues, visit the CalCPA PFP Committee website, calcpa.org/PFPcommittee.
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Allow us to continue to serve you and create a pawsitive experience. Renew your membership for the 2020-21 year.
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