2313 Schedule of civil penalties—accountants

BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS

[ 49 PA. CODE CH. 43b ]

Schedule of Civil Penalties—Accountants

[42 Pa.B. 7275]
[Saturday, December 1, 2012]

 The Commissioner of Professional and Occupational Affairs (Commissioner) amends § 43b.10a (relating to schedule of civil penalties—accountants) to read as set forth in Annex A.

Description and Need for the Rulemaking

 Section 5(a) of the act of July 2, 1993 (P. L. 345, No. 48) (Act 48) (63 P. S. § 2205(a)) authorizes agents of the Bureau of Professional and Occupational Affairs (Bureau) to issue citations and impose civil penalties under schedules adopted by the Commissioner in consultation with the Bureau's licensing boards. It further provides that a penalty may not exceed the sum of $1,000 per violation. Act 48 citations streamline the disciplinary process by eliminating the need for formal orders to show cause, answers, adjudications and orders, and consent agreements. At the same time, licensees who receive an Act 48 citation have the right to a hearing and retain their due process right of appeal prior to the imposition of discipline. The State Board of Accountancy (Board) has had an Act 48 schedule of civil penalties since 1998. The Commissioner published a proposed rulemaking at 41 Pa.B. 4535 (August 20, 2011) to amend the schedule of civil penalties for various violations of the CPA Law (63 P. S. §§ 9.1—9.16b) and regulations of the Board. The rulemaking proposed to increase the Act 48 civil penalty for one continuing professional education (CPE) violation, add Act 48 civil penalties for additional CPE violations, delete the Act 48 civil penalty for a CPE violation that isno longer recognized under the CPA Law, restrict the applicability of Act 48 civil penalties for certain violations involving the unauthorized use of professional designations and other unauthorized representations and make editorial changes to the descriptions of violations for which Act 48 civil penalties are assessed.

 Consistent with the proposed rulemaking published at 41 Pa.B. 4541 (August 20, 2011), the Board is contemporaneously promulgating a final-form rulemaking that, among other things, requires a licensee to make up a CPE deficiency no later than 6 months after imposition of a disciplinary sanction for noncompliance and provides that a licensee's failure to make up that CPE deficiency will result in the automatic suspension of the licensee's professional credentials until the deficiency is satisfied.

Summary of Comments and Responses to Proposed Rulemaking

 The Commissioner published the proposed rulemaking at 41 Pa.B. 4535 with a 30-day public comment period. The Board received comments from the Pennsylvania Institute of Certified Public Accountants (PICPA). Other members of the public did not comment. The Board received comments from the House Professional Licensure Committee (HPLC) and the Independent Regulatory Review Commission (IRRC) as part of their review of proposed rulemaking under the Regulatory Review Act (71 P. S. §§ 745.1—745.12). The Board did not receive comments from the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC).

 PICPA noted its strong belief that the civil penalty amounts provided for violations of section 12(a), (c) and (j) of the CPA Law (63 P. S. § 9.12(a), (c) and (j)) for holding out as a certified public accountant (CPA) or public accountant (PA) without having been licensed are not an effective enough deterrent. The HPLC recommended more stringent penalties for unlicensed persons and firms violating these protected titles. Although the Commissioner had not previously proposed changing the amount of this penalty, the Board agreed that a fine of $500 is not a sufficient deterrent. Accordingly, the Commissioner revised the sanction to be $1,000 for the first offense and formal action for all subsequent offenses.

 PICPA noted that there is an important distinction between practicing without a license and practicing with a lapsed license and suggested providing Act 48 citations for a reduced civil penalty for inadvertent practice on a lapsed license. The HPLC asked why a penalty was not listed for firms operating when ''not currently licensed.'' The HPLC further requested the Board to distinguish between lapsed license and unlicensed practice and impose a more severe sanction for unlicensed practice. The Board further considered how best to handle the process of disciplining a licensee for practice on a lapsed license. The Board agreed with PICPA and the HPLC that a violation is substantively different from practicing without having ever been licensed and should not always result in a $1,000 fine. However, as described in the preamble of the proposed rulemaking, the Board prefers that CPAs, PAs and public accounting firms that use professional designations after licenses have lapsed be charged with the unlicensed practice of public accounting under section 12(q) of the CPA Law. Rather than setting predetermined civil penalties or even a formula for civil penalties, the Board has always enforced this provision through formal action, fashioning each disciplinary sanction on a case-by-case basis by taking into account the length of time that a license has lapsed and the type of accounting activities performed. IRRC inquired why formal action is necessary in matters that would otherwise appear to be straightforward more minor violations. In light of the comments received and to increase efficiency in imposing an appropriate disciplinary sanction with the relatively modest civil penalty, the Board determined that the Commissioner should amend the schedule to provide a civil penalty of $500 for lapsed license practice of less than 6 months. Subsequent violations and lapsed license practice of 6 months or more will continue to be enforced through formal action in which the Board retains the full discretion to impose an appropriate sanction based upon the relevant facts when it issues an adjudication or determines to accept a consent agreement. If these violations were included on the Act 48 schedule, the hearing examiner would be required to impose the full civil penalty from the schedule, as required under § 43b.3(c)(2) (relating to procedures). The Board would not have the opportunity to exercise its discretion unless the respondent denies the violation and, after the hearing examiner issues an order, either the respondent or the Commonwealth files an application for review. While the Board will continue to exercise its discretion in these individual cases, the Board agreed that a lapsed license practice violation generally does not merit the same sanction imposed upon a person who has never been licensed for the same level of practice and length of violation.

 PICPA objected to providing a citation for second offense violations of the various CPE provisions as licensees who receive a first offense citation should then be able to comply or face formal action. The HPLC recommended subjecting second offense violations to formal action rather than simply an increased civil penalty. Upon further consideration, the Board agreed that the Commissioner should not amend this regulation to provide a citation for a second offense violation of the CPE provisions at section 8.2 of the CPA Law (63 P. S. § 9.8b(b)) and § 11.63(a)(1), (6) and (7) (relating to CPE subject areas; relevance to professional competence).

 The HPLC first noted use of an asterisk and a number/pound sign as references in the schedule and suggested at least replacing them with superscript numbers. The Commissioner has replaced the * with superscript ¹ and replaced the # with superscript ².

 IRRC requested that the Bureau clarify the difference between a CPA license and CPA certificate, as referenced for a violation of section 12(a) of the CPA Law. The general term of art for authorization to practice a profession is a ''license.'' Section 4.2(a) of the CPA Law (63 P. S. § 9.4b(a)) refers to the Board issuing a ''certificate'' to a qualified individual who has passed the examination. Sections 5 and 5.1 of the CPA Law (63 P. S. §§ 9.5 and 9.5a) refer to the Board issuing ''certificates'' by domestic and foreign reciprocity, respectively. Section 12(a) of the CPA Law prohibits one from holding out as a CPA or with a similar title unless the person has received a ''certificate'' of CPA. Conversely, section 8.2 of the CPA Law refers to biennial ''licenses'' to engage in the practice of public accounting which are issued to holders of CPA certificates and to public accountants registered with the Board. Section 2 of the CPA Law (63 P. S. § 9.2) defines''licensee'' to include ''an individual certified by or registered with the board and holding a current license to practice under section 8.2 of this act.'' Thus, the statutory scheme would seem to indicate that an individual cannot obtain a renewable license authorizing the individual to practice public accounting without first possessing a CPA certificate or without first registering as a PA with the Board. Essentially, an individual can be credentialed as a CPA but not be licensed to engage in the practice of public accounting unless the individual has a current, active license issued by the Board. See § 11.9 (relating to use of the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as mark of achievement by individual without current license).

 To be consistent with the statutory language, the Commissioner proposed replacing ''never licensed'' with ''not possessing CPA certificate in good standing.'' Upon review of the comments about the difference between wholly unlicensed practice and practice with a lapsed license, the Board further realized that the proposed language might also suggest lapsed license practice. Accordingly, to more closely match the statutory language and make clear that it is directed towards unlicensed practice by individuals not holding credential issued by the Board, the Commissioner further revised the description for violation of section 12(a) of the CPA Law to refer to a person ''who has not received a CPA certificate or whose certificate is revoked or suspended.'' Similarly, because section 12(j) of the CPA Law prohibits one from holding out as a PA or similar title unless registered as a PA or received a CPA certificate, the Commissioner revised the description for violation of section 12(j) of the CPA Law to refer to a person ''who has not received a PA registration or CPA certificate.'' Because section 12(c) of the CPA Law prohibits similar holding out by a firm unless it ''holds a current license,'' the Commissioner did not revised the language referring to this violation as ''by a firm never licensed.''

Fiscal Impact and Paperwork Requirements

 The final-form rulemaking will not have adverse fiscal impact on the Commonwealth, its political subdivisions or the private sector. The final-form rulemaking will not impose additional paperwork requirements upon the Commonwealth, its political subdivisions or the private sector.

Effective Date

 The final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.

Statutory Authority

 This final-form rulemaking is authorized by section 5(a) of Act 48.

Regulatory Review

 Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 8, 2011, the Board submitted a copy of the notice of proposed rulemaking, published at 41 Pa.B. 4535, to IRRC and the Chairpersons of the HPLC and the SCP/PLC for review and comment.

 Under section 5(c) of the Regulatory Review Act, IRRC, the HPLC and the SCP/PLC were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the HPLC, the SCP/PLC and the public.

 Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on October 17, 2012, the final-form rulemaking was deemed approved by the HPLC and the SCP/PLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on October 18, 2012, and approved the final-form rulemaking.

Additional Information

 Persons who require additional information about the final-form rulemaking should submit inquiries to Regulatory Unit Counsel, Department of State, P. O. Box 2649, Harrisburg, PA 17105-2649, [phone], [e-mail].

Findings

 The Commissioner finds that:

 (1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) and regulations promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.

 (2) A public comment period was provided as required by law and the comments were considered.

 (3) This final-form rulemaking does not include amendments that would enlarge the scope of proposed rulemaking published at 41 Pa.B. 4535.

 (4) The final-form rulemaking adopted by this order is necessary and appropriate for the administration of the authorizing acts set forth in this preamble.

Order

 The Commissioner, acting under the authority of Act 48, orders that:

 (a) The regulations of the Commissioner, 49 Pa. Code Chapter 43b, are amended by amending § 43b.10a to read as set forth in Annex A.

 (b) The Bureau shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as required by law.

 (c) The Bureau shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.

 (d) The final-form rulemaking shall take effect upon publication in the Pennsylvania Bulletin.

KATIE TRUE, 
Commissioner

 (Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 42 Pa.B. 6969 (November 3, 2012).)

 (Editor's Note: See 42 Pa.B. 7267 (December 1, 2012) for a final-form rulemaking by the State Board of Accountancy relating to this final-form rulemaking.)

 Fiscal Note: Fiscal Note 16A-48 remains valid for the final adoption of the subject regulation.

Annex A

TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS

PART I. DEPARTMENT OF STATE

Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS

CHAPTER 43b. COMMISSIONER OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS

SCHEDULE OF CIVIL PENALTIES, GUIDELINES FOR IMPOSITION OF CIVIL PENALTIES AND PROCEDURES FOR APPEAL

§ 43b.10a. Schedule of civil penalties—accountants.

STATE BOARD OF ACCOUNTANCY

Violation under 63 P. S.	Title/Description	Civil Penalty
Section 9.8b(b)	Failure to complete 80 hours of acceptable continuing professional education during reporting period	1st offense—1 to 20 hour deficiency—$300; 21 to 40 hour deficiency—$600; 41 to 60 hour deficiency—$800; 61 to 80 hour deficiency—$1,0002 2nd or subsequent offense—formal action
Section 9.12(a)	Unlawful use of ''certified public accountant,'' ''CPA'' or similar representation by person who has not received a CPA certificate or whose certificate is revoked or suspended	1st offense—$1,0001 2nd or subsequent offense—formal action
Section 9.12(c)	Unlawful use of ''certified public accountant,'' ''public accountant,'' ''CPA,'' ''PA'' or similar representation by a firm never licensed	1st offense—$1,0001 2nd or subsequent offense—formal action
Section 9.12(j)	Unlawful use of ''public accountant,'' ''PA'' or similar representation by person who has not received a PA registration or CPA certificate	1st offense—$1,0001 2nd or subsequent offense—formal action
Section 9.12(o)	Unlawful representation of membership in professional society, association or organization of CPAs or PAs by person not credentialed as CPA or PA or firm not licensed	1st offense—$2501 2nd or subsequent offense—formal action
Section 9.12(q)	Engaging in the practice of public accounting in this Commonwealth when the individual's license is expired	1st offense—less than 6 months— $500; 6 months or more—formal action 2nd or subsequent offense—formal action

Violation under 49 Pa. Code Chapter 11
Section 11.62(b)	Failure to complete 20 hours of acceptable continuing professional education during each year of reporting period	1st offense—$300 2nd or subsequent offense—formal action
Section 11.63(a)(1)	Failure to complete 16 hours of acceptable continuing professional education in accounting and attest subjects during reporting period	1st offense—1-4 hour deficiency— $300; 4-8 hour deficiency—$400; 9-12 hour deficiency—$500; 13-16 hour deficiency—$6002 2nd or subsequent offense—formal action
Section 11.63(a)(6)	Failure to complete 8 hours of acceptable continuing professional education in tax subjects during reporting period	1st offense—$3002 2nd or subsequent offense—formal action
Section 11.63(a)(7)	Failure to complete 4 hours of acceptable continuing professional education in professional ethics during reporting period	1st offense—$3002 2nd or subsequent offense—formal action
Section 11.67(b)	Failure to timely submit documentation of continuing professional education during Board audit (assumes no other continuing education violation)	1st offense—$500 2nd or subsequent offense—formal action

¹ The first offense provision does not apply to a situation involving multiple occurrences or a pattern or practice of misconduct.

² When there are violations of both 63 P. S. § 9.8b(b) and 49 Pa. Code § 11.63(a)(1), (6) or (7) (relating to CPE subject areas; relevance to professional competence), a combined civil penalty will not be assessed for both sets of violations. The highest civil penalty will be assessed whether for the violation of 63 P. S. § 9.8b(b) or 49 Pa. Code § 11.63(a)(1), (6) or (7).

[Pa.B. Doc. No. 12-2313. Filed for public inspection November 30, 2012, 9:00 a.m.]