Committee backs bill to allow ESOP ownership of CPA firms

The Senate Workforce Development Committee voted to give House Bill 1156 a do-pass recommendation after hearing testimony that the measure would clarify state law to allow employee stock ownership plans (ESOPs) to own certified public accounting firms while retaining CPA control safeguards.

Supporters told the committee the change would create financial incentives to retain and recruit staff at accounting firms and make explicit language that some states already use.

Representative Austin Shower, district 13 of West Fargo, told the committee, "House bill 11 56 would allow CPA firms to be owned by ESOS." He told members the original North Dakota law required public accounting firms be owned and controlled by individuals licensed as CPAs and that ESOPs were uncommon when the statute was written.

Toby Kommer, chief executive officer and owner of Heggie Comer (spelled in testimony) CPA firm, described why his firm supports the change. "We just thought the best path forward was to make it crystal clear within the law," Kommer said, adding that there are "about 6,500 ESOP companies across The US today." Kommer said his firm has roughly 200 employees across multiple states and plans to move toward ESOP ownership, noting typical ESOP eligibility and vesting structures: "Most of the ones that I've seen ... it's a period of time, like, a year before you're eligible ... and then it's usually anywhere from a 5 to 6 year vesting period."

Mandy Harlow, executive director of the North Dakota Board of Accountancy, testified neutrally. "The board determined it would take a neutral position on house bill 11 56," she said, adding that the board believes current law does not allow ESOP ownership and that adoption of the bill would require changes to the board's administrative rules.

The bill's text, supporters said, specifically modifies the Professional Organizations Act (chapter 40-03-02) to include an employee stock ownership plan in the definition of a "qualified plan" and to permit a firm wholly owned by a qualified plan to obtain a permit to practice if the majority of beneficiaries are licensed CPAs. Representative Shower pointed members to the bill's drafting: "The specific changes in HB 11 56 are found in section 2 subsection 3 line 24 and line 1 page 2 ... In section 3 on page 2 under permit to practice, firm wholly owned by qualified plan lines 6 through 19 outline the criteria..."

After testimony and brief questions, a committee member moved a do-pass recommendation. The clerk opened the roll call and the committee recorded unanimous affirmative votes (Senators Wabamaw, Axman, Larson, Bosche and Powers). The committee's do-pass recommendation sends the bill to the full Senate for further consideration.

The committee record shows the Board of Accountancy reviewed the draft and that, as written, administrative-rule changes would be necessary if the statute is amended. Supporters framed the measure as preserving the spirit of the existing ownership requirement while clarifying how that standard applies when ownership is held through an ESOP.

Votes at a glance: House Bill 1156 — committee action: do pass recommendation. Vote: 5–0 (Wabamaw, Axman, Larson, Bosche, Powers — yes).