Committee advances bill to allow ESOP ownership of CPA firms

House Industry, Business and Labor Committee members voted to advance House Bill 1156, which would clarify that employee stock ownership plans (ESOPs) may be counted as owners of public accounting firms so long as the beneficial owners that control the ESOP meet the existing licensing-control rules for CPAs.

The bill’s sponsor, Representative Schauer, told the committee “House Bill 1156 would allow CPA firms to be owned by ESOPs,” and said the change is intended to preserve the public-protection purpose of the original law while updating it for modern ownership structures.

Supporters said the change simply lets regulators “look through” an ESOP to confirm that licensed CPAs retain a controlling financial interest. Toby Comer, owner of Hega Comer, a CPA firm headquartered in Fargo, testified the bill would let firms convert from partnership or C-corp structures to ESOP-owned S-corps and therefore provide employees with ownership incentives and tax advantages. Comer said his firm aims to transition to roughly 40% ESOP ownership within four years and potentially to 100% over the long term. He added that ESOPs “give buy-in to the entire organization” and can improve retention.

Mandy Harlow, executive director of the North Dakota Board of Accountancy, testified on behalf of the board and said the board would take a neutral position on HB 1156 because the bill, as drafted, appears to address prior concerns and would require the board to change its administrative rules to implement ESOP ownership.

Committee discussion described the bill as aligning the state’s permit-to-practice rule—under which a majority financial interest must belong to licensed CPAs—with modern qualified retirement plans. Representative Koppelman moved that the committee give HB 1156 a “do pass” recommendation; Representative Greenberg seconded the motion. A roll call recorded the motion’s passage; the clerk recorded the following members as voting yes: Chairman Maury; Vice Chair Ausely; Vice Chair Johnson; Representatives Bail, Greenberg, Casper, Koppelman, Ruby, Schatz, Schauer, Volmer and others recorded on the roll. The committee then stood at ease to continue the agenda.

Supporters included the North Dakota Board of Accountancy (neutral overall) and the North Dakota Society of CPAs; the attorney general’s office reviewed the draft, the sponsor said. The bill text specifies looking through an ESOP to determine beneficial ownership and retains the longstanding requirement that a simple majority of owners by financial interest and voting rights be licensed CPAs.

The committee advanced the bill to the next stage; no floor-level enactment occurred during the hearing. Committee members asked staff to confirm technical details about S-corp conversions and the bill’s interaction with current board rules.

Representative Schauer and witnesses emphasized the bill’s workforce and retention rationale; Comer and others framed ESOP conversion as providing tax and retirement benefits for employees and as a tool to retain accounting talent in the state.

The committee recorded no amendments during the hearing and asked staff to confirm rule text changes required for the Board of Accountancy if the bill advances further.

The Committee then moved to other items on its agenda.