Ownership of Firms Pursuant to Neb. Rev. Stat. §1-162.01

STATE OF NEBRASKA ®ffirt nf fqt ~fnrntJJ ~tntral DON STENBERG ATTORNEY GENERAL DATE: 2115 STATE CAPITOL BUILDING LINCOLN, NE 68509-8920 (402) 471-2682 TOO (402) 471-2682 CAPITOL FAX (402) 471-3297 1235 K ST. FAX (402) 471-4725 . STATE OF NE!RASKA OFFICIAL JUL 28 2(0) • 6EfiT. OF JUSTICE July 26, 2000 STEVE GRASZ LAURIE SMITH CAMP DEPUTY ATTORNEYS GENERAL SUBJECT: Ownership of Firms Pursuant to Neb. Rev. Stat. §1-162.01 REQUESTED BY: Annette L. Harmon, Executive Director Board of Public Accountancy WRITTEN BY: Don Stenberg, Attorney General Lynn A. Melson, Assistant Attorney General The Board of Public Accountancy ("the Board") has requested our opm1on concerning the interpretation of Neb. Rev. Stat. §1-162.01 with regard to which persons may be owners of firms engaged in the practice of public accountancy in this state. Specifically, the Board has asked whether a nonnatural person such as a professional corporation may be an owner of such a firm. · Neb. Rev. Stat. §1-162.01 (Supp. 1999) begins as follows: "[N]otwithstanding the Nebraska Professional Corporation Act or the Public Accountancy Act or any other provision of law inconsistent with this section, firms may have persons as owners who are not certified public accountants or public accountants if the following conditions are met " Seven conditions are then listed. Jennifer M. Amen David K. Arterburn William R. Barger L. Jay Bartel J. Kirl< Brown Marie C. Clarl<e Dale A. Comer David D. Cookson Kyle C. Dahl Suzanne Glover-Eitticll Scott G. Gunem Susan J. Gustafson Robert E. Harllins Royce N. Harper Jason W. Hayes Amber F. Henick William L. Hov.1and Marilyn B. Hutchinson Therese N. James Kimberly A. Klein Charlotte R. Koranda Charles E. Lowe Lisa D. Martin-Price Lynn A. Melson Donald J. B. Miller Printed ~ soy Ink on recycled paper Ronald D. Moravec Fredrick F. Neid Thomas J. Olsen Peny A. Pirscll Marl< D. Raffely Hobert B. Rupe James D. Sm~h James H. Spears Marl< D. Starr Martin Swanson John R. Thompson BanyWaid Terri M. Weeks Melanie J. Whittamore-Mantzios Linda L. W illard Annette L. Harmon July 26, 2000 Page 2 One of the statutory requirements for non-CPA ownership of a fitm is that such persons (the non-CPA owners) must actively participate in the business of the firm. Neb. Rev. Stat. §1-162.01 (7). This statutory provision ends with a direction to the Board to promulgate regulations for purposes of interpretation and enforcement of the provision. At 288 NAC 11-001.01 the Board has defined the term "actively participate" to mean the providing of personal services and has stated that "[N]onnatural persons and individuals whose primary source of income from the business entity is provided as a result of passive investment will not be considered as actively participating in the business entity." (Emphasis added.) · "Generally, rules and regulations of an administrative agency governing proceedings before it, duly adopted and within the authority of the agency, are as binding--as if they were statutes enacted by the legislature." Douglas County Welfare Administration v. Parks, 204 Neb. 570, 572, 284 N.W.2d 10, 11 (1979). Accord, Nucor Steel v. Leuenberger, 233 Neb. 863, 866, 448 N.W.2d 909, 911 (1989) ("Agency regulations, properly adopted and filed with the Secretary of State, have the effect of statutory law."). As only natural persons are considered to actively participate in a firm according to the Board's own regulation, a professional corporation or other non-natural person could not qualify as the non-CPA owner of a firm under §1-162.01. If the Board no longer believes its exclusion of non-natural persons is appropriate pursuant to the statute directing that non-CPA owners must actively participate in the business of the firm, then the Board could seek to amend its regulations. Atfurney General - / / / / / Sincerely, DON STENBERG Attorney General ~IJ·MN-- ~nn A. Melson Assistant Attorney General 09·58.2·11 I