BILL ANALYSIS H.B. 505 By: Brimer (Harris) Economic Development 05-25-95 Senate Committee Report (Unamended) BACKGROUND Certified public accountants (CPAs) licensed by the State of Texas perform tax, attest, consulting, and other public accountancy services for clients and issue reports on such services. Under current Texas law, a client is entitled to seek recovery from a CPA for economic loss due to reliance on the CPA's services and reports. This allows third parties to seek damages against a CPA for services rendered even though there is no contractual relationship. Therefore, a CPA becomes potentially liable to any person who receives the work. Other states have passed laws limiting those eligible to seek damages against a CPA for services to contracted clients and third parties that the CPA was aware of at the time the service was performed. PURPOSE As proposed, H.B. 505 provides public accountants with limited liability for their services. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title 4, Civil Practice and Remedies Code, by adding Chapter 91, as follows: CHAPTER 91. PUBLIC ACCOUNTANTS Sec. 91.001. DEFINITIONS. Defines "accountant," "claimant," and "client." Sec. 91.002. LIABILITY LIMITED. Provides that an accountant is not liable to a claimant for negligence with respect to an act or omission in connection with the provision of public accountancy services, except as provided in Section 91.003. Sec. 91.003. EXCEPTIONS. (1) Provides that Section 91.002 does not apply where the claimant is the client. (2) Provides that Section 91.002 does not apply where the accountant was aware at the time the services of the accountant were engaged, or agreed with the client after the time of the engagement, that the claimant intended to rely on a specific financial statement or other information in connection with a specified transaction and communicated that awareness or agreement by words or conduct. (3) Provides that Section 91.002 does not apply to acts or omissions by an accountant involving fraud. Sec. 91.004. WAIVER. Authorizes an accountant to waive in writing the provisions of this chapter. SECTION 2. Effective date: September 1, 1995. Makes application of this Act prospective. SECTION 3. Emergency clause.