The other day I ran an exercise in my risk management class where I asked students to fill in the blank for “______ risk” and describe for me what could be meant by the resulting phrase in terms of who would care, events of concern, and outcomes of concern.  In light of recent frustrating events, I feel compelled to offer yet another example as follows:

California EIT License Risk

(Note that EIT = Engineer in Training).

Backstory

In October 2000, I, like many other 4th-year engineering undergraduate students and professionals throughout the nation, had the painful experience of taking the EIT exam.  Since I was a engineering student at the University of Southern California, I naturally took my exam in California.  Consequently, my success led to my EIT “license” (if you could call it a license) being granted by the California Board for Professional Engineers.

Soon thereafter I graduated and left California to pursue a variety of career options in the Washington, DC area with absolutely no intentions to return to California for work.  Accordingly, from May 2001 onward, I was no longer a California resident.  In fact, since that time I spent no more than one calendar month (cumulative) in California visiting family, vacationing, etc.  With several years engineering experience + a masters degree, I successfully earned my professional engineer license in the State of Maryland, which effectively trumps the EIT (you see, EIT is a necessary stepping stone toward a PE in the engineering world, but once you earn your PE the EIT becomes irrelevant).

Now spring forward to 2005/2006 (I forget the exact month and date).  One day I received a strange letter from the State of California Franchise Tax Board demanding that I file a CA-state income tax return.  Basically, since I held an “active license” with the State of California, the State felt that I must be earning money as either a CA resident or as a person doing business in CA under a CA-license.  Well, I can see this being a plausible inference for most licenses, but for the EIT?  Technically, the EIT entitles you to nothing save for the “right” to make progress toward a PE.  And it has no expiration date and no means of termination except in cases of ethical or criminal misconduct; this means that once you are an EIT, you are effectively always an EIT regardless of where you live.  Moreover, since the EIT is given based on results from a nationally-accredited examination, States recognize EITs granted in other states; this fact leaves little incentive to transfer an EIT between states, if even one could do such a thing.  Fortunately, after a short, but hard-fought battle with a live CA tax representative, I convinced them that they were in error and asked them to ensure that I don’t receive such a letter again.  For two years this worked.

Now in 2008 (about a week ago), I received yet another letter from CA demanding I file a tax return with the state.  (apparently, CA’s aggresive pursuit of tax $$ has led them to develop a filing enforcement program).  Again, CA stated that since I hold an “active license” with the Board for Professional Engineers in the State of California, I must be earning money there, and thus am required to file a tax return.  This time, they hedged a little bit and offered a way out for people who were issued the demand in error.  But this wiggle room came at a cost: unlike my previous experience, finding a live person to talk to was hard to do, so hard in fact that I failed to find an approriate mechanism to speak with a CA tax person on this issue.  The only means available for me to correct this error was to fill out a form they provided, state under penalty of perjury my 2006 family taxable income, and pay for the stamp to return the form to CA.  And if I don’t return the form by mid-Sep, then bad things could happen, such as CA sending me a bill for unpaid taxes on money they estimate I should have earned + interest for two years.  Or worse, I could enter in a very costly multi-year legal battle with CA over an issue in which they never really had jurisdiction.

Me being the risk averse person that I am with such matters, fronted the $0.42 to mail back the form, but I decided to not include my taxable income.  After all, I did nothing wrong, so technically I am not required to tell CA anything at all.  Who gave them the right to ask and then demand that I answer less they fine me, or worse, threaten legal action?  Can they arbitrarily claim jurisdiction over me despite me not having resided in the state for over 7 years?  In the grand scheme of things, I provided sufficient other information on the form to make it clear that I owe nothing, and figured that $0.42 is a very small price to pay to avoid having to engage in a never-ending battle with the California bureaucracy.  But man was I furious.

California EIT Risk

So back to my original purpose.  It seems that for whatever reason, CA recognizes CA-EIT holders as holders of a professional license (although again, though it is important, it isn’t really a license).  That said:

Who Cares? Holders of a CA EIT that moved, or are planning to move, away from CA on a long term basis, and without any intention to do work for a CA-based business.

Events of Concern? California not paying attention to this fact, and thus sending you threatening “Demand for Tax Return Letters” at your new non-CA home (wherever that is).  Note: Since $$ is at stake, California will find you.

Outcomes of Concern? Having to bow down to CA-state pressure to prove your innocence less having to face the wrath of the CA bureaucracy.  Of course, I have no evidence for what CA would really do if one doesn’t respond, but who really wants to find that out.

Admittedly, I am taking a narrow view on this, and one could consider a slew of other events and outcomes of concern.  One, for example, might be that CA misplaces or deletes any record of you having earned an EIT, thus making it more difficult when the time comes to apply for your PE.  But I figured I would keep it simple by focusing on the lesser known events/outcomes that should be on the minds on the thousands of EIT engineers originally “licensed” in CA.

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