CPA licensure and mobility: A deeper, updated look
May 15, 2024 | Linda Wedul, CAE
With a growing number of states, including Minnesota, Hawaii, Arkansas, Oregon and California, now discussing or actively pursuing changes to
broaden the pathways to CPA licensure, an important question centers around the impact to substantial equivalency and mobility?
Like all good CPA and lawyerly responses, it depends.
The following points are not a legal response, and there are varying interpretations across the profession about the potential impact if an individual state moves forward to broaden the pathways to licensure. Changes will require navigating the current regulatory structure that allows CPA mobility to practice across state lines. When we talk about
substantial equivalency and mobility, we are focused on licensed CPAs practicing in a state that did not issue their CPA certificate and where the CPA is a nonresident.
First, substantial equivalency (SE) and mobility must be understood.
Substantial equivalency is based on the three E’s — education, experience, exam.
- Education: 150 college education credits. We see several variations among states for this requirement. An accounting degree is required in some states, others allow a focus in accounting. Most states require 24 accounting credits; however, Alaska allows candidates to have fewer than 15 accounting credits with one year of experience.
- Experience: One year of accounting work experience. Some states require two years of experience. California requires the experience to include 500 hours of attestation work.
- Exam: Passing the CPA exam. This is the one requirement that is consistent for all licensees. Everyone takes the same exam.
Additionally, there are other differences in state educational requirements.
- Ohio allows a CPA certificate to be earned with a two-year degree (60 college credits) and four years of experience or a four-year degree with two years of experience. In both cases, a GMAT (Graduate Management Admission Test) score of at least 670 is also required.
- New York allows licensure with 15 years of experience and no college degree.
- South Carolina allows military personnel to use executive education as a substitute for college credit.
The paths to substantial equivalency
When a state-issued certificate is considered substantially equivalent, it has mobility, allowing a CPA to practice across state lines without applying and paying for a reciprocal certificate from a nonresident state.
There are three ways that SE is determined.
- A state statute that says CPA certificates issued by another state are recognized, regardless of the specific requirements.
- Second, some states defer the SE determination to NASBA. Currently, NASBA has determined 54 of 55 jurisdictions are considered substantially equivalent.
- Other states allow either their BOA or NASBA to determine substantial equivalency. In this case, a state can recognize nonresident CPAs even if NASBA has declared a state not substantially equivalent.
Managing mobility
Now, let’s look at mobility. Many don’t know that mobility also varies among states and territories.
There are six states that commonly recognize CPA certificates regardless of the issuing state as long as the certificate is in good standing. Those include Nebraska, Nevada, Alabama and North Carolina; Ohio implemented new legislation in December 2023, while the Washington governor signed a similar law in January 2024.
Two other states have proposed new rules or statues that are in process for adoption. New Hampshire’s Board of Accountancy introduced a rule change that would recognize CPA certificates in good standing and earned with a bachelor’s degree. Credits are not specified. South Carolina introduced legislation to recognize CPA licenses issued by other states.
Mobility can be managed as the profession works through broadening the pathways to licensure.
As an example, assume that Minnesota allows certification with a bachelors’ degree earned with 120 college credits plus two years of experience. NASBA initially said it would declare all Minnesota CPAs not substantially equivalent, therefore making them unable to use mobility to practice across state lines.
Looking at different states, we find different approaches to mobility.
- Washington, Ohio, Alabama, North Carolina, Nevada and Nebraska have common recognition of CPA certification. A Minnesota CPA would have mobility in those states.
- If a CPA applies for a reciprocal certificate from one of the states listed in the prior bullet, and then practices under that certificate, they would be substantially equivalent, under NASBA’s current SE determination. It would mean holding two active CPA certificates, but it does eliminate the need to have a certificate in every state where someone is practicing.
- A CPA can apply to NASBA for individual substantial equivalency. When NASBA determines state SE, it applies to all CPAs in that state even if the credential holder earned the certificate with requirements meeting substantial equivalency. To correct this error, NASBA allows CPAs to apply for individual SE that is separate from the state issuing the certificate. NASBA charges a fee for determining individual SE.
These solutions are useful for navigating in the short term. For a long-term solution that allows flexibility to licensure requirements and future proofs mobility, changes will need to be made to both state statutes and rules. Two potential options:
- States that do not currently have common recognition pass legislation or rules to recognize CPA certificates of nonresidents. We currently have variances among the states relating to education and experience, and licensure is working. The only uniform requirement is the CPA exam. Under mobility, nonresidents are still subject to BOA investigations and fines when found in violation of regulatory standards. Because common recognition already exists in some states, we know this can work.
- Change the Uniform Accountancy Act (UAA) to broaden the pathways. This also requires each state to adopt the language. Currently, no state has adopted the UAA in its entirety, so we can expect to see variances among the states.
Interpretations vary and gray areas exist in the land of rules and regulations. Currently, Ohio and New York are considered SE even though CPAs have earned their certification without 150 college credits. With the many variations that currently exist among the state rules governing CPAs, we have substantial equivalency — not equivalency — and it works.
We must adapt
More than 30 years ago, the profession could not have anticipated the environmental issues driving changes to the current licensing model, specifically the 150-credit rule.
We have new challenges: a declining population, requirements perceived as barriers by minorities, increasing college tuition costs, and competition from other careers that require less investment in terms of time and money with similar salaries. Allowing an additional year of experience as a substitute for 30 college credits is a practical and simple solution to broaden the pathways to CPA licensure. Mobility is a problem to be solved, not a roadblock to change.
Topics: Legislative & Government Affairs, Regulation, Staffing, Professional Certification, Government, Education, MNCPA Programs & Activities
Linda Wedul, CAE
Linda Wedul is president and CEO of the MNCPA. She’s usually spotted at MNCPA events, introducing herself to members with a warm smile and memorable laugh. Mixed among the Footnotes, accounting journals, leadership books and three monitors in her office, you’d be surprised to see a dog kennel. Her unpaid job is volunteering as a foster family for service dogs in training through Can-Do-Canines. She and her husband have two adult children and live in Farmington. Linda can be reached at 952-885-5516 or lwedul@mncpa.org.
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