Which Path Forward?

By Mike Nelson

How many hours of education should CPA candidates complete? For the last few years, there has been a fierce debate about whether 150 hours or 120 hours of education should be required for licensure. After a year of much debate and many changes, several options are emerging to change licensing laws across the states.

During the May 2023 AICPA Council meeting, the National Pipeline Advisory Group (NPAG) was formed, with representatives from the AICPA, the National Association of State Boards of Accountancy (NASBA), state societies, firms, industry, and academia serving on the group. The group met throughout 2023 and 2024 to produce a report on a multi-faceted approach to addressing the overall pipeline. As part of that report for licensure, NPAG has recommended moving away from a set number of hours and toward an end goal of having competencies embedded in the process. This would allow any candidate, regardless of their educational background, to have the opportunity to pass the exam and demonstrate the various competencies needed to be a CPA.

In October 2023, NASBA, at the direction of their chair, formed their own group to look at licensure and mobility issues. As a result of the efforts of the NASBA group and NPAG, work is now underway to update the Uniform Accountancy Act (UAA) with new language around mobility and licensure. The UAA serves as the model language that states individually adopt into state laws and regulations. By updating the UAA, the hope is that states move together in a general direction of implementing new requirements that preserve mobility and licensure as much as possible in the coming years as new pathways are adopted in various states.

Licensing Pathways

Minnesota in many ways started the discussion around adding additional licensing pathways when they introduced legislation in 2023 which would have allowed candidates a pathway to licensure if they had earned 120 hours and completed two years of experience or 150 hours and one year of experience. While their legislation has not passed yet, several other states and state boards of accountancies had expressed an interest in changing licensing laws following this proposal.

So far this year, one of the largest changes has come out of the California Board of Accountancy. Like other states, California has been watching the conversation around licensure pathways and has put together their own set of proposals. The general framework that they are looking to implement for licensure is completion of a baccalaureate degree in accounting or related field and two years of experience or completion of a master’s degree in a relevant field and one year of experience. California is awaiting final approval to introduce legislation and begin rulemaking.

The AICPA and NASBA groups are suggesting a slightly different model. Their general proposal for a near term change to licensing is a baccalaureate degree with one year of “enhanced” experience and one year of general experience or a master’s degree and one year of general experience. The enhanced experience, as they have conceptualized it, would be designed to validate a candidate’s competencies in various areas needed to become a CPA. There has been some pushback on how the enhanced experience would work and that is still being refined through a public comment period and additional meetings into December. During a NASBA conference call in August, it was noted that states like Washington, Oregon, Nevada, and others who already have the verification of competencies required within experience, would already qualify as the enhanced experience and not need to adopt a completely new “enhanced” proposal as part of an update to experience. This is important because, while California is expected to move forward with their plans in the coming year, Oregon is also planning to run legislation that would closely mirror the outline California has so far proposed.

Substantial Equivalency vs Automatic Mobility 

While the various licensing pathways play out in the coming year, an equally important change being developed is related to mobility. Mobility is important to many CPAs and CPA firms as it allows them to work across state lines. Under the current language in most states, mobility will be lost if a state adopts an alternative pathway to licensure as described above. As a result, two new forms of mobility are being widely discussed.

NASBA and the AICPA have been working on updating the existing language of mobility to allow any state that meets the minimum standards for licensure, and particularly the enhanced experience, would remain substantially equivalent to other states and maintain mobility.

The other option, which is a part of California’s proposal and is being discussed in many other states, is automatic mobility. This language already exists in North Carolina, Nebraska, Alabama, and Nevada statutes. It says that any CPA who has passed the CPA exam and been licensed in a state also is eligible to practice in those states. This would allow the most stability for those CPAs and firms that use mobility as it removes specific requirements around education or experience and instead relies on state boards of accountancy to work together and trust each other to have oversight of licensees in their states.

In the next year or two most states will adopt changes to their licensure and mobility laws. What the final laws will look like remains to be seen but the movement to change away from the current 150-hour education requirement and toward pathways for baccalaureate graduates and competency-verified experience is certain.

Stay up to date on the latest changes by reading the Present Value newsletter and when public comments are open, let national or state leaders know what direction you would like to see.

image: © iStock/EyeEm Mobile GmbH