The Link Between CPA Mobility and the 150-Hour Requirement

In 1983, Florida became the first state to enact the 150-hour requirement. It took another 33 years, until 2016, to achieve full CPA mobility in all 55 states and territories.

DAN DUSTIN

Vice President, State Board Relation, NASBA

MARTA ZANIEWSKI

Vice President, State Regulatory and Legislative Affairs, AICPA

How has the 150-hour education requirement changed the CPA profession?

The requirement was part of an effort to evolve accounting from a trade to a profession. It also was a key factor in the passage of uniform mobility legislation, which generally permits a licensed CPA in good standing from a substantially equivalent state to practice outside of their principal place of business – in person or virtually – without obtaining multiple licenses in other states or jurisdictions.

If CPAs are going to practice across state lines, there has to be some agreement on the rules for entry into the profession, and it took many years to forge that agreement.

For example, in the 1950s, only three jurisdictions required a college degree to become a CPA, and it wasn’t until 1983 that Florida became the first state to enact the 150hour education requirement. By the end of the 1990s, 18 jurisdictions had passed the requirement. That number jumped to 48 when the first decade of the 2000s came to a close. By 2016, it was 55. (See map above.)

When it was finally achieved, CPA mobility was a revolutionary change for practitioners and the wider range of clients they are now able to serve.

Prior to securing national CPA mobility, there were hurdles to cross-border practice that drove inefficiencies and raised questions regarding practice rights.

Three Foundational Elements

To understand the 150-hour requirement’s vital role, it’s important first to look more closely at some of the key concepts involved.

Substantial equivalency is a concept developed to allow licensed CPAs to practice across jurisdictions and to set a minimum level of competency to enter the profession. It was introduced in 1997 in the third edition of the Uniform Accountancy Act (UAA). Jurisdictions are considered substantially equivalent when they have licensing requirements that are essentially equivalent to those outlined in the UAA (150 hours of education, a minimum one year of experience, and successful completion of the Uniform CPA Examination).

Individual mobility legislation allows CPAs in good standing, who are licensed in jurisdictions with substantially equivalent laws and regulations, to practice outside their jurisdictions without obtaining a license with each new board of accountancy. Just as drivers can travel from state to state without showing a license or getting one in each state, CPAs who meet mobility requirements can do the same. They can perform services in person or via telephone, mail or electronic means. They are subject to the jurisdiction and disciplinary authority of the boards of accountancy in the states in which they practice and to local laws and rules. They must also cease practice in other states if their license is no longer valid in their home state.

In addition, CPA firm mobility lets CPA firms in many states provide all services, including attest, across state lines as long as they meet certain requirements.

With its focus on substantial equivalency, mobility is thus built on the three foundational elements of the profession’s licensing model: Passage of the Uniform CPA Examination, along with minimum levels of education and experience. States’ concurrence on one, consistent level of required education – 150 semester hours of undergraduate and/or graduate-level studies – is one critical element in establishing substantial equivalency and maintaining CPA mobility.

SUSTAINING CPAS’ REPUTATION AND RELEVANCE

Let’s look more specifically at some trends that make this level of education so critical, not only as an element of CPA mobility but also in maintaining the profession’s reputation and relevance.

Technology has made it possible for CPAs to build thriving practices that stretch across the country. Even those who serve only local clients may live within large metropolitan areas that encompass more than one state. Without CPA mobility, these practitioners would need to address the administrative requirements for maintaining a license in numerous jurisdictions with varying rules, including the completion of continuing education requirements in ethics and other areas in some or all those states.

Mobility, and the 150-hour requirement that makes it possible, solved that problem. If a state or jurisdiction were to lower its licensure requirements, its CPAs would no longer have credentials that are substantially equivalent to other states and jurisdictions, so these professionals would lose existing mobility and reciprocal practice privileges.

A robust education requirement also reflects where the profession is today and where it is headed. Many manual tasks once performed by entry-level accountants are now handled by technology. Client needs are also shifting, and demand is growing for deeper business acumen from practitioners to address complex challenges.

A Strong Foundation

The 150-hour requirement equips entry-level CPAs for the demands of their new careers and the emerging challenges they will face. Since the 150-hour education requirement was mandated in most states and jurisdictions around the year 2000, the breadth of knowledge that CPAs require has grown exponentially and continues to grow. At the most basic level, the volume and complexity of standards and regulations are much greater as well.

But those who worked hard to pass the 150-hour requirement, including the Florida Institute of Certified Public Accountants, were also advocating for accounting graduates to have a wider range of knowledge, stronger communication and intellectual skills, and enhanced management and leadership abilities. They believed, in addition to passing the rigorous CPA Exam, accounting professionals also needed a solid educational background that enhanced their business and analytical skills. Additional formal education enables new professionals to learn more of the skills required before entering professional practice, giving them a comprehensive foundation at the onset. In a recent poll, the AICPA asked accounting firms what skills and competencies beyond core accounting courses are most valuable for first-year hires to obtain. Soft skills and data analysis topped the list.

More advanced education requirements also establish that CPAs belong to a profession rather than a trade, a crucial factor to continue to attract the best and brightest talent.

Pipeline Concerns

It is true that after many years of strong enrollment in undergraduate and graduate accounting programs, the current rate of students entering the pipeline has slowed. This is due to a variety of factors, including declines in birthrates and in overall college enrollment. The CPA profession is not the only one affected by these trends. Other professions – including engineers, architects and attorneys – are facing similar pipeline challenges, and they are not changing their educational requirements. In fact, the CPA profession’s mobility model is the gold standard for many other professions. The accounting profession mobility model has been noted by Federal Trade Commission staff as a model done right. It has also served as a defense against anti-licensure think tanks that threaten professional licensure.

On April 21, 2023, The National Association of State Boards of Accountancy (NASBA) Board of Directors voted to adopt an amendment to UAA Model Rule 5-7. The amendment increases the length of conditional credit from 18 months to 30 months, bases the calculation of conditional credit for Exam sections passed on the date that scores are released, and adds descriptive language to provide greater clarity for when boards of accountancy may extend conditional credit. Each board of accountancy may consider the amendment to the Model Rule 5-7 and, if they so choose, commence a process to change the rules at the state level. Current Exam candidates remain under existing rules until, if and when, the board to which they applied makes changes.

Additionally, NASBA’s Computer-Based Testing Administration Committee Pipeline Task Force is exploring the concept of reinstating CPA Exam credits that have expired, especially for students who saw their studies disrupted by COVID-19. Any proposal would need to be reviewed and considered for adoption by each U.S. Board of Accountancy. Such a program could allow for the reinstatement of credit for more than 15,000 CPA candidates.

The AICPA is working with key stakeholders including state societies, state boards, NASBA, firms and educators to implement and expand its Pipeline Acceleration Plan, a series of short, medium and long-term efforts to address the root causes of pipeline issues. (Editor’s note: Read more on Page 16).

Looking Ahead

The 150-hour requirement has clearly enhanced opportunities to serve clients wherever they may be located. Going forward, supporting the education requirement is one vital component to maintaining the many advantages of mobility and preparing professionals for a complicated business environment.