CPA Reciprocity is complicated in a way that each state has different rules, and the rules keep changing. Before we get into the details, let’s take a look at the history and the recent development to streamline the CPA reciprocity rules:
CPA Reciprocity: Why the Need
As you may aware, the CPA license is granted by individual State Board of Accountancy in the US. Because of this legacy issue, CPAs often encounter difficulties when it comes to cross-border practice, i.e. providing public accounting service to their clients across jurisdictions.
In order to cater the out-of-state CPAs and accounting firms, each state had its own rules, regulations and requirements to allow these professionals to provide services in that state. This created a patchwork system that was inefficient and difficult to understand.
CPA Reciprocity: The Solution
To streamline the process and reduce additional licensing fees, the AICPA and NASBA have been promoting a “uniform CPA exam requirements”: All states are deemed equal and thus the license granted are considered the same throughout the United States.
Specially, the AICPA and NASBA have worked together a “Uniform Accountancy Act” with the following guidance on the CPA exam requirements for each state (known as the “3E”s):
- Fulfill the 150 credit hours of “Education”
- Pass the Uniform CPA “Exam”
- Accumulate at least one year of “Experience”
Most of the states have adopted this rule since 2007.
CPA Reciprocity: Current Status
Only Virgin Islands are NOT considered substantially equivalent.
The following are substantially Equivalent States but an alternative path still exists that allow candidates to get a CPA license without fulfilling the 3 Es above. In other words, these are “borderline” states that are recognized by some but not others in terms of reciprocity:
- California — until January 1, 2014
- Colorado — 2015
- New Hampshire — until July 1, 2014
Case Study: CPA Reciprocity in Illinois
For example, Illinois has adopted the Uniform Accountancy Act. It is obvious that it does not recognize Colorado, Puerto Rico and Virgin Islands, but it doesn’t allow reciprocity to states such as Delaware, New Hampshire and Vermont. California is considered “borderline” and may be approved under certain circumstances.
Implications To CPA Exam Candidates
Please note that if you are picking a state to sit for the exam, please pay attention to the states that have yet to fully comply with the substantial equivalency test. The good news is, these states will eventually be fully recognized once they scrap away the alternative pathways.
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