CPA Exam Two-Tier States: Which are the Remaining States?

CPA Exam Two-Tier States: Which are the Remaining States?

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CPA exam two tier states

Looking for the remaining two-tier states? I hope the following will shed some light on these states and the important points you should be aware of.

As of July 2015, with Montana changing its rules, there is no more CPA certificate available for international candidates. Please expect to fulfill the experience requirements and get a full CPA license.

Two-Tier States: The History

In the old days, it was prevalent for the state boards to establish a two-tier system for Certified Public Accountants.

The CPA candidates are given a certificate to recognize the completion of the first step in the CPA process, i.e., passing the CPA Exam and/or the ethics exam. Candidates could upgrade this certificate to the full license after completing the working experience.

For those who are going to work in the public accounting industry, it is standard procedure to go from step 1 to step 2 after a few years. However, for those who don’t or never plan to work in the CPA firms, they may choose to remain as a CPA certificate holder.

Back then, many state boards fully recognized these CPA certificate holders as CPAs who might be working in the private sector, government, or academia as experienced accountants.

Two-Tier States: The Significance

For those who obtain the CPA title strictly for credentials, the CPA certificate is great because working experience is normally not required. In other words, if you are willing to study hard to fulfill the educational requirements and pass the CPA Exam, you can become a CPA even if you don’t work in the accounting field.

For people working in a related field such as finance, law, or even information technology, this is truly an attractive option.

The lack of working experience requirement is also appreciated by international candidates because they may have difficulty getting their experience verified by an active CPA licensee regardless of how qualified he/she is in practical terms.

For example, a seasoned financial controller working in India with 20+ years of experience may still not be qualified for the license if he/she cannot find a U.S. CPA to verify their working experience.

Two-Tier States: Trend Towards One-Tier System and the Reason

In the late 90s to early 2000s, some state boards came to the conclusion that the public might be misled in thinking that CPA certificate holders are equally good at auditing and attestation. Since both license and certificate holders could hold themselves out as CPAs, there was no way for the public to differentiate the two.

Therefore, certain state boards enacted rules to disallow CPA certificate holders from presenting themselves out as CPAs, while others stripped away the two-tier system altogether to avoid the confusion.

Examples:

  • Washington and South Dakota stopped issuing CPA certificates in 2002.
  • Delaware switched to a one-tier state in 2006.
  • Illinois did the same on July 1, 2012.
  • Montana did away with the certificate on July 1, 2015.

What Are the Remaining Two-Tier States?

Alabama: Only allows U.S. citizens to sit for the CPA Exam.

ConnecticutHas no residency requirement but does require a SSN.

Kansas: Grants certificate to state residents only.

Nebraska: Grants certificate to state residents only.

Oklahoma: Has 2 levels: PA (public accountant) and CPA (certified public accountant). PAs cannot present themselves as CPAs.

Washington DC and Hawaii are also considered 2-tier states on NASBA’s site but I can’t find related information on their respective state boards, or that the state board website has indicated a change in rules. If you have any questions, please contact either NASBA or state boards for details.

These States May Have Just What You Need

While these states don’t have the same two-tier system, they have a more flexible licensing structure or experience requirement that might provide the solution for you.

Inactive License

Guam has an inactive license that you can get without an SSN and working experience. Please note that, as an inactive license holder, you need to pay the annual license fee, but you cannot present yourself as CPA in Guam and also cannot present yourself as a Guam CPA. You may refer to this page for details.

Non-Reporting License

Massachusetts has a non-reporting license. These license holders are not required to fulfill the working experience, but they have limited privilege in public accounting work.

Working Experience that Does Not Need to be Supervised By a U.S. CPA

Illinois and Virginia allow your experience to be verified by supervisors who are not U.S. CPAs. This policy allows for a lot more flexibility in the process.

Indiana, Tennessee, and Washington allow your experience to be verified (instead of supervised) by a U.S. CPA. In other words, if you know of a U.S. CPA who is willing to verify your experience in your home country, then it will work.

For Your Further Reading

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About the Author Stephanie Ng

I am the author of How to Pass The CPA Exam (published by Wiley), and I also passed all 4 sections of the CPA Exam on my first try. Additionally, I have led webinars, such as for the Institute of Management Accountants, authored featured articles on websites like Going Concern and AccountingWeb, and I'm also the CFO for the charity New Sight. Finally, I have created other accounting certification websites to help mentor non-CPA candidates. I have already mentored thousands of CPA, CMA, CIA, EA, and CFA candidates, and I can help you too!

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