Looking for the remaining CPA Exam two-tier states? Or trying to understand the CPA license vs certificate? I hope the following will shed some light on these states and the important points you should know.
So, is the CPA a license or a certificate? In the old days, it was prevalent for the state boards of accountancy to establish a two-tier system for Certified Public Accountants.
In those CPA two-tier states, CPA candidates were given a certificate to recognize the completion of the first step in the CPA process, like passing the CPA Exam. Candidates could upgrade this certificate to a full license after completing the work experience.
So in these states, you first got a CPA certificate (step 1) when you passed all sections of the CPA Exam. Then, after you met all other CPA requirements (like 1+ years of qualified experience), you received the CPA license or a “permit to practice” (step 2).
For those 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, those who don’t or never plan to work in CPA firms may choose to remain as a CPA certificate holder.
In the past, some state boards fully recognized these CPA certificate holders as CPAs who might be working in the private sector, government, or academia as experienced accountants. Therefore, in the past, the major difference between the CPA license vs certificate was that you only had to pass the exam to get the certificate. But, you needed to gain more experience for the license.
The CPA certificate is great for those who want to pass the CPA Exam strictly for credentials 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 certificate holder even if you don’t work in the accounting field.
This is truly an attractive option for people working in a related field such as finance, law, or even information technology because you can receive an accounting certificate for the CPA Exam. And for people who don’t plan to work directly as accountants, it can be easier to meet the CPA certification requirements. But having a CPA certificate on your resumé still lets potential employers know that you have skills in accounting.
International candidates also appreciate the CPA certificate. They may have difficulty getting their experience verified by an active CPA licensee, regardless of how qualified they are 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 they cannot find a U.S. CPA to verify their working experience.
So, is a certified CPA the same as a licensed CPA? Well, be careful if you only plan to pass the CPA Exam and apply for a certification in a two-tier state. Because in many states, you still can’t call yourself a “CPA” if you haven’t met the work experience requirements and don’t have the CPA license or permit to practice.
In the late 1990s to early 2000s, some state boards decided that the public might be misled into thinking that CPA certificate holders are equally good at auditing and attestation. That is, they were concerned that the public didn’t understand the difference between accountants who held the CPA certificate vs license. Since both license and certificate holders could hold themselves out as CPAs in the past in some states, there was no way for the public to differentiate the two.
Therefore, certain state boards enacted rules to disallow CPA certification holders from presenting themselves as CPAs, while others stripped away the two-tier system altogether to avoid confusion.
So basically, here’s a recap:
CPA candidates must pass the CPA Exam and meet all work and experience requirements to get the CPA license or permit to practice in a one-tier state. So in a CPA non-two-tiered state, they don’t have a CPA certificate.
In the two-tier states, CPA candidates can get a CPA certificate after passing the exam. And once they meet the work experience requirements, they can get a CPA license.
So then, what are the states that have a two-tier CPA system? Here’s a list of the states and jurisdictions still using the two tiers. I’ve included some comments that might be useful to international CPA candidates trying to find the right jurisdiction.
Alabama only allows candidates who are U.S. citizens or are legally allowed to be in the United States to sit for the CPA Exam. Candidates must have a Social Security Number (SSN). Plus, Alabama does not participate in the international exam program.
In Connecticut, candidates must have an SSN. Click here for more information about eligibility in Connecticut.
Hawaii is technically labeled as a 2-tier state by NASBA. However, I think that’s misleading. Let me explain why. To pass the first tier in Hawaii, you have to pass the CPA Exam, complete your work experience, and satisfy the requirement of 150 hours of education. If you meet these requirements, you’ll be granted a CPA license…but wait…
Because in Hawaii, you can’t practice as a CPA until you also get in your annual CPE (continuing professional education) credits. Once you do that, you can pass the second tier, receiving a permit to practice.
Plus, Hawaii requires US citizenship to take the exam. And an SSN is required. So Hawaii isn’t a good option for international candidates looking for a CPA certificate only.
Illinois does not require an SSN to take the exam, participates in the international program, and does not have citizenship or residency requirements. However, candidates must have 150 education hours before taking the exam.
So, Illinois could be an option for international candidates with the required education hours who only want the CPA certificate.
But please note that if you want to apply for the full CPA license in Illinois, you’ll need an SSN. The certificate is granted by the ILBOE (Illinois Board of Examiners), which does not require an SSN on their forms. However, the license is granted by the IDFPR (State of Illinois Department of Financial and Professional Regulation), which does require an SSN on their forms.
Kansas only grants certificates to state residents. Plus, an SSN is required to take the CPA Exam.
Like Kansas, Nebraska has a state residency requirement and requires an SSN.
Oklahoma has 2 levels of accountants: PA (public accountant) and CPA (certified public accountant). But PAs cannot present themselves as CPAs. Plus, Oklahoma has a residency requirement, and you’ll need an SSN.
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.
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 a CPA in Guam. You may refer to this page for details.
Massachusetts used to have a non-reporting license. These license holders were not required to fulfill the working experience, but they had limited privilege in public accounting work. However, Massachusetts stopped issuing non-reporting licenses on May 19, 2017.
Illinois allows your experience to be verified by supervisors who are not U.S. CPAs. This policy allows for a lot more flexibility in the process.
Virginia used to have this same policy. But now, the Virginia Board of Accountancy requires all experience for their CPA candidates to be verified by a CPA with an active license from any jurisdiction. Still, that gives you some flexibility because a CPA just has to verify your work experience, not supervise it.
Indiana, Tennessee, and Washington also 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 example, the Indiana Board of Accountancy states that the CPA who verifies your work experience “must have direct knowledge of the work experience by the applicant.” So, the CPA doesn’t necessarily have to be your supervisor.
Is a CPA certificate the same as a license? No: In most of the 55 jurisdictions that grant the CPA in the United States, the board of accountancies follow a one-tier system. When candidates meet the education requirement, pass the CPA Exam, and meet the work experience requirement, they can apply for the CPA license. But in two-tier states, candidates first apply for a CPA certificate after passing the CPA Exam and then apply for the CPA license after meeting all work requirements.
In two-tier states, candidates first receive a CPA certificate number after passing the CPA Exam. Once all other requirements are met, candidates are awarded a CPA license number.
According to NASBA, the remaining two-tier states are Alabama, Connecticut, Hawaii, Illinois, Kansas, Nebraska, and Oklahoma.
No. California now has a one-tier vs a two-tier board.
Yes, the Illinois board of accountancy still follows a two-tier system for the CPA license. After candidates pass all sections of the CPA Exam and the ethics exam, they are eligible to apply for the Illinois Certificate of CPA Exam Completion. After fulfilling the work experience requirement, candidates can apply for the CPA license and call themselves CPAs.
Tennessee is a one-tier state. So that means that there is only one CPA license that you can get from Tennessee. However, the Tennessee State Board of Accountancy website sometimes uses the terms “license” and “certification” interchangeably. But Tennessee only has one CPA license that requires passing the CPA Exam, 150 hours of education, and 1 year of experience.
As of May 19, 2017, the Massachusetts state board follows a one-tier system.
If you’re moving from a CPA two-tier to a one-tier state, your CPA license may or may not be affected. According to NASBA, all 55 jurisdictions are now deemed to be substantially equivalent to the UAA or the Uniform Accountancy Act. That means that all jurisdictions have similar requirements to get a CPA license. Therefore, many—but not all—states offer reciprocity for CPA licenses. I recommend reading this article for more information.
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!