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CPA Reciprocity Rule and Substantially Equivalent States

CPA Reciprocity Rule and Substantially Equivalent States

By Stephanie Ng
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CPA reciprocity is complicated. Each state has different rules, and the rules keep changing. Before we get into the details of CPA state reciprocity, let’s take a look at the history. Then, let’s review recent developments to streamline the CPA reciprocal license process.

CPA Reciprocity: Why the Need

As you may know, the CPA license is granted by the individual boards of accountancy in each of the 55 U.S. states and territories. Because of this, CPAs often encounter difficulties when it comes to cross-border practice, i.e. providing public accounting services to their clients across jurisdictions.

To cater to out-of-state CPAs and accounting firms, each state used to have its own rules 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 uniform CPA Exam requirements.

Specially, they have worked together to develop a “Uniform Accountancy Act.” They published their first model bill in 1984 and have revised it several times. Basically, the UAA is a model licensing law. It encourages equal standards across individual states. Therefore, the public has a better understanding of the qualifications of a licensed CPA vs. an uncredentialled accountant.

The UAA recommends the following guidance on the CPA Exam requirements for each state (known as the 3Es):

Education: Obtain 150 credit hours of higher education.
Exam: Pass the Uniform CPA Exam.
Experience: Accumulate at least one year of relevant experience.

As of 2014, all jurisdictions have adopted and follow the UAA. So, all 55 jurisdictions in the United States are now “substantially equivalent.” Therefore, if you have a valid CPA license from one state, you may be able to practice in another state without a new license.

CPA Reciprocity: Current Status

States such as California, Colorado, and New Hampshire used to have an alternative path that allowed candidates to get a CPA license without fulfilling the 3 Es above. Therefore, they were considered not “substantially equivalent” because they didn’t require 150 hours of education for a CPA license.

A handful of states still use this two-tier system. Candidates who pass the CPA Exam are awarded a certificate (first tier). And after getting the required amount of experience (1+ years), they get the license (second tier). For these states, the rule of substantial equivalency only applies to those who get the full license.

Reciprocity vs. Mobility

Let’s also go over the difference between reciprocity and mobility rules. Basically, according to reciprocity rules, you need a new license if you’re moving to a new jurisdiction. But, that new license is easier to obtain that getting a new license from scratch. (So you don’t have to take the CPA Exam again, for example.)

But according to the CPA Mobility Act, if you have an active license in one state but need to temporarily practice in another state, you can do so if both states are substantially equivalent. And via the Mobility Act, you don’t have to jump through a lot of hoops like filling out a reciprocity application or paying a fee.

However, there are some catches. The CPA Mobility Act only applies if you’re not offering services to the public. For example, if you’re temporarily working in another state in business, industry, or government, you can hold an out-of-state CPA license. However, if you’re going to be working in a small firm with substantial business roles, you should check if the Mobility Act provisions apply to you. You can verify your eligibility at CPAmobility.org.

Reciprocity Exceptions to the Rule

But still, if you have a CPA license in one state and you plan to work in another, you should check with the board of accountancy where you plan to work. Even though all jurisdictions are now technically substantially equivalent to UAA, there still might be some issues between a few states.

For example, if you might be moving to Massachusetts, read through the FAQs on the website for the Massachusetts Board of Accountancy. The website clearly states that “most states do not allow Massachusetts licensees to practice in those states without obtaining a license.” This issue is due to technicalities between the state boards’ statues and regulations. So for example, of the states in New England (including New York), only CPAs licensed in Rhode Island can practice in Massachusetts with “full mobility privileges” and do not need a MA CPA license.

So, I would always double check about the reciprocity and mobility rules before you get to work.

Check the Date on Your License

Just because all of the 55 jurisdictions now follow the UAA and are deemed substantially equivalent, that hasn’t always been the case. In fact, the Virgin Islands wasn’t deemed substantially equivalent until it passed legislation in 2014. So if you received your CPA license from a state that has changed its requirements, your license may or may not meet the requirements for reciprocal licenses.

CPA Reciprocity by State

If you’re looking for information about CPA license reciprocity by state, it’s best to directly contact the state board where you plan to work. Since states periodically update their regulations, you should always check with them. Click here for a list of state boards maintained by NASBA.

What about CPA International Reciprocity?

The U.S. International Qualifications Appraisal Board (IQAB) on behalf of the AICPA and NASBA has signed a MRA (mutual recognition agreement) with certain international professional accounting bodies. These agreements allow U.S. CPAs to practice in those countries without getting completely recredentialed. Those bodies are:

South African Institute of Chartered Accountants
CPA Australia
Chartered Accountants Australia and New Zealand (CAANZ)
CPA Canada (CPAC)
Hong Kong Institute of Certified Public Accountants (HKICPA)
Chartered Accountants Ireland (CAI)
Instituto Mexicano de Contadores Publicos (IMCP)
Institute of Chartered Accountants of Scotland (ICAS)

CPA Transfer to Another State

If you’re moving, it’s possible to transfer your CPA license from one state to another, although you’ll have some administrative work to do first. Usually, you’ll have to submit documentation that your existing CPA license is active and in good standing. Plus, you might have to take an ethics exam and pay a fee for your new license. I’ve listed some examples based on the questions I get from my readers.

Transfer CPA license to Florida

If you already have a CPA license in another state, you can apply for a Florida CPA license through a process called “endorsement” that many boards use. However, you must:

Meet all education requirements, including a bachelor’s degree.
Pass the Florida Law and Rules examination.
Complete 80 CPE hours if you passed the CPA Exam two or more years ago.
Plus, you need 5+ years of experience in public or governmental accounting after you received your license.

Transfer CPA license to Texas

If you want to transfer your existing active CPA license to Texas, you must submit the following to the state board (all forms are available online):

Application for a transfer license
Letter of good standing from your previous jurisdiction
$100 fee
Documentation of 120+ hours of CPE during the previous 3 years

Plus, you must pass an ethics exam to meet the Texas CPA reciprocity rules.

Transfer CPA license to California

The website of the California Society of Certified Public Accountants clearly states, “Currently, California does not recognize reciprocity.” But don’t let that statement scare you, because the California board has made a process to transfer your existing CPA license. You must:

Submit a transfer license application.
Pass an ethics exam.
Meet the education and licensing California CPA reciprocity requirements, which you can do if you have been an actively licensed and practicing CPA for 4 of the last 10 years.

FAQs

What is the US CPA reciprocity in Canada?

An MRA between the U.S. IQAB (o behalf of the AICPA and NASBA) and all Canadian CPA bodies allow U.S. CPAs in good standing to apply for a Canadian CPA license if you have:

At least 150 hours of higher education, including a bachelor’s degree
At least 30+ HOURS of relevant experience
Passed the CPA Exam

What are the DC CPA reciprocity rules?

If you want to transfer your CPA license to Washington, DC, you can do so as long as you are an existing CPA with an active license from any substantially equivalent jurisdiction. You must submit a reciprocity application and a letter of good standing from your existing board of accountancy.

What are the Florida CPA reciprocity rules?

You can meet the Florida CPA requirements for reciprocity in two ways. First, if you’ve passed the CPA Exam and haven’t applied for a license in another state, you can transfer your credits to Florida. Or, if you already have a license from another state, you can apply for a Florida CPA license via endorsement.

Is there CPA reciprocity in New York?

Yes. New York offers “licensure by endorsement” to CPA license-holders from substantially equivalent states. However, in the last 10 years, candidates must have 4 years of combined experience in accounting, financial advisory, financial management, or tax services.

What are the Illinois CPA reciprocity rules?

If you have an active and unrestricted license in another jurisdiction, you can apply for a license in Illinois via endorsement. However, that jurisdiction’s licensure requirements at the time your license was issued must be substantially equivalent to the Illinois CPA requirements.

What are the Colorado CPA reciprocity rules?

According to the Colorado State Board of Accountancy, you can apply for a CPA certificate (which in Colorado, is the CPA license or permit to practice) if you have an active license from another jurisdiction that is substantially equivalent to Colorado’s requirements. Plus, you must complete 2 hours of a CR & R course (a Colorado Board of Accountancy Statutes, Rules, and Regulations course) within the 6 months between applying for a certificate.

What are the Georgia CPA reciprocity rules?

Georgia offers what they refer to as a “Reciprocal License” if you have an active license if your existing jurisdiction. Candidates apply through a NASBA portal, not directly to the Georgia state board of accountancy.

What are the CPA Pennsylvania reciprocity rules?

You can apply for a CPA license in Pennsylvania if you already have a valid license in another jurisdiction. However, if your license is less than 5 years old, you must verify your experience, education, and CPE hours.