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May I see your license?

What Ohio’s doing to protect CPAs' ability to practice in other states

By Ronald Rotaru, Accountancy Board of Ohio Executive Director

Are you planning to get your CPA license when you graduate? Well kudos to you! That license will be your passport to greater opportunities in the business world, not to mention the higher salaries that come with it.

But guess what: If some of your future clients aren’t based in the same state where you received your CPA license, current restrictions would make it difficult for you to perform work for them. Ohio and some other states are trying to make sure you don’t have to deal with those restrictions by the time you are a practicing CPA.

Let’s break this down…

Imagine taking a road trip to sunny Florida. Instead of hopping in the car and driving off, you sit down to a stack of forms. Before you can drive into Florida, or any of the states in between, you have to register with each state’s Department of Motor Vehicles and pay a different registration fee.

Sound crazy? It sure does to me. In reality, states recognize each other’s motor vehicle licensing of residents. The alternative would be a headache of paper work, and likely a lot fewer road trips.

A similar phenomenon, however, is plaguing CPA practices that cross state borders. Increasingly, CPAs are being required to meet a wide range of requirements when they practice in different states, sometimes even if they don’t physically visit those states.

The Ohio model

The Accountancy Board of Ohio (ABO) views a CPA license as similar to a driver’s license. Just as an out-of-state driver can drive in Ohio, an out-of-state CPA or accounting firm may perform public accounting work in Ohio on an incidental or temporary basis without notification if that CPA holds a current license to practice public accounting in his or her home state.

The Ohio model has been in place since 1961. The accountancy law enacted Oct. 23, 1959 contained no provision for temporary or incidental practice. At the Feb. 5, 1960 meeting, the ABO noted that an Ohio license would be required of all out-of-state CPA partners who practiced in Ohio.

Realizing the problem, legislation was introduced to correct the issue. The current section 4701.15 of the Ohio Revised Code became effective Jan. 10, 1961. Though somewhat duplicative, a no-notification provision was added to the Ohio accountancy law in 1998, along with numerous other UAA provisions, to make identification of Ohio’s longstanding practice clearer to out-of-state CPAs.

The concept of “substantial equivalency” with respect to the “Three Es” of education, examination and experience was invented in Ohio and has been part of the accountancy law since the creation of the Board in 1908. The 1998 statutory changes granted broader practice privileges to licensees from other substantially equivalent states.

Why other states are different

Section 23 of the Uniform Accountancy Act was written in the mid-1990s and ratified over time by 33 states to facilitate interstate mobility of CPAs. However, not all states have the same interpretation of Section 23. In some circumstances, this lack of uniformity has led to requirements that actually inhibit practice by out-of-state CPAs, counter to the intent of Section 23.

In the most restrictive cases, a state requires notification and charges a fee. Some states claim that out-of-state CPAs working with in-state clients, even if the CPA never visits the state, are still required to notify the state and pay a fee. For example, simply filing a tax return could trigger another state’s registration and fee requirements.

Problems and solutions

The National Association of State Boards of Accountancy (NASBA) and the American Institute of CPAs (AICPA) are promoting simplification because uniformity is not achieved if each state has its own specific, detailed regulations governing out-of-state CPA practice.

We believe the superior model is the one that lessens the regulatory burden on CPA firms while still providing a mechanism for effective enforcement.

Hopefully, the trend will be toward streamlined regulations nationwide. Simple and easy-to-understand laws and regulations tend to have wider acceptance than detailed and confusing regulations. Fewer and less cumbersome regulations nationwide would benefit Ohio CPAs as well as the many practitioners licensed in other states.

Hopefully the states with the highest regulatory barriers would realize that, in the long run, complex regulations harm that state more than help. That sure makes good sense to me.

Adapted from an article in Catalyst magazine written by Ronald Rotaru, Executive director of the Accountancy Board of Ohio. For more information about interstate practice mobility, visit The Ohio Society of CPAs Web site.