ALBANY—Since 1999, the New York State Society of CPAs has supported bringing substantial equivalency, one of the centerpieces of the Uniform Accountancy Act, into the accountancy laws in New York state. After years without reform in this arena, the state board of accountancy is calling for the provision, too. 

For almost five years, the State Education Department’s (SED) legislation has not provided for substantial equivalency, which is designed to allow CPAs to easily practice both in person and electronically across jurisdictions. However, at its Sept.10 meeting, the New York State Board for Public Accountancy voted 12-1 to recommend to the SED that substantial equivalency be included in the department’s accountancy reform legislation, S.4935 by Sen. Kenneth LaValle and A.8286 by Assemblyman Ronald Canestrari.

“This will be a major shift for the board of accountancy and I commend it for taking the initiative to recommend substantial equivalency to the department,” NYSSCPA President Jeffrey Hoops said. 

Ultimately, the legislature will have the task of deciding whether or not practice privileges in New York can be based upon substantial equivalency. 

“The Society has recognized for several years that interstate practice of public accountancy will be enhanced as more states adopt substantial equivalency,” Hoops added.

Currently, there are 23 states that have adopted substantial equivalency, and nearly 90 percent (48 of 54) of licensing jurisdictions are deemed by the National Association of the State Boards of Accountancy (NASBA) to be qualified for substantial equivalence.

“In our national economy, we must find ways to facilitate cross-border practice by CPAs licensed in other states and who maintain their principal place of business outside of New York,” Hoops stated.

Hoops also suggested that the adoption of substantial equivalency in New York could encourage other states to provide practice privileges to New York CPAs based upon substantial equivalency.

In 1999, then Society President Alan E. Weiner testified before the State Assembly’s Higher Education Committee on the first UAA bill supported by the Society. Weiner backed Assembly bill 8600 in that it allowed “our CPAs to be free to attend to their clients’ affairs in and out of other states…It also makes less important questions as to what constitutes practicing public accountancy in a particular state in this day of e-commerce and the Internet.” 

At the state board’s meeting last month, Executive Secretary Daniel Dustin informed board members that “The issue of substantial equivalency has obviously been on the table for a long time, with the issuance of the third edition of the UAA.” 

Dustin also said that S.302-D, which the state Senate passed earlier this year, includes a provision on temporary practice. Since then, questions have surfaced as to the difference between temporary practice and substantial equivalency. 

Dustin noted several concepts associated with substantial equivalency. The first is that, for practice purposes, the out-of-state licensee is deemed to be substantially equivalent if approved by NASBA’s qualification appraisal service. But in the model that the board is reviewing, substantial equivalency would be recognized by the SED with assistance from the state board. 

Substantial equivalency also requires that out-of-state licensees acknowledge that they are subject to regulation and disciplinary action by the SED, the state board and the Board of Regents in New York for professional misconduct. A CPA who practices under substantial equivalency must notify the SED, pay a fee and comply with the one-year term requirement.

Prior to the board vote on recommending the concept of substantial equivalency, board members discussed the issue extensively with their two guest speakers. NASBA Executive Director David Costello and Cathy Landau-Painter of KPMG, LLP, each spoke to the board regarding their perspectives on the UAA provision.

Landau-Painter maintained that substantial equivalency is about audit quality and allows firms to bring in the best people to meet a client’s needs. She gave examples of the difficulties firms experience when bringing CPAs from other states into New York. She further pointed out that substantial equivalency is a practice privilege that the Board of Regents would be capable of revoking. The Regents also would be able to enforce New York’s accountancy laws and rules against CPAs practicing through substantial equivalency. 

Costello highlighted New York’s key role in the profession, noting that “Everyone is looking to New York for leadership.” 

In agreement with Hoops’ position, Costello said New York would be an example to other states that are on the margin with respect to substantial equivalency. Referring to a recent General Accounting Office report, Costello suggested that substantial equivalency can also serve as a means to remove barriers to competition. Substantial equivalency would allow small firms to serve publicly traded companies that operate in multiple states. Without it, these firms would continue to face the difficulty of meeting various state licensure requirements.