State Board Mulls Mobility
NASBA Task Force Boss Seeks Pledge of Support; NYSSCPA Wants to Keep Notice in New York

By Colleen Lutolf

NEW YORK—What does Al Smith, the 45th governor of New York state and former Speaker of the Assembly, have to do with CPA mobility?

A lot, if you listened to NYSSCPA Executive Director Louis Grumet when he raised questions about a joint proposal drafted by two national accounting organizations that would allow CPAs from across the country to practice in New York state, or any state, without giving notice.

Grumet evoked Smith’s name when he urged the New York State Board of Public Accountancy to oppose the American Institute of Certified Public Accountants (AICPA)/National Association of State Boards of Accountancy’s (NASBA) proposed revisions to the Uniform Accountancy Act at the Board’s monthly public meeting on Sept. 5 in Manhattan.

As Assembly Speaker, Smith championed greater protection for New Yorkers after the 1911 Triangle Shirtwaist Factory fire, in which over 140 workers died.

Today’s New York state Assembly Speaker Sheldon Silver also sees himself as a stalwart of public protection, said Grumet, who made it clear Silver wants to know how many CPAs are going to come into New York state, what they do when they’re here and how the state is going to know they’re here.

The Tail Is Wagging the Dog

Grumet’s main point, however, was that mobility is an administrative issue, not a legislative one, and that the profession needs “to get real about what the real issues are.”

“The real issue is that [New York] laws don’t make any sense and they don’t regulate what you do,” he said.

The New York state law that regulates accounting was enacted in 1897 and was amended only once, in 1947. Grumet said the law needs to be updated to reflect today’s world.

New York’s law regulating accountancy is “seriously deficient” because the New York state scope of practice is still regulated by the 1890s scope of practice, he said.

Prioritizing mobility before updating New York state’s accounting law is allowing the “tail to wag the dog,” Grumet said. “If we want changes in New York state we have to get serious about mobility.”

The NYSSCPA has helped draft an accountancy reform bill that would make peer review mandatory (New York is one of only a handful of states that does not mandate peer review); expand the scope of practice to include tax practices; regulate CPAs in industry; provide greater due process in disciplinary hearings; expand experience qualifications for licensure; clarify that commissions and referral fees are only allowed for nonattest services, and expand continuing professional education (CPE) requirements. The New York State Senate has approved the bill unanimously several years in a row, but the House has not.
The state could have had updated legislation “if it weren’t for the issue of mobility,” Grumet said.

No Notice/No Fee/No Escape

Grumet was responding to an hour-long presentation Ken L. Bishop, chair of the NASBA CPA Mobility Task Force, provided to the Board in an effort to drum up support for the proposal, which would amend Section 23 of the Uniform Accountancy Act (UAA).

More and more CPAs are crossing their home state’s borders electronically without even leaving their desks, let alone physically crossing state lines. Although CPAs may not be physically present when they practice in another state, under current law they are bound to the rules of whichever state they are practicing in and must notify that state of their presence, yet any disciplinary action would officially be taken by their home states.

Because licensure requirements are state-regulated and not federally regulated, each state’s licensing requirements differ, necessitating massive amounts of paperwork, fees and, in some firms, departments created specifically to comply with out-of-state accounting laws.

This new legislation aims to change that by removing the notification and fee requirements, although CPAs working out of their home state would now fall within the jurisdiction of the state in which they are practicing and could be disciplined by that state.

“A high percentage of firms will say that during the year they violate some state law by crossing state lines,” Bishop said.

The proposal would raise the bar of public protection and advocacy, not lower it, he added.

Board member and past NYSSCPA president Jeff Hoops asked Bishop why he thought the proposal would improve public protection.

“If an individual comes into the state, the board has … jurisdiction over only those you license,” Bishop replied. “[Under the proposal], when they come into the state, you have jurisdiction.”

The “Proposed Revisions to AICPA/NASBA Uniform Accountancy Act” exposure draft, issued in December 2006 and amended in March, argues that notice “is usually a code word for ‘application and fee,’” then goes on to state that applications can be up to four pages long, can cost over $400 in fees and sometimes take up to six months to process.

CPAs and their firms will no longer have to “jump through onerous hoops” in order to provide out-of-state clients services by providing a “no notice, no fee, no escape” approach, Bishop said.

As outlined in the exposure draft, the amendment would do three things:

Substantial Equivalency

The issue of mobility was once thought to be solved by the implementation of substantial equivalency.

Under substantial equivalency, if a CPA has a license in good standing from a state that utilizes CPA certification criteria that are outlined in the UAA (150 hours of education, passing the Uniform CPA Examination and at least one year of experience), then the CPA would be qualified to practice in another state that is not the CPA’s home state, according to the exposure draft.
Yet substantial equivalency, in its current form, didn’t work.

“This is in large part due to practical difficulties including the lack of uniformity in the notice requirement as implemented by the states,” according to the proposal. “No two states have implemented it in exactly the same way.”

Although “(s)ubstantial equivalency remains the foundation of Section 23 in the proposed revision … the ‘notice’ requirement has been eliminated … as an unnecessary and costly barrier to practice across state lines,” according to the proposal.

As of August, seven states have adopted mobility, although Bishop said he expects up to 14 states to have adopted legislation by the end of the year.

New York Is Different

“New York is different from what Ken described,” said Board member John P. (“Jack”) Laschenski. “New York has a higher bar.”

Some states in the past have grandfathered public accountants (PAs) as CPAs, but “New York didn’t go that route,” Laschenski said. “Grandfathered public accountants would be able to practice [here].”

“Some states have grandfathered PAs,” Bishop said. “Most jump through some hoops, but the exposure’s there.”

A PA now considered a CPA in Texas can come to New York and practice and be a shareholder in a firm, Laschenski said, but a New York PA would not be able to be a CPA or a shareholder in another state.

“Isn’t it a different standard of practice?” Laschenski asked.

“Yes,” Bishop responded.

“So it’s not uniform,” Laschenksi said.

“New York has a high bar,” Bishop said. “Some states have a higher bar. You can’t jump to conclusions.

“This law gives you good jurisdiction and wraps up your ability to have good CPAS to come into New York and do work the consumers want and everyone will be protected and everyone will be covered,” Bishop said.

Grumet disagreed in his presentation, calling the legislation “pie in the sky” and urging the Board to “come up with a realistic solution that may not be uniform” but will protect the citizens of New York.

“To have [out-of-state CPAs] without the State Board of Accountancy knowing they’re here and have to deal with the mess afterward is too big a risk to ask New York citizens to undertake,” Grumet said. “The Society favors mobility. The Society does not favor zero notification and it does not favor no fee.”

The State Board did not vote on the proposal, and may not soon, said Board Chair John C. Olsen.

“I see [the] meeting as the first of several meetings and discussions on this subject,” he said. “If all goes well, we will try to coordinate our Board decision with the next legislative cycle.”

Although Olsen would like to see the Board make progress toward resolving the mobility issue, he said he does have some concerns about public protection.

“[New York state] has always had high standards for the CPA profession and I want to protect those high standards as we address mobility,” he said.

If given a choice, Olsen said, he would prefer the Board move forward with scope of practice, firm registration, CPE improvements and quality review adoption in New York state before attempting to resolve mobility.

The proposal is gaining support from other state boards, but Grumet said that’s not reason enough to forego protecting the citizens of New York, the accounting profession and its practitioners.

“We need to protect the citizens of New York,” Grumet told the Board.

Colleen Lutolf, Editor, can be reached at clutolf@nysscpa.org.