The Nature and Extent of CPA Licensing Regulation in New York

Historically, the apparent purpose of regulation limiting the use of the CPA designation in New York to those holding an active license is (or should be) to protect unwary members of the public from relying on the designation to ascribe to those inappropriately claiming to hold it an inappropriate conclusion about their skills and competency to offer and provide certain services.

Unlike in smaller states, New York's body of rules and regulations regarding the practice of public accounting, which interpret the already voluminous statutory language of the State Legislature, comes not from a single source but from an unwieldy, multilevel hierarchy of regulatory bodies including the State Education Department, its Board of Regents, the Office of the Professions, and the Board for Public Accountancy. It is a quagmire of requirements and restrictions that are indeed “onerous,” as Weinstein puts it. They are excessively provincial, unduly complex, and often unclear; sometimes overlapping or contradictory; and impossible to navigate, understand, or be confident that one is in compliance with, especially when outside of the circumstances typical in practice.

The Biggest Part of the Problem

The rules relative to inactive license status are the principal subject of Weinstein's article; they are in my opinion particularly confusing, illogical, and unjust. According to the Board for Public Accountancy's web page “Scope of Practice,” (http://bit.ly/2jnxnvU), “there is a difference between licensure and registration. In New York, upon satisfying the licensure eligibility requirements, a license is awarded. Licensure is for life unless suspended, revoked or annulled for reasons of misconduct. In order to practice as a CPA in New York and use the CPA designation titles, however, a licensee must be currently registered.” Registration requires periodic payment of fees and compliance with the continuing professional education requirements applicable to active practitioners.

If not registered, a New York–licensed CPA may be designated “inactive” (by applying for such status and obtaining approval from the board, which may be denied based on the individual's activities deemed to be “practice”), or if one's registration has been allowed to lapse without an explanation, characterized merely as “not registered.” Any New York licensee designated as “inactive” or “not registered” is not allowed to work within the scope of practice defined in the regulations. There appears to be no substantive difference between “not registered” or “inactive” status and no regulatory consequence of opting for the former or benefit of opting for the latter.

Under section 29.10a.14 of the Rules of the Board of Regents, “failing to maintain an active registration with the Department in accordance with the requirements of this paragraph when a licensee engages in the practice of public accountancy pursuant to Education Law section 7401 or uses the title ‘certified public accountant’ or the designation ‘CPA’” is considered engaging in “unprofessional conduct” in the practice of public accountancy under Part 29 of the Rules of the Board of Regents and subject to regulatory enforcement proceedings under section 6510 of the Education Law, Article 130, subarticle 3. This applies whether the designation is either “inactive” or “not registered.”

Rules section 29.10(a)(14)(iii)(a)–(c) states that:

• “Inactive” status requires regulatory approval and prohibits both the use of the CPA designation and any activity that constitutes the “practice of public accountancy” as defined in Education Law section 7401.

• Use of the designation “CPA” refers to any representation made by the licensee, or by someone associated with or serving as an agent for the licensee with the knowledge and permission of the licensee, that a person holds a license as a certified public accountant.

• A “representation” includes, but is not limited to, “any oral, electronic, or written communication within the control of the licensee, indicating that the person holds a license, including without limitation the use of titles or designations on letterheads, reports, business cards, brochures, resumes, office signs, telephone directories, websites, the Internet, or any other advertisement, news article, publication, listing, tax return signature, signature on experience certifications for licensure applicants, the display of licenses as a certified public accountant or public accountant from this or any other jurisdiction, or the display of certificates or licenses from other organizations which have the CPA designation with the licensee's name.”

A literal interpretation of the foregoing would deny a New York–licensed CPA holding a currently unregistered license that is either “inactive” or “not registered” (but still valid, according to the board) from claiming credit in a professional biography (or even in an author's byline for an article published in The CPA Journal) for ever having been a CPA in New York. Would the Board for Public Accountancy rather have the licensee insert the awkward words, “licensed but unregistered in New York” parenthetically after one's name? What if the CPA designation were silent as to which state granted the license? Is it necessary to presume a significant risk of being read as a claim of active licensure in New York?

Education Law section 7401's definition of the “practice of public accountancy” was significantly expanded by the Public Accountancy Law of 2009. In addition to “offering to perform or performing attest and/or compilation services,” this definition now includes (but is not limited to) offering to perform or performing for anyone (including one's employer) one or more types of accounting, management advisory, financial advisory, and tax services in any and all matters related to accounting concepts, as well as the recording of financial data or the preparation or presentation of financial statements that involve professional skills and competencies necessary to perform any of the exhaustive (but again, not all-inclusive) list of tasks and services contained in subsection 7401(c)(1). I believe this definition is too broad and overreaching.

Also on its “Scope of Practice” web-page, and as Weinstein mentions, the Board for Public Accountancy provides a list of 24 terms/descriptors (which it characterizes as “non-exhaustive”) of commonly used professional titles, job descriptions, or employment duties that “usually indicate … services provided … [that] are within the scope of practice of public accountancy” and would therefore require a New York CPA to register “even if the CPA … is an officer or employee of an enterprise outside of public accounting and is not providing services to clients or customers.” These regulations would likewise require a CPA to register even if only providing pro bono services as a volunteer or for family members.

As also pointed out by Weinstein, many of the skills and competencies deemed necessary to perform the tasks and services listed in subsection 7401(c)(1) “can be and often are performed by individuals who are not and never were CPAs and are, therefore, not regulated by the state.” And, of course, the CPA designation tells one little or nothing about the competency of its holder except at the time when one sat for the Uniform CPA exam. (Meeting annual CPE requirements provides no assurance of competency.) As Weinstein also rightfully points out, there is no qualifying language in the laws and regulations limiting their applicability of services encompassed by the term “practice of public accountancy” to those services for which a fee is or would be charged.

This analysis naturally leads one to ask the following questions:

• If the Board for Public Accountancy acknowledges that a New York CPA license is earned and is “for life,” why then does it restrict one from using the designation when clearly not providing or offering to provide services to the public for fees?

• Why do we have regulations that prevent unregistered but licensed and experienced CPAs from performing services that the unlicensed (and possibly unqualified) can perform without regulation?

• What is the purpose of including services provided for family members, one's employer, or in a volunteer (such as service on a governance board or committee) in the definition of practice of public accounting?

• Why are there two separate designations for “not registered” or “inactive” status for those who no longer wish to engage in the practice of public accountancy (however it may be defined), and why would one take the trouble of opting for the latter when there is no benefit to be obtained from it or no consequence to be met from opting for the former?

• Who is being protected by the current regulatory definition of the “practice of public accountancy” and its almost endless list of tasks that a CPA can offer to perform only with a registered and active license, but that any unlicensed, unregulated individual can offer without restriction?

• How effective can this protection of the public interest be?

Out-of-State Licensees

Weinstein does not mention that as a result of the so-called “mobility” provisions enacted in 2011 (Senate Bill S2628A; Assembly Bill A05964A), an out-of-state licensee may practice (i.e., offer or provide any of the services listed as constituting the practice of public accountancy) for clients located in New York without registering in or paying a fee to the state (except that, if providing compilation or attest services, one must do so through a firm registered in the state). Therefore, none of the foregoing licensing restrictions now apply to any individual who 1) either does not have a New York license or chooses not to use it and 2) whose principal place of business is in one of the 44 other jurisdictions deemed to have substantially equivalent licensing requirements as New York and holds license in that jurisdiction. Since the mobility provisions adopted by most states were intended make CPA licenses portable across state lines, it appears that this legislation also removes restrictions on the use of the CPA designation in New York from qualified out-of-state licensees, whether holding an inactive New York license or not. This is not so clear in practice, however.

According to an e-mail message I received on November 6, 2015, from an employee of the Board for Public Accountancy, a CPA whose New York license is inactive and who does not hold a CPA license in another substantially equivalent state may only use the CPA designation “in an historical context on a professional bio or resume.” Alternatively, this implies that one who does hold an active CPA license in another state may make unrestricted use of the CPA designation to the same extent as a holder of an active New York license. I was unable to confirm either conclusion, however, either through any online explanation by the board of its mobility provisions or the statutes, rules, and regulations themselves. But it is not logical that an out-of-state licensed CPA deemed competent and enabled pursuant to the 2011 mobility provisions to provide or offer to provide services to a New York client would either be prevented from using the CPA designation in the same unrestricted fashion as an active New York licensee or be held to have engaged in “unprofessional conduct.”

In addition, why should an individual out-of-state CPA performing compilation or attest services in New York be required to do so through a New York–registered firm if the individual is subject to peer review as part of an unregistered out-of-state firm?

A Call to Action

Near the end of his letter, Weinstein proposes several steps be taken to address many of these issues, and I agree with all of them. I would only add that, in my opinion, there is a compelling need for the New York State Society of CPAs to lobby legislators and regulators to unravel and simplify these overly complex and restrictive statutes, rules, and regulations and return to a practical and workable body of regulations that facilitates the professional practice of accounting while providing appropriate protection to clients and other users of such services.

The Author Responds

Howard Levy's observations and comments are so much in synch with my own concerns that no additional comments on my part are necessary, with one exception. I heartily agree with his suggestion that the NYSSCPA should begin lobbying for a change in the laws governing our profession.

Augmenting his proposal, I suggest that the NYSSCPA Board of Directors establish an ad hoc committee to develop an outline to change the 2009 law. I also volunteer to be a member of this committee. Undoubtedly there are many among our membership who would be willing, if not eager, to serve and testify to the New York State Legislature.