Potential reform in Madison threatens CPA licensure

Over the past five years, protecting the CPA license from deregulation efforts at the state level has become paramount for CPA profession advocates. Much of the debate concerning the deregulation of

By James Cox professions and occupations stems from both state policymakers’ interest in decreasing the regulatory footprint of government and an attempt to create more economic and workforce opportunities for citizens. Additionally, many policymakers contend that professional and occupational licenses hamper a state’s ability to import and retain needed talent in certain sectors, especially health care. This summer, discussions around licensing became more prominent in Madison with the consideration of licensingrelated legislation and the work of the Wisconsin State Legislature’s Study Committee on Occupational Licenses.

A national trend

The Wisconsin State Legislature’s consideration of professional and occupational licensing is part of a national trend that traces back to 2015, with the U.S. Supreme Court’s decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission. The court found that licensee-controlled state regulatory boards must be actively supervised by a neutral state entity for the board to be immune from federal antitrust law. For state boards of accountancy, this neutral state entity is the governor, who appoints members to the board. Even though the ruling directly concerned dentists and was vague regarding the context of active supervision, its ramifications apply equally to other regulatory boards, including state boards of accountancy. Specifically, the ruling puts members of state boards of accountancy at potential risk of being personally sued for actions taken in their official capacity as a board member. This presents a challenge for state boards of accountancy since board members are chosen from the pool of licensees. The Obama Administration also issued a framework for policymakers on occupational licensing that year. The framework recommended several best practices to ensure that licensing protects consumers without placing unnecessary restrictions on employment. It called for limiting licensing requirements to those that address legitimate public health, safety and welfare concerns and the harmonization of licensing requirements across state borders to increase mobility. Subsequently, the Trump Administration built upon the framework, stressing deregulation and convening workshops for state governors to discuss occupational licensing. This message also carried over to the Biden Administration. Since the Supreme Court’s decision, several approaches to curb the regulation of occupations and professions have emerged across the United States. Since January, 46 states considered over 300 bills that focused on the deregulation of some aspect of professional licensing or removing barriers to cross-border practice. The approaches in these bills include the adoption of a concept known as universal licensing, altering the composition of state regulatory boards, requiring regulatory boards to undergo periodic reviews and the adoption of consumer choice provisions. Many states are also examining the consolidation of regulatory boards and agencies due to budgetary constraints as well as examining ways in which license portability and reciprocity can be expanded. Given their uniqueness, it is helpful to understand the most prominent approaches and their impact on the CPA profession.

Over the past five years, protecting the CPA license from deregulation efforts at the state level has become paramount for CPA profession advocates.

As with the reciprocal licensure process for CPAs, the goal of universal licensing laws is the streamlining of regulations for those individuals who move to a new state and want to practice their trade or profession. States that adopt these laws agree to recognize an occupational or professional license granted by another state. Currently, 18 states have enacted universal licensing laws. Unfortunately, if drafted incorrectly, universal licensing laws may not account for existing systems of reciprocity, including the process CPAs use to obtain licensure in other states. Moreover, these laws may not account for systems of cross-border practice such as CPA mobility, in which an individual may simply wish to provide services to clients in another state.

Consumer choice

Another type of licensing legislation under consideration in states is known as consumer choice. Under the concept of consumer choice, any person can practice an occupation or profession without a license if they obtain a consumer’s consent to using an unlicensed person for the work. If enacted, this type of legislation may allow a client to engage the services of an unlicensed person rather than a CPA to perform an attest service. Allowing a nonlicensee to contract with a consumer to provide such services could erode the trusted advisor role CPAs play in the financial system, where financial statements are relied upon every day by banks, insurance companies, governments and private individuals. Consumer choice bills have been considered and defeated in several states, including Missouri and West Virginia.

Sunrise and sunset reviews

Examinations of the regulatory structures that govern occupational licensing through sunrise and sunset reviews are also frequently employed by states. A sunrise review occurs prior to the introduction of a bill and focuses on the advantages and disadvantages of licensing a certain occupation or profession. Conversely, a sunset review provides for periodic reviews of existing occupations and professions to determine how they are working and how they can better serve the public. Upon the completion of a sunset review, legislation must be enacted to continue the licensing of those occupations and professions that were reviewed. According to the National Conference of State Legislatures, 16 states have formal sunrise processes, while 36 states have some form of regulatory sunset process for occupational licenses. Illinois enacted its sunset review process in 1979, requiring all professions and occupations to undergo a review by the governor and the General Assembly every 10 years. This review determines the need for, and public benefits derived from, the regulation of a profession or occupation licensed by the state. The review also examines potential barriers to entry while considering how the absence of regulating a profession or occupation might impact the public health, safety and welfare.

Allowing a nonlicensee to contract with a consumer to provide such services could erode the trusted advisor role CPAs play in the financial system ...

Discussions in Wisconsin

This public policy landscape informs the discussion around occupational licensing currently underway in Wisconsin. Legislators considered several licensing-related bills over the past few legislative sessions. For example, Assembly Bill 902 and Senate Bill 469, both universal licensing bills, were introduced but failed to pass. The bills applied to all professions and occupations regulated by the Wisconsin Department of Safety and Professional Services (DSPS), including CPAs. The main authors signaled they will be reintroducing these measures in 2023, and the Wisconsin Institute of CPAs (WICPA) is working with the authors to ensure the bills acknowledge the existing system of reciprocity for CPAs and remove a residency requirement that is not included under current law. In 2022, the WICPA was also successful in defeating two bills —

The CPA profession in Wisconsin, through the work of the WICPA, has been a leader in promoting the need for responsible licensing systems that protect the public.

Assembly Bill 857 and Senate Bill 824 – which required legislative approval for any change to an examination required for licensure, including the Uniform CPA Examination. The CPA profession routinely undertakes a practice analysis to make any necessary changes to the Uniform CPA Examination to protect the public. Thus, the Legislature would need to consider these changes prior to the use of the examination in licensing Wisconsin CPAs. If these bills had passed, Wisconsin would have lost substantial equivalency with the other 54 jurisdictions that license CPAs since the current national examination would no longer be in use in the state. The Legislature also formed the Study Committee on Occupational Licenses, which was charged with reviewing the current occupational licensing system administered by DSPS and convened its first hearing in August 2022. The American Institute of CPAs, through the Alliance for Responsible Professional Licensing (ARPL), testified at the committee’s hearing in October. ARPL is a national coalition representing technical professions, including CPAs, architects, engineers and land surveyors. The testimony encouraged committee members to avoid approaching licensing with a broad brush and to instead focus on the aspects of licensing in Wisconsin that are not working. It also called for any recommendations from the committee to acknowledge those systems of cross-border practice and reciprocal licensing that are working. Following its review, the committee issued draft recommendations in November, which include licensing approaches seen nationally that could negatively impact the CPA profession’s successful systems of mobility and reciprocity. The CPA profession in Wisconsin, through the work of the WICPA, has been a leader in promoting the need for responsible licensing systems that protect the public. With reforming the state’s professional and occupational licensing system top of mind for legislators in 2023, the CPA profession must bring a strong voice to these discussions in Madison. All Wisconsin CPAs can play a role in elevating that voice and are encouraged to support the WICPA’s advocacy efforts on protecting the public and capital markets through the CPA license.

James Cox is associate director of state legislative and regulatory affairs for the American Institute of CPAs. Contact him at 202-434-9261 or james.cox@aicpa-cima.com