The Beef Between the AICPA and Minnesota Over the 150 Hour Rule Heats Up

I’m dating myself here but do you remember the East Coast/West Coast rap beef of the 90s? That’s sort of what’s happening in the profession right now over proposed legislation in Minnesota that offers an alternative to the traditional 150 units of education required for licensure. Except in the case of 90s rapper beefs, Tupac and Biggie were equally popular stars whereas in this case the AICPA encompasses the entirety of the profession in the United States versus Minnesota CPAs and the society that serves them. So it’s like…Tupac vs. the guy behind the bodega with the fire mix tape. That’s not to say Minnesota sucks, rather they are going up against the behemoth that is the AICPA. So I guess the AICPA should be Biggie then. Whatever.

Last week we told you about HF 1749 and SF 1660, bills introduced to the Minnesota legislature that would allow for a second pathway to CPA licensure of 120 units and two years of experience. Let’s just say the AICPA is not happy. And we can demonstrate just how not happy they are based on this letter they sent out to membership on February 15:

Burdensome MNCPA Legislative Proposal Needs Your Attention – Please Act Now

Dear member,

The Minnesota Society of CPAs (MNCPA) is advancing a bill that would result in cross-border restrictions for licensed CPAs and public accounting firms in Minnesota.

The proposal would make it harder for Minnesota CPAs to practice across state lines, physically and virtually. The AICPA has expressed directly to the MNCPA leadership our concerns about any effort that would undermine the profession and the CPA license. We write to you now to alert you to this issue and urge you to share your concerns about the legislation.

What’s at risk: A legal review of the proposed changes has been conducted by the National Association of State Boards of Accountancy (NASBA). As the member organization for all state boards of accountancy in the United States, NASBA spelled out key consequences for Minnesota licensees and firms.

Some of the risks that were highlighted:

For Minnesota CPAs: Any change to Minnesota’s education requirement for licensure means Minnesota CPAs would no longer be able to practice in another US state or jurisdiction without first having a re-assessment of their license qualifications, and in most cases, if not all, apply for a license in that jurisdiction.

CPAs would need to hold multiple licenses and incur additional expenses. They would risk being unable to serve clients in a timely manner, would face administrative burdens, and risk noncompliance of various state laws. These requirements would affect current and prospective Minnesota CPA licensees.

For public accounting firms in Minnesota: Minnesota public accounting firms, no longer being able to practice freely across state lines, would need to provide advance notice and gain a practice permit before signing any client engagement agreement or providing any public accounting service.

Real world impact: What do these consequences mean in the real world? If a CPA in Minnesota serves clients in Illinois, they will need to do the following:

• Submit all college transcripts, experience verification documentation, and exam scores to NASBA to determine if the licensee’s initial licensure qualifications meet the requirements to practice in Illinois.
• At the discretion of the Illinois Board of Examiners, the Minnesota CPA may need to additionally apply for an initial license in Illinois.
• The Minnesota CPA’s continuing professional credits may not transfer to Illinois, and the CPA will need to meet any additional continuing professional education requirements in Illinois.
• The Minnesota CPA may need to meet all relevant or additional ethics requirements in Illinois.
• The Minnesota CPA may incur additional fees in Illinois to practice public accounting.

What you can do: Carefully consider how this proposal would impact you. Some questions to consider include:

• What would the new requirements mean for you, your partners, and employees?
• How would your business suffer, given the loss of mobility to serve clients outside of Minnesota?
• Would the stipulations diminish the value you provide to clients?
• Would you be able to set up or continue a virtual and physical practice with these limitations?

If you have concerns about the consequences to you as a CPA, or to your firm, we ask that you share your concerns with the AICPA by filling out this quick survey. As AICPA members in Minnesota, we value your feedback and will defend the importance of mobility for the profession and the public.

The letter is signed by Going Concern favorite Susan S. Coffey, CPA, CGMA and Anoop Natwar Mehta, CPA, CGMA who is also cool af.

Well the Minnesota Society of CPAs was not content to sit around and let the AICPA take shots at them so they penned a response that went out to their membership on February 23. H/t the tipster keeping us abreast of this developing conflict.

The profession is at critical point. In change management, it is called an inflection point — a time of significant change in a situation, a turning point.

Declining high school graduation sizes, increasing demand for CPAs, increasing retirements and declining number of candidates sitting for the CPA exam are converging to severely restrict the number of CPAs who provide critical financial services and advice to communities, businesses and individuals.

Facts to consider:

1. A survey of MNCPA members shows an increase in the number of new hires who hold accounting degrees with 120 credit hours. Fifty percent of respondents say it is unlikely or highly unlikely staff with 120 hours will sit for the CPA exam.
2. A 2019 study titled, “Occupational licensing and accounting quality: Evidence from the 150-hour rule,” by John Barrios, a professor at the University of Chicago Booth School of Business, found a 15% reduction in first-time CPA exam candidates after the 150-credit requirement was implemented. This decline aggregates over multiple years. The study also found there wasn’t an increase in work quality after the 150-hour rule was adopted. [Ed. note: we’ve written about that study before, see: The 150-Hour Rule is Kinda Bullsh*t, Says Guy]
3. A working paper published in 2020 by Brian Meehan and E. Frank Stephenson from Utah State University found the 150-hour education requirement acts as a barrier to entry, and their analysis suggests that that the additional educational requirement does not enhance candidate quality.
4. We see the impacts across Minnesota with a disproportionate effect on Greater Minnesota as businesses, governmental entities, nonprofits and individuals report they are unable to find CPAs. This is also happening in other states.

The profession is under a great deal of pressure. A system under pressure seeks equilibrium. To increase staff, more firms are moving work to an overseas labor force. Not all workers in other countries are subject to the 150-credit requirement. When entities can’t find qualified auditors, will audit thresholds be raised, which increases the risk to communities? Will regulators allow other options for audit and attest requirements because the CPA profession is unable to meet the market needs?

Legislation introduced last week to make a reasonable modification to broaden licensure requirements is being positioned as destroying mobility and isolating Minnesota CPAs. It feels like the David versus Goliath story. To quote a message sent to MNCPA members by the AICPA: “Any change to Minnesota’s education requirement for licensure means Minnesota CPAs would no longer be able to practice in another U.S. state or jurisdiction without first having a reassessment of their license qualifications, and in most cases, if not all, apply for a license in that jurisdiction.”

Three items to consider about this statement:

1. It is the individual state boards of accountancy that determine who can practice in their respective states. The AICPA and NASBA have significant influence, but they are not the regulators.
2. Is it reasonable that CPAs who currently practice across state lines will have mobility revoked if Minnesota makes a licensing change for future licensees? Some individuals would consider that a significant overreach when a large number of those CPAs have 150 credit hours or were grandfathered in and have practiced across state lines for nearly 15 years.
3. The AICPA and NASBA messaging is focused on mobility as it currently exists, when it should focus on the critical problem: More CPAs are needed and the lack of CPAs is a public protection problem.

The MNCPA introduced legislation because attempts over many years by various AICPA and NASBA constituents to have meaningful discussions about licensure were rebuffed. As the largest national association for CPAs, it is the role of the AICPA to bring stakeholders together. It took legislation to open up the conversation. Mobility is a hurdle to solve, but it is not the problem.

The CPA exam is the common requirement that is the same across all jurisdictions for all CPA candidates. Variations exist in the ethics, experience and educational requirements among states. There are examples and precedents that demonstrate mobility and variations in licensing requirements can and do coexist.

The profession has adapted through many technological and cultural changes. Its long tenure is evidence of this adaptability. For the profession to be adaptable, the requirements for licensure must also be adaptable. If there are no substantial equivalents to the additional 30-college credit hours because it would destroy mobility, the profession is missing a critical element of adaptability.

Introducing legislation is the beginning of a necessary robust and public conversation about CPA licensure. Proposed legislation rarely, if ever, passes as originally introduced. We expect more conversation, new ideas to emerge and the legislation to evolve. Legislation is a tool to challenge regulatory rules when the voices of stakeholders are ignored.

Now is the time for the AICPA and NASBA to focus on the core problem and demonstrate leadership and adaptability in lieu of threats and protecting the status quo. It is important for MNCPA and AICPA members to share their opinions about licensure requirements and about the CPA pipeline. Together, the profession will remain resilient, adaptable and continue to provide the financial stability our communities need to thrive.

The letter is signed by MNCPA president and CEO Linda Wedul who is a certified badass for writing it.

There’s no doubt any changes to the 150 hour rule come with some complications and that conversations need to be had around mobility, and that these changes will not happen overnight much in the same way 150 did not become the rule overnight when Florida became the first state to roll it out in the 80s. The question I have is why are we only just talking about it now? Decisions out of desperation tend not to turn out well except by accident.

FWIW from where I’m standing the people we’ve talked to are in support of a change because clearly what we’re doing is not working, whether or not that means lowering the requirement for licensure is a bit more sticky a subject though most people we talk to are certainly open to it if not in full support. As I was writing this we got a comment saying the 150 hour rule is pointless because students can take physical education — or everyone’s favorite, underwater basket weaving — to meet this arbitrary requirement. The AICPA would have a big more leg to stand on if the additional 30 units were guaranteed to develop young accountants into better educated, more well-rounded candidates. As it stands, they’re just really, really good at weaving baskets underwater.

Anyway, that’s where we’re at with that. Your move, Biggie.