As it stands now, CPAs must often register or pay a fee when practicing in a state in which they are not licensed and have no office or intention to open one. This is true even if the CPA's business is being conducted over the Internet, by phone or via mail service, and the CPA never physically enters the other state. A CPA may also face registration and fee requirements for simply preparing a tax return for a client with an investment in a business in another state.To many CPAs, this restraint on mobility does not seem fair. Hasn't every licensed CPA completed roughly the same educational and experience requirements and taken the same Uniform CPA Exam? Isn't every licensed CPA subject to similar continuing professional education requirements?

Now let's look at the situation from the perspective of state legislators and regulators. If a licensed CPA does not have to register to practice in another state, how are the regulators in this other state to know if the CPA's credentials are properly disclosed, or if the CPA has a professional ethics or disciplinary problem? State legislators may also question the state-by-state uniformity of the requirements necessary to become a CPA. In at least two states, a Bachelor's degree is not required, and some states have no experience requirement. Additionally, some states have two-tier CPA licensing, with separate experience requirements to demonstrate competency to perform attest services.

As these differing perspectives show, CPA mobility is complicated, and reasonable people can disagree on what issues are important and how to handle them. It is essential, however, that the issue be resolved quickly, for two main reasons.

First, the Internet economy has expanded the reach of practicing CPAs. Second, the profession has been working on the issue for almost a decade now. The American Institute of CPAs and the National Association of State Boards of Accountancy first tried to improve CPA mobility in 1998, when they issued a revised model in the third edition of the Uniform Accountancy Act. Under that model, CPAs could work across state borders if their qualifications were substantially equivalent. Subsequently, however - after finding that the UAA's provisions were not being adopted uniformly - the AICPA and NASBA's UAA Committees made further revisions and released a fourth edition in December 2005. The committees are now working yet again to revise UAA Section 23 to lessen restraints on CPA mobility. Simultaneously, the AICPA created a Special Committee on Mobility, whose primary charge was to consider the barriers to individual CPA and firm mobility, and to recommend solutions.

The committee's report was recently made public, and its primary recommendation is the creation of a federal statute mandating mobility across state lines. The recommended provision would need to be enacted by the U.S. Congress. Additional notification, fees, or licensing and registration requirements could not be imposed by states where the CPA is not licensed, and jurisdiction for CPAs would be handled by the "home" state in which the CPA is licensed.

TOP-DOWN OR BOTTOM-UP?

The committee offers a thorough, thoughtful analysis of the problem, and its recommendations provide much fodder for discussion. Especially prescient is its implicit analysis that the accounting profession should begin to look beyond itself to craft uniform legislative language if it hopes to solve the mobility crisis. Devising cooperative agreements with government entities may provide the architecture to solve the "mobility crisis." But while looking outside the profession for a solution is clearly a step in the right direction, the committee may have made a fundamental misjudgment in calling for a federally mandated provision, instead of an interstate compact.

What's the difference?

An interstate compact is similar to a federally mandated provision in that it would require uniform language and would carry the force of law. But the compact is, by definition, a contract written conjointly among states (and occasionally involving the federal government, as well). Compacts are built with a bottom-up, state-by-state approach that fosters a sense of ownership over the law - an important component if it is to be universally implemented and accepted.

A federally mandated provision, on the other hand, would be handed down from on high by the federal government, most likely ignoring state-specific circumstances. Individual states would be required to implement the provision with little or no "buy-in," and limiting a state's authority to impose a notification or fee requirement on CPAs who cross state lines might well conflict with the constitutional right of the states to protect their citizenry. Indeed, one of the reasons that the UAA's substantial-equivalency provisions have not been adopted is precisely because many state legislators believe that they would hamper their ability to protect their citizens.

There's a very big difference between saying to the states, "Here's the problem, now work on a solution together," and "Here's the solution, implement it." The very nature of the compact demands buy-in from all involved stakeholders; every state in the compact would need to reach consensus on its language, and each state would have the option to join. For an interstate compact to become law, the states must propose - and agree upon - exact language. To accomplish this with all 50 states won't be easy, but once it's done, the profession will have achieved a long-lasting solution.

The AICPA Special Committee's reliance on federal legislation would obviate the most significant advantage of an interstate compact: consensus. Both the federal provision and the compact would provide uniform language, the force of law and cross-border enforcement. But the compact's bottom-up approach would enable participating states to have a direct, empowering voice in the process and the results. And although creating a successful compact will require a time-consuming, difficult-to-reach unanimity, the accounting profession has the talent, patience, skill and tenacity to accomplish this goal if it is willing to put the time and work into it.

Some members of the profession have attributed certain weaknesses to the interstate compact that need to be addressed before moving forward. As regular readers of this publication may know, I have been touting the benefits of an interstate compact for some time now (I first wrote about the concept in these pages in 2003). Since then, some people have told me that they are unsure if an interstate compact would work, because only one other profession - nursing - has used it, to somewhat lackluster effect. Since it was formed in 1998, claim the critics, "only" 22 states have joined the Nurse Licensure Compact.

But what these critics fail to realize is that the number of states in the NLC - 22 and growing every year - is still significantly more than the number of states that have uniformly adopted the UAA, which was submitted to the state legislatures in 1998, the very same year as the nursing compact. The number of states that have adopted the UAA's Section 23 mobility language?

Zero.

In addition, there's no good reason why creating and implementing a compact for a profession should be any different from creating and implementing any other type of compact. There are dozens of successful compacts that have achieved buy-in from all 50 states, including the Interstate Compact on the Placement of Children, the Interstate Compact on Juveniles, and the Interstate Compact for Adult Offender Supervision.

Meanwhile, NASBA and the AICPA are still hard at work on revisions to Section 23 of the UAA. As a result, at its December 2006 board meeting, the AICPA "delayed the implementation of the Special Committee's recommendation until such time that the board determines that the newly proposed Section 23 cannot be implemented in a uniform manner."

But without the chance to have a greater voice in the process, is it any more likely that the 50 states that rejected the UAA's former and current Section 23 mobility language would now adopt the forthcoming revisions to Section 23, which would further curtail the ability of states to protect the public?

Is this a case of two dogs both barking up the wrong trees? Perhaps. Working to create a federal, state-based mobility provision and attempting to push every state to uniformly adopt the same statutory or regulatory language both could be futile. The licensing of nearly every profession in the U.S. is handled by the individual states, not the federal government.

An interstate compact, on the other hand, could easily be adopted in small steps; a regional compact could be an excellent way to test out the concept to see if it works. Considering this minimal risk, the compact has enormous upside potential and could very well create real, lasting reform. The interstate compact has been proven effective over and over again as a tool to enable states with diverse interests to solve mutual problems with uniform solutions.

It is changing the very fabric of America's political process.

Lou Grumet is the executive director of the New York State Society of CPAs.

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