The American Institute of CPAs should be commended for its recent decision to create a Special Committee on Mobility, whose focus will be eliminating impediments to CPAs practicing across state lines.The formation of this high-level committee could not come soon enough. Obstacles blocking CPAs from practicing across state lines - and confusion about the many different accounting standards for public companies, the private sector, nonprofits and government - have plagued the profession for too long.
Inconsistent standards are also responsible for problems involving substantial equivalency, peer review and the divergent reporting standards of the CPA Exam. The AICPA's committee should bring much-needed attention to the issue.
The committee will immediately be faced with trying to find a solution to problems exacerbated by a complex political and financial world. The
Internet economy and increasingly blurry geographic distinctions have expanded the reach of practicing CPAs, but restrictions imposed on the licensure of the profession remain firmly in the hands of state regulators, and are likely to stay there.
It would make sense for the Special Committee on Mobility not to spend much time recommending revisions to the Uniform Accountancy Act or attempting to create a national CPA license - options that will most likely be politically infeasible. Instead, why not consider a solution that has a chance of succeeding and might actually work?
An interstate compact could be the best way to unify divergent accounting standards and remove the complications prohibiting CPAs from practicing across state lines. Implementing a compact is also by far the most politically feasible option.
Since 1789, when the first interstate compact was approved by Congress to enable Virginia and Kentucky to resolve a boundary dispute, Congress has approved more than 300 additional compacts.
At this point, diligent readers of this publication may be forgiven for experiencing déjà vu. I first proposed the idea of an interstate compact in these pages back in 2003, and have written about it many times since then. But the formation of the new AICPA committee has provided the first real opportunity to have a group seriously look at this concept.
For the uninitiated, a brief primer: An interstate compact is an agreement between two or more states, made possible by the consent of Congress. Once a compact has been established, a new government agency is often created to handle its administration, but compacts can also be used as a tool to facilitate coordination between independent authorities in participating states. Compacts carry the force of law, and compacting states are bound to observe the terms, even if they are inconsistent with other state laws, much like treaties between nations.
A slew of organizations around the country have already realized the power of the interstate compact to quickly enact change and achieve their political and business goals.
Some examples of existing compacts include the Multistate Tax Compact, which promotes uniformity of tax systems and helps determine the state and local tax liability of multistate taxpayers (only Delaware, Indiana, Nevada and Virginia are non-members of this compact); the Colorado River Compact, which divides water among seven western states; the Port Authority of New York and New Jersey, a two-state compact; the Driver License Compact, which includes all states except Georgia, Massachusetts, Michigan, Tennessee and Wisconsin; and the National Council of State Boards of Nursing, which in 1997 adopted a professional licensing compact that addresses disciplinary issues and multistate licensure.
There have also been some high-profile instances of organizations proposing an interstate compact. National Popular Vote, a coalition of prominent former congressmen, has recently proposed using the compact as a tool to elect the president by a national popular vote. The story was featured in the New Yorker magazine, and National Popular Vote's plan has been endorsed by The New York Times and the Chicago Sun-Times.
Easier than amendments
The increased consideration of the compact can be attributed to the fact that it makes possible large-scale change without altering the U.S. Constitution - an arduous and nearly impossible task requiring the concurrence of two-thirds of both houses of Congress, plus three-quarters of the state legislatures.
Working to create a national license for CPAs or somehow pushing every state to uniformly adopt the same version of the UAA could be futile. The licensing of nearly every profession in the United States is handled by individual states, not the federal government, and the UAA is being adopted too inconsistently to be an effective solution.
An interstate compact, on the other hand, is effective, viable and could be adopted in baby steps; a regional compact may be an excellent way to test out the concept to see if it works. I hope the Special Committee on Mobility seriously considers the interstate compact, especially considering the minimal risk involved with implementing a regional compact, and the enormous potential upside of a compact to make real, lasting reform.
Lou Grumet is executive director of the New York State Society of CPAs and publisher of The CPA Journal.
