Core Dynamics

  • California's AB 1175 bill aims to provide an alternative path to CPA licensure. According to a social media post from the California Board of Accountancy, the bill was sent to Governor Gavin Newsom's office after passing the state Senate on Tuesday, and the governor has 30 days to sign it into law.
  • The legislation received unanimous support in the Senate, passing after a third reading, according to records on the California Legislature's website. Previously, the state Assembly passed the bill on May 5 with 70 votes in favor, 0 against, and 2 'no vote recorded' (NVR).
  • Following this year's wave of CPA licensure reform bills, the new California rules would allow applicants to meet licensure requirements through a new path, including completing a bachelor's degree, two years of work experience, and passing the CPA exam. If signed into law, the new rules would take effect on January 1, 2027; while the current path requiring 150 semester units of college credit, one year of experience, and passing the CPA exam would be repealed on January 1, 2029, according to a July bill analysis.

In-Depth Analysis

The number of states that have enacted legislation providing alternative CPA paths is approaching half. By the end of this year, California, along with Massachusetts, New Jersey, and New York, are considered likely to codify similar CPA path bills, which would bring the total number of states with new laws from the current 21 to 25. Similar to California, New York's law has been approved by the legislature but is still awaiting the governor's signature.

California's bill has been closely watched by licensure policy advocates because the state's law is expected to impact many local businesses and candidates and help drive momentum for licensure reform.

'It's exciting to see this progress,' Eric O'Link, board chair of the Minnesota Society of CPAs, said in an interview Wednesday. The society was a pioneer in pushing for licensure reform in the state as a solution to the accounting talent shortage. 'Having large states involved is helpful.'

The bill would not only eliminate the 150-hour college credit rule (which effectively amounts to a fifth year of higher education that some candidates do not complete), but O'Link also said that if more states adopt the new rules, it would also make it easier for CPAs to practice across state lines.

California's new legislation would also adjust the requirements for out-of-state CPAs to practice in California.

'The bill revises California's current practice privilege, removing the current requirement for the California Board of Accountancy to determine 'substantial equivalency' of education and experience for CPAs whose principal place of business is not in California, and instead directly accepting licenses issued by other states as authorization to practice,' an August bill analysis stated. Meanwhile, CPAs practicing in California would still need to be employed by firms registered with the California Board of Accountancy and meet other specific requirements.

The California Board of Accountancy and the California Society of CPAs did not respond to requests for comment.

The state bill passed the Senate at the last minute. As previously reported by CFO Dive, if it had not passed by September 12, the legislation would have had to be reintroduced next year.

To track CPA licensure reform developments, see CFO Dive's related tracking topic.