State Legislative Update: CPA Profession Seeks Action on Firm Mobility and Attest 

Published June 20, 2017

State namesThe AICPA’s State Regulation and Legislation Team tracked over 300 bills impacting the CPA profession at the state level in 2017.  Multiple states adopted full CPA firm mobility, the comprehensive definition of attest, and new peer review requirements.  State-level taxes on professional services also continue to threaten the profession.

CPA Firm Mobility

Continuing the trend from 2016, several states introduced legislation to adopt full CPA firm mobility, also known as mobility for attest services.  The legislation allows CPAs and CPA firms to offer attest services such as audits and reviews without having to get a reciprocal license in each state.  Governors in three states, Iowa, Montana and New Mexico, signed firm mobility legislation into law, bringing the total number of states with firm mobility to 19.  Legislation is awaiting governors’ signatures in Florida, Illinois and Missouri.  The Massachusetts, Michigan and New Jersey legislatures are also considering firm mobility bills.

In today’s marketplace, both businesses and consumers operate across state lines.  Firm mobility will continue to be a key profession issue in 2018 as it gives the pubic more choices in services provided by CPA firms and allows consumers to find a CPA that best meets their needs.

Comprehensive Definition of Attest

Over the past five years, almost every state has adopted the comprehensive definition of attest.  In 2014, the AICPA and the National Association of State Boards of Accountancy released a more comprehensive definition of attest in the Uniform Accountancy Act that ensures important public protection for services performed under the AICPA’s Statements on Standards for Attestation Engagements to CPAs.  The profession provides the public with a consistent standard of competence and regulatory oversight, whereas allowing non-CPAs to use AICPA standard reporting language risks misleading the public into believing they are bound by the same oversight and quality control as CPAs.

In 2017, Arkansas, the District of Columbia, Idaho, New Mexico, Utah and Vermont all adopted the comprehensive definition of attest.  Missouri and New Jersey still have pending legislation, with Missouri’s bill pending the governor’s signature.  Forty-six states now have the updated definition, with more expected to move forward with adoption in 2018.

Peer Review

Arkansas Governor Asa Hutchinson signed legislation in 2017 to require CPA firms to be enrolled in a peer review program as of January 1, 2019, though the bill does exclude licensees who perform compilation or preparation of financial statement services as their highest level of service from the peer review requirement.

Wisconsin has pending legislation to allow the Accounting Examining Board access to peer review documents through the Facilitated State Board Access Program.

Taxes on Professional Services

Taxes on professional services continues to threaten the CPA profession at the state-level.  Many states are seeking new and additional revenue sources, resulting in proposals to tax services, including those provided by CPAs and CPA firms.  Legislatures in California, Georgia, Indiana, Kentucky, Louisiana, Missouri, Montana, Nebraska, Oklahoma, Utah, West Virginia and Wyoming considered proposals in 2017 that would create new taxes on professional services.  While none of the bills succeeded, the AICPA expects the issue to return in 2018.

Currently, Hawaii, New Mexico and South Dakota are the only states that impose a tax on accounting services.  The South Dakota legislature introduced a bill in 2017 to raise the tax on professional services; however, the bill failed to pass.  Accounting firms in Connecticut and Delaware are taxed on services such as data processing through a gross receipts tax.

Taxes on professional services cause a rise in compliance costs, leading to higher costs for consumers and small business owners.  CPA firms regularly practice across state lines, meaning organizational and technical problems for administering a sales tax.  Sales taxes can also cause businesses to take their accounting needs to firms outside the state, putting accounting firms in the state at a distinct disadvantage.


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