Beyond borders: why Ohio leads the nation in breaking down barriers to interstate practice.

AuthorPaul, Kenneth C.

Last January, news swept the nation of a practice privilege requirement for any CPA with clients in California. Coupled with stinging retribution for those who didn't comply, these new regulations panicked CPAs across the nation. What is the future of interstate practice requirements? What does this mean for Ohio CPAs?

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California's new registration and notification program was arguably the most burdensome in the nation. Considering Illinois instituted a similar requirement in 2005, many began wondering whether this is a growing trend.

Are these new regulations the latest example of state accountancy boards flexing their muscles under the guise of protecting consumers in their states? Cynics believe such regulations are just another way for cash-strapped state bureaucracies to shake down unassuming CPAs with long-standing business relationships in other states. It is also possible that the California Board of Accountancy (CBA) was simply guilty of over thinking notification requirements set forth in Section 23 of the Uniform Accountancy Act.

Could state regulators, California in particular, be so out of touch with the realities of cross-border practice that they didn't fully comprehend the impact of their own policies? Is the trend real, or maybe even reversing? It is possible that other states have unveiled similar practice privilege requirements with fewer fireworks, and as a result have gone unnoticed. Ideally, states will follow the lead of the Accountancy Board of Ohio (ABO) and work to break down barriers to interstate practice.

California dreaming

Under a California law passed in 2005, all temporary practice rights for out-of-state accountants engaged in the "practice of public accounting" in California were revoked as of Jan. 1. Any out-of-state CPA engaged in the practice of public accounting in California was required to apply for and obtain "practice privileges" from the CBA. If a CPA failed to do so, they could be fined as much as $5,000 for the first violation, and $10,000 for each violation thereafter. Plus, the CPA would risk conviction of a misdemeanor punishable by up to six months in jail and a $1,000 fine.

In addition to the individual requirement, there was a completely separate registration requirement for firms that required at least one member of the firm to be licensed to practice public accounting in California. If the firm was organized as a limited liability company (LLC), that posed another...

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