Accounting
New paths to CPA licensure
The ongoing staffing shortage is forcing the accounting profession to do some soul searching. Numerous factors contribute to the pipeline problem, including declining birth rates, a decreasing emphasis on college education, and fewer students majoring in accounting, to say nothing of entry-level salaries that can’t compete with those on offer in a number of other careers.
But of all the factors, the 150-credit hour requirement for CPA licensure has become something of a flashpoint, and has come to be emphasized as particularly prohibitive, which is now raising questions regarding what it takes and means to be a CPA today.
Three primary issues arise with the 150-hour rule: cost, time and lack of structure.
For starters, the cost of the extra year of education isn’t worth the starting salary into which accounting students are graduating. Young accountants are effectively paying more to make less.
According to a 2023 study by the Center for Audit Quality, 61% of nonaccounting majors cited higher starting salaries with other majors as a reason for not choosing to study accounting. Additionally, 57% said they did not want to pursue the fifth year of education required for CPA licensure, and 52% said they could not afford 150 hours and needed to start earning immediately after graduation.
Accounting starting salaries have not kept pace with neighboring professions and industries, like finance and technology. Students can graduate into higher-paying jobs with the same level or education, or less, than is required to start a career in accounting.
“If you just took [the Consumer Price Index] and applied it to the starting salary back in 1982, you’re very close to the starting salary of what the fifth-year students were a year ago, so the profession really hasn’t caught up,” said Edward Wilkins, an accounting professor and former audit partner at a Big Four firm. “Did they ever really get credit for that fifth year if it was just a CPI adjustment?”
The second issue is time. Accounting students and young professionals say the top hurdles to becoming a CPA are the time commitments to study for and take the exam, according to a survey by the Illinois CPA Society. Not to mention the fact that the professions’ spring and fall busy seasons coincide with the busiest parts of college semesters.
Thirdly, within the current framework, the requirements for the final 30 credit hours are not standardized. While some states have specific (and sometimes confusing) credit requirements, others do not even require those credits to consist of accounting courses.
“States, at the end of the day, get to make the call about how they’re going to license people,” said Jennifer Wilson, partner and co-founder of ConvergenceCoaching, and facilitator of the National Pipeline Advisory Group. “That creates an inherent set of nuances and inconsistencies in the 150-hour program.”
And firms aren’t the only ones feeling the effects of the decreasingly popular fifth year.
“What was a boondoggle beginning for the schools has flipped around because the customer goes elsewhere,” said Stan Veliotis, associate professor and chair of accounting and tax at Fordham University. “At the beginning, the customer had to come to you because you were the only one selling this product. Then they realized, ‘You know what, I could just substitute this with something else,’ and that’s what’s happening.”
Alternatives to the 150-hour rule
As the pipeline problem has grown worse and worse, many solutions and initiatives have emerged to reduce the cost and time of education. These programs alone do not fill the pipeline; however, they do provide immediate relief to students, especially those from traditionally underrepresented populations.
One such program is the Experience Learn and Earn program from the American Institute of CPAs and the National Association of State Boards of Accountancy, which is designed to be cost-effective and flexible, and to offer transcript credits, according to Liz Burkhalter, associate director of CPA pipeline at the AICPA and head of the ELE.
The program lets students with four years of college start working at participating CPA firms while taking low-cost online courses from Tulane University to get the the extra credits they need to qualify for CPA licensure. Earning all 30 hours cost approximately $5,000 for the more than 100 students who participated in its pilot year in 2024, with 25 graduating the program.
A private company called CPA Credits provides another cost-effective route to 150 hours. Founded by Jeffrey Chesner in 2020, it offers around 80 self-paced courses costing $675 each. Students taking 10 courses receive a discount, meaning a student could pay around $6,000 to earn all 30 credits through CPA Credits.
“Students just really don’t know exactly what they need or how to fulfill the 150 credit requirements. There are certain state boards which are very difficult to understand,” Chesner explained, noting that the bureaucracy of state boards sometimes makes it hard for students to get their questions answered quickly.
For this reason, CPA Credits also offers free transcript evaluations to help students determine exactly what credits they need. The company provides about 50 evaluations per day, according to Chesner.
Some states have also developed similar initiatives. The Florida Institute of CPAs, in partnership with Nova Southeastern University and three accounting firms, launched the Bridge to CPA pilot program in May 2024.
Meanwhile, the New Jersey Society of CPAs offers numerous initiatives, including The CPA Pathway Apprenticeship with Withum and Seton Hall University, and a work-for-credit program with Saint Peter’s University and PwC.
NJCPA is hoping to draft legislation by spring and pass a bill by the summer to create alternatives to the 150 rule, according to its CEO and executive director, Aiysha Johnson.
“We’re not looking to get rid of 150 because we want to be additive — we want to add to the current framework,” Johnson said. “What we want to do is include an option where a student can graduate with 120 hours plus two years of experience, or a master’s plus one year of experience. That would lend three distinct pathways.”
“Work-for-credit could still be an option within this framework,” she added. But the main priority is “to ensure continued practice mobility, and we think the way to do that is through automobility with specific guard rails, which we would put in our legislation.”
New Jersey isn’t the only state on this wave. The Ohio Society of CPAs announced Jan. 9 that its state governor signed a bill that creates a second pathway to licensure, effective Jan. 1, 2026. The bill requires a bachelor’s degree, two years of work experience, and passing the CPA exam.
The Minnesota Society of CPAs introduced a similar bill in February 2023 that creates two additional pathways: 120 credits and two years of work experience, or 120 credits and both one year of work experience and 120 CPE credits earned concurrently.
Arkansas, California, Indiana, Iowa, New Hampshire, South Carolina and Utah are also at various stages of considering developing and proposing alternative licensure requirements.
However, the profession has mixed opinions on changing licensure requirements. Sixty-nine percent of stakeholders, responding to a survey by NPAG, said that they agreed that changes should be made to components for CPA licensure, while 60% said they were concerned about changes negatively affecting the profession’s reputation.
An image to maintain?
When the AICPA raised the education requirement from 120 to 150 credit hours in 1998, the thinking was that the extra year of education would boost the credibility of the profession and make for a more well-rounded accountant. Now, with talks of changing licensure requirements again, a major concern among some experts is maintaining the prestige of the CPA. Some critics argue that experience-based education may liken accounting to that of a trade apprenticeship.
“The question is, if we allow experience to count, does it make it less professional? And my answer is this: It doesn’t have to,” Wilson said. “Experiential learning delivered under the supervision or by university professionals through an employer is not really cutting corners. That’s different. You’re still getting transcript college credits. That’s not a corner-cutter — it just moves the cost of that education to the employer.”
She says the key is for states to prescribe consistent competencies — skills and abilities that can be demonstrated in measurable ways.
“The reality is that many of our experienced, talented, smart CPAs across the country were graduates when there was the requirement of 120 hours, so a bachelor’s plus two years of experience,” added New Jersey’s Johnson. “I think it’s hard to question the rigor when we have so many professionals out here, so many executives, doing great work to say that that’s something that we should not consider.”
The priority in making changes to CPA licensure is maintaining mobility. The 150-hour rule has been uniform across states for more than two decades, but the mobility and ease of interstate practice starts to fissure here: Inconsistencies are a challenge for employers to manage, especially when employing people in multiple states or serving clients in multiple states. Changes to licensure requirements at the state level mean employers will have to keep track of those differences, similar to how they track differences in CPE, Wilson said.
“We’re going to have some increased complexity back on the service providers and the employers and the CPAs themselves to figure out: What are the rules to practice in this state?” Wilson said.
New reasons to CPA
Beyond making the CPA less prohibitive, the profession also needs new ways to make the CPA appeal to the next generation of talent if it wants to boost the candidate pool. The old arguments just aren’t cutting it anymore.
“The old story was, ‘The fifth year is mandatory, starting salaries are fine, you’re going to make more than all those other business majors midcareer and above, so just wait till then, kid.’ But people don’t want to hear about midcareer,” Wilson said. “No, they want to be able to move out of their parents’ house. They want to be able to afford a car payment and housing and whatever loan payments they may have on college, immediately, and still have a good quality of life.”
But one aspect that has always pulled talent, and still does, is the stability and career mobility the profession offers. The skills an accountant learns are highly transferable and ultra-employable.
“You can gain deep expertise across industries. You can work for startups, government corporations, public accounting. There are so many opportunities that you can make your own,” Johnson said.
And the CPA remains a highly respected credential that displays discipline, rigor and trust. The credential is the third-most valued certification or degree considered when hiring chief financial officers, according to a study by the Pennsylvania Institute of CPAs.
“It’s almost like buying a piece of meat in the supermarket: It’s got the USDA stamp on it, versus a piece of meat that doesn’t have the stamp on it,” Veliotis said. “Maybe it’s still OK, but it doesn’t have the stamp, whereas if it does, it’s more likely that it’s reliable.”
“I don’t think that it’s all about the year-one or year-two experience,” Johnson said. “I think it’s really about the foundation that they can create for themselves, the success that they can have in their communities, and the legacy that they can build within their families.”
It’s important for the profession to communicate a strong message because the consequences of an accounting shortage don’t just impact one accounting firm or industry, she added: “We’re talking about overall threats to corporate governance and financial reporting. And we see that with government agencies and not being able to submit their filings on time. There’s a lot of risk associated.”
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
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The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
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