Deregulation’s state of play and the threats it poses to CPA licensure

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James Cox, an AICPA vice president, explains why efforts to weaken professional licensure are gaining traction in state legislatures. He discusses the role of the Alliance for Responsible Professional Licensing (ARPL) and the risks that deregulation could pose to CPAs and the public.

The episode also highlights how organizations and professionals can stay informed and engaged as debates about professional licensing evolve.

What you’ll learn from this episode:

• Why Cox says that “attacks” on CPA licensure have expanded to new fronts in recent years.
• How state budget pressures and political trends are fueling deregulation efforts.
• How weakening licensing standards could reduce trust in financial reporting and other services.
• What polling shows about public and business support for professional licensure.
• Cox’s recommendations to CPAs to stay vigilant and work with state societies.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome to the Journal of Accountancy podcast. This is Neil Amato with the JofA. Thanks for coming back for another episode. Our topic today is the deregulation threats targeting high-impact professions, including CPAs. You’ll hear that conversation right after this word from our sponsor.

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Welcome back to the show. As I said, our topic is deregulation threats, and here to discuss some of those threats, especially as they relate to CPAs, is James Cox, the AICPA’s vice president–State Advocacy & State Society Relations. James, thank you for being on the podcast. We’re glad to have you.

James Cox: It’s good to see you, Neil.

Amato: Yeah, thank you. Good to see you. Good to hear you. What I’ll ask first is, I mentioned your role at the start. In addition to that AICPA VP role, again, of State Advocacy & State Society Relations, you are also the executive director of ARPL. So what is ARPL? Who is ARPL, and why did it form?

Cox: ARPL is the Alliance for Responsible Professional Licensing. It’s an advocacy coalition of national groups that represent CPAs, engineers, architects, landscape architects, and surveyors. These are high-impact professions that are responsible for the safety of the nation’s financial and physical infrastructure.

The issue really circles around legislative proposals that are intended to weaken or eliminate licensing that are advancing through state legislatures. ARPL really was designed to fill this gap. There was no representation in terms of these professions working together to fill that void. And that’s really where ARPL comes into play.

Amato: That’s great. Thanks for setting the stage on that. What are the main threats as you see them that are posing a risk to CPA licensure?

Cox: Over the last 10 years, the anti-licensing efforts really have evolved. And currently, there are new and more fronts of attack. These proposals weaken underlying qualifications for licensure. They go after boards, similar to boards of accountancy, and work to dismantle the infrastructure on which licensing depends. I think the attack on licensing boards really is the most pervasive trend that we have seen.

Amato: Why is deregulation more top of mind now than, say, five or 10 years ago?

Cox: There’s a potent mix of factors at the state level that are feeding deregulation. The makeup of state legislatures, the philosophical, political views of many legislators lean toward libertarian, free-market thinking. DOGE [the Department of Government Efficiency] — certainly, that was a big buzzword at the federal level. We’ve seen kind of DOGE-ing trickle down to states in terms of looking for efficiencies within state government.

And finally, the budget and workforce pressures that I think state governments are feeling really create a bipartisan approach to deregulation. It is very much a blue and red issue. And I think that mix of issues really is propelling this issue forward more so than we’ve ever seen before.

Amato: Yeah, you mentioned states and state budgets. A lot of people in the United States, they’re always talking about the federal budget, the budget deficit, all those things — spending. But state spending or state revenue shortfalls or budget issues don’t always get the same publicity. What’s the tie-in there?

Cox: When states are facing shortfalls, they often look for areas to cut, certainly. That’s how anyone approaches their own budgets, right? We would look for areas to cut. And when you look at the costs of state government, where can they cut back? Where can they create efficiencies? Where can they streamline processes that the state provides its citizens?

With the pressures on state budgets, we’ve seen the loss of COVID funding. We’ve seen states look at a variety of different mixes of taxes, new tax proposals, all really in the effort to close budget deficits.

Amato: So what are the professions doing to protect their members? And what kind of is the relationship to the patchwork nature of state legislation that makes this more challenging?

Cox: First, I think it’s important to focus on what ARPL is doing. ARPL has created tools for state partners, like state CPA societies, that help shape the way in which we discuss licensing to make the impact more effective with state lawmakers. This includes opinion research, talking points, perspective on the types of bills that are damaging and why. And we’re really trying to get in front of these issues and steer them from the onset.

Amato: Beyond what deregulation might mean for the professionals themselves, what could it mean for the public that relies on these licensed professionals to protect their well-being?

Cox: Fundamentally, licensing exists to protect the public. And weakening or destroying licensing results in weakening the standards that the public has grown accustomed to. It really is that simple.

When you look at the history of licensing in the United States, that’s a consistent theme. It has certainly morphed in terms of economics.

Let’s just take CPAs, for instance. The CPA profession really does underpin the financial workings of this country, and not just the country, but Main Street America, right? When the public thinks of licensing, they don’t think of what a CPA has to do to get licensed. They just know that the CPA is supporting the economy and pushing that wheel of society forward.

There’s a significant amount of trust that the public places in highly technical fields like CPAs and architects. A school board is trusting that a CPA has audited their financials. These are big issues that people don’t often think about in their everyday life.

Amato: Yeah, the Journal of Accountancy recently had a news article on a report about the number of errors in tax returns that come from unlicensed or uncredentialed preparers. As a consumer, you would not trust an unlicensed architect to build your building. So it’s kind of the same thing. It is to protect the public. Anything more you want to add on that?

Cox: Yeah, it’s a big risk when you think about it. Everyday folks really do rely on the services provided by highly technical professionals. And I often think, what would that look like? Could a public company rely on the audited financials? Could a state government rely on that? It really leads to a number of questions and concerns.

Amato: We have addressed several of those concerns, but let’s turn it around a different way. Is there any good news on this front? What has ARPL seen work against — you used the word — attacks, and where does licensing gain traction?

Cox: It’s really fascinating to me, the polling data that ARPL has pulled together over many years. The public and the business community really are on the side of licensing. When people understand what licensing actually does, they appreciate the existence of a strong framework and a strong regulatory system.

Some of the data that we’ve found is that 75% of voters believe that licensing is essential to ensuring professional standards. Seventy-two percent agree that licensing keeps the public safe. From business owners, we’ve heard 90% say licensing protects and enhances their business reputation.

So going back to our previous discussion about these professions underpinning society, there is a belief from consumers that that’s what they’re getting — that there is benefit.

Amato: There are definitely many benefits. Thank you for those stats and that background. We’ve talked about accounting, we’ve talked about other professions, but what’s the main thing that you think CPAs should take away from this topic, this discussion?

Cox: It’s one thing that I consistently try to get across in anything that I speak to on behalf of the CPA profession or on behalf of ARPL, and that’s to be vigilant and stay informed. These attacks on professional licensing take many forms, and they can happen anywhere.

We’ve discussed that it’s not a red or blue issue. And when these issues — I’ll speak to CPAs directly — when these issues do materialize, engage with your state CPA society. State societies are at the forefront of state-level policy issues, and they’re working on members’ behalf to ensure that licensing remains, is efficient, and ultimately serves the consumer. So, I really would suggest that your listeners engage with their state CPA societies on this issue.

Amato: That’s great. James, any particular resources that you’d like to point listeners to as we close this episode? We can link to those in the show notes.

Cox: Sure. I think ARPL’s website is a great resource on this issue. A significant amount of our research is available on the website, so all of the stats that I briefly discussed. I would also have them take a look at state society resources, including their websites and newsletters. There is a lot of information out there for your listeners.

Amato: That’s great. James Cox, thank you very much for being on the JofA podcast.

Cox: Thanks, Neil.