Reciprocal licensing: A new interpretation of an old law

By Carol W. Kirwan, CPA
MACPA Director of Technical Services and Regulatory Affairs

It is a familiar story. A CPA with a valid license from another state moves to Maryland, settles into a new home and becomes gainfully employed. With the major accomplishment of changing jobs and moving households completed, the CPA attends to other details, such as getting a reciprocal license in Maryland. It never occurs to the CPA that he or she may not meet the qualifications to become licensed in Maryland. However, too many times at the monthly meeting of the Maryland State Board of Public Accountancy I hear a report on reciprocal license applications and transfer of grade applications that have been denied for lack of appropriate courses.

Last month I heard a bit of good news concerning a similar situation. I witnessed a hearing on an application for a reciprocal license. The applicant held a valid CPA license from another state, but was denied reciprocity because she lacked three credit hours in one specific subject that was required by Maryland at the time she received her license in the other state. The Board has no room for leniency on the requirements. The law was created to make sure that someone from another state would not have an advantage over a Maryland candidate seeking the same license. It requires the individual to meet Maryland's licensing requirements in effect "at the time the applicant was licensed by the other state or country." That means it does not matter if you meet the license requirements in effect when you apply for the reciprocal license. It also means it would not help to go back and get any of those missing courses now. Try as they might, I have not seen anyone bend that law.

The applicant pleaded her case and asked how it might be possible to obtain the license in Maryland at this point. A new law was passed this year that allows applicants to obtain a reciprocal license if they have practiced public accounting four out of the most recent 10 years, called the 4-in-10 rule. (The law used to require five out of 10 years.) The new law also changed the requirement so that the years begin counting after passing the examination. (It used to be you had to have your license first.) That is good news for many, but not for this candidate. Her prior experience was in industry, not public accounting. And any experience she may gain from working in public practice in Maryland could not count toward the 4-in-10 rule, because that must be gained outside Maryland in the state where the applicant is licensed.

So what is the good news? It seemed in this case as in so many others that the only alternative was to obtain the missing courses and take the exam again. No one wants to do that. No one should have to. Matthew Lawrence, legal counsel to the Board, offered an option we had never known possible before. He explained that the applicant could obtain the missing course, obtain another license in a different state where she does meet their qualifications and then apply to Maryland for a reciprocal license. The applicant would have to be certain she was in compliance with the requirements in Maryland law at the time she obtains the license in the new state. This is a new interpretation of the law that will be very important to CPAs seeking reciprocal licenses in Maryland, allowing out-of-state CPAs to obtain reciprocal licenses more easily.

It was asked, since the computer science requirement has been dropped, should someone who is applying for a reciprocal license be required to have taken this course? The law requires that one must meet the requirements at the time they are licensed in another state, in compliance with the law in effect at that time. Any and all courses required by law would need to be met. This clearly demonstrates the need for substantial equivalence in all 54 jurisdictions.

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