CPA Out-of-state licensing

Tuesday, January 31, 2006

Q&As from the California Board of Accountancy

Effective January 1, 2006, the new practice privilege rules went into effect in California. The Board of Accountancy has issued a revised set of questions and answers that are available on their website. Here is a direct link to those Q&As:

I noted a couple of interesting issues contained in the California Board of Accountancy Q&As.

Specifically for California CPAs

Q: I am a California CPA and prepare tax returns for a few clients in other states. Do other states require a practice privilege in order to continue to serve these clients?

A: The requirements to practice public accountancy vary from state to state. It is your responsibility to comply with the laws and requirements of any jurisdiction in which you practice. Therefore, it is suggested you contact the relevant state board(s) to determine what is required. Unauthorized practice in another state can be cause for discipline against your California license.

Specifically for out-of-state licensees with California clients

Q: I’m a CPA in another state and do not plan to be in California. I do only one tax return for a California client. Do I need a California practice privilege?

A: Yes, in order to provide public accounting services to clients who reside in California you will be required to obtain a California practice privilege or obtain a California CPA license. Preparing tax returns as a CPA is a service that falls within the definition of the practice of public accountancy contained in Section 5051 of the California Accountancy Act.

If tax returns are prepared in the name of a firm, the firm would also need to be registered in California. You can visit the Board’s Web site at: to review the firm registration requirements and obtain the application.

However, Section 5054 of the California Accountancy Act allows for a narrow exception from the practice privilege requirements for the preparation of tax returns for clients who are individuals (natural persons) or the estate of individuals (natural persons) who were clients at the time of death.

The exception provides that an individual or firm holding a valid and current license, certificate, or permit to practice public accountancy from another state may prepare tax returns for natural persons who are California residents or estate tax returns for the estates of natural persons who were clients at the time of death without obtaining a permit to practice public accountancy issued by the Board provided that the individual or firm does not physically enter California to practice public accountancy pursuant to Section 5051, does not solicit California clients, and does not assert or imply that the individual or firm is licensed or registered to practice public accountancy in California.

For a complete discussion of the new California rules on practice privilege go to: