Q&A with the California Board of Accountancy on the Landmark CPA Reform and California CPA License Requirements for Out-of-State Residents

In October 2025, Governor Gavin Newsom signed Assembly Bill (AB) 1175 into law — a significant reform that reshapes how Certified Public Accountants (CPAs) are licensed and regulated in California, including important updates to California CPA license requirements for out of state residents. Sponsored by the California Board of Accountancy (CBA) and authored by Assembly member Jacqui Irwin (D–Thousand Oaks), this new legislation takes effect on January 1, 2026, marking one of the most meaningful updates to California’s CPA requirements in decades.

We’ve compiled answers to some of the most important questions surrounding AB 1175, helping current and future accountants — as well as firms and clients — understand what’s changing, when it happens, and why it matters, including implications for California CPA license requirements for out of state residents.

What is AB 1175, and why is it considered a landmark bill?

AB 1175 is a modernization bill designed to streamline California’s CPA licensure process and improve professional mobility for out-of-state CPAs. For decades, the profession has debated how best to balance accessibility with rigorous consumer protection.

This legislation strikes that balance by removing unnecessary educational barriers, updating experience requirements, and creating a more flexible system for CPAs licensed in other states to practice in California under the updated California CPA license requirements for out of state residents.

The law is significant because it responds directly to the changing realities of the accounting profession — including workforce shortages, cost-of-education challenges, and the increasing need for cross-state mobility in a digital economy.

When does AB 1175 take effect?

The bill becomes effective on January 1, 2026, but the new CPA licensure requirements apply to candidates starting January 1, 2027.

This transition period gives universities, employers, and aspiring accountants time to adapt their programs and expectations.

How do the new CPA licensure requirements differ from the old ones, including California CPA license requirements for out of state residents?

Under the previous system, candidates were required to complete 150 semester units of education, typically including a fifth year of college coursework beyond a bachelor’s degree.

Starting in 2027, the path to CPA licensure will include:

• A bachelor’s degree with an accounting concentration of courses,
• Two years of general accounting experience, and
• Successful completion of the CPA Exam.

Importantly, the 150-unit rule has been eliminated. This means candidates will no longer need to pay for an additional year of education — a requirement that often delayed entry into the profession and discouraged qualified students from pursuing the CPA credential.

Why was the 150-unit requirement removed?

The decision to remove the 150-hour rule was driven by concerns over cost and accessibility.

Many candidates found the extra 30 units — often unrelated to core accounting competencies — to be an expensive and time-consuming hurdle. The CBA and other stakeholders recognized that this fifth year could create a barrier to entry for talented students from diverse socioeconomic backgrounds.

By returning to a 120-unit bachelor’s degree model paired with meaningful professional experience, California aims to maintain high standards while expanding access to the profession.

What changes are being made to the experience requirement?

AB 1175 introduces more flexible options to satisfy the two-year experience requirement.

Previously, CPA candidates often had limited paths to qualify — typically through supervised work under a licensed CPA in public accounting. The new model allows for broader qualifying experience, potentially including accounting roles in industry, government, or education, provided they meet CBA standards.

This change recognizes the variety of career paths that develop accounting competence and helps ensure that California continues to attract a diverse and skilled workforce.

How will these changes affect the supply of CPAs in California?

California, like the rest of the nation, faces a declining pipeline of CPA candidates. The new structure is expected to make licensure more attainable and appealing, especially for younger professionals and mid-career accountants who previously viewed the 150-hour rule as prohibitive.

By modernizing both education and experience pathways, the state hopes to strengthen the profession’s future and ensure that consumers continue to have access to competent, ethical, and well-trained CPAs.

What about out-of-state CPAs — how does AB 1175 affect mobility?

AB 1175 also modernizes California’s mobility provisions, which govern how CPAs licensed in other states can practice in California without obtaining a separate California license.

Under the new system, California adopts a “CPA = CPA” mobility model, similar to how a driver’s license works across states. If you’re licensed as a CPA in another U.S. jurisdiction, you can practice in California — as long as your home state’s standards align with California’s consumer protection requirements, consistent with California CPA license requirements for out of state residents.

This new flexibility enhances the state’s ability to attract qualified professionals while maintaining oversight. If another state later lowers its standards or fails to meet its regulatory obligations, the CBA retains authority to remove that state from the no-notice mobility program.

Why is mobility reform important for the profession and consumers under California CPA license requirements for out of state residents?

Accounting today is increasingly national and digital. Many firms serve clients across multiple states or provide virtual services that cross state lines.

Mobility reform ensures that qualified CPAs can meet client needs efficiently without redundant red tape. At the same time, it safeguards the public by giving the CBA clear authority to monitor compliance and take corrective action when necessary.

This balance of access and accountability helps both businesses and consumers — encouraging economic growth while maintaining the profession’s integrity.

What steps come next in implementing AB 1175?

Now that AB 1175 is law, the CBA will submit a regulatory package to implement and clarify its provisions. This process includes drafting, proposing, and adopting regulations that translate the bill’s text into specific administrative rules.

These regulatory developments will be available for public review, and progress updates will be posted on the CBA website. Stakeholders — including educators, employers, and licensees — are encouraged to follow along and provide input during the rulemaking phase.

How can CPA candidates and firms prepare for these upcoming changes?

While the new requirements don’t take effect until 2027, now is the time for strategic planning:

• Students should work with their advisors to plan coursework under the updated education model.
• Employers may want to review their training programs to align with the expanded experience options.
• Out-of-state firms should confirm that their home state licensure standards meet California’s new mobility criteria under California CPA license requirements for out of state residents.

By preparing early, both individuals and organizations can ensure a smooth transition when the new rules take effect.

Expanding Opportunities for Out-of-State Accountants: Why Form a California Professional Accountancy Corporation

The passage of AB 1175 doesn’t just modernize licensure—it opens the door to an entirely new level of cross-state opportunity for the accounting profession. For the first time, California’s regulatory structure explicitly welcomes qualified CPAs from other jurisdictions to practice in the state with greater flexibility, consistent with California CPA license requirements for out of state residents.

Why a California Professional Corporation Makes Sense

Even if you are licensed elsewhere, forming a California Professional Accountancy Corporation (PC) offers important advantages:

Credibility and Market Presence

California clients—especially corporate and institutional ones—often prefer to engage firms that are organized under California law. A domestic entity signals commitment to the market and familiarity with California’s tax, privacy, and consumer-protection environment.

Regulatory Alignment

A California PC operates squarely within the state’s statutory framework for accountancy, ensuring compliance with the California Accountancy Act and the Board of Accountancy’s specific naming, ownership, and ethical-practice requirements.

Tax and Business Efficiency

A properly structured PC allows income splitting among shareholder-CPAs, deductibility of fringe benefits, and potential separation of California-source income from other state operations—all while maintaining professional-liability safeguards.

Scalability and Growth

Whether you intend to open an office, collaborate with California-licensed partners, or simply handle an expanding base of California clients remotely, a professional corporation creates the legal and operational infrastructure to grow confidently.

Why Work with the Law Offices of Gale & Vallance

Our firm has formed dozens of professional corporations for accountants across California. We understand every nuance—from securing name approval with the CBA to drafting shareholder agreements that satisfy both professional and tax requirements.

For out-of-state CPAs, we handle all the cross-jurisdictional details related to California CPA license requirements for out of state residents:

• Verifying mobility eligibility under AB 1175;
• Preparing California-compliant bylaws and ownership structures; and
• Filing with the Secretary of State and Franchise Tax Board for seamless registration.

In short, we make it simple to establish a California footprint while protecting your professional standing and ensuring full compliance.

Start Your California Practice the Right Way

If you’re a CPA licensed outside California and you see the possibilities this new law creates, now is the ideal time to act. Forming a professional accountancy corporation positions you to expand your client base, enhance your brand, and operate under the protection of a well-structured California entity.

Contact the Law Offices of Gale & Vallance at (714) 634-4838 to schedule a consultation and learn how we can help you navigate every step—from entity formation and CBA registration to long-term compliance and tax planning.

Let us help you turn California’s new era of opportunity into a strategic advantage for your accounting practice.

Final Thoughts on California’s CPA Reform and California CPA License Requirements for Out-of-State Residents

AB 1175 represents a forward-thinking shift for California’s accounting profession, with implications that extend beyond in-state candidates to California CPA license requirements for out of state residents. By removing unnecessary educational barriers, expanding practical experience options, and enabling smart mobility for interstate CPAs, the state is helping to build a stronger, more inclusive, and more responsive profession.

As California continues to evolve its standards, one principle remains unchanged: ensuring that the public has access to competent, ethical, and trustworthy CPAs who support the state’s financial health and transparency.