Back 
In boardrooms and university lecture halls alike, the debate over the “150-hour rule” once felt academic. Important, but distant from the day-to-day realities of running an accounting organization. That is no longer the case.
As of early this year, more than 20 states, including California, New York, Illinois, Texas, Ohio, and Virginia, have formally adopted or are implementing alternative CPA licensure pathways commonly referred to as “120+2” (120 credit hours plus two years of experience). What began as a policy conversation has quickly become a structural reality for accounting leaders.
For those of us building teams inside high-growth, tech-enabled businesses, this shift is more than a regulatory update. It fundamentally changes how we recruit, hire, and retain talent.
A New Legislative Landscape
Momentum accelerated in mid-2025 when the American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA) approved updates to the Uniform Accountancy Act (UAA), creating a model framework that allows states to offer alternatives to the “150-hour rule” while preserving mobility under “substantial equivalency.”
California’s AB 1175, signed in late 2025 and effective January 1, 2026, established a permanent pathway (fully operative in 2027) allowing a bachelor’s degree plus two years of supervised experience as an alternative to 150 hours. New York followed with similar legislation in November 2025, marking a major policy win for the NYSSCPA. Other states, including Ohio, Minnesota, Texas, and Virginia, have also activated or finalized similar pathways.
The speed and breadth of state adoption make one thing clear: this isn’t about lowering standards. It’s a belief that real-world experience can be just as powerful as time spent in a classroom.
The Traditional “Three Es”
To understand why this shift matters, we have to revisit the framework that governed the profession for nearly three decades: Education, Exam, and Experience. Under the traditional model, CPA candidates were required to complete:
- Education: 150 semester hours of college credit, effectively mandating a fifth year of higher education beyond the 120-hour bachelor’s degree.
- Exam: Passing the four-part Uniform CPA Examination.
- Experience: One year of supervised professional experience under a licensed CPA.
The “150-hour rule” gained momentum in the 1980s and was widely adopted by the early 2000s. Back then, the rationale was clear:
- Complexity: Expanding tax codes, international accounting standards, and evolving audit requirements demanded deeper preparation.
- Professional Status: Accounting sought alignment with other learned professions, such as law and medicine, which require postgraduate education.
- Exam Performance: Early data, particularly from Florida, the first adopter in 1983, suggested higher CPA exam pass rates among 150-hour candidates.
This rule became the universal language of licensure. Through a concept known as “substantial equivalency,” CPAs licensed in one state could practice across state lines with relative ease. Uniformity created mobility, and mobility supported national firms and growing businesses alike.
Why the “150-Hour Rule” Is Fading
Despite its original intent, the 150-hour rule increasingly became a bottleneck.
The cost of a fifth year, often a Master of Accountancy or 30 additional credits, has been estimated to cost $15,000+ in tuition alone, not including the opportunity cost of delayed full-time employment. Meanwhile, the accounting talent pipeline has shrunk. A recent AICPA trends report noted a significant decline in accounting enrollments and CPA exam candidates over the past several years, raising alarms about long-term interest in the career.
At the same time, broader labor market dynamics have shifted. According to Gartner, 58% of finance leaders reported difficulty attracting and retaining qualified talent, with skills shortages ranking among their top operational risks.
Academic research over the past few years has further complicated the case for 150 hours, with some studies finding no measurable difference in audit quality or disciplinary outcomes between 120-hour and 150-hour CPAs.
The new “120+2” pathway reframes the equation: instead of one additional year in the classroom, candidates complete an additional year in supervised professional practice. Education is reduced to 120 credit hours, and experience doubles to two years. For employers, that means talent enters the workforce 12 months earlier and accrues business-specific experience sooner.
Pros and Cons for Accounting Leadership
From my vantage point, the additional year of supervised work experience is not a compromise. It’s an accelerator.
In high-growth environments, contextual knowledge (how revenue flows through systems, how controls interact with automation, how regulatory expectations evolve) is more valuable than abstract credit hours. A second year embedded in the business often produces stronger operational judgment than a fifth year of elective coursework.
But reform introduces complexity. Mobility remains the key concern. While many states have adopted “120+2” pathways, some still require 150 hours to qualify for “substantial equivalency.” A CPA licensed under a 120-hour pathway in New York may face limitations if asked to lead an audit in a state that has not yet aligned its reciprocity rules. For multi-state or remote-first organizations, this creates a new layer of complexity. Accounting teams now effectively manage two populations:
- National CPAs: Licensed under traditional 150-hour standards with broad mobility.
- State-Specific CPAs: Licensed under alternative pathways with potentially narrower portability.
Simultaneously, we’re witnessing a cultural shift in job design. Increasingly, roles in FP&A, treasury, and revenue operations are listed as “CPA preferred” rather than “CPA required.” In a competitive talent market, rigid credential filters often extend time-to-fill metrics without demonstrable gains in performance.
The lesson is clear: the CPA license remains vital for certain roles. But in many operational finance functions, capability and adaptability are emerging as stronger predictors of impact.
Beyond the CPA: Competing on Culture and Capability
In this new landscape, the “war for talent” has shifted from a battle of credentials to a battle of culture and capability. With the technical barriers to entry shifting in many states, the most competitive accounting teams are those that differentiate themselves. To build a future-ready team, my advice is to prioritize the following:
1. Hire for the Human Advantage
Today’s generation of accountants brings strengths that go beyond traditional metrics like hours of coursework or exam scores. They offer value in different ways. Accounting teams can build a workforce capable of offering more by looking for key traits, like:
- Intellectual Curiosity: With advanced automation and AI handling routine tasks, the accountant’s value lies in asking the “Why?” behind the data. Hire candidates who demonstrate a history of proactively seeking out new ways to solve old problems.
- Automation and AI Literacy: The agentic AI boom has moved AI from a “nice-to-have” to a business necessity. Top hires today will possess AI prowess and an understanding of AI bias detection, ensuring that automated outputs are not only fast but also accurate and compliant.
- Adaptability over Pedigree: As CPA pathways expand, accounting teams should prioritize candidates who can pivot between specialized roles (e.g., from tax compliance to tech-driven audit) over those who simply have the most credit hours.
2. Retain Through a Tech-First Culture
Top-tier talent (especially the “120-hour” cohort entering the workforce a year earlier) will not stay in roles that feel like digital paper-pushing. Retention will be driven by your tech stack experience, like:
- Adopting Top-Tier Automation Solutions: High-performers are attracted to environments that use advanced technology systems. When a business automates the highly manual parts of the job, like accounts payable, it signals to talent that their brainpower is valued for its strategic, not clerical, potential.
- Offering a Safe Place to Experiment: A true culture of modernization requires a “safe to experiment” mindset. Accounting leaders must provide their teams with the opportunity to question “the way we’ve always done it” and pilot modern workflows.
The Strategic CPA Pivot
The shift to “120+2” is not a lowering of standards. It’s a recalibration of where we are now—less time in a classroom and more time in supervised practice. As accounting leaders, we are architects of a more dynamic talent pipeline. We must track mobility implications, redesign job requirements, and invest in practical development frameworks that transform two years of experience into two years of mastery.
Licensure reform has expanded the entry point. But what sustains performance is not only the pathway—it’s the environment. If we hire for curiosity, prioritize technological fluency, and create cultures where experimentation is encouraged, we will not merely adapt to regulatory change. We will build accounting teams capable of navigating complexity that no credit-hour requirement alone could solve.
The future CPA will not be defined by the “150-hour rule” or “120+2,” but by how effectively they translate their skills into action. And if we approach this shift with intention by rethinking how we hire, develop, and empower our teams, we won’t just be filling roles. We’ll be building the next generation of strategic finance leaders.
