The New Path to CPA: Beyond the 150-Hour Rule
Yes, the 150-hour rule for CPAs is changing. In May 2025, the AICPA and NASBA approved updates to the Uniform Accountancy Act (UAA) that formally added a third licensure pathway: a standard 120-semester-hour bachelor’s degree in accounting plus 2 years of supervised professional experience. More than half of U.S. jurisdictions had already enacted or were in the process of enacting this alternative by mid-2026. The traditional 150-hour requirement remains available but is no longer the only route to the CPA credential.
Why the 150-Hour Rule Was Created, and Why It Is Now Under Pressure
The 150-hour education requirement became a fixture of U.S. CPA licensure in the 1980s and 1990s, championed as a way to raise the intellectual rigor of the credential and align accounting with other licensed professions like law and medicine. The idea was straightforward: 120 semester hours earned through a standard bachelor’s degree leave little room for advanced accounting coursework, and 30 additional hours, usually satisfied through a master’s program or a fifth undergraduate year, gave candidates deeper technical grounding before entering practice.
For decades, this model held. But the profession is now confronting a supply crisis that the 150-hour barrier has made significantly worse.
The Numbers Behind the Shortage
The accountant shortage is structural, not cyclical. The AICPA’s 2025 Trends Report found that U.S. schools awarded 55,152 accounting bachelor’s and master’s degrees in the 2023-2024 academic year, a roughly 20-year low and a 6.6% drop from the prior year. The Bureau of Labor Statistics projects about 124,200 accounting and auditing job openings annually over the 2024-2034 period, meaning the profession needs to hire far more people than it graduates. The AICPA has reported that roughly 75% of currently licensed CPAs are within 15 years of retirement age, and more than 300,000 accountants and auditors left the field between 2019 and 2022, a decline of about 17% from the profession’s peak. Industry staffing data indicates that finance roles requiring a CPA now take an average of about 73 days to fill, roughly 41% longer than comparable positions without the credential requirement.
The 150-hour requirement sits at a specific friction point in this equation. Research consistently shows that the cost and time of a fifth year of education, without a corresponding salary premium in early career, causes a meaningful share of accounting students to exit the pipeline before taking the exam. The rule was designed to raise the bar; in practice it has also narrowed the gate.
The New UAA Framework: Three Pathways to Licensure
In July 2025, NASBA and the AICPA published the ninth edition of the Uniform Accountancy Act, codifying three distinct routes to CPA licensure. This followed the May 2025 approval of model legislation that added the new pathway. States are not required to adopt the UAA verbatim, but the model legislation gives state boards a tested framework to work from.
Pathway 1: The Traditional 150-Hour Route
A bachelor’s degree with an accounting concentration, plus 30 additional semester hours (reaching 150 total), plus 1 year of supervised professional experience, plus passage of the Uniform CPA Examination. This pathway remains fully valid and available.
Pathway 2: The Graduate Degree Route
A post-baccalaureate degree (master’s or higher) with an accounting concentration, plus 1 year of supervised professional experience, plus the CPA Exam. This effectively mirrors the intent of the 150-hour rule for candidates who pursue a full graduate credential.
Pathway 3: The New 120+2 Alternative
A bachelor’s degree with an accounting concentration (120 semester hours, the standard four-year degree), plus 2 years of supervised professional experience, plus the CPA Exam. This is the pathway that represents the structural shift. The trade-off is explicit: candidates who skip the additional education make up for it with an extra year of practice-based experience before the license is granted.
The experience requirements under all three pathways are determined at the jurisdiction level, meaning states set the specifics, including whether experience must be in public accounting, whether it can span industry or government roles, and how supervision is documented.
State Adoption: Where Things Stand in 2026
As of mid-2026, state adoption of a 120-credit pathway is broad but uneven. Some jurisdictions moved quickly after the UAA update was published; others are still working through their legislative and rulemaking processes. Industry trackers indicate that roughly 28 jurisdictions had a bachelor’s-plus-two-years pathway available by mid-2026, with several more enacted on future effective dates and additional bills in progress.
States that have enacted or made effective a 120-credit-plus-experience pathway include Ohio (House Bill 238, signed January 2025), Virginia (effective January 1, 2026), and Minnesota. Texas established its Pathway B with a baccalaureate degree, 120 semester hours, and two years of experience, effective August 1, 2026. Other jurisdictions, including Connecticut, Pennsylvania, South Carolina, New Jersey, and additional states, have enacted or advanced similar legislation, and industry analysts project that more than 40 jurisdictions will offer a 120-credit pathway by the end of 2026.
Because each state board sets its own effective dates and coursework details, status can change quickly. A handful of states had not yet enacted enabling legislation as of this writing. Candidates should always confirm current requirements with their specific state board of accountancy before making education or timeline decisions.
The UAA also includes safe harbor language protecting CPAs who were licensed under the older education requirements as of December 31, 2024. Existing license holders are not affected by the changes.
What Changed Beyond Education Hours: Individual Mobility
The 9th edition UAA also addressed an underappreciated problem: interstate practice. Under the prior model, a CPA licensed in one state could practice in another through a state-to-state mobility framework, but that framework was tied to whether the home state’s requirements met a threshold that was increasingly hard to apply as pathway rules diverged across states.
The updated UAA shifts mobility from a state-based construct to an individual-based practice privilege. A CPA who meets the requirements in their home jurisdiction will have practice privileges in other states on an individual basis, regardless of whether those states have adopted the same pathway configuration. This keeps the national credential genuinely national as the patchwork of state rules grows more varied.
For firms operating across markets, including those serving mid-market companies with multi-state footprints, this distinction is meaningful. The ability to staff an audit or assurance engagement with licensed professionals regardless of where a client operates depends on mobility rules working cleanly. The shift to individual-based privilege makes that less dependent on whether every state has aligned its education rules.
The CPA Exam Has Already Changed: CPA Evolution
The licensure pathway changes arrive alongside a parallel redesign of the CPA Examination itself. The CPA Evolution initiative launched in January 2024, replacing the prior four-section exam with a new structure built around 3 core sections and 1 discipline section of the candidate’s choice.
The 3 required core sections are:
- Auditing and Attestation (AUD)
- Financial Accounting and Reporting (FAR)
- Taxation and Regulation (REG)
Candidates then choose one discipline section from:
- Business Analysis and Reporting (BAR)
- Information Systems and Controls (ISC)
- Tax Compliance and Planning (TCP)
Pass rates through 2025 reflect the adjustment period typical after any major exam redesign. FAR and BAR posted cumulative 2025 pass rates around 42%, while TCP reached roughly 78%. Across all sections, pass rates improved year-over-year as candidates and review providers calibrated to the new format. The exam’s emphasis on higher-order judgment and technology skills reflects where the profession is heading, not where it has been.
What This Means for Future CPAs, Firms, and Their Clients
For Candidates
The 120+2 pathway removes a cost and time barrier that deterred a meaningful share of accounting graduates from continuing to licensure. The trade-off is real: 2 years of supervised experience rather than 1 means a slightly longer pre-license career phase. But for candidates who want to enter the workforce and earn while building toward the credential, that trade-off is often preferable to a fifth year of tuition.
Candidates considering the 120+2 route should verify that their target state has enacted enabling legislation, confirm how their employer’s roles qualify as supervised experience under that state’s rules, and plan their CPA Exam timeline accordingly. The exam itself does not vary by pathway, so preparation requirements are identical regardless of the education route taken.
For Accounting Firms and Finance Teams
A broader pipeline is straightforwardly good for employers. Firms that can recruit from candidates who pursued the 120+2 pathway have access to a larger pool of qualified staff who may also carry less student debt burden, potentially improving retention at the early-career levels where turnover is most costly.
The changes also affect how firms think about audit quality and talent development. An additional year of supervised experience under the 120+2 pathway means entry-level license holders may arrive with more practical exposure than their counterparts who satisfied the 150-hour route with coursework alone. How firms structure that supervised experience, and what it counts toward, will matter more as the alternative pathway becomes common.
For the Profession’s Long-Term Trajectory
Most analysts characterize the accountant shortage as structural through at least the late 2020s. Demographic pressure, a retiring workforce, and a decade of enrollment declines created a deficit that will take years of sustained pipeline growth to reverse. Early data from the National Student Clearinghouse shows 12% year-over-year enrollment growth in accounting programs in the 2024-2025 academic year, which is an encouraging sign. Licensure reform removes a barrier to converting those students into licensed professionals.
The long-term picture also includes the role of technology. AI-native firms can operate more efficiently per CPA, which eases some of the capacity pressure. But this does not eliminate the demand for licensed professionals; it changes the leverage ratio. The credential’s value, rooted in legal authority to sign audit opinions and attest to financial statements, does not diminish because AI assists in the work.
Frequently Asked Questions
Is the 150-hour rule for CPAs going away?
The 150-hour rule is not being eliminated. It remains one of three valid pathways under the updated Uniform Accountancy Act, alongside a graduate degree pathway and a new 120+2 pathway. The traditional 150-hour requirement is no longer mandatory in states that have adopted the alternative, but it is still a fully recognized route to licensure.
What is the 120+2 CPA pathway?
The 120+2 pathway requires a 120-semester-hour bachelor’s degree with an accounting concentration (the standard four-year degree), passage of the Uniform CPA Examination, and 2 years of supervised professional experience, rather than the 1 year required under the 150-hour pathway. It is available in states that have enacted the updated Uniform Accountancy Act model legislation.
Which states have adopted the alternative CPA licensure pathway?
As of mid-2026, roughly 28 U.S. jurisdictions had a 120-credit-plus-two-years pathway available, with more enacted on future effective dates or working through legislation. Confirmed examples include Ohio, Virginia (effective January 1, 2026), Minnesota, and Texas (Pathway B, effective August 1, 2026), among others. State adoption is ongoing, and candidates should confirm current requirements with their specific state board of accountancy.
Does the 120+2 pathway use a different CPA exam?
No. The Uniform CPA Examination is the same regardless of which education pathway a candidate uses. All candidates must pass 3 core sections (AUD, FAR, REG) plus 1 discipline section (BAR, ISC, or TCP) under the CPA Evolution exam format that launched in January 2024.
Can a CPA licensed under the 150-hour rule still practice across state lines?
Yes. The updated UAA includes safe harbor language for CPAs who were licensed as of December 31, 2024 under prior education requirements. The model legislation also shifts interstate practice to an individual-based practice privilege framework, which preserves national mobility as state licensure rules increasingly vary.
Why did the AICPA and NASBA change the CPA licensure requirements?
The primary driver is a documented accountant shortage. The AICPA’s 2025 Trends Report found accounting degree completions at roughly a 20-year low, while the Bureau of Labor Statistics projects about 124,200 annual openings for accountants and auditors. Research indicated that the cost and time burden of the extra year required to reach 150 hours was a meaningful exit point in the pipeline. The alternative pathway is designed to reduce that barrier without lowering the credential’s technical or professional standards.
Filed under: Firm & Profession Trends