Michigan Office of Administrative Hearings and Rules

Administrative Rules Division (ARD)

611 W. Ottawa Street

Lansing, MI 48909

Phone: 517-335-8658 Fax: 517-335-9512

REGULATORY IMPACT STATEMENT

and COST-BENEFT ANALYSIS (RIS)

Agency Information:

Department name:

Licensing and Regulatory Affairs

Bureau name:

Bureau of Professional Licensing

Name of person filling out RIS:

Weston MacIntosh

Phone number of person filling out RIS:

517-241-9269

E-mail of person filling out RIS:

MacIntoshW1@michigan.gov

Rule Set Information:

ARD assigned rule set number:

2020-30 LR

Title of proposed rule set:

Accountancy - General Rules

Comparison of Rule(s) to Federal/State/Association Standared:

1. Compare the proposed rules to parallel federal rules or standards set by a state or national licensing agency or

accreditation association, if any exist.

Each state creates its own requirements for the profession. There are no parallel federal rules or standards set by a

state or national licensing agency or accreditation association.

A. Are these rules required by state law or federal mandate?

The rules are required to be promulgated under state law by MCL 339.205, MCL 339.308, MCL 339.721, MCL

339.725, MCL 339.726, MCL 339.728, and MCL 339.729, and Executive Reorganization Order Nos. 1991-9, 1996-2,

2003-1, 2008-4, and 2011-4, MCL 338.3501, MCL 445.2001, MCL 445.2011, MCL 445.2025, and MCL 445.2030.

B. If these rules exceed a federal standard, please identify the federal standard or citation, describe why it is

necessary that the proposed rules exceed the federal standard or law, and specify the costs and benefits arising out

of the deviation.

The proposed rules do not exceed a federal standard or law.

2. Compare the proposed rules to standards in similarly situated states, based on geographic location, topography,

natural resources, commonalities, or economic similarities.

The proposed rules are like accountancy standards in the other Great Lake states as well as other states throughout the

United States. According to the National Association of State Boards of Accountancy’s National Qualification

Appraisal Service, all United States jurisdictions are considered to have requirements that are substantially equivalent

to the licensure requirements of the Uniform Accountancy Act (https://nasba.org/licensure/substantialequivalency/).

The proposed rules are consistent with the standards proposed in the Uniform Accountancy Act and the rules where

states regulate the practice of accountancy.

A. If the rules exceed standards in those states, please explain why and specify the costs and benefits arising out of

the deviation.

The rules on licensure, license renewal, continuing education, and relicensure in the proposed rules are similar to the

standards in other states and do not exceed the standards of other states in the Great Lakes region.

MCL 24.245(3)

RIS-Page 2

3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the proposed

rules.

There are no other laws, rules, or other legal requirements that may duplicate, overlap, or conflict with the proposed

rules.

A. Explain how the rules have been coordinated, to the extent practicable, with other federal, state, and local laws

applicable to the same activity or subject matter. This section should include a discussion of the efforts undertaken

by the agency to avoid or minimize duplication.

No coordination is necessary because there are no other federal, state, and local laws that apply to the same activity or

subject matter of the proposed rules.

4. If MCL 24.232(8) applies and the proposed rules are more stringent than the applicable federally mandated

standard, a statement of specific facts that establish the clear and convincing need to adopt the more stringent

rules and an explanation of the exceptional circumstances that necessitate the more stringent standards is

required.

MCL 24.232(8) does not apply because the federal government has not mandated that Michigan promulgate rules for

the regulation of licensed accountants.

5. If MCL 24.232(9) applies and the proposed rules are more stringent than the applicable federal standard, either

the statute that specifically authorizes the more stringent rules or a statement of the specific facts that establish

the clear and convincing need to adopt the more stringent rules and an explanation of the exceptional

circumstances that necessitate the more stringent standards is required.

MCL 24.232(9) does not apply because the federal government does not have standards for the regulation of licensed

accountants.

6. Identify the behavior and frequency of behavior that the proposed rules are designed to alter.

The proposed rules address the following:

R 338.5101: This rule pertains to definitions used in the rule set. The proposed rule is designed to clarify the

meaning of terms used in the proposed rules and remove definitions that are no longer necessary or are duplicative of

definitions found in the Occupational Code.

R 338.5102: This rule pertains to standards of professional practice adopted by reference. The proposed rule uses the

most current standard published and supplies the cost for obtaining copies of the adopted standards from the

department.

R 338.5110a: This rule pertains to the Uniform CPA exam procedures. The proposed rule removes language that

imposes a limited exam window for passing the Uniform CPA exam. The proposed rule is designed to eliminate the

exam window for passing the exam because the national administrator of the exam will allow candidates to sit for the

exam without regard to an exam window.

R 338.5115: This rule pertains to qualifying educational requirements, approved educational institutions, and

adoption of accreditation standards. Reorganization of the rule was necessary to clearly identify the educational

requirements to sit for the Uniform CPA exam. The proposed rule also updates the standards and supplies the cost for

obtaining copies of the adopted standards.

R 338.5116: This rule pertains to educational requirements for the CPA certificate. Reorganization of the rule

involved the removal of different and non-standardized concentration in accounting options, as R 338.5115 addresses

the specifics of the concentration in accounting requirement.

R 338.5210: This proposed rule pertains to license renewals and continuing education requirements.

R 338.5215: This rule pertains to acceptable continuing education. The proposed rule supplies greater clarity of the

requirements and limitations for continuing education activities outlined in the table.

R 338.5230: This rule pertains to the requirements for relicensure. The proposed rule allows an applicant to submit

proof of the required continuing education within one year after filing a relicensure application, if the department

determines that the continuing education submitted with the application is deficient.

MCL 24.245(3)

RIS-Page 3

A. Estimate the change in the frequency of the targeted behavior expected from the proposed rules.

The proposed rules provide greater clarity to licensees about compliance with requirements of the rules and the act.

The proposed rules should make compliance easier for applicants and licensees.

B. Describe the difference between current behavior/practice and desired behavior/practice.

Updating standards, clarifying the documentation that is required to satisfy the licensure requirements, and providing

additional detail related to renewal, continuing education, and relicensure requirements help provide clarity and

certainty of the rules. These proposed changes will make compliance easier for applicants and licensees.

C. What is the desired outcome?

The desired outcome is to supply greater clarity to applicants and licensees to help them follow the licensure

requirements under the act. By making improvements and clarifications to the rules, applicants and licensees should

find compliance easier. In addition, the proposed rules should result in fewer questions, fewer regulatory problems,

and aid with protecting the public.

7. Identify the harm resulting from the behavior that the proposed rules are designed to alter and the likelihood

that the harm will occur in the absence of the rule.

The proposed rules relieve ambiguity about the requirements for licensure, renewal, and relicensure under the act. In

the absence of the proposed rules, applicants and licensees are likely to misunderstand the requirements and will not

be made aware of all of the criteria used by the department for determining compliance with the rules.

A. What is the rationale for changing the rules instead of leaving them as currently written?

The proposed rules primarily update the previously adopted rules and eliminate ambiguous and outdated requirements

to provide applicants and licensees with greater clarity that will assist them with understanding and complying with

the requirements under the rules.

8. Describe how the proposed rules protect the health, safety, and welfare of Michigan citizens while promoting a

regulatory environment in Michigan that is the least burdensome alternative for those required to comply.

The proposed rules supply regulatory requirements for licensure for the practice of accountancy. To protect

Michigan’s citizens, it is important for the proposed rules to provide licensees with clarity about licensure

requirements.

9. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.

R 338.5110: This rule pertains to the Uniform CPA exam. Recission of the rule is necessary because amended

requirements for the exam are now under R 338.5110a.

R 338.5112: This rule pertains to the failure to write the Uniform CPA exam during a specific period. Recission of

the rule is necessary because amended requirements for the exam are now under R 338.5110a.

10. Please provide the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings

for the agency promulgating the rule).

There is no fiscal impact expected on the agency for promulgating the proposed rules.

11. Describe whether or not an agency appropriation has been made or a funding source provided for any

expenditures associated with the proposed rules.

There was no agency appropriation made, and there was no funding source supplied for any expenditures associated

with the proposed rules.

12. Describe how the proposed rules are necessary and suitable to accomplish their purpose, in relationship to the

burden(s) the rules place on individuals. Burdens may include fiscal or administrative burdens, or duplicative

acts.

The proposed rules supply regulatory requirements related to the practice of accountancy. They do not impose more

burden on individuals than is necessary to conduct the statutory requirement of supplying the rules. There is no

identified burden on individuals because of the proposed rules.

A. Despite the identified burden(s), identify how the requirements in the rules are still needed and reasonable

compared to the burdens.

There is no identified burden on individuals because of the proposed rules.

13. Estimate any increase or decrease in revenues to other state or local governmental units (i.e. cities, counties,

school districts) as a result of the rule. Estimate the cost increases or reductions for other state or local

governmental units (i.e. cities, counties, school districts) as a result of the rule. Include the cost of equipment,

supplies, labor, and increased administrative costs in both the initial imposition of the rule and any ongoing

monitoring.

MCL 24.245(3)

RIS-Page 4

The proposed rules do not increase or decrease revenues or costs to other state or local government units.

14. Discuss any program, service, duty, or responsibility imposed upon any city, county, town, village, or school

district by the rules.

The proposed rules do not impose any program, service, duty, or responsibility upon any city, county, town, village,

or school district.

A. Describe any actions that governmental units must take to be in compliance with the rules. This section should

include items such as record keeping and reporting requirements or changing operational practices.

The proposed rules do not impose any program, service, duty, or responsibility upon any city, county, town, village,

or school district.

15. Describe whether or not an appropriation to state or local governmental units has been made or a funding

source provided for any additional expenditures associated with the proposed rules.

The proposed rules do not require state or local governmental units to make added expenditures. Therefore, no

appropriation or funding source is necessary.

16. In general, what impact will the rules have on rural areas?

The proposed rules do not have an impact on rural areas.

A. Describe the types of public or private interests in rural areas that will be affected by the rules.

The proposed rules do not affect rural areas.

17. Do the proposed rules have any impact on the environment? If yes, please explain.

The proposed rules do not have any impact on the environment.

18. Describe whether and how the agency considered exempting small businesses from the proposed rules.

The proposed rules impose requirements on individual licensees rather than small businesses. Even if a licensee’s

practice qualified as a small business, the proposed rules are not expected to have an impact on his or her small

business and the department could not exempt his or her small business because it would create disparity in the

regulation of the profession.

19. If small businesses are not exempt, describe (a) the manner in which the agency reduced the economic impact

of the proposed rules on small businesses, including a detailed recitation of the efforts of the agency to comply

with the mandate to reduce the disproportionate impact of the rules upon small businesses as described below (in

accordance with MCL 24.240(1)(a-d)), or (b) the reasons such a reduction was not lawful or feasible.

The proposed rules impose requirements on individual licensees rather than small businesses. The proposed rules

will have little to no economic impact on individual licensees. As a result, even if a licensee’s practice qualified as a

small business, the proposed rules do not have an economic impact on his or her small business.

A. Identify and estimate the number of small businesses affected by the proposed rules and the probable effect on

small businesses.

The proposed rules do not have an economic impact on small businesses. The proposed rules affect individual

licensees.

B. Describe how the agency established differing compliance or reporting requirements or timetables for small

businesses under the rules after projecting the required reporting, record-keeping, and other administrative costs.

The department does not collect or have access to information that would allow it to find and estimate the number of

small businesses affected. It is not possible to estimate the number of small businesses affected by the proposed

rules.

C. Describe how the agency consolidated or simplified the compliance and reporting requirements for small

businesses and identify the skills necessary to comply with the reporting requirements.

The proposed rules pertain to individuals and not small businesses. There are no differing compliance or reporting

requirements or timetables for small businesses.

D. Describe how the agency established performance standards to replace design or operation standards required

by the proposed rules.

The department did not set up performance standards to replace design or operation standards, because they are

unnecessary for the proposed rules.

20. Identify any disproportionate impact the proposed rules may have on small businesses because of their size or

geographic location.

The proposed rules do not have a disproportionate impact on small businesses because of their size or geographic

location.

MCL 24.245(3)

RIS-Page 5

21. Identify the nature of any report and the estimated cost of its preparation by small businesses required to

comply with the proposed rules.

The proposed rules do not require any reports to follow the proposed rules.

22. Analyze the costs of compliance for all small businesses affected by the proposed rules, including costs of

equipment, supplies, labor, and increased administrative costs.

There are no costs of compliance expected for small businesses because the proposed rules affect individual licensees

and not small businesses.

23. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses

would incur in complying with the proposed rules.

The proposed rules apply to individuals and not small businesses. Therefore, there is no estimated cost for legal,

consulting, or accounting services that small businesses would incur.

24. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without

adversely affecting competition in the marketplace.

Since the rules affect individual licensees rather than small businesses, the rules do not cause economic harm or

adversely affect a small business’ competition in the marketplace.

25. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser

standards for compliance by small businesses.

The proposed rules impose requirements on individual licensees rather than small businesses. Even if a licensee’s

practice qualifies as a small business, the department cannot exempt his or her small business because it would create

disparity in regulation of the profession. Therefore, exempting or setting lesser standards of competence for small

businesses is not in the best interest of the public.

26. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small

businesses.

The proposed rules impose requirements on individual licensees rather than small businesses. Even if a licensee’s

practice qualifies as a small business, the department cannot exempt his or her small business because it would create

disparity in regulation of the profession. Therefore, exempting or setting lesser standards of competence for small

businesses is not in the best interest of the public.

27. Describe whether and how the agency has involved small businesses in the development of the proposed rules.

Development of the proposed rules occurred in consultation with, and approval of, the Michigan Board of

Accountancy, whose members include employees of small businesses. However, the department did not involve any

other small businesses in the development of the proposed rules because the proposed rules impose requirements on

individual licensees rather than small businesses.

A. If small businesses were involved in the development of the rules, please identify the business(es).

Development of the proposed rules occurred in consultation with, and approval of, the Michigan Board of

Accountancy, whose members include employees of small businesses. However, the department did not involve any

other small businesses in the development of the proposed rules because the proposed rules impose requirements on

individual licensees rather than small businesses.

28. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.

There is no estimated compliance cost with these proposed rules on businesses or groups.

A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit from the

proposed rules.

Licensees bear the cost and receive the benefit from the proposed rules.

B. What additional costs will be imposed on businesses and other groups as a result of these proposed rules (i.e.

new equipment, supplies, labor, accounting, or recordkeeping)? Please identify the types and number of businesses

and groups. Be sure to quantify how each entity will be affected.

There will be no expected added costs imposed upon licensees because of compliance with these proposed rules.

29. Estimate the actual statewide compliance costs of the proposed rules on individuals (regulated individuals or

the public). Include the costs of education, training, application fees, examination fees, license fees, new

equipment, supplies, labor, accounting, or recordkeeping.

The proposed rules make no changes to compliance costs that are different than the actual cost of compliance

imposed under current statutes and rules. Licensure and applications fees are set up by statute under the State

Licensee Fee Act, 1979 PA 152, MCL 338.2201 to 338.2277.

A. How many and what category of individuals will be affected by the rules?

MCL 24.245(3)

RIS-Page 6

All individuals applying for a license in this state.

B. What qualitative and quantitative impact do the proposed changes in rules have on these individuals?

There are no other qualitative or quantitative impacts as it relates to the actual statewide compliance costs of the

proposed rules because the proposed rules are not expected to increase or decrease costs for education, training,

experience, application fees, examination fees, or licensure fees.

30. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a result

of the proposed rules.

There are no cost reductions for businesses, individuals, groups of individuals, or governmental units because of the

proposed rules.

31. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rules. Please

provide both quantitative and qualitative information, as well as your assumptions.

The proposed rules use clear, concise language, and implement the statutory requirements for licensing. The clear

and concise language allows the public and licensees to better understand the requirements for licensure.

32. Explain how the proposed rules will impact business growth and job creation (or elimination) in Michigan.

The proposed rules do not have a significant impact on business growth, job growth, or job elimination.

33. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their

industrial sector, segment of the public, business size, or geographic location.

The department does not expect any disproportionate effect on any individuals or businesses by their industrial

sector, segment of the public, business size, or geographic location.

34. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the

methodology utilized in determining the existence and extent of the impact of the proposed rules and a cost-

benefit analysis of the proposed rules.

National Association of State Boards of Accountancy (NASBA): https://nasba.org/

Illinois: http://www.ilboe.org/

Indiana: https://www.in.gov/pla/accountancy.htm

Minnesota: http://www.boa.state.mn.us/

New York: http://www.op.nysed.gov/prof/cpa/

Ohio: http://www.acc.ohio.gov/

Pennsylvania:

http://www.dos.pa.gov/ProfessionalLicensing/BoardsCommissions/Accountancy/Pages/default.aspx#.VOTI5i6QfT8

Wisconsin: https://dsps.wi.gov/pages/BoardsCouncils/Accounting/Default.aspx

A. How were estimates made, and what were your assumptions? Include internal and external sources, published

reports, information provided by associations or organizations, etc., which demonstrate a need for the proposed

rules.

Because the proposed rules have no measurable economic impact on individuals, businesses, or governmental units

of the state, no estimates were necessary.

35. Identify any reasonable alternatives to the proposed rules that would achieve the same or similar goals.

Since statute requires the rules, there are no reasonable alternatives to the proposed rules.

A. Please include any statutory amendments that may be necessary to achieve such alternatives.

Since statute requires the rules, there are no reasonable alternatives to the proposed rules.

36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based systems

utilized by other states.

MCL 24.245(3)

RIS-Page 7

Since statute requires the rules, private market-based systems cannot serve as an alternative. The regulation of

accountants is a state function, so a regulatory program independent of state intervention cannot be set up. Although

there are accountancy-related professional associations that could be considered regulatory mechanisms that are

independent of state intervention, these organizations would provide the public with significantly less protection

because membership in these organizations is voluntary and would not encompass all licensed accountants.

36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based systems

utilized by other states.

Since statute requires the rules, there are no reasonable alternatives to the proposed rules. There were no alternatives

that the department considered to achieve the intended changes. They are necessary for the administration and

enforcement of the licensing process and practice of the profession.

38. As required by MCL 24.245b(1)(c), please describe any instructions regarding the method of complying with

the rules, if applicable.

The rules include the instructions for compliance.

MCL 24.245(3)