As we have covered over the past few months, the future of the PCAOB remains in hands of Congress as a proposal was advanced to eliminate the PCAOB and fold its auditor oversight operations into the SEC. As Dan Goelzer noted earlier this month, a group of forty-six academics and former regulatory officials wrote to the Senate Banking and Budget committees to explain why the proposal to abolish the PCAOB in the 2025 budget resolution violates the Senate’s “Byrd Rule.” Dan notes: “That rule requires that the budget impact of reconciliation provisions must be more than merely incidental to the non-budgetary consequences. Eliminating the PCAOB would have little effect on the federal budget but major policy implications for auditor oversight and investor protection.” The letter from the academics and former regulatory officals states:

We believe this proposal violates several of the Byrd Rule criteria for inclusion in a reconciliation bill for the following reasons:

1. The PCAOB is a nonprofit organization and is not funded through the federal budget.

2. The proposal would not result in a significant reduction to the federal deficit, because, per Sec. 50002 and the Congressional Budget Office (CBO), it would replace the PCAOB by establishing a new program inside the SEC that would require similar funding to carry out operations.

3. The PCAOB was created by a provision of the Sarbanes-Oxley Act of 2002, which was enacted through regular order, not through budget reconciliation. If this provision of the Act is to be overturned, that should also be accomplished through regular order rather than through budget reconciliation.

4. The non-budgetary consequences of Sec. 50002 are substantial and very large relative to any budgetary consequences, which are merely incidental.

5. The proposal relates to a specific organization and could be considered “targeting.” Targeting violates the Byrd Rule.

As this Thomson Reuters article notes, last Thursday the Senate parliamentarian deemed the Republican PCAOB elimination proposal to be subject to the Byrd Rule. The article notes:

The June 19, 2025, ruling by the Senate parliamentarian means the provision would be subject to a 60-vote requirement, which would almost certainly be unworkable for a bill that faces a precarious road to passage even through the simple majority allowed under the reconciliation process.

With this development, it appears that the PCAOB will likely continue to operate in its current form, at least for now.

– Dave Lynn