The Senate parliamentarian has deemed a Republican proposal to fold the PCAOB into the SEC to be subject to the “Byrd Rule,” dealing a severe setback to plans to eliminate the audit regulatory board.
Democratic lawmakers, academics, and ex-regulators had predicted the SEC-PCAOB consolidation would run afoul of the Senate rule designed to exclude non-budgetary provisions from filibuster-proof reconciliation bills.
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.
The House last month narrowly passed the Trump-backed reconciliation package, H.R. 1, the One Big Beautiful Bill Act, which, among other provisions, would hand the PCAOB’s duties and powers over to the commission within one year of enactment. The measure would also bar the SEC from collecting the accounting support fees that now make up the bulk of the PCAOB’s budget.
The Senate Banking Committee followed suit with similar reconciliation language earlier this month, while going further to restrict the commission’s ability to pay for the new responsibilities.
The plan had faced broad skepticism over whether the SEC could quickly replicate the oversight, inspection, and rulemaking functions of the PCAOB without a resulting drop in quality, while at the same time renegotiating dozens of cross-border audit inspection pacts, including with China. The board was set up under the Sarbanes-Oxley Act of 2002 following the Enron and WorldCom accounting scandals to oversee public company auditors, and later registered broker-dealers.
“This is good news for millions of Americans whose retirement savings and investments would be put at risk by eliminating the PCAOB,” PCAOB Chair Erica Williams said in a statement on the Byrd Rule decision.
SEC Chairman Paul Atkins had predicted the commission would be able to secure funding to handle the PCAOB’s functions should the provision ultimately pass. The SEC, in its budget request for the coming fiscal year, set aside as much as $100 million to take on the PCAOB’s duties should the measure pass, a quarter of the board’s current budget.
“It’s pretty clear that the resources are not there in this budget if [the PCAOB] gets folded in,” Senator Chris Van Hollen (D-MD) told Atkins during an appropriations subcommittee hearing earlier this month.
The Senate parliamentarian also ruled several other of the Banking Committee’s proposed cuts to be subject to the Byrd Rule 60-vote threshold, according to Budget Committee Ranking Member Jeff Merkley (D-OR).
In a June 20 statement, Senate Banking Committee Chairman Tim Scott (R-SC), said he will continue working with the Senate parliamentarian on the committee’s reconciliation provisions and remains “committed to advancing legislation that cuts waste and duplication in our federal government and saves taxpayer dollars.”
This article originally appeared in the June 23, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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