AICPA Defends CPA Turf and Challenges IRS Efforts to Regulate Unenrolled Preparers

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The AICPA has been busy in the last week or so when it comes to taking on IRS and Congressional efforts to exercise more oversight over unenrolled preparers. I reported last week that the Senate Finance Committee had scheduled an open executive session addressing that and other measures meant to combat identity theft and refund fraud; the Committee postponed the session following some backlash on parts of the bill, including the language in the bill that would override Loving.

Some of the backlash came from the AICPA, which sent a letter to Senators Wyden and Hatch stating that the “AICPA has serious concerns and misgivings about granting the IRS unlimited authority to regulate tax return preparers.”

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The Journal of Accountancy has a summary of the letter (which also addresses other parts of the legislation). AICPA’s stated reason for its opposition to the oversight is its concern over market confusion, (i.e., market share):

To mitigate marketplace confusion …we strongly recommend that currently-unenrolled PTIN holders using any paid advertising involving print, television, radio, or other medium – in which the individual represents themselves as a PTIN holder, a registered tax return preparer or some type of a new IRS category of return preparers – to display or broadcast a statement explaining the differences between the different type of preparers (e.g., qualifications) and, most importantly, educating the public that the IRS does not endorse any particular tax return preparer.

AICPA Renews Challenge to IRS Voluntary Plan

Not content to take aim solely at possible legislative authority to regulate unenrolled preparers, last week the AICPA took its latest swing against the IRS’s voluntary plan to regulate unenrolled preparers. You may remember that the district court dismissed the AICPA suit that sought to enjoin the voluntary program; I wrote about that last year in AICPA Suit Against IRS Voluntary Education and Testing Regime Thrown Out of Court. AICPA appealed and in the DC Circuit Court of Appeals oral argument was last week.

The issue on appeal revolves whether the AICPA has standing to challenge the plan in court rather than the merits of the suit. The panel and AICPA’s focus was on so-called competitive standing, which essentially gives a hook for litigants to challenge an action in court if the litigant can show an imminent or actual increase in competition as a result of the regulation.

AICPA on appeal and in its complaint states that the IRS voluntary plan will increase competition for CPAs preparing tax returns who compete in the market with unenrolled preparers. DOJ was hard-pressed to rebut the point that there would be a competitive boost associated with the record of completion volunteers would receive as well as the publication of unenrolled preparers in the government database that I also described in a prior post. That the credentials would allow those previously unenrolled preparers to be able to still presumably charge less than CPAs and appear to be more qualified than was otherwise the case without the voluntary plan is the crux of the AICPA’s allegation that the competitive effects should be enough to give the AICPA standing to challenge the IRS plan in court.

AICPA made other standing arguments as well, but the panel seemed most sympathetic on the issue of competitive standing. The panel seems to be leaning to remanding the case back to the district court, allowing it to get to the merits of the AICPA’s case. For a summary of what the AICPA argued in its original suit see its press release from last year where it stated that IRS does not have authority to institute a voluntary plan and that the plan confuses customers and does nothing to “address the problem of unethical or fraudulent tax return preparers.”

Of course, the suit would be moot if in fact Congress did give IRS the authority it has sought and which was part of the Senate mark-up. In the meantime the voluntary plan is in effect. The AICPA policy arguments against the voluntary plan are similar to those made by challenges to the IRS’s mandatory plan. One difference now is that an IRS compliance study from last year (I discuss and link that in IRS Issues New Report on EITC Overclaims) showed significantly higher error rates among EITC tax returns prepared by unenrolled preparers. While the study does not demonstrate that IRS regulatory efforts would drive those rates down, it does provide further justification for IRS efforts to influence the market choices taxpayers have, especially if the evidence suggests that some types of preparers’ returns have significantly fewer errors than other preparers’ returns.

 

 

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

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