Senate Finance Committee Drops Tax Preparer Regulation Provision from Bill on Taxpayer Protections.

(Parker Tax Publishing APRIL 2016)

The original text of a bill aimed at protecting taxpayers from fraud contained a provision which would have given the IRS authority to regulate all aspects of federal tax practice, including paid tax return preparers. After markup on April 20, the tax preparer regulation provision has been dropped from the Bill.

The Taxpayer Protection Act of 2016, which has been advancing through the Senate Finance Committee, originally contained a provision that would have given the Department of the Treasury and the IRS authority to regulate all aspects of federal tax practice, including paid tax return preparers.

The provision would have legislatively overridden a U.S. district court's decision in Loving v. U.S., 2013 PTC 10 (D.C. D.C. 2013) (Loving I), as well as the D.C. Circuit Court's affirmation of that case in Loving v. U.S., 2014 PTC 73 (D.C. Cir. 2013) (Loving II). As a result of Loving I and Loving II, the IRS was enjoined from enforcing regulations it had issued requiring an individual seeking to be a registered tax return preparer to (1) pass a competency exam or otherwise satisfy standards prescribed by the IRS, (2) attend continuing education courses, and (3) pass a compliance and suitability check.

The most recent version of the bill, which went for additional mark up on Wednesday, April 20, did not contain the tax preparer regulation provision. In response, Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) and other Finance Democrats called for the committee to establish minimum standards for paid tax return preparers, as were included in the previous bipartisan committee bill.

"If this legislation, when it hits the Senate floor, doesn't allow for minimum standards to crack down on crooked, fraudulent, and incompetent return preparers, it will be one more example of lawmakers in Congress willfully failing to protect vulnerable taxpayers," Wyden said.

"Right now there are no minimum national standards whatsoever for paid tax return preparers. No rules to prevent rank incompetence. No safeguards to keep con artists from falsifying returns and leaving their victims in financial ruin. It just doesn't pass the smell test to say everything's A-OK with a system that has taxpayers handing over their Social Security and bank account numbers to people who meet no standards at all."

For a discussion of the Loving court decisions, see Parker Tax ¶271,101.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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