Institute Pushes for Change in Preparer Penalty Standard

Reps. Joe Crowley, D-N.Y., and Jim Ramstad, R-Minn., introduced a bill (HR 4318) in the House to make tax preparers subject to penalties under IRC § 6694 if a position for an undisclosed, non-tax avoidance item lacks substantial authority. A provision in a larger troop funding bill, which was enacted in May 2007, had raised the applicable standard to more likely than not (see “Washington Report,” JofA, Sept. 07, page 25).

The bill has 44 co-sponsors. The staff of Rep. Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, supports the bill, and it was included in HR 5719, the Taxpayer Assistance and Simplification Act of 2008, which the House passed on April 15. Because this bill has some controversial parts, President Bush has threatened to veto it if the Senate acts on it. At this time, it is unlikely the Senate will take up a similar bill.

On May 15, the House Ways and Means Committee marked up the Energy and Tax Extenders Act (HR 6049). It also includes HR 4318. This bill was passed on May 21.

A companion bill to the Crowley/Ramstad bill (S 2851) was introduced in the Senate on April 14 by Sens. Kent Conrad, D-N.D., and Jim Bunning, R-Ky. Sen. Orrin Hatch, R-Utah, is an original co-sponsor. The bill was part of a larger tax package that failed to get enough votes in the Senate on June 10. However, the Senate is working to reformulate the bill so that it can pass in the near future. President Bush, in the budget he presented on Feb. 4, adopted the approach taken by the Crowley bill.

The AICPA is working for its passage this year.