AICPA reiterates its strong concerns about IRS voluntary certification program

The AICPA on Tuesday sent a 14-page letter to the IRS, expressing its strong concerns that a proposed IRS voluntary certification program for unenrolled tax return preparers “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.” The IRS is expected to soon implement the program by the release of a revenue procedure.

Background

After the IRS lost its appeal in Loving, No. 13-5061 (D.C. Cir. 2/11/14), which held that the IRS does not have statutory authority to regulate tax return preparers, IRS Commissioner John Koskinen indicated that, while the IRS might look to Congress to give it authority to regulate return preparers, he was also considering a “voluntary certification” program. On April 8, he testified before the Senate Finance Committee, telling the members that the IRS was “taking a close look at the possibility of an interim step involving a program of voluntary continuing education.”

As details emerged, the AICPA expressed its concerns about the proposed program, culminating in a letter to the commissioner on May 21 (see here for prior coverage). The IRS has indicated to the AICPA that it intends to move forward with the program and to implement it through the issuance of a revenue procedure, rather than through proposed regulations (which would require a formal comment period).

AICPA concerns

In Tuesday’s letter, signed by William E. Balhoff, AICPA chairman, and by AICPA President and CEO Barry Melancon, the AICPA raised several legal and policy concerns about the proposed voluntary certification program. These concerns include:

1. No statute authorizes such a program, and “[b]ecause federal agencies may act only pursuant to a valid delegation of authority by Congress, the IRS may not implement the proposed program”;
2. The program will be viewed as a way to circumvent the federal court’s Loving decision;
3. The way the IRS has developed the proposed program does not comply with the notice and comment requirements of the Administrative Procedure Act, since the program will be “de facto mandatory”; it violates the Paperwork Reduction Act, since the IRS has not sought approval from the Office of Management and Budget before collecting personal information from tax return preparers; and it probably will require the IRS to perform a cost/benefit analysis of the program and alternatives and get approval from the Office of Information and Regulatory Affairs, since the program is likely to be considered a “significant regulatory action” that must comply with Executive Order 12,866; and
4. The proposed program is “arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers who defraud their clients, runs counter to evidence presented to the IRS, and will create market confusion.”

The letter sums up the proposed program as “unlawful and improper.” However, the AICPA does recognize “the public policy benefits that could accrue from additional regulation of tax return preparers,” and, the letter says, the AICPA stands ready to work with the IRS to “achieve workable solutions to regulate tax return preparers and protect the public.”

—Alistair M. Nevius (anevius@aicpa.org) is the JofA’s editor-in-chief, tax.