House Committee Approves Bill
Would Enhance Role of CPAs
as Taxpayer Advocates

AICPA Press Release

Washington, DC (April 9, 2008) – The American Institute of Certified Public Accountants applauded the House Ways and Means Committee’s approval today of a bill that would enhance the role of CPAs as advocates for taxpayers by equalizing the IRS disclosure standards between tax preparers and taxpayers.

“The AICPA believes legislation is necessary to correct the flaw in the law that was passed by Congress in May of 2007 that tightened the disclosure requirements for tax preparers under the section of the tax code [Section 6694] that spells out what must be disclosed on tax returns in order to avoid having a penalty imposed,” said Tom Ochsenschlager, AICPA vice president for taxation.

“We very much appreciate the leadership of House Ways and Means Committee Chairman Charles Rangel, who supported including in H.R. 5719, the “Taxpayer Assistance and Simplification Act of 2008,” the corrective language that was introduced by Representative Joseph Crowley, a New York Democrat, and Representative Jim Ramstad, a Minnesota Republican, as H.R. 4318 on Dec. 6, 2007.

Ochsenschlager explained that under the 2007 law, in order to protect themselves from a potential penalty, preparers would have to ask the taxpayer to disclose to the IRS any tax positions taken by a taxpayer that didn’t meet the Internal Revenue code’s “More Likely Than Not” standard. In general, the “More Likely Than Not” standard requires a reasonable belief that the position has a greater than 50 percent chance of being accepted by the IRS or a court.

“That creates a problem,” Ochsenschlager said, “because the standard imposed under the new law for tax preparers is higher than the standard for taxpayers. The unequal thresholds create the potential for conflicts of interest between preparers and their clients, and consequently affect the nature of taxpayers’ representation.”

Ochsenschlager noted that the IRS and Treasury delayed implementation of the new law in June 2007 and then issued interim guidance on Dec. 31, 2007 that provided tax return preparers with an understanding of how they can comply with the new law during the current filing season and until final IRS guidance is developed.

“Legislation is critical in order to permanently correct the problem, and we look forward to having the bill brought before the full House for a vote on April 15, which House leaders have indicated they plan to do,” he said.

He noted the AICPA will continue its support of IRS and Treasury as they draft the needed guidance to implement the 2007 law. In general, the “Substantial Authority’’ standard requires that a tax position have a 40 percent chance of being sustained.