Limited Representation Rights

Bill Delaney, Westwood MA

As covered in a recent article (see "IRS Changes Who Can Represent Taxpayers"), the IRS has released Rev. Proc. 2014-12 which deals with (among other things) the elimination of a right to limited representation presently enjoyed by unlicensed tax preparers (those not subject to Circular 230).  This becomes effective for tax returns signed and filed after December 31, 2015.

What brings this about is the creation, by the IRS, of a “voluntary” Annual Filing Season Program (AFS) which consists of a written exam, completion of CPE, and an agreement that the unlicensed preparer be subject to certain sections of Circular 230.  Since this program is “voluntary”, the IRS considers it to be a done deal and not effectively barred as a result of the Loving decision (which denied the IRS the authority to initiate a mandatory program.

The “voluntary” program magically restores the right to limited representation if you meet the requirements of the program.  Otherwise, you may not represent even though you have prepared and signed the return as a paid preparer.

The American Institute of Certified Public Accountants (AICPA) has filed a civil action in the U.S. District Court for the District of Columbia (the same Court which heard the Loving case) which requests that the Court grant a permanent injunction and kill a program which, according to the AICPA argument, is an attempt to do an end run around the Loving decision.

Your editor’s opinion is that the Court will hear the complaint, even though the typical AICPA member, being a licensee, is not affected by this “voluntary” program, since the complaintant has made an excellent argument for the applicability of Loving to this “voluntary” program, i.e. the IRS lacks the statutory authority to regulate in such a manner those who are not licensed to fully represent taxpayers.   Interestingly, the complaint does not raise the issue of a taking away of an existing practice right
(limited representation), which your editor feels is an important and central matter.

Also, the “voluntary” program requires that one agree to be subject to certain sections of Circular 230 which would not otherwise apply to unlicensed tax preparers.  In view of the recent decision (in response to Loving) by the Office of Professional Responsibility (OPR) to restore practice rights to CPAs who were denied a PTIN renewal and/or otherwise put out of business while attempting to practice as non-licensees (i.e. as persons not subject to Circular 230), it would be a strange twist indeed if the IRS were to succeed in cajoling unlicensed tax preparers into “voluntary” submission to portions of Circular 230.  Talk about an end run around Loving; this would also be an end run around the OPR!  In your editor’s opinion, a federal agency does not have the legal authority to subject you to law, regulation, etc. from which you are most clearly excluded by statute according to the Court in Loving.  Who is writing the law anyway---the Congress or the IRS?

Stay tuned.  This one will be most interesting.

Bill Delaney, Editor