A group of mostly conservative public policy organizations have sent a letter to members of the House of Representatives asking them to oppose legislation that would require licensing of paid tax preparers.
The bill, known as the Tax Return Preparer Competency Act, was introduced last December by Rep. Diane Black, R-Tenn., and Pat Meehan, R-Pa. (see Congress Introduces New Bill to Regulate Tax Preparers). It would require professional tax preparers to undergo examinations, take annual continuing education classes and submit to a background check. The American Institute of CPAs lobbied against the bill soon after it was introduced (see AICPA Opposes Legislation to Regulate Tax Preparers).
Now a coalition of nonprofit organizations is banding together to oppose the bill. They include the Institute for Justice, a libertarian law firm that successfully represented a trio of independent tax preparers who sued the IRS in 2013 in the case of Loving v. IRS. A district court and later an appeals court invalidated the IRS’s attempt to impose mandatory testing and continuing education for paid tax preparers, effectively ending the IRS’s Registered Tax Return Preparer program. The courts ruled the IRS lacked the statutory authority to regulate tax preparers, leaving the matter up to Congress. The IRS has since introduced a voluntary program known as the Annual Filing Season Program.
The Institute for Justice and the other groups who signed the letter to Congress argue that the new legislation would kill jobs and increase costs to consumers. They estimate that upwards of 20 percent of tax preparers could go out of business as they grapple with the time and cost of complying with burdensome licensing requirements. At the same time, by imposing artificial barriers to entry, licensing would reduce competition in the tax preparation market, thereby increasing costs to consumers.
“Granting the IRS the increased power to impose an occupational licensing scheme will destroy jobs,” they wrote. “Industry experts and analysts estimate that licensing will cause tens of thousands of independent tax preparers—as much as 20 percent of the industry—to close shop due to compliance costs, including lost time and out-of-pocket expenses. IRS licensing will thus only serve to protect large incumbents and licensed professionals (such as CPAs) from competition by erecting costly barriers to entry that will fall hardest on independent entrepreneurs.”
Besides the Institute for Justice the coalition includes a number of conservative and libertarian groups, such as Americans for Prosperity, the Campaign for Liberty, the Competitive Enterprise Institute, FreedomWorks, the Jeffersonian Project, Less Government, the National Taxpayers Union, the R Street Institute, the Rio Grande Foundation, the Taxpayers Protection Alliance and Tea Party Nation.
They argue that tax preparer conduct is already regulated by dozens of federal laws, and failure to comply with any of these laws or regulations results in serious penalties, including injunctions, fines of up to $100,000, and prison.