The American Institute of CPAs is appealing a court decision that upheld the Internal Revenue Service’s voluntary program for tax preparer education and testing.

The IRS introduced the Annual Filing Season Program in 2014 after the federal courts invalidated a mandatory program it had instituted requiring all tax preparers to be tested and undergo continuing education. The AICPA filed suit to challenge the voluntary program, but the lawsuit was dismissed later that year by the same federal judge, James Boasberg, who had invalidated the IRS’s earlier Registered Tax Return Preparer program in 2013 in the case of Loving v. IRS. He said the AICPA lacked standing to challenge the newer program (see Judge Dismisses AICPA Lawsuit against the IRS). Earlier this month, Boasberg again ruled against the AICPA.

“On the surface it seems difficult to square the AIPCA’s interest in dismantling the IRS’s program with Congress’s goal of safeguarding consumers,” he wrote.

The AICPA has now appealed to a higher court. “We filed a notice of appeal with the Court of Appeals for the DC Circuit on Wednesday,” said AICPA spokesman Jay Hyde in an email. “We look forward to having our appeal heard.” 

The AICPA has argued that the program represents an "end-run" around Loving v. IRS, and that the IRS does not have the authority to proceed with the program. By doubling the number of categories of tax return preparers to eight, the program would confuse consumers and do nothing to address the problem of unethical or fraudulent tax return preparers, the Institute contended. The AICPA also argued that the IRS had circumvented the normal process of issuing a notice and soliciting comments and feedback before proceeding with the program.

Jessica A. Magaldi, assistant professor of legal studies and taxation in the Lubin School of Business at Pace University in New York, has written about the case in a recent paper and doubts the appeal will be more successful. “I can’t imagine the prospects are very good,” she told Accounting Today. “They’ve tried now three times with this first case, and then the appeal gave them a narrow window to go back on.”

She and her co-author on the paper, John Spencer Treu, an assistant professor of accounting in the College of Business and Economics at West Virginia University, believe the AICPA will have a difficult time proving injury to CPAs from the Annual Filing Season Program. “We felt like there was no real sense their members had an injury and that they had the standing to bring a suit,” she said.

The court pointed out it still has not ruled on the actual merits of the Annual Filing Season Program. However, a separate class-action lawsuit in New Mexico by a group of taxpayers claiming their returns might receive extra scrutiny from the IRS if they are filed by unenrolled preparers may provide that opportunity. “That’s going to be very interesting as well,” said Magaldi.

Like his colleague, Treu is also skeptical about the AICPA’s prospects for succeeding in its lawsuit. “I don’t have a real positive outlook on the case from the AICPA’s perspective,” he said. “I think they have a hard time arguing that there’s really any harm from this voluntary program. At the end of the day it’s a difficult position for them to succeed on. The heart of their argument is that this one new designation is competing with their own, but the adoption of the designation has been pretty modest.”

He pointed out that only about 10 percent of unenrolled preparers are in the Annual Filing Season Program.

“We find states that regulate preparers actually have more CPAs than states that don’t, so it seems like the AICPA is arguing against their own interest,” said Treu. “Their perception is we need to squelch competition, but I think they may be preventing something that may be of benefit to them in a way.”

He and Magaldi found that when the RTRP regulation for requiring tax preparer education and testing was in place for one year, more people sought to become enrolled agents that year than had ever previously applied to become EAs. States such as California and Oregon, which have regulated tax preparers for many years, have more CPAs than attorneys, after controlling for other factors. “We actually think the AICPA is misguided in arguing against their own interests in filing these suits,” said Treu.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access