As part of an effort to strengthen professional standards, Cono R. Namorato was appointed to head up the Internal Revenue Service Office of Professional Responsibility in December 2003.
The office is responsible for investigating allegations of misconduct, or negligence, against tax practitioners while enforcing standards of practice for the attorneys and accountants who represent taxpayers before the IRS.
As director of OPR, Namorato oversaw the service's increased efforts to achieve compliance nationwide among tax practitioners with newly enhanced standards of conduct, and he also served as senior advisor to IRS Commissioner Mark Everson on complex enforcement matters. After leaving the post in 2005, Namorato returned to the Washington law firm of Caplin & Drysdale.
Namorato recently reflected on his experienced during his year in office, as well as current issues affecting the agency, with Accounting Today senior editor Roger Russell.
Describe the environment when you took over as director at the Office of Professional Responsibility.
There was a perspective that there were a lot of abuses in the profession during the 1990s. When Commissioner [Mark] Everson came on board, he recognized the corrosive effect this had, and decided to implement a strategic plan to counter this. The plan, which is to run from 2005 to 2009, has three objectives: to improve taxpayer service, to continue modernization of the IRS and to enhance enforcement.
What were the objectives of the plan to enhance enforcement?
A major objective of the enforcement initiative was to ensure that tax accountants and tax practitioners adhere to professional standards and follow the law. The plan placed emphasis on practitioner oversight, which led to my appointment as director of the OPR. A voluntary tax system cannot function without scrupulous tax practitioners. These are the people on the front lines -- they are really partners of the IRS in tax administration.
How was the OPR to be involved in enhanced enforcement?
Commissioner Everson wanted to raise the visibility and importance of the Office of Professional Responsibility. As IRS organizations go, it's a very small operation with only about 60 people. In any event he brought in me -- a private practitioner -- and made me a director at a high level with a direct report to the deputy commissioner and the commissioner himself. And then he made the director a member of the Services Enforcement Committee and the senior executive team.
We accomplished a number of things. We succeeded in raising the visibility of the office and started it on a path of becoming an effective arm of tax administration. One of things I tried to do is change the nature of our docket of cases, and change the docket to cases that would have higher impact on tax administration.
The director of the OPR, along with the deputy secretary of the Treasury for tax policy and the IRS chief counsel, were the main forces behind the covered opinions section of 230.
The covered opinion section has been in force for a year now. Are you happy with the results?
I think that Section 10.35 -- the covered opinion regulation -- was exactly what was needed at the time it was promulgated. We needed to get the attention of the tax community, and for that reason it was a success.
Was it perfect? No. My personal opinion today is we don't need section 10.35 in Circular 230. This is a conclusion I came to halfway through my tenure as OPR director. It is so complicated as to be almost unenforceable from an OPR point of view.
Also, I think the OPR can do its work using traditional provisions of Circular 230, such as the Section 10.22 due diligence provision, and the Section 10.51 disreputable conduct provision. During my tenure, we initiated a number of opinion-writing cases. They all involved conduct that predated the effective date of the new covered opinion standards, and they illustrate that the traditional provisions are sufficient to do this work.
Then do you believe the current standards for practitioners are too harsh?
No. When I say Section 10.35 should be repealed, I'm not advocating a pullback in practitioner oversight. I'm saying we don't need the legend [printed disclaimer material on letterheads] to be so ubiquitous that it has lost its purpose. Every e-mail or fax that leaves a law firm or accounting firm has this.
In addition to a repeal of Section 10.35, I would expand Section 10.36, which deals with firm responsibility. Firms should be involved with policing their own professionals. In an ideal world, the OPR should be limited to educating, communicating and liaising with the practitioner community.
Is it fair for the IRS to be so aggressive with Circular 230 preparers, while treating non-Circular 230 preparers with such laxity?
It depends on how you define practice before the IRS. Merely being a return preparer is not by itself concerned with practice before the IRS. If any of the measures to regulate all return preparers are passed, it would level the playing field with respect to Circular 230 and non-Circular 230 preparers, since it would bring all of them under the jurisdiction of the OPR. Then the question would be how to augment the size of the office to deal with the new responsibilities. The estimate is that there are from 1.2 to 1.6 million return preparers.
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