Global tax services firm Ryan has filed suit in a federal court in Washington against Treasury Secretary Tim Geithner and IRS Commissioner Doug Shulman challenging Circular 230 provisions governing contingency fee arrangements.
In 2007, Circular 230 was revised to generally prohibit attorneys, CPAs and other practitioners from entering into contingent fee arrangements for services rendered in connection with any matter before the Internal Revenue Service, including the preparation and filing of claims for refunds after a taxpayer has filed its original tax return, but before the IRS has initiated an audit of the return. Before the 2007 revision, the firm noted, Circular 230 prohibited contingent fee arrangements for preparing original returns, but permitted the use of contingent fee arrangements for services rendered in connection with the preparation and filing of refund claims if the practitioner reasonably anticipated that the claim would receive substantive review by the IRS.
Ryan's legal challenge seeks a declaratory judgment that the Circular 230 provisions prohibiting the use of contingent fee arrangements in the preparation and filing of ordinary refund claims and any related representation before the IRS are unconstitutional, exceed the scope of the authorizing statute, and thereby warrant a permanent injunction against the prohibition. Ryan is represented by the law firm Morrison & Foerster, LLP.
“Ryan is leading the charge against regulatory overreach that negatively impacts the ability of taxpayers with bona fide refund claims to obtain representation to pursue their statutory right to a tax refund," said chairman and CEO G. Brint Ryan in a statement. “Ryan will continue to aggressively defend our rights and the rights of our clients to engage advisors in whatever manner they so choose.”
In the complaint, he and his firm claim that the Circular 230 restrictions violate his First Amendment right to petition the government for a redress of grievances, and his due process right to obtain a refund of taxes paid. He claims the restrictions also violate Ryan chief operating officer Gerald D. Ridgely Jr.'s right as a CPA to practice before the IRS. Ridgely is also named as a plaintiff.
Ryan and Ridgely are seeking a judgment declaring that the Circular 230 restrictions on contingent fee arrangements are unconstitutional and exceed the Treasury’s and the IRS’s authority to regulate the conduct of practitioners; and a permanent injunction against the enforcement of the Circular 230 restrictions on the use of contingent fee arrangements in the preparation and filing of claims for refund with the IRS.
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