Court Ruling: AICPA Can Sue IRS Over Tax Preparer Rules

An appellate court has overturned a ruling made last year that stopped the AICPA from challenging the IRS’ new voluntary program to “credential” tax preparers, Forbes reported.

Initially, a U.S. District Court judge dismissed the lawsuit brought against the IRS after it announced implementation of its Annual Filing Season Program (AFSP). Under the AFSP, an uncredentialed tax preparer may opt to register with the IRS, take 18 hours of continuing education each year and sit for a comprehension test of 100 questions; in exchange, the preparer would receive a certificate of completion and be listed on the IRS website, the magazine reported.

The AICPA had initially called the program “unlawful and improper” and sent an opposition letter to IRS Commissioner John Koskinen. The organization voiced concern that the program “would cause significant legal problems that may ultimately frustrate the IRS’ goals, confuse the public, and lead to litigation” and alleged that the IRS did not have the statutory authority to move ahead with the program. In July 2014, the AICPA officially filed suit, calling it “an illegitimate exercise of government power.”

The IRS argued that the case should be dismissed for lack of standing, which refers to the legal ability of the AICPA to bring suit. The judge initially argued that the AICPA did not meet the criteria and thus, denied standing. The Appellate Court found, contrary to the earlier ruling, that the AICPA “ has adequately alleged the program will subject its members to an actual or imminent increase in competition” and thus “it therefore has standing to pursue its challenge.”

The IRS credential from the AFSP is intended to make preparers “stand out from the competition by giving them a recognizable record of completion that they can show to their clients,” according to the IRS. However, the AICPA says that this will “dilute the value of a CPA’s credential in the market for tax-return-preparer services” and permit unenrolled preparers to more effectively compete with CPAs. The appellate court found that the AFSP is “clearly intended to offer competitive benefits to those unenrolled preparers who participate in the program.” That competition could cause harm and therefore, the court reversed the lower court’s decision and agreed that the AICPA has standing to proceed.