HB258 By Representative Scott RFD Financial Services Rd 1 18-FEB-16

SYNOPSIS: Under current law, Certified Public Accountants, Attorneys, and Enrolled Agents are required to obtain a license or certification in order to prepare tax returns in Alabama.

However, there are few provisions in place to protect consumers against individual income tax preparers that repeatedly misrepresent information on their tax returns.

This legislation would require certain tax preparers to register with the Department, prior to preparing returns, which will help regulate services, prohibit unregistered persons from performing said services, and establish penalties for violators.

It would also establish qualifications for registration, requirements of disclosures to consumers, and exemptions to those obligated to register.

The legislation also establishes an Individual Tax Preparers Fund that will be used to provide for the cost associated with the administration and enforcement of this act.

A BILL TO BE ENTITLED AN ACT

To provide for the registration and regulation of certain individual tax preparers; to provide for registration exemptions; to prohibit individuals not registered from conducting tax preparation services; and to provide penalties for violations; and in connection therewith would have as its purpose or effect the requirement of a new or increased expenditure of local funds within the meaning of Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the "Alabama Taxpayer Protection and Assistance Act."

Section 2. The Alabama Taxpayer Protection and Assistance Act is enacted to protect consumers by establishing a registration program to ensure that qualified individuals provide individual tax preparation services.

Section 3. When used in this act, the following terms shall have the following meanings:

(1) CONSUMER. Any natural person who, singly or jointly with another consumer, pays an individual tax preparer to prepare his or her individual federal or state tax return.

(2) DEPARTMENT. The Alabama Department of Revenue.

(3) FUND. The Individual Tax Preparers Fund established under this act.

(4) INDIVIDUAL TAX PREPARER. An individual who is registered by the Department to provide individual tax preparation services.

(5) IN GOOD STANDING. An individual who has not engaged in conduct that would justify censure, suspension, or disbarment from practice.

(6) PERSON. An individual, firm, proprietorship, association, corporation, or another entity.

(7) PROVIDE INDIVIDUAL TAX PREPARATION SERVICES. To prepare, advise, or assist in the preparation of, or assume final responsibility for, preparation of another individual's federal or state personal income tax return for valuable consideration.

(8) REGISTRATION. An authorization issued by the Department to provide individual tax preparation services.

(9) TAX RETURN. A return, declaration, statement, refund claim, or other document required to be made or filed in connection with state or federal income taxes.

Section 4. (a) There are different levels of tax preparers each with specific requirements for compliance. CPAs, Enrolled agents, and attorneys who prepare tax returns already fulfill the necessary Department requirements by completing the compliance standards required by their professions to be in good standing. All CPAs, Enrolled agents, and attorneys are required to pass a rigorous exam before being certified.

(b) The following individuals are exempt from the requirements of this act:

(1) An individual in good standing with an active license issued by the Alabama State Department of Public Accountancy or the state Department of Public Accountancy in another state.

(2) An individual in good standing and admitted to practice law in this state or in another state.

(3) An individual employed by a local, state, or federal governmental agency, but only in performance of official duties.

(4) An individual enrolled to practice before the Internal Revenue Service.

(5) An individual preparing returns other than individual tax returns for a firm, a proprietorship, an association, or a corporation by which the individual is employed.

Section 5. (a) No individual may provide tax preparation services of Alabama individual income tax returns unless registered with the Department. This provision does not apply to persons exempt under Section 4. Upon meeting all registration requirements, the Individual Tax Preparer shall be issued an Alabama identification number.

(b) The Department may set reasonable fees for the registration and renewal of registration of individual tax preparers. The amount of each shall be prescribed by the Department.

(c) Each individual tax preparer that registers under this act shall pay the Department a registration fee at the time of registration or a renewal fee at the time of renewal of registration.

(d) The Department shall pay all fees collected under this section to the Comptroller who shall distribute the fees to the fund established herein.

Section 6. (a) The Department may investigate a complaint that alleges a violation of this act.

(b) On receipt of the results of an investigation made under this section, the Department shall promptly take action that is appropriate under this act to ensure compliance with this act.

(c) If the Department concludes that conduct alleged to be in violation of this act will result in harm to a resident of the state, the Department may seek a permanent or temporary injunction with respect to the conduct from the circuit court of the county in which the alleged violation occurred.

(d) In seeking an injunction under this subsection, the Department is not required to post bond or prove that an adequate remedy at law does not exist.

(e) The Department or its designee may issue a subpoena for the attendance of witnesses to testify or the production of evidence in connection with a disciplinary action brought under this act or a proceeding brought for an alleged violation of this act.

(f) If an individual fails to comply with a subpoena issued under this section a court of competent jurisdiction may compel compliance with the subpoena.

Section 7. (a) There is established the Individual Tax Preparers Fund in the State Treasury.

(b) The purpose of the fund is to provide for the costs associated with the administration and enforcement of this act, support the efforts of Internal Revenue Service certified Volunteer Income Tax Assistance (VITA) programs, and increase outreach efforts to encourage low-income taxpayers to make use of free tax services and claim the earned income tax credit.

(c) The Department shall administer the fund.

(d) The fund shall consist of the following:

(1) Revenue distributed to the fund under this act.

(2) Money appropriated in the state budget to the fund.

(3) Any other money from any other source accepted for the benefit of the fund.

(e) The fund may be used only for costs associated with the administration and enforcement of this act.

(f) Revenue from registration fees that exceeds the amount necessary to administer this act shall be made available for the following purposes:

(1) To provide funding for IRS-Certified Volunteer Income Tax Assistance (VITA) Programs through a grant application program. The grant applications and organizations which receive the funds shall be determined through a process determined by the Department in consultation with the IRS Office of Stakeholder Partnerships, Education and Communication.

(2) To support outreach efforts that provide low-income taxpayers with information about the availability of the earned income tax credit and encourage low-income taxpayers to make use of Internal Revenue Service certified Volunteer Income Tax Assistance programs. The Department may establish an outreach subcommittee to develop or implement, or both, a plan to achieve this purpose.

Section 8. (a) The Department shall confirm the registration status and qualifications of any individual who is the subject of the request.

(b) Each registration under this section shall include a statement of the registration status of the individual who is the subject of the request and may include any of the following:

(1) Information about examination results and other qualifications of the individual.

(2) Information about the dates of issuance of the registration of the individual.

(3) Information about any disciplinary action taken against the individual.

Section 9. (a) An individual shall be registered by the Department before the individual may provide individual tax preparation services in this state.

(b) To qualify for registration, the applicant shall meet the following minimum requirements that he or she:

(1) Has never been convicted of a felony.

(2) Is at least 18 years of age.

(3) Possess a high school diploma or have passed a graduation equivalency examination.

(4) Submit an application in a manner prescribed by the Department.

(5) Be a citizen of the United States or, if not a citizen of the United States, a person who is legally present in the United States with appropriate documentation from the federal government.

Section 10. (a) An applicant who otherwise qualifies for registration is entitled to be examined as provided in this section.

(b) The Department may give examinations to applicants, in a manner prescribed by the Department.

Section 11. (a) The Department shall issue a registration number to each qualified applicant and upon payment of the registration fee.

(b) A registration authorizes the individual to provide individual tax preparation services.

(c) Unless renewed, a registration expires on the first December 31 after the effective date of the registration.

(d) Before a registration expires, the individual may renew the registration for an additional one-year term if the individual meets the following requirements:

(1) Otherwise is entitled to be registered.

(2) Pays to the Department a renewal fee, as set by the Department.

(3) Submits to the Department a renewal application in a manner prescribed by the Department and satisfactory evidence of compliance with the continuing education requirements set by the Department for registration renewal.

(e) The Department shall renew the registration of each individual who meets the requirements of this section.

Section 12. (a) The Department shall adopt continuing education requirements as a condition of the renewal of a registration issued under this act.

(b) The department will prescribe the continuing education requirements and in what manner these requirements will be submitted to the department.

Section 13. (a) The Department shall adopt rules for the reinstatement of an individual who has failed to renew a registration for any reason if the individual otherwise is entitled to be registered, complies with the continuing education requirements set by the Department, and pays to the Department all past due renewal fees and a reinstatement fee.

(b) The Department may deny a registration to any applicant, reprimand any registered individual, or suspend or revoke a registration if the applicant or registered individual does any of the following:

(1) Fraudulently or deceptively obtains or attempts to obtain a registration for the applicant or registered individual or for another.

(2) Fraudulently or deceptively uses a registration.

(3) Under the laws of the United States or of any state, is convicted of a felony or a misdemeanor directly related to the fitness and qualification of the applicant or registered individual to provide individual tax preparation services.

(4) Is guilty of negligence, incompetence, or misconduct while providing individual tax preparation services.

(5) Violates any provision of this act.

(c) Civil penalties for unethical tax preparation imposed under this act, will be imposed as prescribed under 40-2A-11.1.

Section 14. (a) An individual tax preparer shall maintain for seven years all records of personal income tax returns prepared by the individual tax preparer.

(b) Prior to rendering individual tax preparation services, an individual tax preparer shall disclose to the consumer, in writing, all of the following information:

(1) The individual tax preparer's name, state preparer registration number, physical address, email address, and telephone number.

(2) That the individual tax preparer is not a certified public accountant, an enrolled agent, or an attorney.

(3) Services that the individual tax preparer is qualified to provide individual income tax preparation services in Alabama.

(4) The individual tax preparer's education and training, including examinations taken and successfully passed.

(5) Any other information that the Department requires.

(c) The individual tax preparer must only use the title of "individual income tax preparer" in reference to himself or herself and may not use the terms "certified" or "registered" in any advertisement, website, business cards, or any other information or materials made available to the public.

(d) The disclosure required under subsection (b) shall be provided to a consumer at an initial meeting between the individual tax preparer and the consumer and, if the individual tax preparer maintains a website, on the website.

(e) An individual tax preparer may not do any of the following:

(1) Fail to sign a consumer's individual tax return.

(2) Obtain the consumer's signature on an individual tax return or other authorization document prior to the completion of the individual tax preparation services.

(3) Disclose information received for the purposes of preparing a consumer's federal or state income tax return, unless consented to in writing by the consumer, expressly authorized by law and in compliance with Internal Revenue Code §7216, necessary for the preparation of the tax return, or in accordance with a court order.

(f) A penalty of 100 dollars will be imposed for each violation under (e) of this section.

Section 15. Except as otherwise provided in this act, a person may not provide, attempt to provide, or offer to provide individual tax preparation services in the state unless registered by the Department.

Section 16. On or before July 1 of each year, beginning July 2018, each individual tax preparer shall file an annual report with the Department pursuant to procedures that the Department shall establish. An annual consolidated report shall be prepared by the Department and made available to the public. These reports shall include the following information for the time period of January 1 to December 31 of that year:

(1) The total number of completed federal and state tax returns.

(2) Any other information required by the Department.

Section 17. The provisions of this act are servable. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains.

Section 18. All laws or parts of laws which conflict with this act are hereby repealed.