35% flat tax hits non-CPAs.
Rainbow, a Nevada company, argued that state law restricts accounting services to licensed CPAs. Since Rainbow did not offer services that state law authorized only CPAs to perform and did not employ any CPAs, Rainbow said it was entitled to use the graduated corporate income tax rates of section 11(b)(1).
The court agreed the taxpayer was not a public accounting firm and its services were restricted by state law, but it said section 448(d)(2) requires only that the services be in the "field of accounting," not that they be performed by CPAs. Since tax return preparation and bookkeeping are clearly "branches" of accounting under Treasury Regulation 1.448-1T(e)(5)(vii), example 1(i), the court concluded Rainbow was a personal-services corporation and must pay the flat 35% tax rate.
Prepared by JofA Copy Editor Jeffrey Gilman, J.D.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||non-certified public accountants; Rainbow Tax Service v. Commissioner|
|Publication:||Journal of Accountancy|
|Date:||May 1, 2007|
|Previous Article:||In the line of duty.|
|Next Article:||More than a Numbers Game: A Brief History of Accounting.|