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Leveling the playing field.

Leveling the Playing Field

Just after announcing that he would not seek re-election, Senator William Armstrong (R-CO) introduced a series of bills aimed at "leveling the playing field" between taxpayers and the Internal Revenue Service. Acknowledging his retirement, the introduction of this bill series has caught many national leaders by surprise. A strong proponent of Senator Pryor's Taxpayer's Bill of Rights, passed in 1988, Senator Armstrong believes that more work must be done to prevent agency abuses. The Senator publicly introduced five bills as part of his taxpayer's "fair play" package; his staff indicates that more are coming.

The proposals attempt to remedy certain oversights currently contained within Internal Revenue Code Sections 7430, 6621 and 7433, as well as Rule 501 of the Federal Rules of Evidence. Several of these proposals are of particular importance to public accountants and tax practitioners.

Senate Bill 2400, referred to the Senate Finance Committee, would effectively amend Section 7430 of the Internal Revenue Code of 1986. Upon passage, this proposal would alter the definition of prevailing parties for awarding of attorneys' fees in tax cases by striking clauses 7430(c)(4)(a) and 7430(c)(7). The elimination of these provisions would change the standard for awarding attorney's fees against the IRS, so that merely winning in court is de facto evidence of an entitlement to fees. Senate Bill 2400 would ultimately require federal officials to address the implications of unjustifiably aggressive efforts, actions or procedures. NSPA supports the proposal and the fairer structure which it would ultimately encourage.

Senate Bill S. 2433, entitled "Determination of Rate of Interest" and referred to the Senate Banking Committee, would effectively amend Section 6621 of the Internal Revenue Code of 1986. Upon passage, this proposal would amend clause 6621(a)(1)(B) adjusting the overpayment rate to match the current underpayment rate. Therefore, the proposal would establish that the overpayment rate shall be the sum of the federal short-term rate plus three percentage points instead of the current allowance of two percentage points. Section 2433 would undoubtedly remedy IRCS. 6621's existent tax inequities and unfairness by equalizing the interest rates between amounts owed to the IRS and amounts the agency refunds. NSPA views passage of this provision as a great step forward for taxpayers in the tax equity struggle.

Senate Bills S. 2467 and S. 2486, referred to the Senate Finance Committee, would effectively amend Section 7433 of the Internal Revenue Code of 1986 to provide civil damages for certain careless collection actions, and civil damages for certain unauthorized determination of income tax, respectively. Simply put, these proposals broaden the scope of this Code provision by adding the terms "carelessly" and "determination or" to 7433(a) in an effort to adequately recognize all dispute aspects. Upon passage of these provisions 7433(a) would read as follows:

"If, in connection with a determination or collection of federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly, carelessly, or intentionally disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in Section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions."

NSPA supports Senate Proposals 2467 and 2486 as they would effectively establish a tax preparer's privilege and expand the standard of care with which the IRS must comply.

Most significant within this series is Senate Bill 2452, referred to the Senate Judiciary Committee. The bill was introduced to amend Rule 501 of the Federal Rules of Evidence to establish a tax preparer's privilege. Simply put, this proposal would amend Rule 501 to establish that "communications between a lawyer or an accountant with respect to the preparation of a tax return for a client and the client shall be privileged in the courts of the United States."

This proposal, though designed to expand the scope of privileged material in the tax preparation arena, falls short of solving the identified problem. The National Society believes that two potential ambiguities currently exist within proposal 2452. The term "enrolled agent" should be included in the list of professions covered by the privilege, and no definition is provided for the term "accountant". In this respect, NSPA upholds that the exclusion of enrolled agents and/or a narrow definition of the term "accountant" could very well serve to frustrate the goal of this proposal.

The Society firmly believes that if there is to be a level playing field between taxpayers and the Internal Revenue Service, it must occur for all taxpayers, and not merely for those who choose only certain types of return preparers. In this respect, the National Society applauds the intent of S. 2452, yet could only support the introduction of an amendment to specifically include enrolled agents and to provide the broadest possible definition of the term "accountants".

The National Society commends Senator Armstrong for his exhibited interest and concern on behalf of the American taxpayer. Indeed the retiring senator is completing his congressional career quite admirably. The National Society will continue to monitor, lobby and advise Society members on the progression of this bill series. In addition, Society officials will continue dialogue with Senator Armstrong's office in an effort to obtain the inclusion of accountants and enrolled agents.

Dorothea Barr Legislative Assistant
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Title Annotation:between taxplayers and the Internal Revenue Service
Author:Barr, Dorothea
Publication:The National Public Accountant
Article Type:column
Date:Jul 1, 1990
Previous Article:The 1990 NSPA Legislative Strategy conferences.
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