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Accountants Can Sue IRS Over New Tax Prep Rule

(CN) - An accounting association can challenge an Internal Revenue Service program that allows previously uncredentialed tax return preparers to be included in an agency directory of industry professionals, the D.C. Circuit ruled.

In 2013, the IRS started the annual filing season program, allowing people who complete certain classes to be listed in an online directory of federal tax return preparers.

The program is "designed to encourage non-credentialed tax return preparers to participate in continuing education courses," the agency's website says.

No one is required to participate in the program, but it gives participants a "Record of Completion" to show their clients, and "a level of differentiation from the rest of the marketplace," the IRS says.

Participants may not describe themselves as "certified" for having completed the program, or make a representation that the IRS has endorsed them.

But the American Institute of Certified Public Accountants, an organization representing 400,000 accountants, challenged the program, alleging that it confuses consumers, and places a burden on its members.

The district court dismissed the complaint, agreeing with the IRS that the association lacked standing because the program did not harm its members. But the D.C. Circuit revived the case Friday.

"The Institute's members will face intensified competition as a result of the challenged government action," U.S. Circuit Judge David Tatel said, writing for the three-judge panel.

"The Institute alleges - and we must accept as true for purposes of assessing its standing - that [the program] 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 and take business away from presumably higher-priced CPAs," Tatel wrote.

The panel found it "hardly speculative" that the government-backed credentials given to program participants will provide them competitive benefits.

Having made this finding, the court declined to address whether consumers might confuse the "Record of Completion" with a CPA license.

"Even if the program causes no confusion, it still causes competitive harm by 'dilut[ing] the value of a CPA's credential in the market for tax-return-preparer services' and by making it more difficult for unenrolled preparers employed by the Institute's members to secure business," Tatel said, quoting the complaint.

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