May 13, 2003
8:00 A.M. PDT

Members Present

• Gensiejewski Jr., Gerald, PA
• Griffin, James, CA
• Grimaldi, James, NY
• Lexow, Lawrence, IL
• Lowe, Chris, CA, Chair
• Maciulla, Gregory, AZ
• Meldman, Robert, Vice Chair
• Mignano, Diane, RI
• Paolone, Francis, AL
• Smathers, Paul, ND
• Whah, Sherry, AK
• Woo, Lillian, TX
• Nicholas, Judi, Designated Federal Official

Guest Speaker

• Drexler, Ken

Note Taker

• Marla Ofilas

Welcome/Announcements/Review Agenda
Chris Lowe began the meeting by noting that the time of the meeting had changed on a temporary basis from the afternoon to the morning. He asked the committee if this was a more appropriate time it could be made permanent. The committee agreed that the morning was appropriate and felt that it worked better with their busy schedules. Judi Nicholas explained that there might be a conflict with Anne Gruber's schedule, but will discuss it with her and get back to the committee.

Action: Judi will discuss Anne's options regarding her work schedule so the start time of the Ad Hoc Committee teleconference can begin at an earlier time. Judi will contact Chris when a decision has been made.

Roll Call
Roll call was taken was taken by Marla Ofilas.

Review Minutes
Chris asked the committee members if they were able to review the meeting minutes from their previous call. All members reviewed the minutes and no changes were made. Committee members approved the meeting minutes.

National Licensing of Practitioners
Chris began by addressing the first issue of the agenda. Sherry Whah was asked to give a report on the licensing issue and she deferred to Bob Meldman. Chris introduced Robert (Bob) Meldman to briefly discuss the subcommittee and the work that was done on the survey.

Bob explained that the subcommittee gathered to get a sense of where some subcommittee members stood on the licensing of practitioners. Rather than going to the public the subcommittee decided to survey the 101 TAP members. The subcommittee received 58% response to the survey. Anne designed a graph and chart that included the responses that were received. Bob told the group that the Internal Revenue Service (IRS) prepared a statement opposing the National Taxpayer Advocate's (NTA) proposal on national licensing of tax preparers.

Chris told the committee that they should have received, in preparation for the teleconference, several documents. One of the documents is the response from the IRS, The Regulation of Federal Tax-Return Preparers, and IRS Position Paper - April 2003. In this document the IRS identified six (6) different reasons for its opposition. Chris summarized the reasons.

• The IRS felt this is the role of the state and that the state is tasked with regulating the tax service.
• The public perception, if the IRS regulates tax preparers, it would be an endorsement by the agency
• The IRS does not have sufficient current resources to engage in this process.
• The IRS would be faced with pulling resources from other programs and this would deplete funds from other programs that the IRS feels have value.
• Many preparers would go underground if this is implemented and it would be difficult to locate and regulate them.
• Businesses typically pass on fees to the consumers and if this were imposed any cost for certification would be passed on to the taxpayers.

The survey was drafted to get panel members input on the idea of national licensing of tax practitioners and specifically the recommendation in the NTA's Annual Report to Congress. Bob indicated that 78% of respondents support national licensing. The NTA has asked the committee to develop and provide a formal recommendation on this issue.

Chris introduced Ken Drexler, who is the NTA staff person responsible for the Annual Report to Congress, to briefly discuss the NTA's perspective on this issue.

Since the committee was familiar with the NTA's proposal and the IRS opposition Ken stated that the most compelling reason for implementing the recommendation is that it is a national tax and there should be national rather than local regulation/certification. Ken also stated that the NTA was testifying at the Joint Review Committee regarding the implementation of RRA 98 provisions and had been asked to address some of her comments to the issue of national licensing of practitioners. Having the Ad Hoc committee recommendations prior to that hearing would be of value. Chris opened the floor for comments or ideas from the committee members.

Paul Smathers felt that the proposal conflicted with state's rights to regulate such occupations. He feels the overall bureaucracy that this may create would not be wise at this time. Chris acknowledged Paul's comments and stated that the NTA's view is that there are 50 states and if each were allowed to come up with its own system of certification there would likely be 50 different processes. Ken added that in the legal profession, there is a split in the extent to which the state verses federal entities require certification. He gave an example that lawyers normally have to pass a state exam that is administered by the state to practice in the state but not before federal court. To argue a case before the U.S. court, an attorney must pass a federal exam. Paul felt that some of the points were valid but CPA's that are currently allowed to practice before the IRS are state licensed and the states have different rules. He understands that NTA's proposal won't change for CPA's and they will be able to practice before the IRS. They currently operate on state laws, which vary from state to state.

Ken agreed and also expressed additional concerns. CPA's and lawyers are required to be licensed in all states and enrolled agents need to take an exam to practice before the IRS. The likelihood that all 50 states, anytime soon, are going to impose regulations on tax-preparers is low. NTA's concern is that the federal tax system has something at stake and there are real consequences for the taxpayer and for the IRS when the tax returns are not properly prepared.

The committee continued to express their thoughts and feelings on this issue. Chris reviewed the responsibility of the Ad Hoc Committee; to take the data from the survey; use the IRS position paper and if the Ad Hoc Committee is able to synthesize that into a unanimous opinion. Judi offered that if the committee does not have a unanimous decision that the committee include a dissenting opinion.

The committee took a poll of each member asking the question: Does the Ad Hoc Committee support the certification of tax preparers? Supporters of this statement voted "Yes" and non-supporters of this statement voted "No".

• Gerald Gensiejewski - No
• James Griffin - Yes
• James Grimaldi - Yes
• Lawrence Lexow - Yes
• Chris Lowe - Yes
• Gregory Maciulla - Yes
• Robert Meldman - Yes
• Diane Mignano - Yes
• Francis Paolone - Yes
• Paul Smathers - No
• Sherry Whah - Yes
• Lillian Woo - No
• Judi Nicholas - Yes

Chris recommended that the three-committee members that voted "No" meet and develop a minority report to be included in the committee recommendation. . Chris also indicated that the Ad Hoc Committee should come up with a position so it could help the NTA in giving her testimony to congress. Chris also explained that this is the first issue given to the committee and he wanted to make sure that there was a lot of thought, consideration and consensus that went into this decision.

Chris asked each of the members opposed to the issue to share their reasons with the rest of the committee. Gerald explained that the Ad Hoc Committee conducted a poll and based on the responses that were received a majority of the respondents are in favor of national licensing. And, although Gerald was not in favor of national licensing he could support a statement that "a majority of respondents and majority of the Ad Hoc Committee members supported the proposal." Paul also expressed that he is not in favor for previously stated reasons but could support a statement such as the one Gerald made. Lillian agreed with the IRS' position stating that most of the objections the Service had were compelling in terms of government resources, cost, and enforcement. Lillian also felt that if the government doesn't have the resources, you couldn't fight for something they don't have. She also believes that federal licensing should not be for everything and if there are alternative ways besides federal licensing, then it should be sought out.

Action:
The Ad Hoc Committee agreed to the following:

• Sherry Whah will draft a general letter to the NTA from the Ad Hoc Committee to be ready in time to be considered in her testimony at the Joint Review Committee.
• Sherry will produce the letter and have this out to the committee for comments by the end of the day.
• Response to Sherry's letter will be due to her by May 15th, 2003.
• Respective members of the Ad Hoc Committee will produce a majority and minority report. The reports will be developed at the Committee meeting in June and sent to the NTA shortly thereafter.

Joint Committee Meeting Report
Chris had to leave the call and this topic will be held until the June meeting.

Ad Hoc meeting in St. Louis
Judi discussed the agenda for the St. Louis meeting and advised that the agenda had not changed materially. The NTA has proposed that the Ad Hoc committee begin work on an issue regarding financial literacy. The TAP director is seeking details about the issue. This issue may be added to the agenda for this meeting.

Public Input
No one from the public was scheduled to speak therefore there was no public input.

Committee Comments
Lillian asked if there would be a teleconference on June 2nd. The committee agreed that the teleconference should be cancelled since they will be having their face-to-face meeting that week in St. Louis.

No other comments were made and the teleconference adjourned.