November 1999

Society Endorses AICPA Decision to Issue Enforceable Tax Standards

The NYSSCPA Executive Committee voted at its October 28 meeting to endorse the recent decision by AICPA Council to empower the Institute's Tax Executive Committee to issue enforceable professional standards in taxation.

Council's decision capped a multiyear campaign by the AICPA tax division, currently headed by NYSSCPA member David A. Lifson, to obtain authority to issue enforceable standards. The division's Statements on Responsibilities in Tax Practice (SRTP), although currently not enforceable in AICPA ethics hearings, have, in effect, been enforced elsewhere.

"In malpractice cases, trial courts have regularly 'enforced' the SRTPs for years," Lifson said. "The federal government included significant parts of the SRTPs in its Treasury Circular 230, which it uses to discipline CPAs and others authorized to practice before the IRS. Still, the AICPA and state societies weren't empowered to enforce these professional guidelines. Council's action paves the way for the Tax Executive Committee to make the SRTPs enforceable and clears up what must be a very confusing situation for tax practitioners."

The AICPA tax division has issued voluntary educational standards on an occasional basis since 1964. There presently are eight SRTPs: Tax Return Positions (suggesting that CPAs should have a "realistic possibility of success" before taking positions on tax returns), Answers to Questions on Returns, Certain Procedural Aspects of Preparing Returns, Departure from a Position Previously Concluded in an Administrative Proceeding or Court Decision, Knowledge of Error: Return Position, Knowledge of Error: Administrative Proceedings, and Form and Content of Advice to Client.

The NYSSCPA Tax Division Oversight Committee, chaired by John J. Kearney, also endorsed Council's action.

"We found that much of the standards-setting world was getting ahead of the AICPA in the tax arena," Kearney said. "The IRS director of practice considers the SRTPs to constitute minimal tax practice standards, implying that he expects this much and more from practitioners. Several state boards of accountancy have begun enforcing them. And the plaintiff's bar uses them in malpractice cases. It is time for the AICPA to catch up."

In developing its position, the AICPA Tax Executive Committee consulted the Institute's professional ethics and PCPS executive committees. While both committees supported making the current SRTPs enforceable, only the ethics committee advocated giving the Tax Executive Committee the standards-setting authority it requested.

"The PCPS committee was concerned about standards overload," Lifson said. "The Tax Executive Committee assured both the PCPS Executive Committee and AICPA Council that it has no intention to proliferate the profession with additional standards. We are very deliberate in issuing these things. After all, over thirty-five years, we issued only ten, two of which were dropped or consolidated into other statements in 1988. And that was when the statements were voluntary--the process will be subject to even more prerelease exposure and scrutiny now." *