|
Comments Regarding Proposed Amendments
to the Regulations
Governing Practice Before the Internal Revenue Service
(Title 31, Code of Federal Regulations, Subtitle A, Part 10)
April 23, 2001
Section 10.50 Sanctions.
The Section generally supports the expansion of the types of sanctions available to the
Service under the Proposed Amendments. The Section believes that a "censure"
sanction is an appropriate remedy in certain circumstances, and for that reason the
Section endorses the concept of the addition of this potential sanction. However, it is
unclear whether Congress has given the Secretary or the Director of Practice authority to
create such a sanction. This is especially problematic because a censure is a public
sanction that could implicate a practitioner’s due process rights.
Section 10.50(a) is an authorizing regulation pursuant to which the Secretary of the
Treasury delegates to the Director of Practice the same authority to sanction
practitioners that is granted to the Secretary by Congress in 31 U.S.C. §330(b). Section
330(b) of Title 31 gives the Secretary authority to suspend or disbar practitioners for
incompetence, disreputable conduct, violating Circular 230 or misleading or threatening a
client. Section 10.50(a) of Circular 230, as currently written, tracks the language of 31
U.S.C. §330(b) almost word for word. However, the proposed amendment to section 10.50(a)
grants to the Director of Practice an additional power to censure practitioners that was
not given to the Secretary by Congress in 31 U.S.C. §330.
Although the Section endorses the concept of "censure" as a sanction that is
imposed by the Director of Practice, the Section believes that statutory authority must
exist before the Treasury may delegate that power. The Section urges the Service to obtain
statutory authority for this proposed sanction. If and when such statutory authority
exists, the Section will strongly support the addition of this sanction.5
In addition, the proposed amendments to section 10.50(a) change the word
"refuses" to the word "fails" when describing the conduct of a
practitioner who violates the regulations. The Section believes that this change should
not be made because the change in phraseology could be interpreted to change the standard
for sanctions that is currently set forth in section 10.52. Section 10.52 currently
requires that a violation occur through gross incompetence, recklessness, or willfulness.
However, changing the word "refuses" to the word "fails" could be
interpreted to lower the standard for sanctions to a mere negligent or inadvertent failure
to comply with the regulations. Lowering the standard for sanctions to negligence or
inadvertence is not only inadvisable for many reasons, but also contrary to the express
standards set forth in section 10.52. The change in phraseology contained in the proposed
amendments to this section will lead to confusion and should be eliminated.
|
| 5 Some members of the
Section have questioned whether the Director of Practice has the necessary authority to
regulate many of the types of conduct addressed throughout Circular 230, including the
proposed expanded definition of “tax shelter opinion” in section 10.35(c)(4).
The reasoning behind this position is that 31 U.S.C. §330 authorizes the Secretary to
regulate the practice of representatives before the Service. Practice before the Service
is limited by section 10.2(e) of Circular 230 to any matter in which a practitioner makes
a presentation to the Service, which typically requires the submission of a power of
attorney. Many of the provisions of Circular 230, such as sections 10.33, 10.34, or 10.35,
do not involve the submission of a power of attorney. The conduct addressed in these and
possibly other sections of Circular 230 might be viewed as outside the scope of
jurisdiction granted to the Secretary and, derivatively, to the Director of Practice, by
31 U.S.C. §330. These members suggest that additional statutory authority could be sought
from Congress to permit the Director of Practice to regulate this type of conduct. After
careful consideration, the Section has adopted a position contrary to this view. The
Section believes sufficient authorization is present in the power of the Secretary to
suspend or disbar practitioners for violations of regulations prescribed by the Secretary
under 31 U.S.C. §330. The Section notes that section 10.2(e) of Circular 230 defines
practice before the Service to include “all matters connected with a presentation to
the Service.” (Emphasis added.) The Section considers most, if not all, of the
conduct addressed in Circular 230 to be conduct connected with a presentation to the
Service. Thus, such conduct constitutes practice before the Service that is subject to
regulation by the Secretary. Section 10.2(e) could itself be amended to confirm this
rationale by including the conduct in question within the regulatory definition of
practice before the Service. Alternatively, if the Service seeks statutory authority for
the proposed “censure” sanction, which the Section recommends, it might also be
appropriate for the Service to obtain a clarification from Congress concerning the scope
of the Service’s authority under Circular 230. |
|
|