VSCPA Sends Follow-Up Letter to Rep. Cantor on 'More Likely Than Not' Standard

The VSCPA sent the following letter to Rep. Eric Cantor to urge a fix for the "more likely than not" standard. This letter is a follow-up to an August 23, 2007, letter on the same subject.

December 12, 2007


The Honorable Eric I. Cantor
House Committee on Ways and Means
329 Cannon House Office Building
Washington, D.C. 20515

Re: H.R. 4318 — Tax Return Reporting Standards for Preparers

Dear Congressman Cantor:

On August 23, 2007, I wrote you about a tax problem caused by increasing the tax return reporting standards applicable to tax return preparers under section 6694 of the Internal Revenue Code for undisclosed, non-tax avoidance items, from the “realistic possibility of success” standard to the “more likely than not” standard. The increase in the standard came from an amendment added in section 8246 of the U.S. Troop Readiness, Veteran’s Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007. For your reference, I have attached a copy of that letter.

Congressmen Crowley and Ramstad introduced a bill, H.R. 4318, on December 6, 2007, to rectify this situation. On behalf of the Virginia Society of CPAs, I am asking that you join as a co-sponsor on this bill.  

By raising the standard to “more likely than not,” a number of problems were created, including:

  • If tax preparers have a higher standard than the taxpayer, they cannot be a tax advocate for the taxpayer.
  • H.R. 4318 does not reduce the standard for tax shelter items.
  • The number of disclosures that would be made to the IRS using the higher “more likely than not” standard would increase exponentially over the disclosures made at the “substantial authority” level. The IRS would not have the resources to review the larger volume of disclosures, and it would be an administrative nightmare for the IRS.

H.R. 4318 would alleviate all of the problems caused by the increase in the standard. We urge you to lend your support to this bill.

Thank you for your consideration of this issue.

Sincerely,


Monique T. Valentine, CPA
Chair of the VSCPA Board of Directors

Encl.

LAST UPDATED 12/12/2007

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