HB4031 99TH GENERAL ASSEMBLY

LRB099 09104 HLH 29297 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB4031

Introduced , by Rep. Marcus C. Evans, Jr.

SYNOPSIS AS INTRODUCED:

New Act

Creates the Tax Consultant and Tax Preparer Licensure Act. Provides that tax consultants must be licensed by the Department of Revenue. Provides that a person may not prepare or advise or assist in the preparation of personal income tax returns for another for valuable consideration, or represent that the person is so engaged, unless the person is licensed as a tax consultant. Provides that a tax preparer may prepare or advise or assist in the preparation of tax returns only under the supervision of a licensed tax consultant, and provides that those tax preparers must also be licensed by the Department of Revenue. Contains provisions concerning fees, suspension or revocation of licenses, and prohibited activities. Contains provisions concerning refund anticipation loans. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Tax Consultant and Tax Preparer Licensure Act.

Section 5. Definitions. As used in this Act:

"Department" means the Department of Revenue.

"Facilitator" means a person that individually or in conjunction or cooperation with another person processes, receives, or accepts for delivery an application for a refund anticipation loan or a check in payment of refund anticipation loan proceeds or in any other manner materially facilitates the making of a refund anticipation loan.

"Facilitator" does not mean a financial institution, an affiliate that is a servicer for a financial institution, a person issued a certificate as a certified public accountant or licensed as a public accountant, or any person that acts solely as an intermediary and does not deal with a taxpayer in the making of a refund anticipation loan.

"Lender" means a person that makes a refund anticipation loan with the person's own funds or a line of credit or other funding from a financial institution, but does not include a financial institution.

"Refund anticipation loan" means a loan that the lender arranges to be repaid directly from the proceeds of the taxpayer's federal or State personal income tax refund.

"Refund anticipation loan fee" means the charges, fees, or other consideration charged or imposed by the lender or facilitator for the making of a refund anticipation loan.

"Refund anticipation loan fee" does not mean any charge, fee, or other consideration usually charged or imposed by the facilitator in the ordinary course of business for non-loan services, including fees for tax return preparation and fees for electronic filing of tax returns.

"Taxpayer" means an individual who files a federal or Illinois personal income tax return.

Section 10. Prohibited activities.

(a) Except as otherwise provided in this Act, a person may not prepare, or advise or assist in the preparation of, personal income tax returns for another for valuable consideration, or represent that the person is so engaged, unless the person is licensed as a tax consultant under this Act.

(b) A tax preparer may prepare or advise or assist in the preparation of tax returns only under the supervision of a licensed tax consultant, and subject to such conditions and limitations as the Department by rule may impose.

(c) A person may not be a facilitator of a refund anticipation loan without first being issued a license as a tax consultant or tax preparer under this Act.

Section 15. Qualifications for tax consultant and tax preparer; examination.

(a) Every applicant for a license as a tax consultant and every applicant for licensing as a tax preparer must:

(1) be 18 years of age or older;

(2) possess a high school diploma or have passed an equivalency examination;

(3) present evidence satisfactory to the Department that the applicant has successfully completed at least 80 hours in basic personal income tax law, theory, and practice at a school training session or educational institution approved by the Department; and

(4) possess a preparer tax identification number issued by the Internal Revenue Service.

(b) In addition to the requirements of subsection (a) of this Section, every applicant for licensing as a tax preparer must pass an examination in the form and manner prescribed by the Department. The examination must measure the applicant's knowledge of Illinois and federal personal income tax law, theory, and practice.

(c) In addition to the requirements of subsection (a) of this Section, every applicant for licensing as a tax consultant must do all of the following:

(1) Present evidence satisfactory to the Department of employment as a tax preparer in this or another state in a capacity that is, in the judgment of the Department, equivalent to that of a tax preparer or tax consultant, for not less than a cumulative total of 1,100 hours during at least 2 of the last 5 years. The Department shall consider certification submitted by a tax consultant that the applicant was employed as a tax preparer under his or her supervision for the period indicated in the certificate to be satisfactory evidence of the applicant's employment as a tax preparer for the period indicated. If an applicant has worked less than a cumulative total of 1,100 hours in at least 2 of the last 5 years, the Department may consider the number of hours employed, the number of years employed, the number of tax returns prepared, and whether the work involved contributed directly to the professional competence of the individual in determining if a tax preparer or tax consultant has met the work experience requirement.

(2) Pass an examination in the form and manner prescribed by the Department. The examination must measure the applicant's knowledge of Illinois and federal personal income tax law, theory, and practice, and be of a more exacting nature and require higher standards of knowledge of personal income tax law, theory, and practice than the examination for a tax preparer's license.

(d) If, in the judgment of the Department, an applicant has, in combination, the education and experience to qualify for a tax consultant's or preparer's license, but does not meet or cannot present evidence of strict compliance with the requirements of paragraph (3) of subsection (a) or item (1) of subsection (c) of this Section, the Department may allow some of the applicant's education or experience to substitute one for the other. However, this subsection does not allow a waiver of, or substitution for, any qualifications needed for a tax consultant's or preparer's license other than those described in those paragraphs.

Section 20. Tax consultant's application. Every person desiring to be licensed as a tax consultant shall apply in writing to the Department. The application forms shall be approved by the Department. Each application shall include or be accompanied by evidence, satisfactory to the Department, that the applicant meets the qualifications prescribed in this Act. Each application shall be accompanied by the examination fee as provided under Section 70.

Section 25. Tax preparer's application. Every person desiring to be licensed as a tax preparer shall apply in writing to the Department. The application forms shall be approved by the Department. Each application shall include or be accompanied by evidence, satisfactory to the Department, that the applicant meets the qualifications prescribed in this Act. The application shall be accompanied by the examination fee as provided under Section 70.

Section 30. Licensing of person licensed in another state or enrolled to practice before Internal Revenue Service; requirements; fees.

(a) The Department may issue a license to an applicant for a license as a tax consultant or as a tax preparer who:

(1) presents evidence satisfactory to the Department that the applicant is licensed as a tax consultant or preparer in a state that has requirements for licensing substantially similar to the requirements for licensing in this State; and

(2) has passed to the satisfaction of the Department an examination covering Illinois personal income tax law, theory, and practice, the provisions of this Act, and the code of professional conduct prescribed by the Department.

(b) Notwithstanding subsection (a) of this Section, the Department shall license as a tax consultant any person who is, on the date of the application for a tax consultant's license, enrolled to practice before the Internal Revenue Service if the person has passed to the satisfaction of the Department an examination covering Illinois personal income tax law, theory, and practice, the provisions of this Act, and the code of professional conduct prescribed by the Department.

(c) Except as otherwise provided in this Section, an examination is not required for licensing under this Section.

(d) Any person desiring to be licensed under this Section shall make written application to the Department and shall pay to the Department at the time required by the Department the examination and license fees provided by rule of the Department.

Section 35. Issuance of licenses. The Department shall license as a tax consultant or a tax preparer each applicant who:

(1) demonstrates to the satisfaction of the Department fitness for a license;

(2) pays to the Department an initial license fee as provided under Section 70; and

(3) has no disciplinary actions pending before the Department.

The Department shall issue evidence of licensing to each person licensed.

Section 40. Preparation of tax returns by corporation, firm, or partnership; requirements; liability; prohibitions.

(a) A sole proprietorship, partnership, corporation or other legal entity, through individuals who are authorized within this State to render those services, may engage in the preparation, or in advising or assisting in the preparation of personal income tax returns for another for valuable consideration and represent that it is so engaged if the entity:

(1) registers annually with the Department in the manner prescribed by the Department;

(2) designates and reports in the manner prescribed by the Department the authorized individual or individuals who are responsible for the tax return preparation activities and decisions of the entity; and

(3) complies with this Act and the rules adopted by the Department.

(b) A sole proprietorship, partnership, corporation, or other legal entity shall not be relieved of responsibility for the conduct or acts of its agents, employees, or officers by reason of its compliance with subsection (a) of this Section, nor shall a licensed tax consultant be relieved of responsibility for professional services performed by reason of employment by or relationship with such sole proprietorship, partnership, corporation or other legal entity.

(c) A sole proprietorship, partnership, corporation or other legal entity shall not engage in tax return preparation activities under subsection (a) of this Section if the tax consultant, or the proprietor, a partner, a principal, an officer, director or manager, or a shareholder of the entity, is:

(1) an individual whose license as a tax consultant or tax preparer has been permanently revoked;

(2) an individual to whom the Department has refused to issue or renew a license on the basis of dishonest conduct or conduct involving tax preparation;

(3) an individual whose occupational license, permit, or registration has been revoked or refused by another state regulatory agency or the Internal Revenue Service for dishonest conduct or conduct involving tax preparation;

(4) a sole proprietorship, partnership, corporation, or other legal entity prohibited from engaging in tax return preparation activities under subsection (a) of this Section by reason of this subsection.

(d) The shareholders referred to in subsection (c) of this Section are:

(1) if the corporation is publicly traded, a shareholder that owns more than 10% in value of the outstanding stock of the corporation; and

(2) if the corporation is not publicly traded, any shareholder.

(e) For purposes of subsections (c) and (d) of this Section, "publicly traded" means traded on an established securities market.

(f) If a sole proprietorship, partnership, corporation or other legal entity must sever a relationship in order that it may engage or may continue to engage in tax preparation activities in compliance with this Section, the entity shall be allowed a reasonable time to sever the relationship. Except as otherwise provided in this Section, the time allowed to sever a relationship shall not exceed 180 days after the Department gives notice that the severance is required. The notice shall include a statement affording an opportunity for hearing on the issue of severance.

(g) If a hearing is requested under subsection (f) of this Section, or if an appeal is taken of the Department's order following hearing, the Department or court may allow additional time for the affected parties to comply with any order requiring severance.

Section 45. Renewal of licenses; restoration of lapsed license; rules.

(a) Each licensed tax consultant or tax preparer shall apply to the Department and pay the fee for a renewal of the license. The application shall be made annually, on or before a date established by the Department by rule. The application shall be accompanied by evidence satisfactory to the Department that the person applying for renewal of the license has completed the continuing education required by Section 50.

(b) At least 30 days before the annual renewal date, the Department shall notify the licensee that the annual renewal application and fee are due.

(c) Any license that is not renewed within 15 days after the annual renewal date shall lapse.

(d) The Department may restore any lapsed license upon payment to the Department of all past unpaid renewal fees and a fee for restoration of a lapsed license and upon proof of compliance with any continuing education requirements that may be adopted by the Department by rule.

Section 50. Continuing education requirement; waiver.

(a) Except as provided in subsection (b) of this Section, upon annual renewal of a tax preparer's or tax consultant's license, each person licensed as a tax consultant or tax preparer under this Act shall submit evidence satisfactory to the Department that the person has completed at least 30 hours of instruction or seminar in subjects related to income tax preparation since the preceding license renewal date. If the Department does not receive evidence that the continuing education requirement has been completed by the applicant, the Department shall not renew the applicant's active license.

(b) The Department may exempt a tax consultant or tax preparer from the continuing education required by this Section upon application showing evidence satisfactory to the Department of inability to comply because of unusual or extenuating circumstances.

Section 55. Licenses to be displayed. Each tax consultant and preparer shall display the evidence of licensing issued to the tax consultant or tax preparer in accordance with rules adopted by the Department.

Section 60. Use of title. An individual may not assume or use the title or designation "tax consultant" unless the person is licensed as a tax consultant under this Act.

A sole proprietorship, partnership, corporation, or other legal entity may not assume or use the title or designation "tax consultant" unless the entity is in compliance with Section 40.

Section 65. Inactive status; application; renewal; reactivation; revocation or suspension; prohibition; rules.

(a) Whenever a tax consultant or tax preparer ceases to engage in the preparation or in advising or assisting in the preparation of personal income tax returns, the consultant or preparer may apply to the Department for inactive status. A license that is granted inactive status may be renewed upon payment of the applicable license fee. No proof that the continuing education required by Section 50 has been fulfilled need be presented to the Department for renewal of an inactive license.

(b) A license in inactive status may be reactivated upon payment of a reactivation fee and upon proof of compliance with such continuing education requirements as may be adopted by the Department by rule.

(c) A license in inactive status may be revoked or suspended by the Department when conditions exist under which the Department would have been authorized to revoke or suspend the license if it were active.

(d) No person whose license is inactive shall act as a tax consultant or as a tax preparer.

Section 70. Fees. The Department shall by rule adopt fees for:

(1) application for examination for a tax consultant's license;

(2) application for examination for a tax preparer's license;

(3) issuance or renewal of a tax consultant's license;

(4) issuance or renewal of a tax preparer's license;

(5) issuance or renewal of a tax consultant's inactive license;

(6) issuance or renewal of a tax preparer's inactive license;

(7) reactivation of a tax consultant's inactive license or reactivation of a tax preparer's inactive license;

(8) restoration of lapsed license;

(9) issuance or replacement of a duplicate license;

(10) issuance of a replacement or duplicate tax consultant certificate;

(11) registration or registration renewal for a sole proprietorship, partnership, corporation, or other legal entity;

(12) issuance or renewal of a combined tax consultant's or tax preparer's license and registration for a sole proprietorship, partnership, corporation, or other legal entity; eligibility for a combined license shall be determined under rules adopted by the Department; and

(13) annual registration of a branch office of a sole proprietorship, partnership, corporation or other legal entity.

Section 75. Tax consultant's records.

(a) Except as provided in this Section, every person licensed as a tax consultant shall keep records of all personal income tax returns prepared by the person, or in the preparation of which advice or assistance of the person has been given. The records of the returns shall be kept for a period of not less than 4 years after the date of the preparation, advice, or assistance.

(b) If a tax consultant is employed by another tax consultant, the records shall be kept by the employing tax consultant.

(c) If tax consultant who has been designated as responsible for the tax return preparation activities and decisions of a partnership, corporation, or other legal entity ceases to be connected with the partnership, corporation, or other legal entity, the records shall be retained by the partnership, corporation, or other legal entity.

Section 80. Secretary of State as agent for service of process against nonresident; fee.

(a) The acceptance by a nonresident of a license as tax consultant or a tax preparer shall be considered equivalent to the appointment by the nonresident of the Secretary of State as attorney upon whom may be served any summons, process, or pleading in any action or suit against the nonresident in any court of this State, arising out of any business done by the nonresident as a tax consultant or tax preparer in this State.

(b) The acceptance of a license shall be considered equivalent to any agreement by the nonresident that any summons, process, or pleading in the action or suit may be made by leaving a copy thereof, with a fee of $2, with the Office of the Secretary of State. Such service shall be sufficient and valid personal service upon the defendant if notice of such service and a copy of the summons, process, or pleading is sent forthwith by registered mail or by certified mail with return receipt by the plaintiff or the attorney of the plaintiff to the defendant at the most recent address furnished to the Department by the nonresident tax consultant or tax preparer or to the last known address. An affidavit of the plaintiff or the attorney of the plaintiff of the mailing shall be appended to the summons, process, or pleading and entered as a part of the return thereof. However, personal service outside of the State in accordance with the statute relating to personal service of summons outside of the State shall relieve the plaintiff from such mailing requirement.

(c) Any summons received or provided in this Section shall require the defendant to appear and answer the complaint within 4 weeks after receipt thereof by the Secretary of State. The court in which the action or suit is brought may order such continuance as may be necessary to afford the defendant reasonable opportunity to defend the action. The fee of $2 paid by the plaintiff to the Secretary of State shall be taxed as costs in favor of the plaintiff if the plaintiff prevails in the action. The Secretary of State shall keep a record of each summons, process, or pleading served upon the Secretary of State under this Section, showing the day and hour of service.

Section 85. Continuing authority of the Department. The lapsing, suspension, or revocation of a license by operation of law or by order of the Department or by decision of a court of law, or the voluntary surrender of a license by a licensee, shall not deprive the Department of jurisdiction to proceed with any investigation of or any action or disciplinary proceeding against the licensee, or to revise or render null and void an order suspending or revoking the license.

Section 90. Disciplinary action; grounds. The Department may refuse to issue or renew a tax consultant or preparer's license, or may suspend or revoke a tax consultant or preparer's license, or may reprimand any person licensed as a tax consultant or tax preparer for:

(1) a violation of Section 10, Section 95, or Section 105;

(2) failure to keep records as required under this Act;

(3) negligence or incompetence in tax consultant or tax preparer practice, or when acting in the capacity of a tax preparer or tax consultant in another state or under an exempt status, or in preparation of the personal income tax return for another state or the federal government;

(4) conviction of any crime, an essential element of which is dishonesty, fraud, or deception, under the laws of any state or of the United States;

(5) conviction of willful failure to pay any tax or estimated tax, file any tax return, keep records or supply information required under the tax laws of any state or of the United States, or conviction of the willful making, rendering, delivery, disclosure, signing or verifying of any false or fraudulent list, return, account, statement or other document, or of supplying any false or fraudulent information, required under the tax laws of any state or of the United States.

(6) failure to comply with continuing education requirements under this Act;

(7) violation of the code of professional conduct prescribed by the Department;

(8) failure to timely pay any civil penalty incurred under this Act; or

(9) cancellation, revocation, or refusal to renew by any State or federal agency, or entry of a consent order, stipulated agreement, or judgment related to, the person's or business's authority to practice law, to practice as a certified public accountant or a public accountant, or to practice under other regulatory law in any state, or to practice as an enrolled agent, if the grounds for the cancellation, revocation, refusal to renew, consent order, stipulated agreement, or judgment were related to income tax preparation or if dishonesty, fraud, or deception was involved.

Section 95. Prohibited acts. It is unlawful for any person to:

(1) obtain or attempt to obtain a license as a tax consultant or a tax preparer by any fraudulent representation;

(2) represent that the person is licensed as a tax consultant or a tax preparer if the person is not so licensed;

(3) present or attempt to use the license of another person;

(4) attempt to use a suspended, lapsed, or revoked license;

(5) falsely impersonate a licensee under this Act;

(6) engage in dishonesty, fraud, or deception relating to the preparation of personal income tax returns; and

(7) violate a position of trust, including a position of trust outside the licensee's professional practice.

Section 100. Exclusions. Sections 5 through 95 of this Act do not apply to any of the following:

(1) Any full-time or part-time employee hired to fill a permanent position, who in connection with the duties as an employee, has the incidental duty of preparing income tax returns for the business of the employer only.

(2) Any attorney rendering services in the performance of the duties of an attorney.

(3) While acting as such, any fiduciary, or the regular employees thereof, acting on behalf of the fiduciary estate, the testator, trustor, grantor, or beneficiaries thereof.

(4) A certified public accountant who holds an active permit issued by any state, a public accountant, or a public accounting firm registered in any state.

(5) Any employee of a certified public accountant, public accountant or registered public accounting firm described in paragraph (4) of this Section.

(6) Any person employed by a local, State, or federal governmental agency but only in performance of official duties.

Section 105. Refund anticipation loan disclosures.

(a) Prior to a taxpayer's completion of an application for a refund anticipation loan, the facilitator shall clearly disclose in writing to the taxpayer on a form separate from the application:

(1) a listing or table of refund anticipation loan fees and the annual percentage rates, as defined by the federal Truth in Lending Act, 15 U.S.C. 1601 et seq., charged by the facilitator or lender for 3 or more representative refund anticipation loan amounts; for each loan amount, the schedule shall list separately the amount of each fee and the amount of interest charged by the facilitator or lender and the total amount of fees and interest charged;

(2) that the refund anticipation loan is a loan and not the taxpayer's actual personal income tax refund;

(3) that electronic filing of the taxpayer's tax return is available without applying for a refund anticipation loan;

(4) the average time announced by the appropriate taxing authority within which the taxpayer can expect to receive a refund if the taxpayer does not obtain a refund anticipation loan and the taxpayer's return is filed:

(A) electronically and the refund is directly deposited in the taxpayer's bank account; or

(B) by mail and the refund is directly deposited in the taxpayer's bank account or mailed to the taxpayer;

(5) that the Internal Revenue Service does not guarantee that the full amount of the anticipated refund will be paid or a specific date on which the taxpayer will receive the refund;

(6) that the taxpayer is responsible for repayment of the loan and related fees in the event the tax refund is not paid or is not paid in full;

(7) the estimated time within which the proceeds of the loan will be paid to the taxpayer if the loan is approved; and

(8) the fees charged by the facilitator or lender if the refund anticipation loan is not approved.

(b) Prior to entering into a refund anticipation loan agreement, the facilitator shall clearly disclose to the taxpayer:

(1) the estimated total fees for the loan; and

(2) the estimated annual percentage rate, as defined by the federal Truth in Lending Act, for the loan.

Section 999. Effective date. This Act takes effect upon becoming law.