To promote and ensure the protection of taxpayers from unfair and deceptive advertising claims from unscrupulous delinquent tax debt representation providers.
SECTION 1. SHORT TITLE; TABLE OF CONTENTS
SHORT TITLE – This Act may be cited as the “Delinquent Tax Debt Representation and Service Act”.
TABLE OF CONTENTS – The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and declaration of purpose.
Sec. 3. Definitions.
Sec. 4. Exemptions.
Sec. 5. Fees.
Sec. 6. Duty to client.
Sec. 7. Bond.
Sec. 8. Conditions of providing service.
Sec. 9. Customer service.
Sec. 10. Right of cancellation.
Sec. 11. Disclosures.
Sec. 12. Advertising and solicitation.
Sec. 13. Due diligence.
Sec. 14. Return of client’s records.
Sec. 15. Prompt disposition of pending matters.
Sec. 16. Knowledge of client’s omission.
Sec. 17. Prohibited practices.
Sec. 18. Requirement of good faith.
Sec. 19. Retention of records.
Sec. 20. Severability.
Sec. 21. Civil liability for willful noncompliance.
Sec. 22. Civil liability for negligent noncompliance.
Sec. 23. Jurisdiction of courts; limitation of actions.
Sec. 24. Good faith reliance defense.
Sec. 25. Effective date.
SECTION 2. FINDINGS AND DECLARATION OF PURPOSE
|(a)||The Legislature makes the following findings:|
|(1)||Tax law is complex and changes frequently;|
|(2)||Tax law and tax law procedural requirements require that taxpayers have access to and representation from delinquent tax debt representation providers;|
|(3)||Delinquent tax debt representation providers are an essential part of ensuring that taxpayers have competent representation when addressing the Internal Revenue Service regarding delinquent taxes;|
|(4)||Taxpayers facing delinquent tax debts are vulnerable and may be subject to engage providers of services to resolve problems that are potentially unfair and deceptive; and|
|(5)||The Treasury Department’s rules and regulations governing practice before the Internal Revenue Service are aimed at protecting the integrity of a tax system that depends upon voluntary compliance.|
|The purpose of this title is –|
|(1)||To protect clients from unfair and deceptive advertising claims and inappropriate practices of some delinquent tax debt representation providers; and|
|(2)||(2) To balance taxpayers’ rights and interests against improper conduct by some delinquent tax debt representation providers|
SECTION 3. DEFINITIONS
|(a)||As used in this title –|
|(1)||The term “agreement” means an agreement between a provider and an individual for the performance of tax debt relief services;|
|(2)||The term “client” means any person who owes a tax debt and enters into an agreement with a provider for delinquent tax debt representation services;|
|(3)||The term “delinquent tax debt representation services” means a program or strategy provided to a client by a provider for a fee to effect the settlement, forgiveness, suspension, release, abatement, reduction, adjustment, compromise, payment by installment or discharge of any tax debt;|
|(4)||The term “good faith” means honesty in fact and the observance of reasonable standards of fair dealing;|
|(5)||The term “inadvertent error” means a mechanical, electronic, or clerical error that was not intentional and occurred notwithstanding the maintenance of procedures reasonably adapted to avoid such errors;|
|(6)||The term “interest abatement” means forgiveness, suspension, release or reduction of assessed interest in a person’s unpaid tax debt by the Internal Revenue Service;|
|(7)||The term “offer in compromise” means a settlement between a person and the Internal Revenue Service that discharges the person’s tax debt for less than the full amount owed subject to specified terms and conditions;|
|(8)||The term “payment” means any transfer of money, property, other thing of value;|
|(9)||The term “penalty abatement” means forgiveness, suspension, release or reduction of an assessed penalty in a person’s unpaid tax debt by the Internal Revenue Service;|
|(10)||The term “person” means an individual, husband and wife jointly, corporation, business trust, estate, trust, partnership, limited liability company, association, unincorporated association, joint venture, or any other legal or commercial entity. The term does not include a public corporation, government, or governmental subdivision, agency, or instrumentality;|
|(11)||The term “practice before the Internal Revenue Service” means all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to, preparing and filing documents, corresponding and communicating with the Internal Revenue Service, rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion, and representing a client at conferences, hearings and meetings;|
|(12)||The term “provider” means a person that provides representation to individuals or companies before the Internal Revenue Service, or before a State taxing authority, as defined below. This term shall include any person or entity who receives money or other valuable consideration or expects to receive money or other valuable consideration for:
|(13)||The term “record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;|
|(14)||The term “services” means delinquent tax debt representation services.|
|(15)||The term “state” means any state, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States;|
|(16)||The term “state tax” means a tax demanded by a state based on income, payroll, sales tax or use tax. The term does not include an assessment for real property tax, personal property tax, or any tax assessed on a specific item, purchase or service;|
|(17)||The term “tax debt” means the amount of state tax or federal tax including principal, interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed;|
|(18)||The term “tax return” includes an original tax return, substitute for return or amended tax return;|
|(19)||The term “unenrolled return preparer” means a person who prepares and signs a tax return as the preparer, or who prepares a tax return but is not required by the instructions to the tax return or regulations to sign the tax return, and to that end does not provide tax debt representation services.|
SECTION 4. EXEMPTIONS
|(a)||The requirements of Sections 7 and 9 shall not apply to:|
|(1)||An unenrolled return preparer; or|
|(2)||A person other than an unenrolled tax return preparer that is authorized to practice before the Internal Revenue Service pursuant to Title 31 Code of Federal Regulations, Subtitle A, Part 10 and provides tax debt relief services.|
SECTION 5. FEES
|(a)||A provider may not charge an unconscionable fee to a client to provide delinquent tax debt representation services.|
|(b)||A provider shall enter into a written fee agreement with any client which sets forth the compensation to be paid to the provider.|
|(c)||Any statement of fee information concerning matters in which costs may be incurred must include a statement disclosing whether a client will be responsible for such costs.|
|(d)||A provider may not impose charges or receive payment for services until the provider and the client have entered into a written agreement. The provider may obtain credit card information from a client, but may not charge the client until the written agreement is signed by the client.|
SECTION 6. DUTY TO CLIENT
|(a)||A provider shall not provide services:|
|(1)||To a client that will be directly adverse to another client to whom the provider provides services; or|
|(2)||When a significant risk exists that providing services to a client will be materially limited by the provider’s responsibilities to others.|
|(b)||Notwithstanding a conflict of interest, a provider may provide services to a client if:|
|(1)||There exists a reasonable belief that the provider is able to provide competent and diligent services;|
|(2)||Providing services is not prohibited by law; and|
|(3)||A written, informed waiver of the conflict by each affected client is signed no later than 30 days after the conflict is known by the provider.|
SECTION 7. BOND
|(a)||Any person engaged in providing delinquent tax debt representation services shall obtain and maintain at all times a surety bond in the sum of $100,000 conditioned on the faithful performance and payment of obligations of such provider arising in connection with providing services, and for the payment of all claims for damages for which the provider may become liable in the course of business as a provider.|
SECTION 8. CONDITIONS OF PROVIDING SERVICE
|(a)||A provider shall not provide services without conducting a good faith analysis of the information available to the provider before entering into an agreement with a client that the provider’s services are suitable for the client.|
|(b)||A provider shall not knowingly make any false statement when providing information to the Internal Revenue Service.|
|(c)||A provider shall make reasonable inquiries if information received or assumptions appear incorrect or incomplete.|
SECTION 9. CUSTOMER SERVICE
|(a)||A provider shall maintain a toll-free communication system, staffed at a level that reasonably permits a client to speak to a customer-service representative, as appropriate, during ordinary business hours.|
SECTION 10. RIGHT OF CANCELLATION
|(a)||(a) A client may cancel an agreement before midnight of the third business day after the client assents to it. To exercise the right to cancel, the client must give written notice in a record to the provider.|
SECTION 11. DISCLOSURES
|(a)||If a provider offers services for offers in compromise, it shall disclose in a clear and conspicuous manner in any agreement between the provider and the client:
|(b)||If a provider offers services for penalty abatement, it shall disclose in a clear and conspicuous manner in any agreement between the provider and the client:
|(c)||If a provider offers services for interest abatement, it shall disclose in a clear and conspicuous manner in any agreement between the provider and the client:
|(d)||An agreement between a client and a provider shall disclose in a clear and conspicuous manner the provider’s cancellation and refund policies.|
|(e)||If a provider has a policy of not making refunds or cancellations, the agreement between the client and a provider shall disclose in a clear and conspicuous manner the terms and conditions of the provider’s policy.|
|(f)||If a provider makes a representation about a refund or cancellation the agreement between the client and a provider shall disclose in a clear and conspicuous manner the terms and conditions of the provider’s policy.|
|(g)||A provider shall disclose in a clear and conspicuous manner in any agreement between the provider and the client any limitations and alternatives available in a delinquent tax case and the responsibilities of all parties;|
|(h)||A provider shall disclose in a clear and conspicuous manner opportunities, if available, for a client to avoid penalties through disclosure and the requirements for an adequate disclosure.|
|(i)||A provider that maintains an internet web site shall disclose on the home page of its web site or on a page that is clearly and conspicuously connected to the home page by a link that clearly reveals its contents:
SECTION 12. ADVERTISING AND SOLICITATION
|(a)||A provider shall not make, directly or indirectly, any solicitation to provide services if the solicitation violates federal or state law.|
|(b)||Any solicitation made by or on behalf of a provider must clearly identify the solicitation as such.|
|(c)||A provider may state that it is “enrolled to represent taxpayers before the Internal Revenue Service,” “enrolled to practice before the Internal Revenue Service,” or “admitted to practice before the Internal Revenue Service.” only if such statement is true.|
|(d)||If a provider advertises on radio or television broadcasting, the broadcast must be recorded and the provider must retain a script of the actual transmission.|
|(e)||If a provider advertises through direct mail and e-commerce communications, the provider must retain a copy of the actual communication, along with a list or other description of persons to whom the communication was mailed or otherwise distributed.|
SECTION 13. DUE DILIGENCE
|(a)||A provider shall exercise due diligence when preparing, providing and filing tax returns, documents, affidavits, and other records on behalf of a client to the Internal Revenue Service.|
SECTION 14. RETURN OF CLIENT’S RECORDS
|(a)||A provider shall, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her state tax or federal tax obligations. A provider may retain copies of the records returned to a client.|
SECTION 15. PROMPT DISPOSITION OF PENDING MATTERS
|(a)||A provider may not negligently or intentionally unreasonably delay the prompt disposition of any matter before the Internal Revenue Service.|
SECTION 16. KNOWLEDGE OF CLIENT’S OMMISSION
|(a)||A provider who has knowledge that a client has not complied with the revenue law of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission. The provider must advise the client of the consequences as provided under the Internal Revenue Code and regulations of such noncompliance, error, or omission.|
SECTION 17. PROHIBITED PRACTICES
|(a)||A provider shall not, directly or indirectly:
SECTION 18. REQUIREMENT OF GOOD FAITH.
|(a)||A provider shall act in good faith in all matters under this title.|
SECTION 19. RETENTION OF RECORDS.
|(a)||A provider shall maintain records required to be retained under this title and for each client for whom it provides services for 3 years after the final action with the client. The provider may use electronic or other means of storage of the records.|
SECTION 20. SEVERABILITY
|(a)||If any provision of this title or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this title that can be given effect without the invalid provision or application, and to this end the provisions of this title are severable.|
SECTION 21. CIVIL LIABILITY FOR WILLFUL NONCOMPLIANCE
|(a)||In general – Any provider who willfully fails to comply with any requirement imposed under this title with respect to any client is liable to that person in an amount equal to the sum of:
|(b)||Attorney’s fees. Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this title was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party, attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion or other paper.|
SECTION 22. CIVIL LIABILITY FOR NEGLIGENT NONCOMPLIANCE
|(a)||In general – Any provider who is negligent in failing to comply with any requirement imposed under this title with respect to any client is liable to that client in an amount equal to the sum of:
|(b)||Attorney’s fees. On a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this title was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion or other paper.|
SECTION 23. JURISDICTION OF COURTS; LIMITATION OF ACTIONS
|(a)||An action to enforce any liability created under this title must be commenced by a client in any court of competent jurisdiction not later than the earlier of (1) one year after the date that the client discovers, or through the use of reasonable diligence should have discovered, the facts constituting the violation that is the basis for such liability; or (2) three years from the date of the wrongful act or omission that constitutes the violation that is the basis for such liability.|
SECTION 24. GOOD FAITH RELIANCE DEFENSE
|(a)||A provider shall not be held liable in any action for a violation of this title if the provider shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction, and programming and printing errors, except that an error of legal judgment under this title is not a bona fide error.|
|(b)||A provider may rely in good faith, without verification, upon information furnished by a client.|
SECTION 25. EFFECTIVE DATE
|(a)||This title takes effect upon the expiration of 180 days after the date of its enactment.|