Professional standards for claim preparers | Research Credit Integrity Alliance

The problem

Treasury's Circular 230 sets the rules for those who represent taxpayers before the IRS. Its stated scope covers attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, registered tax return preparers and other persons representing taxpayers before the IRS.1 Treasury has stated that, as a result of the Loving decision described below, the 2011 amendments that relate to registered tax return preparers "are no longer enforceable", and its December 2024 proposed amendments would eliminate the rules on registered tax return preparers.2 It imposes duties on practitioners, including due diligence in preparing and filing returns and other documents,3 standards for positions taken on returns and claims for refund,4 and the restriction on contingent fees.5

Treasury's authority for these rules comes from a statute that allows the Secretary of the Treasury to "regulate the practice of representatives of persons before the Department of the Treasury".6 In 2014 the US Court of Appeals for the District of Columbia Circuit held, in Loving v. Internal Revenue Service, 742 F.3d 1013 (D.C. Cir. 2014), that this authority "cannot be stretched so broadly as to encompass authority to regulate tax-return preparers", and affirmed the judgment against the IRS.7 Later that year the US District Court for the District of Columbia applied the same reasoning to the preparation and filing of ordinary refund claims, and held that the IRS lacked authority to restrict contingent fees for that work.8

The penalty statutes reach further than Circular 230. A tax return preparer, for penalty purposes, is any person who prepares for compensation all or a substantial portion of a return or claim for refund, or employs others to do so,9 and the preparer penalty in section 6694 applies to any such preparer.10 But a penalty applies after a claim has gone wrong. There is no federal requirement, set by statute, that a person who prepares research credit claims for a fee demonstrate any minimum competence in the tax law or in the technical tests for qualified research before doing so.

The proposal

Our position

Congress should give Treasury clear statutory authority to set minimum standards for any person who prepares, or advises on a substantial portion of, a research credit claim under Section 41 for compensation. The standards should cover:

Competence: a working knowledge of Section 41 and its regulations, including the tests for qualified research and the documentation the IRS requires for claims.
Diligence: a duty to make reasonable inquiries and to keep a record of the basis for each position, comparable to the due diligence duty already in Circular 230.3
Fees: no contingent fees, consistent with our central position.
Identification: naming on the claim, as set out in proposal 3.
Sanctions: the ability for Treasury to suspend or bar a preparer who does not meet the standards, with due process.

The standards should apply in the same way whether the preparer is a lawyer, an accountant, an enrolled agent or none of these.

Who would act

Congress, because the 2014 decision held that the existing statute does not authorize the IRS to regulate tax return preparers.7 Once the authority exists, Treasury and the IRS would write the standards through the normal rulemaking process, with public comment, and enforce them.

Expected effect

Our position

Businesses would be able to assume that anyone offering to prepare their research credit claim meets a federal minimum, rather than having to judge that for themselves. The standards would apply the same diligence and fee rules to every preparer of these claims, which removes the current difference in treatment between practitioners and other preparers. Over time, the standards would make claims more consistent and easier for the IRS to review.

Objections and response

"This creates a barrier to entry and raises costs for small businesses." Licensing rules can reduce competition and raise prices.

Our position

The proposal is for minimum standards, not a closed profession. Its scope is narrow: paid preparers of one federal credit. We accept that compliance has a cost, and the rulemaking should keep it proportionate, for example by recognizing existing qualifications.

"Research credit work needs engineers and scientists, not only tax professionals." The tests for qualified research are technical.

Our position

We agree. The standards would apply to the person responsible for the claim, who can rely on technical colleagues. Circular 230 already presumes due diligence where a practitioner relies on another person's work and used reasonable care in engaging, supervising, training and evaluating that person.3 The same approach could apply here.

"Professional bodies and state boards already regulate accountants and lawyers." Many preparers are already subject to a professional code.

Our position

That is true for many preparers, and the proposal does not replace those codes. It sets a federal floor for everyone who prepares these claims for a fee, including those who are not members of any regulated profession, so that the same baseline applies to every claim the IRS receives.

Sources

Treasury Department, Circular No. 230, 31 CFR § 10.0, Scope of part, § 10.0(a). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/section-10.0 (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, REG-116610-20, 89 FR 104915 (December 26, 2024), Explanation of Provisions part A.1, 89 FR 104917. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 17 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR § 10.22, Diligence as to accuracy, § 10.22(a) and (b). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/section-10.22 (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR § 10.34, Standards with respect to tax returns and documents, affidavits and other papers, § 10.34(a). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/section-10.34 (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR § 10.27, Fees, § 10.27(b). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/section-10.27 (accessed 11 October 2026). Back
U.S. Government Publishing Office, United States Code, 2024 Edition, 31 U.S.C. § 330, Practice before the Department, § 330(a)(1). https://www.govinfo.gov/content/pkg/USCODE-2024-title31/html/USCODE-2024-title31-subtitleI-chap3-subchapII-sec330.htm (accessed 11 October 2026). Back
United States Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, 742 F.3d 1013 (D.C. Cir. 2014), slip opinion pages 2 to 3 and 18. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026). Back
United States District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565, 55 F. Supp. 3d 89 (D.D.C. 2014), memorandum opinion pages 1, 10 and 14 to 15. https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv0565-48 (accessed 11 October 2026). Back
Treasury Department, 26 CFR § 301.7701-15, Tax return preparer, § 301.7701-15(a). https://www.ecfr.gov/current/title-26/chapter-I/subchapter-F/part-301/section-301.7701-15 (accessed 11 October 2026). Back
U.S. Government Publishing Office, United States Code, 2024 Edition, 26 U.S.C. § 6694, Understatement of taxpayer's liability by tax return preparer, § 6694(a)(1). https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6694.htm (accessed 11 October 2026). Back

The problem

The proposal

Who would act

Expected effect

Objections and response

Sources

The other proposals