HOUSE 3rd Reading Unamended March 17, 2014 HOUSE Amended 2nd Reading March 14, 2014Second Regular Session Sixty-ninth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 14-0734.01 Jennifer Berman x3286HOUSE BILL 14-1285 HOUSE SPONSORSHIP Ryden, Becker, Court, Exum, Ferrandino, Fields, Hamner, Kraft-Tharp, Labuda, Melton, Rosenthal, Williams SENATE SPONSORSHIP Aguilar and Johnston, House Committees Senate Committees Business, Labor, Economic, & Workforce Development A BILL FOR AN ACT Concerning a requirement that a professional tax preparer provide certain disclosures to a client when preparing tax documents for the client. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill requires a person who prepares, for a fee, an income tax return or a claim for a refund on an income tax return for a taxpayer (professional tax preparer) to make certain disclosures to the taxpayer concerning the professional tax preparer's qualifications, fees, year-round contact information, willingness to represent the taxpayer in a government audit, and obligation to sign the tax documents prepared. Section 1 of the bill makes a professional tax preparer's failure to provide a taxpayer with the requisite disclosures a deceptive trade practice, and section 2 provides the penalty scheme for the deceptive trade practice. Section 3 requires the department of revenue to provide a disclosure form available on its web site and requires every professional tax preparer to provide a copy of either the department's disclosure form or a substantially similar disclosure form to each taxpayer before commencing work on preparing the taxpayer's income tax return or claim for refund on an income tax return. Section 4 of the bill criminalizes the act of providing fraudulent information in a professional tax preparer's disclosure form and makes the crime a class 2 misdemeanor. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 6-1-105, add (1) (fff) as follows: 6-1-105. Deceptive trade practices. (1) A person engages in a deceptive trade practice when, in the course of the person's business, vocation, or occupation, the person: (fff) Violates part 12 of this article. SECTION 2. In Colorado Revised Statutes, 6-1-112, amend (1) (c); and add (1) (e) as follows: 6-1-112. Civil penalties. (1) The attorney general or a district attorney may bring a civil action on behalf of the state to seek the imposition of civil penalties as follows: (c) Any A person who violates or causes another to violate any provision of this article, where such the violation was committed against an elderly person, shall forfeit and pay to the general fund of the state a civil penalty of not more than ten thousand dollars for each such violation; except that, where the person commits a violation of section 6-1-1203 against an elderly person, the person shall forfeit and pay to the general fund of the state a civil penalty of not more than one hundred dollars for each violation. For purposes of this paragraph (c), a violation of any provision of this article shall constitute constitutes a separate violation with respect to each elderly person involved. (e) A tax preparer, as defined in section 6-1-1202, who fails to disclose all or part of the information required to be disclosed under section 6-1-1203 shall forfeit and pay to the general fund of the state a civil penalty of not more than fifty dollars for each client, as defined in section 6-1-1202, to whom the tax preparer failed to disclose the requisite information; except that the maximum civil penalty must not exceed twenty-five thousand dollars. SECTION 3. In Colorado Revised Statutes, add part 12 to article 1 of title 6 as follows: PART 12 COLORADO TAXPAYER PROTECTION ACT 6-1-1201. Short title. This part 12 shall be known and may be cited as the "Colorado Taxpayer Protection Act". 6-1-1202. Definitions. As used in this part 12, unless the context otherwise requires: (1) "Client" means a taxpayer who pays a fee to a tax preparer to prepare or submit the taxpayer's income tax return or claim for a refund on an income tax return. (2) "Income tax return" means a return filed under section 39-22-601, C.R.S., or a return filed under section 6012 of the federal internal revenue code. (3) (a) "Tax preparer" means a person who, for a fee, prepares all or substantially all of an income tax return or a claim for refund on an income tax return. (b) "Tax preparer" does not include: (I) A certified public accountant, certified by and in good standing with the state board of accountancy under section 12-2-108, C.R.S., or similarly certified and in good standing in another state; (II) An attorney-at-law, licensed by and in good standing with the Colorado supreme court under section 12-5-101, C.R.S., or similarly licensed and in good standing in another state; (III) An enrolled agent, who is authorized by and in good standing with the United States department of treasury under 31 CFR, secs. 10.5 and 10.6; or (IV) An individual employed by a local, state, or federal government agency, but only while in the performance of his or her official duties. 6-1-1203. Tax preparer disclosure requirements. (1) A tax preparer shall provide each client with a copy of the disclosure form created by the department of revenue, as required in subsection (2) of this section, or a substantially similar disclosure form. (2) The department of revenue shall provide on its web site a disclosure form that contains: (a) The following disclosure statements: (I) That a client is entitled to know how the tax preparer calculates his or her fees and charges and that the tax preparer shall provide a receipt stating the charges for each tax return or claim for refund; (II) That a tax preparer or tax preparation company is required to provide the client with information on how the client may contact the tax preparer or tax preparation company throughout the year; (III) That a client is entitled to know whether a tax preparer is qualified to represent the client at a government audit, and that, if the tax preparer is willing to represent a client at a government audit, the tax preparer shall disclose his or her fee for representation; and (IV) That a client is entitled to have a tax preparer sign every income tax return that the tax preparer prepares on the client's behalf. If the income tax return is filed electronically, the tax preparer shall provide an electronic signature. (b) A place for the tax preparer to provide information about the tax preparer's background, qualifications, education, and experience. The tax preparer shall, upon request, produce documentation verifying his or her qualifications. (c) Signature lines for both the tax preparer and client to sign and date the disclosure form; (d) A place for the tax preparer to provide his or her preparer tax identification number, required for all paid federal tax return preparers by the federal internal revenue service under section 6695 (c) of the federal "Internal Revenue Code of 1986", as amended; and (e) The department of revenue's web site address and a statement indicating that the client might find helpful information concerning taxes on the web site. (3) Before commencing with the preparation of a client's income tax return or claim for refund on an income tax return, a tax preparer must: (a) Provide the client with a copy of the disclosure form created by the department of revenue, as required in subsection (2) of this section, or a substantially similar disclosure form; and (b) Obtain a signed and dated copy of the disclosure form that contains the client's signature. SECTION 4. In Colorado Revised Statutes, add 18-5-310 as follows: 18-5-310. Fraudulent information in tax preparer disclosure form. (1) A tax preparer, as defined in section 6-1-1202 (3), C.R.S., commits a class 2 misdemeanor if he or she provides a client, as defined in section 6-1-1202 (1), C.R.S., with fraudulent information in the tax preparer disclosure form that the tax preparer is required to provide the client under section 6-1-1203, C.R.S. (2) The tax preparer commits a separate offense for each fraudulent statement included in a disclosure form and for each client to whom the tax preparer provided a disclosure form containing fraudulent information. SECTION 5. Potential appropriation. Pursuant to section 2-2-703, Colorado Revised Statutes, any bill that results in a net increase in periods of imprisonment in the state correctional facilities must include an appropriation of moneys that is sufficient to cover any increased capital construction and operational costs for the first five fiscal years in which there is a fiscal impact. Because this act may increase periods of imprisonment, this act may require a five-year appropriation. SECTION 6. Act subject to petition - effective date - applicability. (1) This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 6, 2014, if adjournment sine die is on May 7, 2014); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2014 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor. (2) This act applies to offenses committed on or after the applicable effective date of this act.