Impact Alabama pushed legislation to have tax preparers licensed by state
Stephen Black, left, director of the UA Center for Ethics & Social Responsibility, said Impact Alabama found that people were being overcharged by tax preparation businesses. David Lindsay, right, a University of Alabama student, said the group will keep pushing for the legislation.Although the bill to get seasonal tax preparers tested and licensed failed in the waning days of the 2009 session of the Alabama Legislature, University of Alabama student David Lindsay said he is not disillusioned about his first brush with the political process.

“It was definitely disappointing,” said Lindsay, who worked with Impact Alabama, an initiative of the UA Center for Ethics & Social Responsibility, on the bill that died on the next to last day of the session last month.“But at the same time, we’ll be coming back next year, we’ll be going at it again and while this experience definitely opened my eyes to some aspects of politics, at the same time I wouldn’t say it made me cynical,” the Chicago junior said. “I got to know a lot of people involved in the legislative process and got a better understanding about how it all works.”

The bill grew out of Impact Alabama’s three-year project that has college students across the state helping low-income individuals and families file their tax returns for free.Stephen Black, the director of the ethics center on the UA campus, said the project found that many such people, most of them eligible for refunds under the Earned Income Tax Credit program, were being over-charged by tax preparation businesses that spring up every tax season.

Students involved in Impact Alabama even went undercover to document abuses, which included large over-charges, instant loans based on future refunds at huge interest rates and even fraud in cases where preparers urged tax filers to claim dependents they did not have.“We decided to draw up legislation that would require tax preparation agencies to subject their employees to comprehensive tests so that they would know the law and to get licensed by the state, so there would be some accountability,” Black said.

The bill was introduced to much fanfare before the legislative session began in February. It had Democratic and Republican sponsors in the House and Senate, as well as the support of the Alabama Revenue Commission and the Alabama Society of Certified Public Accountants.The concept behind the bill also got some unexpected support last week from the IRS, which said it wants to start regulating paid tax preparers. IRS Commissioner Doug Shulman said these preparers are used by more than half of the nation’s taxpayers.

The IRS also said it wants education and testing of part-time tax preparers, as well as a licensing system, just as the Impact Alabama bill proposed for this state.But the IRS support came too late for the Alabama bill, which sailed through the Senate and, after a few snags, also cleared the House. It was in a position to pass on the next to last day of the session, but by that time, the bill had drawn opposition from members of an ad hoc coalition of seasonal tax preparation businesses that did not want to pay licensing fees.

The bill was carried over until the final day, May 8, and Black said it was included among the hundreds of bills that traditionally die in the metaphorical “logjam” of a session’s waning moments.“But we will live to fight another day,” he said. “Our students are still motivated and with a little experience under their belt, we expect success next year.

“A lot of good bills don’t get passed the first time around.”

He said the unexpected announcement from the IRS last week that the agency is on the same page as his students came as a pleasant surprise.“From what I read, the IRS found many of the same abuses our students did,” he said.Indeed, Shulman echoed many of the findings the UA students had already documented.

“In most states, anyone can charge to prepare tax returns regardless of training, education, experience, skill, licensing or registration,” the Associated Press reported from an IRS press conference in Washington on Thursday. “Virtually anyone can set up a tax return business.”While Shulman said he did not know how many people nationwide fall prey to unscrupulous preparers, Sarah Louise Smith, who worked closely with the students in drawing up the bill as part of the program to provide fee tax services, said in Alabama as many as 80 percent of lower-income taxpayers pay commercial preparers to do their taxes.

“Many of these families are unaware that the preparer to whom they pay hundreds of dollars has not been required to complete basic educational requirements or obtain a license,” said Smith, the administrator of the UA SaveFirst Initiative, part of the UA Center for Ethics & Social Responsibility.“We are gratified to learn that the IRS is now actively considering ways to address the growing problems evident throughout the industry,”And Lindsay said lawmakers can expect to see him and other students back at the Statehouse next year.

“We’ve learned some lessons the hard way,” he said. “But we will be back.”