SENATE BILL 6058
State of Washington 52nd Legislature 1992 Regular Session
By Senator L. Smith
Read first time 01/14/92. Referred to Committee on Commerce & Labor.
AN ACT Relating to tax consultants and preparers; adding a new chapter to Title 18 RCW; creating a new section; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
(1) "Department" means the department of licensing.
(2) "Director" means the director of the department of licensing.
(3) "Tax consultant" means any person who is licensed under this chapter to provide advice on limiting personal income tax liability or to prepare or assist in the preparation of personal income tax returns for another, for valuable consideration.
(4) "Tax preparer" means a person who is licensed under this chapter to prepare personal income tax returns for another for valuable consideration.
NEW SECTION. Sec. 2. This chapter does not apply to:
(1) A full-time or part-time employee hired to fill a permanent position who, in connection with his or her duties as an employee, has the responsibility of preparing income tax returns for the business of the employer only;
(2) A certified public accountant or public accountant holding a license under RCW 18.04.215;
(3) An attorney at law while performing his or her duties;
(4) A person employed by a local, state, or federal government agency, but only in the performance of his or her official duties.
NEW SECTION. Sec. 3. After June 30, 1993, except as otherwise provided:
(1) A person shall not provide advice on limiting personal income tax liability or prepare 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 chapter.
(2) A tax preparer may prepare or assist in the preparation of personal income tax returns only under the direct supervision of a licensed tax consultant and subject to such conditions and limitations as the director may impose.
NEW SECTION. Sec. 4. (1) Every applicant for a license as a tax preparer must:
(a) Be at least eighteen years of age;
(b) Possess a high school diploma or have passed an equivalency examination;
(c) Present evidence satisfactory to the director that the applicant has successfully completed not less than eighty hours of coursework in basic personal income tax law, theory, and practice at an educational institution approved by the director; and
(d) Pass an examination that the director constructs to measure the applicant's knowledge of personal income tax law, theory, and practice.
(2) In addition to the requirements of subsection (1) of this section, every applicant for a tax consultant's license must:
(a) Present evidence of active employment as a tax preparer in this or another state for a minimum of seven hundred eighty hours during at least two of the last five years. Certification by one or more licensed tax consultants that the applicant has been employed as a tax preparer under his or her direct supervision and satisfied the seven hundred eighty hour employment requirement shall be considered evidence satisfactory to the director of the applicant's employment as a tax preparer for the period specified. If an applicant has worked less than a cumulative of seven hundred eighty hours in at least two of the last five years, the director may consider the number of hours employed, the number of years employed, the number of tax returns prepared, other certificates or degrees held by the applicant, and whether the work contributed to the professional competence of the individual in determining if the applicant has met the work experience requirement; and
(b) Pass an examination that the director constructs to measure the applicant's knowledge of personal income tax law, theory, and practice. The examination for a tax consultant's license shall differ from the examination for a tax preparer's license in that it shall be more demanding and require a significantly higher degree of knowledge of personal income tax law, theory, and practice.
(3) If, in the judgment of the director, an applicant has, in combination, the 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 subsection (2)(a) of this section, the director may allow some of the applicant's education or experience to substitute one for the other.
(4) Nothing in this section shall be construed to allow a waiver of, or substitution for, any qualifications needed for a tax consultant's or tax preparer's license other than those specifically described in subsection (3) of this section.
NEW SECTION. Sec. 5. (1) A corporation, firm, or partnership, through individuals who are licensed within this state to provide advice on limiting personal income tax liability or to prepare or assist in the preparation of personal income tax returns for another, for valuable consideration, may engage in such activities and represent that it is so engaged if the corporation, firm, or partnership designates and annually reports to the director the authorized individuals responsible for: (a) Providing advice on limiting personal income tax liability or preparing or assisting in the preparation of personal income tax returns for another; and (b) commercial decisions of the corporation, firm, or partnership.
(2) A corporation, firm, or partnership is not relieved of responsibility for the conduct or acts of its agents, employees, or officers by reason of compliance with subsection (1) of this section, and a licensed tax consultant or tax preparer is not relieved of responsibility for professional services performed by reason of employment by or relationship with such corporation, firm, or partnership.
(3) A corporation, firm, or partnership shall not engage in any of the activities under subsection (1) of this section if the tax consultant, the tax preparer, the proprietor, a partner, a principal, an officer, director or manager, or a shareholder of the corporation, is:
(a) An individual whose license as a tax consultant or tax preparer is permanently revoked by the director;
(b) An individual to whom the director has refused to issue or renew a license;
(c) An individual whose occupational license, permit, or registration has been revoked or refused by another state regulatory agency or the internal revenue service; or
(d) A corporation, firm, or partnership prohibited from engaging in activities under subsection (1) of this section.
(4) For purposes of this section:
(a) "Shareholder" means:
(i) If the corporation is publicly traded, a shareholder that owns more than ten percent in value of the outstanding stock of the corporation; or
(ii) If the corporation is not publicly traded, any shareholder.
(b) "Publicly traded" means traded on an established securities market.
(5) If, after June 30, 1993, a corporation, firm, or partnership must sever a relationship in order that it may engage or may continue to engage in providing advice on limiting personal income tax liability or tax preparation activities in compliance with this section, the corporation, firm, or partnership shall be allowed a reasonable time to sever the relationship. Except as provided under subsection (6) of this section, the time allowed to sever a relationship shall not exceed one hundred eighty days after the director gives notice that severance is required. The notice shall include a statement affording an opportunity for hearing on the issue of severance. The notice and all proceedings conducted under this section shall be in accordance with the provisions of the administrative procedure act, chapter 34.05 RCW.
(6) If a hearing is requested under subsection (5) of this section or if an appeal is taken of the director's order following hearing, the director or court may allow additional time for the affected parties to comply with any order requiring severance.
NEW SECTION. Sec. 6. (1) Applications for a tax preparer's license or tax consultant's license required under this chapter shall be filed with the director on a form provided by the director. The director may require any information and documentation that reasonably relates to the need to determine whether the applicant meets the licensing criteria.
(2) After receipt of an application for a license, the director shall conduct an investigation to determine whether the facts set forth in the application are true.
NEW SECTION. Sec. 7. (1) The provisions of this chapter relating to the licensing for regulatory purposes of tax preparers and tax consultants are exclusive. No governmental subdivision of this state may enact any laws or rules licensing, for regulatory purposes, such persons, except as provided in subsections (2) and (3) of this section.
(2) This section shall not be construed to prevent a political subdivision of this state from levying a business license fee, business and occupation tax, or other tax upon tax preparers or tax consultants if such fees or taxes are levied on other types of businesses within its boundaries.
(3) This section shall not be construed to prevent this state from licensing or regulating tax preparers or tax consultants with respect to activities performed or offered that are not of a personal income tax nature.
NEW SECTION. Sec. 8. Tax preparers and tax consultants whose duties require them to operate across state lines may operate in this state if they are properly registered and certified in another state with training, insurance, and certification requirements that the director finds are at least equal to the requirements of this state. Out-of-state tax preparers and tax consultants shall register with the state of Washington's department of licensing before they may practice in Washington.
NEW SECTION. Sec. 9. Persons acting as tax consultants or tax preparers prior to the effective date of this act shall be licensed without regard to the requirements under section 4 of this act. They shall be granted a license after presenting evidence of the employment to the department. The department shall adopt rules concerning what is adequate proof.
NEW SECTION. Sec. 10. The following acts are prohibited and constitute grounds for disciplinary action or denial, suspension, or revocation of any license under this chapter, as deemed appropriate by the director:
(1) Knowingly violating any of the provisions of this chapter or the rules adopted under this chapter;
(2) Practicing fraud, deceit, or misrepresentation in any of the activities covered by this chapter;
(3) Knowingly making a material misstatement or omission in the application for a license;
(4) Conviction of a gross misdemeanor or felony or the commission of any act involving moral turpitude, dishonesty, or corruption, whether or not the act constitutes a crime. If the act constitutes a crime, conviction in a criminal proceeding is not a condition precedent to disciplinary action. Upon such a conviction, however, the judgment and sentence is conclusive evidence at the ensuing disciplinary hearing of the guilt of the licensee or applicant of the crime described in the indictment or information, and of the person's violation of the statute on which it is based. For the purposes of this section, conviction includes all instances in which a plea of guilty or nolo contendere is the basis for the conviction and all proceedings in which the sentence has been deferred or suspended. Nothing in this section abrogates rights guaranteed under chapter 9.96A RCW;
(5) Misrepresentation or concealment of a material fact in obtaining a license or in reinstatement thereof;
(6) Advertising that is false, fraudulent, or misleading;
(7) Incompetence or negligence;
(8) Suspension, revocation, or restriction of the individual's license to practice the profession by competent authority in any state, federal, or foreign jurisdiction, a certified copy of the order, stipulation, or agreement being conclusive evidence of the revocation, suspension, or restriction;
(9) Failure to cooperate with the director by:
(a) Not furnishing any necessary papers or documents requested by the director for purposes of conducting an investigation for disciplinary action, denial, suspension, or revocation of a license under this chapter;
(b) Not furnishing in writing a full and complete explanation covering the matter contained in a complaint filed with the department; or
(c) Not responding to subpoenas issued by the director, whether or not the recipient of the subpoena is the accused in the proceeding;
(10) Failure to comply with an order issued by the director or an assurance of discontinuance entered into with the disciplining authority;
(11) Aiding or abetting an unlicensed person to practice if a license is required;
(12) Misrepresentation or fraud in any aspect of the conduct of the business or profession;
(13) Failure to adequately supervise employees to the extent that the public is at risk;
(14) Interference with an investigation or disciplinary proceeding by willful misrepresentation of facts before the director or the director's authorized representative, or by the use of threats or harassment against a client or witness to prevent them from providing evidence in a disciplinary proceeding or any other legal action.
NEW SECTION. Sec. 11. The director has the following authority in administering this chapter:
(1) To adopt, amend, and rescind rules as deemed necessary to carry out this chapter;
(2) To issue subpoenas and administer oaths in connection with an investigation, hearing, or proceeding held under this chapter;
(3) To take or cause depositions to be taken and use other discovery procedures as needed in an investigation, hearing, or proceeding held under this chapter;
(4) To compel attendance of witnesses at hearings;
(5) To conduct practice reviews in the course of investigating a complaint or report of unprofessional conduct;
(6) To take emergency action ordering summary suspension of a license, or restriction or limitation of the licensee's practice pending proceedings by the director;
(7) To use the office of administrative hearings as authorized in chapter 34.12 RCW to conduct hearings. However, the director or the director's designee shall make the final decision in the hearing;
(8) To enter into contracts for professional services determined to be necessary for adequate enforcement of this chapter;
(9) To adopt standards of professional conduct or practice;
(10) In the event of a finding of unprofessional conduct by an applicant or licensee, to impose sanctions against a license applicant or licensee as provided by this chapter;
(11) To enter into an assurance of discontinuance in lieu of issuing a statement of charges or conducting a hearing. The assurance shall consist of a statement of the law in question and an agreement to not violate the stated provision. The applicant or licensee shall not be required to admit to any violation of the law, and the assurance shall not be construed as such an admission. Violation of an assurance under this subsection is grounds for disciplinary action;
(12) To designate individuals authorized to sign subpoenas and statements of charges;
(13) To employ such investigative, administrative, and clerical staff as necessary for the enforcement of this chapter; and
(14) To compel the attendance of witnesses at hearings.
NEW SECTION. Sec. 12. A person, including but not limited to consumers, licensees, corporations, organizations, and state and local governmental agencies, may submit a written complaint to the department charging a licensee or applicant with unprofessional conduct and specifying the grounds for this charge. If the director determines that the complaint merits investigation, or if the director has reason to believe, without a formal complaint, that a licensee or applicant may have engaged in unprofessional conduct, the director shall investigate to determine if there has been unprofessional conduct. A person who files a complaint under this section in good faith is immune from suit in any civil action related to the filing or contents of the complaint.
NEW SECTION. Sec. 13. (1) If the director determines, upon investigation, that there is reason to believe a violation of this chapter has occurred, a statement of charges shall be prepared and served upon the licensee or applicant and notice of this action given to the employing firm. The statement of charges shall be accompanied by a notice that the licensee or applicant may request a hearing to contest the charges. The licensee or applicant must file a request for hearing with the department within twenty days after being served the statement of charges. The failure to request a hearing constitutes a default, whereupon the director may enter an order pursuant to RCW 34.05.440.
(2) If a hearing is requested, the time of the hearing shall be scheduled but the hearing shall not be held earlier than thirty days after service of the charges upon the licensee or applicant. A notice of hearing shall be issued at least twenty days prior to the hearing, specifying the time, date, and place of the hearing.
NEW SECTION. Sec. 14. The procedures governing adjudicative proceedings before agencies under chapter 34.05 RCW, the administrative procedure act, govern all hearings before the director.
NEW SECTION. Sec. 15. (1) If the director believes a licensee or applicant may be unable to practice with reasonable skill and safety to the public by reason of a mental condition, a statement of charges shall be served on the licensee or applicant and notice shall also be issued providing an opportunity for a hearing. The hearing shall be limited to the sole issue of the capacity of the licensee or applicant to practice with reasonable skill. If the director determines that the licensee or applicant is unable to practice with reasonable skill for one of the reasons stated in this subsection, the director shall impose such sanctions as are deemed necessary to protect the public.
(2) In investigating or adjudicating a complaint or report that a licensee or applicant may be unable to practice with reasonable skill by reason of a mental condition, the department may require a licensee or applicant to submit to a mental examination by one or more licensed or certified health professionals designated by the director. The cost of the examinations ordered by the department shall be paid by the department. In addition to any examinations ordered by the department, the licensee may submit mental examination reports from licensed or certified health professionals of the licensee or applicant's choosing and expense. Failure of the licensee or applicant to submit to examination when directed constitutes grounds for immediate suspension or withholding of the license, consequent upon which a default and final order may be entered without the taking of testimony or presentations of evidence, unless the failure was due to circumstances beyond the person's control. A determination by a court of competent jurisdiction that a licensee or applicant is mentally incompetent or mentally ill is presumptive evidence of the licensee or applicant's inability to practice with reasonable skill. An individual affected under this section shall at reasonable intervals be afforded an opportunity to demonstrate that the individual can resume competent practice with reasonable skill.
(3) For the purpose of subsection (2) of this section, an applicant or licensee governed by this chapter, by making application, practicing, or filing a license renewal, is deemed to have given consent to submit to a mental or psychological examination if directed in writing by the department and further to have waived all objections to the admissibility or use of the examining health professional's testimony or examination reports by the director on the ground that the testimony or reports constitute hearsay or privileged communications.
NEW SECTION. Sec. 16. Upon a finding that a licensee or applicant has committed unprofessional conduct or is unable to practice with reasonable skill, the director may issue an order providing for one or any combination of the following:
(1) Revocation of the license;
(2) Suspension of the license for a fixed or indefinite term;
(3) Restriction or limitation of the practice;
(4) Requiring the satisfactory completion of a specific program of remedial education or treatment;
(5) Monitoring of the practice by a supervisor approved by the director;
(6) Censure or reprimand;
(7) Compliance with conditions of probation for a designated period of time;
(8) Withholding a license request;
(9) Other corrective action; or
(10) Refund of fees billed to and collected from the consumer.
Any of the actions under this section may be totally or partly stayed by the director. All costs associated with compliance with orders issued under this section are the obligation of the licensee or applicant.
NEW SECTION. Sec. 17. If an order for payment of a fine is made as a result of a hearing and timely payment is not made as directed in the final order, the director may enforce the order for payment in the superior court in the county in which the hearing was held. This right of enforcement shall be in addition to any other rights the director may have as to a licensee ordered to pay a fine, but shall not be construed to limit a licensee's ability to seek judicial review.
In an action for enforcement of an order of payment of a fine, the director's order is conclusive proof of the validity of the order of payment of a fine and the terms of payment.
NEW SECTION. Sec. 18. (1) The director shall investigate complaints concerning practice by unlicensed persons of a profession or business for which a license is required by this chapter. In the investigation of the complaints, the director shall have the same authority as provided the director under section 11 of this act. The director shall issue a cease and desist order to a person after notice and hearing and upon a determination that the person has violated this section. If the director makes a written finding of fact that the public interest will be irreparably harmed by delay in issuing an order, the director may issue a temporary cease and desist order. The cease and desist order shall not relieve the person practicing or operating a business without a license from criminal prosecution therefor, but the remedy of a cease and desist order shall be in addition to any criminal liability. The cease and desist order is conclusive proof of unlicensed practice and may be enforced under RCW 7.21.060. This method of enforcement of the cease and desist order may be used in addition to, or as an alternative to, any provisions for enforcement of agency orders.
(2) The attorney general, a county prosecuting attorney, the director, or any person may, in accordance with the law of this state governing injunctions, maintain an action in the name of this state to enjoin a person without a license practicing a profession or business for which a license is required by this chapter from engaging in such practice or operating such business until the required license is secured. However, the injunction shall not relieve the person practicing or operating a business without a license from criminal prosecution therefor, but the remedy by injunction shall be in addition to any criminal liability.
(3) Unlicensed practice of a profession or operating a business for which a license is required by this chapter, unless otherwise exempted by law, constitutes a gross misdemeanor. All fees, fines, forfeitures, and penalties collected or assessed by a court because of a violation of this section shall be remitted to the department.
NEW SECTION. Sec. 19. A person or business that violates an injunction issued under this chapter shall pay a civil penalty, as determined by the court, of not more than twenty-five thousand dollars, which shall be paid to the department. For the purpose of this section, the superior court issuing any injunction shall retain jurisdiction and the cause shall be continued, and in such cases the attorney general acting in the name of the state may petition for the recovery of civil penalties.
NEW SECTION. Sec. 20. The director or individuals acting on the director's behalf are immune from suit in any action, civil or criminal, based on disciplinary proceedings or other official acts performed in the course of their duties in the administration and enforcement of this chapter.
NEW SECTION. Sec. 21. The director, in implementing and administering the provisions of this chapter, shall act in accordance with the administrative procedure act, chapter 34.05 RCW.
NEW SECTION. Sec. 22. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
NEW SECTION. Sec. 23. If specific funding for the purposes of this act, referencing this act by bill number, is not provided by June 30, 1992, in the supplemental budget, this act is null and void.