HF 722

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:41am

A bill for an act
relating to taxation; modifying tax preparation services law; amending Minnesota
Statutes 2008, section 270C.445.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2008, section 270C.445, is amended to read:

270C.445 TAX PREPARATION SERVICES.

Subdivision 1.

Scope.

This section applies to a person who provides tax preparation
services deleted text begin . deleted text end new text begin , except:
new text end

new text begin (1) a person who provides tax preparation services for fewer than ten clients in a
calendar year;
new text end

new text begin (2) a person who provides tax preparation services only to immediate family
members. For the purposes of this section, "immediate family members" means a spouse,
parent, grandparent, child, or sibling;
new text end

new text begin (3) an employee who prepares a tax return for an employer's business;
new text end

new text begin (4) any fiduciary, or the regular employees of a fiduciary, while acting on behalf of
the fiduciary estate, testator, trustor, grantor, or beneficiaries of them; and
new text end

new text begin (5) nonprofit organizations providing tax preparation services under the Internal
Revenue Service Volunteer Income Tax Assistance Program or Tax Counseling for the
Elderly Program.
new text end

Subd. 2.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Client" means an individual for whom a tax preparer performs or agrees to
perform tax preparation services.

(c) "Person" means an individual, corporation, partnership, limited liability
company, association, trustee, or other legal entity.

(d) "Refund anticipation loan" means a loan new text begin or any other extension of credit new text end , whether
provided by the tax preparer or another entity such as a financial institution, in anticipation
of, and whose payment is secured by, a client's federal or state income tax refund or both.

(e) "Tax preparation services" means services provided for a fee or other
consideration to a client to:

(1) assist with preparing or filing state or federal individual income tax returns;

(2) assume final responsibility for completed work on an individual income tax
return on which preliminary work has been done by another; or

(3) deleted text begin offer or deleted text end facilitate the provision of refund anticipation loans new text begin and refund
anticipation checks new text end .

(f) "Tax preparer" or "preparer" means a person providing tax preparation services
subject to this section.

new text begin (g) "Advertise" means to solicit business through any means or medium.
new text end

new text begin (h) "Facilitate" means to individually or in conjunction or cooperation with another
person:
new text end

new text begin (1) accept an application for a refund anticipation loan;
new text end

new text begin (2) pay to a client the proceeds, through direct deposit, a negotiable instrument, or
any other means, of a refund anticipation loan; or
new text end

new text begin (3) offer, arrange, process, provide, or in any other manner act to allow the making
of, a refund anticipation loan.
new text end

new text begin (i) "Refund anticipation check" means a negotiable instrument provided to a client
by the tax preparer or another person, which is issued from the proceeds of a taxpayer's
federal or state income tax refund or both and represents the net of the refund minus the tax
preparation fee and any other fees. A refund anticipation check includes a refund transfer.
new text end

Subd. 3.

Standards of conduct.

No tax preparer shall:

(1) without good cause fail to promptly, diligently, and without unreasonable delay
complete a client's tax return;

(2) obtain the signature of a client to a tax return or authorizing document that
contains blank spaces to be filled in after it has been signed;

(3) fail to sign a client's tax return when payment for services rendered has been
made;

(4) fail or refuse to give a client a copy of any document requiring the client's
signature within a reasonable time after the client signs the document;

(5) fail to retain for at least four years a copy of individual income tax returns;

(6) fail to maintain a confidential relationship deleted text begin between themselves and their deleted text end new text begin with new text end
clients or former clients;

(7) fail to take commercially reasonable measures to safeguard a client's nonpublic
personal information;

(8) make, authorize, publish, disseminate, circulate, or cause to make, either directly
or indirectly, any false, deceptive, or misleading statement or representation relating to or
in connection with the offering or provision of tax preparation services;

(9) require a client to enter into a loan arrangement in order to complete a tax return;

(10) claim credits or deductions on a client's tax return for which the tax preparer
knows or reasonably should know the deleted text begin taxpayer deleted text end new text begin client new text end does not qualify;

(11) charge, offer to accept, or accept a fee based upon a percentage of an anticipated
refund for tax preparation services;

(12) under any circumstances, withhold or fail to return to a client a document
provided by the client for use in preparing the client's tax return deleted text begin . deleted text end new text begin ;
new text end

new text begin (13) establish an account in the preparer's name to receive a client's refund through
a direct deposit or any other instrument unless the client's name is also on the account,
except that a taxpayer may assign the portion of a refund representing the Minnesota
education credit available under section 290.0674 to a bank account without the client's
name, as provided under section 290.0679;
new text end

new text begin (14) fail to act in the best interests of the client;
new text end

new text begin (15) fail to safeguard and account for any money handled for the client;
new text end

new text begin (16) fail to disclose all material facts of which the preparer has knowledge which
might reasonably affect the client's rights and interests;
new text end

new text begin (17) violate any provision of section 332.37;
new text end

new text begin (18) include any of the following in any document provided or signed in connection
with the provision of tax preparation services:
new text end

new text begin (i) a hold harmless clause;
new text end

new text begin (ii) a confession of judgment or a power of attorney to confess judgment against the
client or appear as the client in any judicial proceeding;
new text end

new text begin (iii) a waiver of the right to a jury trial, if applicable, in any action brought by or
against a debtor;
new text end

new text begin (iv) an assignment of or an order for payment of wages or other compensation for
services;
new text end

new text begin (v) a provision in which the client agrees not to assert any claim or defense otherwise
available;
new text end

new text begin (vi) a waiver of any provision of this section or a release of any obligation required
to be performed on the part of the tax preparer;
new text end

new text begin (vii) a waiver of the right to injunctive, declaratory, or other equitable relief or
relief on a class basis; or
new text end

new text begin (viii) a mandatory arbitration clause; or
new text end

new text begin (19) if making, providing, or facilitating a refund anticipation loan, fail to provide all
disclosures required by the federal Truth in Lending Act, United States Code, title 15, in a
form that may be retained by the client.
new text end

new text begin Subd. 3a. new text end

new text begin Written agreements required; refund anticipation loans and checks.
new text end

new text begin All agreements to make, provide, or facilitate a refund anticipation loan or refund
anticipation check must be in writing. No agreement may include a provision that
directly or indirectly arranges for payment of or deduction from any portion of the refund
anticipation loan or refund anticipation check for check cashing, credit insurance, attorney
fees, or the collection of any debt owed to any party for any other good or service other
than a debt owed to the facilitator for the repayment of a refund anticipation loan and tax
preparation fees associated with the refund anticipation loan or refund anticipation check.
new text end

Subd. 4.

Required disclosures deleted text begin ; refund anticipation loans deleted text end .

(a) deleted text begin If deleted text end new text begin Before or at the
same time new text end a tax preparer offers to make or facilitate a refund anticipation loan to the
client, the preparer must make the disclosures in deleted text begin this subdivision. The disclosures must
be made before or at the same time the preparer offers the refund anticipation loan to the
client. deleted text end new text begin subdivision 4a. Before or at the same time a tax preparer offers or facilitates a
refund anticipation check or refund transfer, the tax preparer must make the disclosures
in subdivision 4b.
new text end

new text begin (b) The disclosures must be provided to a client in a written notice on a single sheet
of paper, separate from any other document or writing.
new text end

new text begin (c) All required statements must be in capital and small font type fonts, in a
minimum of 14-point type, with at least a double space between each statement.
new text end

new text begin (d) The notice must be signed and dated by the tax preparer and the client.
new text end

new text begin (e) All required disclosures, notices, and statements must be provided in the client's
primary language, if the tax preparer advertises in that language.
new text end

deleted text begin (b) The tax preparer must provide to a client a written notice on a single sheet of
paper, separate from any other document or writing, containing:
deleted text end

deleted text begin (1) a legend, centered at the top on the single sheet of paper, in bold, capital letters,
and in 28-point type stating "NOTICE";
deleted text end

deleted text begin (2) the following verbatim statements:
deleted text end

deleted text begin (i) "This is a loan. The annual percentage rate (APR), based on the estimated
payment period, is (fill in the estimated APR)."
deleted text end

deleted text begin (ii) "Your refund will be used to repay the loan. As a result, the amount of your
refund will be reduced by (fill in appropriate dollar amount) for fees, interest, and other
charges."
deleted text end

deleted text begin (iii) "You can get your refund in about two weeks if you file your return electronically
and have the Internal Revenue Service send your refund to your own bank account." and
deleted text end

deleted text begin (3) if the client is subject to additional interest when a refund is delayed, the
following verbatim statement must also be included in the notice: "If you choose to take
this loan and your refund is delayed, you may have to pay additional interest."
deleted text end

deleted text begin (c) All required statements must be in capital and small font type fonts, in a
minimum of 14-point type, with at least a double space between each line in the statement
and four spaces between each statement.
deleted text end

deleted text begin (d) The notice must be signed and dated by the tax preparer and the client.
deleted text end

new text begin Subd. 4a. new text end

new text begin Refund anticipation loan disclosures. new text end

new text begin The disclosure required under
subdivision 4 for a refund anticipation loan must contain:
new text end

new text begin (1) a legend, centered at the top on the single sheet of paper, in bold, capital letters,
and in 28-point type stating "NOTICE";
new text end

new text begin (2) the following verbatim statements:
new text end

new text begin (i) "This is a loan. This is not your refund. The annual percentage rate (APR), based
on the estimated payment period, is (fill in the estimated APR)."
new text end

new text begin (ii) "Your refund will be used to repay the loan. As a result, the amount of your
refund will be reduced by (fill in appropriate dollar amount) for fees, interest, and other
charges."
new text end

new text begin (iii) "You have the right to cancel this transaction by returning the loan check or the
amount of the loan in cash within one business day after you get the loan."
new text end

new text begin (iv) "You can get your refund in about two weeks if you file your return electronically
and have the Internal Revenue Service send your refund to your own bank account."; and
new text end

new text begin (3) if the client is subject to additional interest when a refund is delayed, the
following verbatim statement must also be included in the notice: "If you choose to take
this loan and your refund is delayed, you may have to pay."
new text end

new text begin Subd. 4b. new text end

new text begin Refund anticipation check disclosures. new text end

new text begin (a) The disclosure required
under subdivision 4 for a refund anticipation check must contain:
new text end

new text begin (1) a legend, centered at the top on the single sheet of paper, in bold, capital letters,
and in 28-point type stating "NOTICE";
new text end

new text begin (2) the following verbatim statements:
new text end

new text begin (i) "You do not have to purchase a refund anticipation check (RAC) to get your
tax refund."
new text end

new text begin (ii) "Generally the IRS can direct deposit your income tax refund to your personal
bank account within 8 to 15 days after the IRS accepts your tax return for processing."
new text end

new text begin (iii) "If you choose to purchase a RAC, your tax return funds will generally be
made available to you within 8 to 15 days."
new text end

new text begin (iv) "A RAC is not a loan."
new text end

new text begin (v) "The cost of the RAC is $ (fill in dollar amount)."
new text end

new text begin (vi) "You can either pay for your RAC now or you can have it withheld from
your refund."
new text end

new text begin (vii) "The cost of your tax return is not any more or any less if you purchase a RAC."
new text end

new text begin (b) A tax preparer offering a refund anticipation check that uses a different product
name, including but not limited to refund transfer, must substitute the product name for
"RAC" in all the statements required under this subdivision.
new text end

Subd. 5.

Itemized bill required.

A tax preparer must provide an itemized statement
of the charges for services, at least separately stating the charges for:

(1) return preparation; deleted text begin and
deleted text end

(2) providing or facilitating a refund anticipation loan deleted text begin . deleted text end new text begin ; and new text end

new text begin (3) each fee associated with the provision of a refund anticipation check.
new text end

Subd. 5a.

Nongame wildlife checkoff.

A tax preparer must give written notice of
the option to contribute to the nongame wildlife management account in section 290.431
to corporate clients that file an income tax return and to individual clients who file an
income tax return or property tax refund claim form. This notification must be included
with information sent to the client at the same time as the preliminary worksheets or other
documents used in preparing the client's return and must include a line for displaying
contributions.

new text begin Subd. 5b. new text end

new text begin Right to rescind refund anticipation loan. new text end

new text begin (a) A client may rescind a
refund anticipation loan on or before the close of business on the next day of business
following execution of the loan agreement or receipt of the proceeds of the loan by:
new text end

new text begin (1) providing written notification to the tax preparer of the rescission; and
new text end

new text begin (2) returning the original check issued for the loan; or
new text end

new text begin (3) tendering the amount of the loan to the tax preparer.
new text end

new text begin (b) The tax preparer may charge a fee for rescinding a refund anticipation loan
only if an account has been established at a financial institution to electronically receive
the refund and the financial institution has charged a fee to establish the account. The
allowable fee the tax preparer may charge the client rescinding the refund anticipation
loan may not exceed the fee charged to the tax preparer by the financial institution to
establish the account.
new text end

Subd. 6.

Enforcement; penalties.

The commissioner may impose an administrative
penalty of not more than $1,000 per violation of subdivision 3, new text begin 3a, new text end 4, deleted text begin or deleted text end 5 new text begin , or 5b, provided
that a penalty may not be imposed for any conduct that is also subject to the tax return
preparer penalties in section 289A.60, subdivision 13 new text end . The commissioner may terminate a
tax preparer's authority to transmit returns electronically to the state, if the commissioner
determines the tax preparer engaged in a pattern and practice of violating this section.
Imposition of a penalty under this subdivision is subject to the contested case procedure
under chapter 14. The commissioner shall collect the penalty in the same manner as the
income tax. Penalties imposed under this subdivision are public data.

Subd. 6a.

Exchange of data; State Board of Accountancy.

The State Board of
Accountancy shall refer to the commissioner complaints it receives about tax preparers
who are not subject to the jurisdiction of the State Board of Accountancy and who are
alleged to have violated the provisions of subdivisions 3 deleted text begin to deleted text end new text begin , 3a, 4, 4a, 4b, new text end 5 new text begin , new text end new text begin and 5b new text end .

Subd. 6b.

Exchange of data; Lawyers Board of Professional Responsibility.

The
Lawyers Board of Professional Responsibility may refer to the commissioner complaints
it receives about tax preparers who are not subject to its jurisdiction and who are alleged
to have violated the provisions of subdivisions 3 deleted text begin to deleted text end new text begin , 3a, 4, 4a, 4b, new text end 5 new text begin , new text end new text begin and 5b new text end .

Subd. 6c.

Exchange of data; commissioner.

The commissioner shall refer
complaints about tax preparers who are alleged to have violated the provisions of
subdivisions 3 deleted text begin to deleted text end new text begin , 3a, 4, 4a, 4b, new text end 5 new text begin , new text end new text begin and 5b new text end to:

(1) the State Board of Accountancy, if the tax preparer is under its jurisdiction; and

(2) the Lawyers Board of Professional Responsibility, if the tax preparer is under
its jurisdiction.

Subd. 6d.

Data private.

Information exchanged on individuals under subdivisions
6a to 6c are private data under section 13.02, subdivision 12, until such time as a penalty
is imposed as provided in section 326A.08 or by the Lawyers Board of Professional
Responsibility.

Subd. 7.

Enforcement; civil actions.

(a) Any violation of this section is an unfair,
deceptive, and unlawful trade practice within the meaning of section 8.31. new text begin An action taken
under section 8.31 is in the public interest.
new text end

(b) A client may bring a civil action seeking redress for a violation of this section in
the conciliation or the district court of the county in which unlawful action is alleged to
have been committed or where the respondent resides or has a principal place of business.

(c) A deleted text begin district deleted text end court finding for the plaintiff must award new text begin :
new text end

new text begin (1) new text end actual damages deleted text begin , including deleted text end new text begin ;
new text end

new text begin (2) new text end incidental and consequential damages deleted text begin , deleted text end new text begin ;
new text end

new text begin (3) statutory damages of twice the sum of: (i) the tax preparation fees; and (ii) if the
plaintiff violated subdivision 3a, 4, or 5b all interest and fees for a refund anticipation loan;
new text end

new text begin (4) new text end reasonable attorney fees deleted text begin , deleted text end new text begin ;
new text end

new text begin (5) new text end court costs deleted text begin , deleted text end new text begin ; new text end and

new text begin (6) new text end any other equitable relief as the court considers appropriate.

Subd. 8.

new text begin Limited new text end exemptions deleted text begin ; enforcement provisions deleted text end .

The provisions of this
section, except for deleted text begin subdivision deleted text end new text begin subdivisions 3a, new text end 4 new text begin , and 5b new text end , do not apply to:

(1) an attorney admitted to practice under section 481.01;

(2) a certified public accountant or other person who is subject to the jurisdiction of
the State Board of Accountancy;

(3) an enrolled agent who has passed the special enrollment examination
administered by the Internal Revenue Service; new text begin or
new text end

deleted text begin (4) any fiduciary, or the regular employees of a fiduciary, while acting on behalf of
the fiduciary estate, the testator, trustor, grantor, or beneficiaries of them;
deleted text end

deleted text begin (5) a tax preparer who provides tax preparation services for fewer than six clients
in a calendar year;
deleted text end

deleted text begin (6) tax preparation services to a spouse, parent, grandparent, child, or sibling of
the tax preparer; and
deleted text end

deleted text begin (7) the preparation by an employee of the tax return of the employee's employer
deleted text end

new text begin (4) anyone who provides, or assists in providing, tax preparation services within
the scope of duties as an employee or supervisor of a person who is exempt under this
subdivision new text end .