Federal agencies have begun using user fees as a substantial means of financing the federal government. Certain requirements must be met in order for user fees to be (lawfully) charged.
Under 31 U.S.C. section 9701, heads of agencies may prescribe regulations establishing a charge for a service of thing of value provided by the agency. Regulations prescribed are subject to policies prescribed by the President and must be as uniform as practicable. Each charge must be: (a) fair; and (b) based on (1) the costs to the Government; (2) the value of the service or thing of value; (3) the public policy or interest served; and (4) other relevant facts. At least one U.S. circuit court has opined that the cost to the government is what must be analyzed. In addition, the U.S. Supreme Court has ruled that the payer must receive a “special benefit” in exchange for the payment, and payment must be made voluntarily. An involuntary fee payment is a tax, and only Congress can tax.
The Administrative Procedure Act generally permits lawsuits to challenge the legality of regulations.
Historically, courts have upheld user fees when things of value, to which the payer is not entitled, are supplied by a government agency at the request of the payer. Examples include fees charged for cattle grazing on federal land, patent fees and license issuance fees. No one has a right to a patent. Rather, a submission must be filed with the federal government to receive a patent. A fee is charged to cover the government work involved. If a patent is issued, it could have tremendous value to the recipient. While the states have many licensing requirements, the federal government has not required licenses in many areas. Exceptions exist. For example, a license is required from the federal government to create and maintain a nuclear power plant. Licenses are similar to patents, and courts have generally permitted fees to be charged to cover the costs of issuance.
Recently, agencies have begun creating requirements (which agencies often have the power to do), and then demanding fees in order to fulfill the requirements. An example is a charge to get, and charges to annually renew, a Preparer Tax Identification Number (PTIN). Once issued, similar to a Social Security number, the PTIN does not change. This new requirement was created in 2010, via regulatory action calling for regulation of the tax return industry by the U.S. Treasury Department. There is no statute that authorizes regulation of the industry. Three times, Congress rejected attempts to regulate the industry. For many years, the IRS has had the power to require an ID number of a preparer be placed of prepared returns. Previously, a preparer’s Social Security number could be used. The ID requirement was enacted to help the IRS better identify problem preparers. Few, if any, preparers want to place an ID number on a prepared return. Preparers do so because they potentially face substantial penalties for failing to do so. In a lawsuit titled Brannen v. U.S., Jerry Froelich, Jr. and I represent all preparers in an effort to strike down the fees. We believe that no “special benefit” is received because, as the IRS pointed out in 2010 in its Publication 4832, any person can prepare tax returns for others for compensation. Also, given the penalty scheme, the fees are paid involuntarily.
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In June 1995, OMB and General Accounting Office (GAO) published the FASAB Statement of Federal Financial Accounting Standards No. 4: Managerial Cost Accounting Concepts and Standards for the Federal Government . In this document the FASAB recommends five standards as the fundamental elements of managerial cost accounting for Federal agencies: “(1) accumulating and reporting costs of activities on a regular basis for management information purposes, (2) establishing responsibility segments to match costs with outputs, (3) determining full costs of government goods and services, (4) recognizing the costs of goods and services provided among federal entities, and (5) using appropriate costing methodologies to accumu late and assign costs to outputs.” (FASAB, Statement of Federal Financial Accounting Standards Number 4, section 2, pg. 1) These standards became effective for Federal agencies on September 30, 1996.
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c. In any case where an Office of Management and Budget circular provides guidance concerning a specific user charge area, the guidance of that circular shall be deemed to meet the requirements of this Circular. Examples of such guidance include the following: OMB Circular No. A-45, concerning charges for rental quarters; OMB Circular No. A-130, concerning management of Federal information resources; and OMB Circular No. A-97, concerning provision of specialized technical services to State and Local governments.
c. In any case where an Office of Management and Budget circular provides guidance concerning a specific user charge area, the guidance of that circular shall be deemed to meet the requirements of this Circular. Examples of such guidance include the following: OMB Circular No. A-45, concerning charges for rental quarters; OMB Circular No. A-130, concerning management of Federal information resources; and OMB Circular No. A-97, concerning provision of specialized technical services to State and Local governments.
In June 1995, OMB and General Accounting Office (GAO) published the FASAB Statement of Federal Financial Accounting Standards No. 4: Managerial Cost Accounting Concepts and Standards for the Federal Government . In this document the FASAB recommends five standards as the fundamental elements of managerial cost accounting for Federal agencies: “(1) accumulating and reporting costs of activities on a regular basis for management information purposes, (2) establishing responsibility segments to match costs with outputs, (3) determining full costs of government goods and services, (4) recognizing the costs of goods and services provided among federal entities, and (5) using appropriate costing methodologies to accumu late and assign costs to outputs.” (FASAB, Statement of Federal Financial Accounting Standards Number 4, section 2, pg. 1) These standards became effective for Federal agencies on September 30, 1996.
Title to real property acquired by recipients with Federal awards vests with the recipient. It must be used for the originally authorized purpose as long as needed for that purpose. Real property may be used in other Federally sponsored projects or programs that have purposes similar to the one for which the property was acquired, just as long as the Federal government authorizes it, however it may not dispose of or encumber the title to real property without the prior consent of the Federal government. When it is no longer needed for the Federally supported programs or projects, the recipient must request disposition instructions from the Federal government. Just like equipment, if the property is sold, a proportionate share is provided to the Federal government amount of the current fair market value, based on the percent of Federal funds to own recipients fund used to acquire the item.
Originally the PTIN number for tax preparers was given to those of us who volunteered for it, at no cost, and was not supposed to cost us ever. And even though Enrolled Agents are SUPPOSED to be exempt from the RTRP requirements, if we do not now PAY the fee for the PTIN renewal, it is deactivated, and due to the IRS’s having taken over continuing education and planning to TRACK the education hours itself, for all us tax preparers and Enrolled Agents alike, without the active PTIN the education providers are finding they cannot report our hours. So ALL must pay now, Registered Tax Return Preparers and Enrolled Agents too, or all will be dead in the water as to preparing tax returns.