Back in June the IRS Office of Professional Responsibility (OPR) issued its first solid AI guidance in the form of a bulletin titled Introductory Guidelines for Responsible AI Use in Federal Tax Practice. We of course wrote about it at that time and chose to focus on the part where the IRS calls out Deloitte and the hallucination-riddled consulting report they produced for the Australian government specifically as an example of how not to do AI because we thought that part was funny and that’s why we’re here.
But there was another bit in that bulletin of note, one that the AICPA has taken issue with. This part, where they throw out Circular 230 provisions as they relate to this brave new world of AI-augmented tax practice:
- 10.27(a) – Fees: “A practitioner may not charge an unconscionable fee in connection with any matter before the Internal Revenue Service.”
AI can reduce research and drafting time, such that billing clients for manual labor or time that was not actually spent or double billing for AI-assisted tasks may violate § 10.27, depending on the facts (e.g., a noticeable pattern across clients or the size of the billing differentials). Cost savings should be passed on openly, with billing practices that reflect the efficiencies gained from the use of GAI. Practitioners should not only disclose, in general or specific terms as needed, the AI activities performed, but also fairly credit to the client’s account any cost reductions.
Yesterday, Journal of Accountancy published an article outlining the AICPA’s beef with this statement, a beef that has been seasoned by feedback they’ve received from practitioners who operate under the yoke of Circular 230 provisions:
“The IRS statement implies that any efficiencies gained through AI should be directly passed on to the client,” Eva Simpson, CPA, CGMA, AICPA vice president–Member Value, Tax & Advisory Services, said in an email. “That is an overly simplistic view that ignores the full economics of AI adoption, including software licensing costs, implementation expenses, governance requirements, and the significant investment needed to train professionals to use these tools responsibly and effectively. It also overlooks that professional services are increasingly priced based on value delivered, not just time spent, and that the benefits AI creates for clients should be considered as part of that equation.”
AICPA leaders discussed the issue during a recent Town Hall and Washington Tax Brief. Melanie Lauridsen, the AICPA’s vice president–Tax Policy & Advocacy, said the AICPA is working with the IRS on clarifying language and FAQs “because value pricing is something that is just part of business, and you have to be able to include the liability that you’re taking as you go through all of this.”
AICPA chair Jan Lewis, CPA, CGMA, a firm partner and former chair of the AICPA’s Tax Executive Committee, said firms also incur costs to train employees and establish procedures for using AI responsibly.
“We know that that AI-generated work is valuable to our client, and that value, however it is performed by AI or by the profession, has a cost and it has a benefit, and we need to bill for that service based on the value provided,” Lewis said.
Mark Koziel, CPA, CGMA, president and CEO of the AICPA, who said he had heard from CPAs on the issue, said the OPR language is not authoritative and could be “overstepping a little bit.”
Clients no doubt think they deserve a discount if their practitioner is saving tons of time with AI but the AICPA certainly has a point here too.
It’s funny that the profession’s love of the billable hour is coming back to bite here. If time is the primary measure of value and these technologies save time then you’ve shot yourself in the foot if you don’t pass that on to the client. The AICPA is basically making the same argument value pricing fanatics have been making for years, that time is just one piece of a multi-layered puzzle.
