In March 2009 then-IRS Commissioner Douglas Shulman tapped Karen Hawkins to lead the agency's Office of Professional Responsibility. Hawkins had been slated to become the next chair of the American Bar Association Section of Taxation, but chose to take the commissioner up on his challenge to reinvigorate OPR. Six years later, Hawkins has dramatically transformed OPR, even if she hasn't quite accomplished as much as she intended.
Hawkins is leaving OPR in July. She leaves behind a record that will always be at least slightly tainted by the IRS's major overreach in its efforts to regulate return preparers, but the Loving decision striking down her regime should not obscure the fact that she is the probably the most recognizable OPR director the IRS has ever had. Hawkins was ubiquitous at conferences, meetings, and events, touting the importance of Circular 230 and reminding practitioners of their obligations. She fielded tough questions, gave in-depth previews of what OPR was going to do, and explained the reasoning behind increasingly controversial disciplinary actions. She was almost certainly one of the most visible IRS officials during Shulman's tenure.
But Hawkins didn't just change the style of how OPR operated. She altered the substance of its enforcement actions. She threatened firms with monetary penalties for the misconduct of their practitioners, something that would have been unheard of 10 years ago. She cleared the backlog of disciplinary cases and published numerous opinions about what actions were taken against those who didn't live up to their ethical obligations. OPR revised the covered opinion rules and the due diligence standard. And, of course, she ordered practitioners to finally stop putting those silly disclosures at the end of their e-mails.
Her major goal -- a comprehensive regulatory regime for all those involved in the preparation of tax returns -- collapsed at the hands of a federal district judge. The IRS also suffered litigation defeats in Ridgely and Sexton, both of which limited the scope of Circular 230 and OPR's authority. The preparer regime was the centerpiece of Hawkins's and Shulman's campaign to bring the seediest elements of the return preparation industry under the IRS's thumb. Its failure made clear the limitations of IRS power (regulations and old laws can only be stretched so far) and the need for legislative action. Loving also caused opposition to further IRS involvement in return preparation to solidify and find a voice in the form of several advocacy groups.
Hawkins will probably always face at least some criticism because of the overreach of the preparer regime, and some accusations that she was too favorable to the large practitioner groups such as the ABA and the American Institute of Certified Public Accountants. But she should more properly be remembered as the person who brought coherence to IRS Circular 230 enforcement and essentially rebuilt OPR from scratch.
