Colorado's Uniform Debt Management Services Act - John R. Dundon II, Enrolled Agent
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Colorado’s Uniform Debt Management Services Act

Business Entity Selection and the Tax Consequences of Converting

Colorado’s Uniform Debt Management Services Act

According to Colorado’s Uniform Debt Management Services Act (UDMSA) any person acting on behalf of a consumer in an effort to negotiate a debt must register with the Attorney General (AG).  Subsequently I learned ANYONE NEGOTIATING TAX DEBT RELIEF could be subject to enforcement by the state of Colorado Attorney General for failure to comply with registration.

The Colorado AG’s rules regarding registration under the UDMSA clearly state: “Any person or organization that provides, offers to provide, or agrees to provide DebtManagement services directly or through others must register as a DebtManagement Services Provider.  This includes, but is not limited to, Consumer Credit Counseling agencies, Debt Settlement agencies, telemarketing or marketing companies advertising as Credit Counseling or Debt Settlement agencies, and the like.”

To get a better understanding of the UDMSA I called the Colorado Attorney General’s office and was routed through to Neal Monaghan who serves as a financial investigator and is purportedly the ‘go-to’ person for the AG as I was of the opinion that registration with the AG under UDMSA is obligatory only if you intend to enter into an ‘agreement’ to offer ‘debt management services’ as a ‘provider’ by offering a ‘plan’ in exchange for a ‘settlement fee’ based on the following specific statute definitions:

(3) “Agreement” means an agreement between a provider and an individual for the performance of debt-management services.

(10) (A) “Debt-management services” means services as an intermediary between an individual and one or more creditors of the individual for the purpose of obtaining concessions

(14) “Plan” means a program or strategy in which a provider furnishes debt-management services to an individual and that includes a schedule of payments to be made by or on behalf of the individual and used to pay debts owed by the individual.

(16) “Provider” means a person that provides, offers to provide, or agrees to provide debt-management services directly or through others.

(18) “Settlement fee” means a charge imposed on or paid by an individual in connection with a creditor’s assent to accept in full satisfaction of a debt an amount less than the principal amount of the debt.

What I learned however is that the Colorado Attorney General’s office now includes taxpayer representation and tax dispute resolution services compensated for on an hourly fee for service basis under the definition of ‘debt management services’ and anyone offering this service in Colorado must register with the AG under the UDMSA.  Attorneys and CPAs are exempt from registering but Enrolled Agents are not.  This interpretation of ‘debt management services’ is a real game changer here in Colorado.  I additionally learned that the AG’s position on the matter is that those of us not registered need to draw a distinction between actions associated with arriving at a ‘true tax liability determination’ and actions associated with ‘negotiating terms for payment.’  Evidently any work associated with negotiating payment terms on behalf of Colorado residents even if the total liability does not change is a precursor for AG registration under UDMSA regardless of how we are compensated, fee for service or otherwise.  That means no more IRS forms 433’s, 656’s, or even CNC requests until registration is obtained.

For whatever it is worth I was lead to believe that the AG is scrutinizing practitioners that consumers have complained about which on the bright side is better than investigating all tax practitioners industry wide.  So before taking on any more tax resolution work investigate registering with the Colorado AG under the UDMSA.