The Circuit Court of Appeals for the
District of Columbia today ruled that the IRS has no legal authority to
impose nationwide licensing and other requirements on tax-return
preparers. The decision upholds the January, 2013, ruling by US
District Court Judge James E. Boasberg, which struck down the IRS’s
proposed regulations as unlawful.
Appeals case No. 13-5061, Sabina Loving et al v. Internal Revenue Service et al can be found here.
The opinion of the court was filed by Circuit Judge Brett Michael
Kavanaugh, who wrote in part: “In this case, three independent
tax-return preparers contend that the IRS’s new regulations exceed the
agency’s authority under the statute. The precise question is whether
the IRS’s statutory authority to “regulate the practice of
representatives of persons before the Department of the Treasury”
encompasses authority to regulate tax-return preparers. The District
Court ruled against the IRS, relying on the text, history, structure,
and context of the statute. We agree with the District Court that the
IRS’s statutory authority under Section 330 cannot be stretched so
broadly as to encompass authority to regulate tax-return preparers. We
therefore affirm the judgment of the District Court.”
Both courts rejected the IRS’s claim
that tax-preparer licensure was authorized by an 1884 statute (31 U.S.C.
§ 330) governing the representatives of Civil War soldiers seeking
compensation for dead horses.
The Court held, “The IRS may not
unilaterally expand its authority through such an expansive, atextual,
and a historical reading of Section 330. As the Supreme Court has
directed in words that are right on point here, the “fox-in-the-henhouse
syndrome is to be avoided . . . by taking seriously, and applying
rigorously, in all cases, statutory limits on agencies’ authority.” City of Arlington v. FCC, 133 S. Ct. 1863, 1874 (2013). We affirm the judgment of the District Court.”
“This is a major victory for tax
preparers—and taxpayers—nationwide,” said Dan Alban of the Institute for
Justice, the lead attorney for the three independent tax preparers who
filed the suit. “The court found that Congress never gave the IRS the
power to license tax preparers, and the IRS cannot give itself that
authority.”
The Institute for Justice claims that
more than 350,000 tax return preparers would have been affected by the
regulations, and that tens of thousands of mom-and-pop preparers would
be put out of business.
The Wall Street Journal, in its
assessment of the case, noted that “Big-foot tax preparers like H&R
Block and Jackson Hewitt lobbied for the regulation and have been
explicit in hoping it will squeeze lower-priced competition.” The
drafting of the regulations was overseen by former H&R Block CEO
Mark Ernst, and several financial analysts have concluded they benefit
the company.
Source: US District Court of Appeals
for the District of Columbia at
http://www.cadc.uscourts.gov/internet/opinions.nsf/B63C3129A4FE761985257C7C00539949/$file/13-5061-1479431.pdf
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contained in this communication, including in any attachments, it was not
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