On Tuesday, February 11, 2014, the U.S. Court of Appeals for the District of Columbia struck down the Internal Revenue Service’s new licensing requirements for all paid tax return preparers.
In 2011 the Department of Treasury issued new regulations regarding the registration and licensing of paid tax return preparers. Under Treasury Department Circular No. 230 and the regulations governing Practice Before the Internal Revenue Service, the IRS maintains standards of competency for attorneys, accountants, and other tax professionals that appear in proceedings before the IRS. These new regulations require all paid tax return preparers to pass a qualifying exam, pay an annual fee, and take at least 15 hours of continuing education courses. The IRS estimated that the new regulations would apply to more than 600,000 tax return preparers.
Three independent tax return preparers filed suit seeking to prevent enforcement of the new regulations. The plaintiffs contended that the new regulations exceeded the IRS’s authority. “The question in this case is whether the IRS’s authority to ‘regulate the practices of representatives of persons before the Department of Treasury’ encompasses authority to regulate tax-return preparers.” See Sabina Loving, Et Al v. Internal Revenue Service, No. 13-5061, U.S. Court of Appeals, D.C. Cir. (February 11, 2014)
The IRS relied on 31 U.S.C. §330 which authorizes it to “regulate the practice of representatives of persons before the Department of the Treasury.” This statute was originally enacted in 1884 to give the Treasury the authority to regulate the claims for missing horses lost during the Civil War, many of which were fraudulent.
The U.S. District Court ruled for the plaintiffs. On appeal, the U.S. Court of Appeals, agreeing with the district court, struck down the new licensing requirements for all paid tax return preparers stating that the “IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of Section 330.”
 See Sabina Loving, et al v. Internal Revenue Service, No. 13-5061, U.S. Court of Appeals, D.C. Cir. (February 11, 2014), Part II, first sentence
 See Sabina Loving, et al v. Internal Revenue Service, No. 13-5061, U.S. Court of Appeals, D.C. Cir. (February 11, 2014), Last paragraph