U.S. Courts of Appeals Strikes Down New IRS Regulation to Register Paid Tax Return Preparers

more+
less-
more+
less-

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,[1] 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.”[2] 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it to “regulate the practice of representatives of persons before the Department of the Treasury.”[3]  This statute was originally enacted in 1884 to give the Treasury the authority to regulate the claims for missing horses lost during the Civil War, many of which were fraudulent.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.”[4]


[1] 31 CFR Part 10

[2] 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

[3] 31 U.S.C. §330, 1(a)

[4] 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

 

Topics:  IRS, Registration, Tax Preparers, Tax Returns

Published In: Administrative Agency Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© M. Robinson & Company, P.C. | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »