The Other IRS Abuse of Power Case

May 29, 2013

‘Mom and Pop’ Tax Preparers Continue Legal Fight

Washington, D.C., May 29, 2013—The Tax Foundation and seven independent tax preparers have filed a legal brief opposing the Internal Revenue Service’s continued attempts to increase regulation of tax preparation services. The case of Loving v. IRS, currently being litigated by attorneys from the civil liberties law firm Institute for Justice, will return to court for oral arguments sometime after the IRS’ filing deadline on May 31st.

The IRS issued new regulations effective 2011 that require federal tax return preparers to register with the agency, pay significant fees, and pay for certified continuing education (larger preparers with other professional credentials are exempt from some of these requirements). “Mom and pop” tax return preparers filed suit against the IRS, arguing that the regulations exceed the IRS's power and are arbitrary and capricious.

In January 2013, a trial judge ruled against the IRS, striking down the regulatory scheme, and the agency has appealed to the U.S. Court of Appeals for the D.C. Circuit. The brief filed by the Tax Foundation and independent tax preparers opposes the IRS in this appeal. The brief makes three main arguments:

  • Preparing a tax return is not equivalent to “presenting a case” before a tax court, as was argued by former IRS commissioners who support the regulatory scheme;

  • The regulations are poorly targeted for their stated goal of deterring tax preparer fraud, and in fact are arbitrary and capricious under relevant case law;

  • The regulations’ enactment did not comply with notice and comment requirements, violating transparency.

“We argue that the appeals court should affirm the lower court's decision and strike down the regulatory scheme in its entirety,” said Tax Foundation Vice President for Legal and State Projects Joseph Henchman.

The full text of the Tax Foundation’s amicus brief in the case of Loving v. IRS is available in PDF.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

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