Court of Appeals Not Loving IRS Arguments

September 25, 2013

Yesterday, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in Loving v. IRS. The IRS attempted to argue that it has the statutory authority to require non-attorney, non-CPA tax return preparers who prepare and file returns for compensation to pass an annual exam, pay an annual fee, and take 15 hours of continuing-education courses every year. However, the IRS ran into a very skeptical bench. The court was particularly skeptical of the fact that Congress passed the original version of the statute at issue in 1884, yet the IRS did not assert the authority to regulate paid return preparers under that statute for almost 130 years. Another judge asked why the IRS does not require these preparers to turn in a Power of Attorney and Declaration of Representative form like other tax representatives are required to do. The implication seemed to be that if the IRS does not require the form, then the IRS does not really believe that these return preparers are representatives practicing before the IRS. One judge wondered how the IRS could know that these return preparers had more accuracy problems than pro-bono return preparers, like the IRS claims, when the IRS has not done a study comparing the two.

This appeal arose after the U.S. District Court for the District of Columbia ruled against the IRS earlier this year, holding that it did not have the statutory authority to regulate the return preparers because the help they were providing did not rise to the level of practicing before the IRS. The hostile line of questioning today, and the lack of hostility towards the Loving attorney, are a good sign that the appeals court is leaning towards upholding the decision of the district court. The Tax Foundation filed an amicus curiae brief with the Court of Appeals in this case arguing, in part, that the return preparers are not presenting cases to the IRS, and that the IRS did not properly consider the increased cost to consumers when promulgating the regulations. If the court does uphold the decision, it would be a win for low-income taxpayers everywhere, who would continue to have access to affordable tax return preparation help. 

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