May 24, 2013

IRS Exceeds Powers and Violates Transparency with Tax Preparer Regulations: Loving v. IRS

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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 IRS has appealed to the U.S. Court of Appeals for the D.C. Circuit.

On May 24, 2013, the Tax Foundation and seven independent tax preparers filed an amicus brief opposing the IRS in this appeal. Our brief makes three main arguments:

  • Preparing a tax return is not equivalent to “presenting a case” before 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 striking down the regulatory scheme.

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