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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, December 7, 2013

District Court: Approval of PTIN User Fees Not Relevant to Loving Challenge to IRS Regulation of Tax Return Preparers

PTINFollowing up on yesterday's discussion of Buckley v. United States, No. 1:13-cv-01701 (N.D. GA Dec. 4, 2013), which permits the IRS to continue to charge annual user fees to tax return preparers for the use of a Preparer Tax Identification Number:

According to the plaintiffs, no law allows the United States Treasury Department or the IRS to assess the user fees and associated annual renewal fees in question. Additionally, the plaintiffs argue that the annual fee is either arbitrary and capricious or excessive. Relying upon Loving v. Internal Revenue Service, 2013 U.S. Dist. LEXIS.7980 (D.D.C. Jan. 18, 2013), the plaintiffs argue that this court should strike down what they characterize as improper licensing and annual registration fees assessed against those individuals who prepare taxes for compensation.

the court notes that the Eleventh Circuit in Brannen v. United States, 682 F. 3d 1316 (11th Cir. 2012), held that the regulation imposing a user to obtain a PTIN passed constitutional muster for the reasons set forth on pages 8-11 the defendant's motion for summary judgment. Specifically, the Eleventh Circuit in Brannen held that the imposition of a user fee was established in accordance with the statutory authority set forth in 31 U.S.C. § 9701, which enables agencies to charge agency user fees. Moreover, the Eleventh Circuit in Brannen held that the user fee associated with the PTIN number confers a special benefit on tax return preparers who prepare the tax returns of others for compensation and therefore satisfies the Independent Offices Act, 31 U.S.C. § 9701. Because this court can find no reason for ignoring the Eleventh Circuit's clear guidance in Brannen, the court GRANTS the defendant's motion for summary judgment to the extent that the plaintiff challenged the constitutionality of the imposition of the original user fee. ...

The court concludes that the Loving case has no applicability to this case. In reaching this conclusion, the court notes that the D.C. District Court in the Loving case reviewed the competency testing and continuing education requirements for return preparers who are not attorneys, accountants, or enrolled agents, i.e., so called "registered tax return preparers."  However, the competency testing and continuing education requirements for "registered tax return preparers" are not being challenged by the plaintiffs here. In this case, like in Brannen, the plaintiffs challenge the authority of the government to charge user fees associated with the issuance of PTINs. As the defendant correctly noted, the Eleventh Circuit disagreed with a prior challenge of the government's authority to impose the PTIN user fees. Again, as the defendant correctly notes in its motion for summary judgment, the Loving case specifically held that Congress authorized the PTIN scheme via a different statutory authority than the testing and competency requirements for registered tax return preparers, which were at issue in the Loving case. Therefore, the court concludes that Loving has no applicability to the facts of this case.

TaxProf Blog coverage of Loving:

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