Court Says IRS Lacks Authority to Regulate Tax Preparers

Loving v. United States, No. 12-385 (D.C. D.C. Jan. 18, 2013):

To close a gap in the federal oversight of tax professionals, in 2011 the IRS began regulating hundreds of thousands of non-attorney, non-CPA tax-return preparers who prepare and file tax returns for compensation. The new regulations require each such preparer to pass a qualifying exam, pay an annual application fee, and take fifteen hours of continuing-education courses each year. Agency action, however, requires statutory authority. The IRS interpreted an 1884 statute as enabling these new regulations. That statute allows the IRS to regulate “representatives” who “practice” before it. Believing that tax-return preparers are not covered under the statute, and thus cannot be so regulated, Plaintiffs – three independent tax-return preparers – brought this suit. Plaintiffs and the Government have now cross-moved for summary judgment. Concluding that the statute’s text and context unambiguously foreclose the IRS’s interpretation, the Court will grant Plaintiffs’ Motion.

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