Breaking News: Decision in the Loving v. IRS appeal

The United States Court of Appeals for the DC Circuit, today rejected the IRS appeal in the case of Loving v. IRS in which three independent tax return preparers argued that the IRS had overstepped its authority when implementing the Registered Tax Return Preparer (RTRP) program.
The RTRP program was created to regulate paid tax preparers other than those already under Circular 230’s regulatory structure such as Enrolled Agents, certified public accountants and attorneys. The program required other paid preparers to register with the IRS, pass a competency test and complete specified continuing education annually.

CSEA has been covering this story since the original District Court ruling in early 2013. Readers will recall that the ruling in favor of the plaintiff, by the U.S. District Court for the District of Columbia on January 18, 2013, effectively stopped the IRS from implementing its RTRP program. The IRS filed a motion to suspend the Court-ordered injunction, which was quickly countered by a cleverly crafted memorandum from the plaintiff opposing the defendant’s motion. Just days later, on February 1, 2013, the Court responded to the IRS’ motion to suspend the injunction with a resounding “motion denied”. Now a year later, the Court of Appeals made its final ruling on the matter.

The Court of Appeals for the DC Circuit today concluded that:

“The precise question is whether the IRS’s statutory authority to ‘regulate the practice of representatives of persons before the Department of the Treasury’ encompasses authority to regulate tax-return preparers. The District Court ruled against the IRS, relying on the text, history, structure, and content of the statute. We agree with the District Court that the IRS’s statutory authority under Section 330 cannot be stretched so broadly as to encompass authority to regulate tax-return preparers. We therefore affirm the judgment of the District Court.”

The appeal court examined six considerations when coming to this decision specifically: the meaning of the key statutory term “representatives”; the meaning of the phrase “practice…before the Department of the Treasury”; the history of Section 330; the broader statutory framework; the nature and scope of the authority being claimed by the IRS; and finally, the IRS’s past approach to this statue. (see case here):

As the Court of Appeals stated:

“It might be that allowing the IRS to regulate tax-return preparers more stringently would be wise as a policy matter. But that is a decision for Congress and the President to make if they wish by enacting new legislation. The “role of this court is to apply the statue as it is written – even if we think some other approach might accord with good policy.”