(graphic: Tax Celebrity, Zazzle)
Efforts to limit access to the lucrative business of tax preparation were struck down last week by a federal judge in Washington, DC, who voided Internal Revenue Service (IRS) regulations purporting to license and regulate the nation’s 600,000 tax preparers. In the case of Loving v. IRS, U.S. District Court Judge James E. Boasberg enjoined the agency against enforcing its Registered Tax Return Preparer (RTRP) requirements.
The RTRP effort, which included mandatory continuing education, testing, and registration, was a priority of former IRS Commissioner Doug Shulman, who hoped a licensing system would root out unqualified, unethical tax preparers and improve tax compliance. The IRS interpreted an 1884 statute empowering it to regulate “representatives” who “practice” before it as authorizing the new regulations, despite having taken the opposite position for years.
The lawsuit was filed last March by three tax preparers—Sabina Loving of Chicago, John Gambino of Hoboken, New Jersey, and Elmer Kilian of Eagle, Wisconsin— represented by the Institute for Justice, a libertarian public interest law firm. Institute attorney Dan Alban reacted to the ruling by calling it “is a victory for hundreds of thousands of tax preparers across the country and the tens of millions of taxpayers who rely on them to prepare their taxes.”
The court enjoined the IRS from enforcing RTRP, whose requirements were just beginning to take effect. The ruling does not affect CPAs, Enrolled Agents or tax attorneys, who are already regulated in other ways and who have long resented unregulated tax preparers for the lower-cost competition they provide.
The IRS, which is expected to appeal the ruling to the U.S. Court of Appeals for the District of Columbia Circuit, made no official comment on the ruling, but would face Institute of Justice attorneys again on appeal, according to Alban.
-Matt Bewig
To Learn More:
Loving v. IRS (U.S. District Court, District of Columbia, 2013) (pdf)
IRS Loses Lawsuit Challenging Authority to Regulate Tax Preparers (by Michael Cohn, Accounting Today)
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