A Small Bit of Good News -- DC Circuits Slaps Down the IRS

The creeping regulatory / corporate state gets a setback

Faulting the IRS for attempting to “unilaterally expand its authority,” the D.C. Circuit today affirmed a district court decision tossing out the agency’s tax-preparer licensing program. Under the program, all paid tax-return preparers, hitherto unregulated, were required to pass a certification exam, pay annual fees to the agency, and complete 15 hours of continuing education each year.

The program, of course, had been backed by the major national tax-return preparers, chiefly as a way of driving up compliance costs for smaller rivals and pushing home-based “kitchen table” preparers out of business. Dan Alban of the Institute for Justice, lead counsel to the tax preparers challenging the program,called the decision “a major victory for tax preparers—and taxpayers—nationwide.”

The licensing program was not only a classic example of corporate cronyism, but also of agency overreach. IRS relied on an 1884 statute empowering it to “regulate the practice of representatives or persons before [it].” Prior to 2011, IRS had never claimed that the statute gave it authority to regulate preparers. Indeed, in 2005, an IRS official testified that preparers fell outside of the law’s reach.

Perhaps a first indication that the Obama Administration strategy to pack the DC Circuit with Obama appointees may not necessarily protect his executive overreach.

PS - you gotta love the IJ.

PPS - The IRS justified its actions under "an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses"

  • jdgalt

    This appears to be more a "victory" in appearance than fact. At least four states (CA, OR, NY, and MD) also require preparers to register, and those laws aren't going anywhere.

    Also, scuttlebutt says the IRS will appeal to the Supreme Court. No telling what will happen there, now that we have a Chief "Justice" willing to pull new rules out of his backside whenever it's convenient for the government.

  • Chris

    You need to fix the last sentence before the PS. Who's Obama gonna pack the D.C Circuit with . . . Bush appointees?

  • Tom Nally

    I favor the decision of the DC Circuit, but why would dead Civil War horses need tax preparers?

  • Craig L

    A 1884 statute...passed before there was an income tax.