Main Street Practitioner Blog

As NSAlert readers are aware, three tax return preparers filed suit in 2012 challenging the IRS regulations that would have required them to become “Registered Tax Return Preparers.”  Specifically, they argued that the IRS did not have statutory authority to (1)  require testing for RTRPs or (2) require RTRPs to take a minimum of 15 hours of continuing education annually or (3) to pay an annual registration fee.  The preparers won their case at the U.S. District Court in January, 2013.  The IRS appealed the decision to the U.S. Court of Appeals for the D.C. Circuit.   A copy of the Appeals Court opinion is available here.  References below are to the designated pages in the Opinion.

Today, the Court of Appeals issued a unanimous opinion agreeing with the District Court’s view that the IRS lacks the statutory authority to regulate tax return preparers. The Appeals Court opinion states that:  "In our view, at least six considerations foreclose the IRS’s interpretation of the statute" (Op. 6.)  They are:

• The IRS is incorrect in asserting that tax preparers are "representatives" or agents of taxpayers. They have no legal authority to act on a taxpayer's behalf. The court cites IRS regulations indicating so. "The tax-return preparer certainly assists the taxpayer, but the tax-return preparer does not represent the taxpayer." (Op. 8.)  
• Preparing tax returns is not the same as practicing before the Treasury Department or Tax Court, which refers to adversarial proceedings where the taxpayer has secured representation.  
• The statute where the IRS claims its authority to regulate tax preparers was in fact enacted with the stated intent of codifying existing practices without changing them.  
• Congress has enacted specific regulations of tax preparers, such as requiring preparers to sign returns and penalizing deliberate understating of liability. If the IRS had separate authority to do such things, Congress's action would have been unnecessary. "[W]e find at least some significance in the fact that multiple Congresses have acted as if Section 330 did not extend so broadly as to cover tax-return preparers." (Op. 14.)  
• The IRS is asserting a major expansion of authority but "nothing in the statute's text or the legislative record contemplates that vast expansion of the IRS's authority." (Op. 15.)  
• The IRS frequently interpreted the statute narrowly until 2011, when it decided to assert this new authority. "[I]n the circumstances of this case, we find it rather telling that the IRS had never before maintained that it possessed this authority." (Op. 16).

The Court concludes: "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 IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of Section 330." (Op. 17.)

NSA fully expects Congress to address the statutory authority of tax return preparers at some point in the near future.  We expect to work with Congress to craft statutory language that addresses concerns we have had with the IRS regulatory approach, including the recognition of various tax preparer exams already offered or recognized for regulatory purposes at the state level.


John G. Ams
Executive Vice President
National Society of Accountants