Appeals Court Rules against the IRS in RTRP Case.

On February 11th, 2014, the US District Court of Appeals for the District of Columbia Circuit issued its ruling in Sabina Loving et. al. v IRS et. al.  Writing on behalf of the court, Judge Kavanaugh summarizes:

“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 court lists and explains 6 reasons to support its opinion:

  1. The court does not accept the IRS argument that tax preparers are “representatives of persons.”
  2. While tax preparers could be deemed to have a “practice”, it is not a “practice….before the Department of Treasury.”
  3. The court disagrees with the IRS’s reading of the history of Section 330. The history of Section 330 does not support the IRS’s interpretation.
  4. The IRS’s interpretation is inconsistent with the “broader statutory framework” and would make existing laws for regulating tax return preparers essentially unnecessary.
  5. Courts should tread lightly when interpreting congressional intent in a manner that would empower an agency to make major political or economic decisions.
  6. The IRS never before claimed that Section 330 authorized the agency to regulate tax-return preparers.  While an agency may update the interpretation of statutes it administers, it is clear that no previous IRS administration claimed this authorization because it is incorrect to do so.

It is not known at this time if the IRS plans an appeal.  You may read the full text of the ruling below.

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Ruling: Sabina Loving et. al v IRS et. al.