A group of tax practitioners, including CPAs and Enrolled Agents, along with a former IRS agent and the nonprofit Tax Foundation, have filed an amicus brief in support of a trio of tax preparers who successfully filed suit against the Internal Revenue Service to stop its program for mandatory testing and continuing education of Registered Tax Return Preparers.
The brief, which was filed Friday, includes a number of new arguments that have not been previously advanced in prior filings, according to Dan Alban, lead attorney on the case at the Institute for Justice, a libertarian law firm in Arlington, Va., which represented the tax preparers in their suit against the IRS.
The three preparers—Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wis.—won a victory against the IRS in January when U.S. District Court Judge James E. Boasberg ruled in their favor and found the IRS had exceeded its statutory authority in imposing its Registered Tax Return Preparer requirements (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). The IRS appealed, and Judge Boasberg clarified the ruling in February, enabling the IRS to re-open its Preparer Tax Identification Number, or PTIN, online registration system for tax preparers. The judge also clarified that tax preparers could take competency tests and continuing education courses on a voluntary basis, but they would not be required to do so while his injunction remained in place (see Court Modifies Ruling Invalidating Tax Preparer Regulations). However, an appeals court in the District of Columbia turned down the IRS’s request to lift an injunction against mandatory testing and continuing education (see Appeals Court Refuses to Lift Injunction against IRS Tax Preparer Regulation).
The amicus brief filed Friday responds further to a brief filed by five former IRS commissioners on behalf of the IRS last month claiming that preparing a tax return is “presenting a case,” which was only partially addressed in a merits brief filed last week in the case by the plaintiffs (see ‘Loving’ Lawyers in Latest Filing against IRS Appeal).
“Presenting cases to either a court or an administrative agency requires the formulation and presentation of factual evidence and legal arguments, in writing and in person, to support the position of the party represented,” said the latest brief. “Presenting a case encompasses not only the party’s affirmative case but also the formulation and presentation of responses, on factual and legal issues, in writing and in person, to questions or objections regarding the party’s affirmative case. Preparing a tax return involves none of these activities. Preparing a tax return instead involves merely the presentation of conclusions regarding the various items that should be reported on the return. A tax return presents neither factual evidence nor legal arguments supporting the conclusions reflected in the amounts on the return. Consequently, a tax-return preparer is clearly not engaged in the combination of written and in-person formulation and presentation of factual evidence, legal arguments, and responses to questions and objections that characterizes presenting a case either in court or to an administrative agency.”
“It pretty thoroughly demonstrates the myriad ways in which the IRS disregarded the requirements of the Administrative Procedure Act (APA) and other federal statutes in passing the RTRP regulations,” said Alban.
The brief argues that the IRS violated the APA’s arbitrary and capricious standard in issuing the regulations, for example, by engaging in a flawed cost/benefit analysis under Executive Order 12866 in rejecting alternative approaches. “The IRS ignored the increased costs to consumers of tax-return preparation services in making this analysis,” said the brief.
The amicus brief was filed on behalf of Ronda Gordon, a tax preparer in Vancouver, Wash., who has been preparing returns for 23 years; Jason Dinesen, an Enrolled Agent in Indianola, Iowa, who believes the RTRP designation would diminish the value of the EA designation; Christine Engel, a CPA who works in a small accounting firm in Tucson, Ariz., and specializes in federal income tax work; Dennis Tafelski, a retired former IRS employee in Summerfield, Fla., who has prepared 10 to 15 individual tax returns per year for other retirees in recent years, but who formerly worked for the IRS for 33 years as an internal revenue agent, examination group manager and appeals officer; Russell Fox, an Enrolled Agent based in Las Vegas who is a co-owner of Clayton Financial and Tax LLC and maintains the tax blog TaxableTalk.com; Joe Kristan, a CPA in Des Moines, Iowa, who is a shareholder in Roth & Company, a company with 35 employees he helped found in 1990; Richard Schiveley, a CPA for over 40 years, who operates as a sole practitioner in Reno, Nev.; and the Tax Foundation, a nonpartisan, nonprofit research institution in Washington, D.C., that educates the public on tax policy.