united states court of appeals for the eleventh … · ii allen buckley ga. bar no. 092675 law...

i

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 14-10424-A

____________

ALLEN BUCKLEY and

ALLEN BUCKLEY LLC

Plaintiffs-Appellants,

v.

UNITED STATES OF AMERICA

Defendant-Appellee

___________

On Appeal from the United States District Court

for the Northern District of Georgia

Atlanta Division

____________

OPENING BRIEF OF

PLAINTIFFS-APPELLANTS ALLEN BUCKLEY AND

ALLEN BUCKLEY LLC

Case: 14-10424 Date Filed: 03/05/2014 Page: 1 of 67

ii

Allen Buckley

Ga. Bar No. 092675

Law Office of Allen Buckley LLC

Suite 100-C

2802 Paces Ferry Road

Atlanta, Georgia 30339

(770) 319-0110

[email protected]

Counsel for Plaintiffs-Appellants Allen Buckley and

Allen Buckley LLC


iii

IN THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

ALLEN BUCKLEY and )

ALLEN BUCKLEY LLC )

)

)

Plaintiffs-Appellants, )

) Appeal No. 14-10424-A

)

v. )

)

UNITED STATES OF AMERICA )

)

Defendant-Appellee )

CERTIFICATE OF INTERESTED PERSONS AND CORPORATE

DISCLOSURE STATEMENT

Pursuant to Fed. R. App. P. 26.1 and 11th Cir. R. 26.1-1, the following listed

attorneys, persons, associations of persons, firms, partnerships or corporations may

have an interest in the outcome of this appeal:

Buckley, Allen- Plaintiff-Appellant and counsel for Plaintiffs-Appellants

Anne Oliver - counsel for Defendant-Appellee


iv

Claire H. Taylor - counsel for Defendant-Appellee

Koelbl, Thomas F. - counsel for Defendant-Appellee

Patrick J. Urda – counsel to Defendant-Appellee

Robert L. Vining, Jr. - United States District Judge

Yates, Sally Quillian - United States Attorney, of counsel to Defendant-

Appellee


v

STATEMENT REGARDING ORAL ARGUMENT

Plaintiffs-Appellants Allen Buckley and Allen Buckley LLC respectfully

submit that, particularly given a recent decision of the U.S. Court of Appeals for

the District of Columbia explained in the following brief, the issues presented in

this case are of a degree of national importance and complexity that they warrant

oral argument.


vi

TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS AND CORPORATE

DISCLOSURE STATEMENT ............................................................................. iii

STATEMENT REGARDING ORAL ARGUMENT ........................................... v

TABLE OF CONTENTS ...................................................................................... vi

TABLE OF CITATIONS .................................................................................... xiii

STATEMENT OF JURISDICTION ....................................................................xv

STATEMENT OF THE ISSUE .......................................................................... xvi

STATEMENT OF THE CASE ............................................................................... 1

1. COURSE OF PROCEEDING AND DISPOSITION

BELOW..…………………………………………………………………………..1

2. STATEMENT OF THE

FACTS….………………………………………………………………………….2

SUMMARY OF THE

ARGUMENT..…………………………………………………………………...17

ARGUMENT AND CITATIONS OF AUTHORITY ........................................17

1.THE FIRST ISSUE…..……………………………………………………… 17

Congress's Scheme v. Treasury's Scheme…………………………………25


vii

The Brannen Case………………………………………………………… 32

2.THE SECOND ISSUE ...…………………………………………………….39

Pandora's Box………………………………………………………………….. 46

What is Most Important…………………………………………………………47

CONCLUSION .......................................................................................................48

CERTIFICATE OF COMPLIANCE ..................................................................50

CERTIFICATE OF SERVICE ............................................................................51


viii

TABLE OF CITATIONS

Cases

Alaskan Artic Gas Pipeline Co. v. U.S., 831 F.2d 1043 (D.C. Cir. 1987)……….20

Betancur v. State of Florida Department of Health, 296 Fed. Appx. 761, 763

(2008), cert. den’d 555 U.S. 1213 (2009)………………………………………...35

Brannen v. U.S., 682 F.3d 1316 (11th Cir. 2012), cert. den’d __U.S.__, 133 S. Ct.

587 (2012)…………………………………………………………21, 31, 32, 35-39

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984)…………………………….28

Commonwealth Edison Co. v. U.S. Nuclear Regulatory Commission, 830 F.2d 610

(7th

Cir. 1987) …………………………………………………………………….20

Cottage Saving Ass’n v. Comm’r, 499 U.S. 554, 561 (1994)

Demarest v. Manspeaker, 498 U.S. 184 (1991) ………. ……………………..…..18

Electronic Industries Ass’n, Consumer Electronics Group v. F.C.C., 554 F. 2d

1109, 1114-1116 (C.A.D.C. 1976)……………………………………………40, 43

Food & Drug Admin. v. Brown & Williamson Tobacco, 529 U.S. 120 (2000)

………………. …………………………………………………………...18, 22, 29


ix

Cases (continued)

Federal Power Commission v. New England Power Company,

415 U.S. 345 (1974) ………………………………… …………………………..20

Hubbard v. U.S., 514 U.S. 695 (1995)……………………………………………37

Loving v. Internal Revenue Service, 2013 U.S. Dist. LEXIS 7980, aff’d D.C. Cir.

No. 13-5061 (2014)………………………………...13, 16, 28-31, 35, 38-41, 45, 48

Lying v. Payne, 476 U.S. 926 (1986)……………………………..18, 33, 36, 40, 42

MCI Telecommunications Corp. v. American Telephone, Telegraph Co.,

512 U.S. 218 (1994) ……………………………………………………...18, 26, 31

Mississippi Power & Light Co. v. U.S. Nuclear Regulatory Commission,

601 F. 2d 223 (5th

Cir. 1979) ……………………………………………………..20

Morgan v. U.S., 309 F.2d 234 (D.C. Cir. 1962)………………………………37, 38

Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Co.,

463 U.S. 29 (1983)……………………………………………………………18, 32

National Cable Television Association, Inc. v. U.S. 415 U.S. 336 (1974) ……... 20


x

Cases (continued)

National Ass’n of Broadcasters. F.C.C., 554 F. 2d 1118 (C.A.D.C. 1976)……….40

Oceanair of Florida, Inc. v. U.S. Department of Transportation, 876 F.2d 1560

(11th

Cir. 1989)……………………………………………………………………20

Old Mission Portland Cement Co. v. Helvering, 293 U.S. 289 (1934)…………...47

Roberts v. Sea-Land Services, Inc., __ U.S.___, 132 S. Ct. 1350 (2012)………..29

Seafarers Int’l Union of North American v. U.S. Coast Guard,

81 F. 3d 179 (D.C. Cir. 1996) ………………………………………………...40-42

Thorne v. Maggio, 765 F.2d 1270 (5th Cir. 1985)……………………………….. 18

U.S. v. Bramblett, 348 U.S. 503 (1955)………………………………………37, 38

U.S. v. Cartwright, 411 U.S. 546 (1973)………………………………………….46

U.S. v. Vogel Fertilizer Co., 455 U.S. 16 (1982)…………………………………46

Wright v. Everson, 543 F.3d 649, 656 (11th Cir. 2008)………………………16, 46

Yosemite Park and Curry Company v. U.S., 686 F.2d 925, 931 (Ct. Cl. 1982) …43


xi

Statutes

5 U.S.C. §500 …………………………………………………………….. 5, 16, 28

5 U.S.C. §§702 ………………………………………………………………….. 15

5 U.S.C. § 706 …………………………………………………………………....15

26 U.S.C.§ 6103(k)(5)………………………………………………………...23, 24

26 U.S.C. §6107 ……………………………………………………………….…. 7

26 U.S.C. §6109(a)(4) ………………..7-9, 12, 15, 18, 19, 21-27. 31-34, 36, 38-42

26 U.S.C. §6109(c) …………………………………………………………..14, 41

26 U.S.C. §6694 ...…………………………………………………………..……11

26 U.S.C. §6695 ………………………………………………………….11, 25, 31

26 U.S.C. §7001(a)…..………………………………………………………. 22, 24

26 U.S.C. §7203 …………………………………………………………..….11, 34

26 U.S.C. §7206………………………………………………………………..…11

26 U.S.C. §7216 ...……………………………………………………………..…11

26 U.S.C. §7407…………………………………………………..11, 24, 25, 31, 33


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Statutes (continued)

28 U.S.C. §1291 ………………………………………………………………….15

28 U.S.C. §1331………………………………………………………………..…15

31 U.S.C. §330 ……………………….3, 5, 7, 12, 15, 16, 26, 27, 29, 30, 38, 39, 51

31 U.S.C. §9701………………………………………………………………19, 40

42 U.S.C. §2133 ……………………………………………………….…….….. 22


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Other Authorities and Publications

IRS Publication 4832 ………………………………………..3-8, 10, 15, 16, 26, 27

INTERNAL REVENUE SERVICE Fiscal Year 2009 Budget Request and Interim

Performance Results of IRS’s 2008 Tax Filing Season...……………………...4, 13

Written Testimony of David R. Williams, Director, Return Preparer Office,

Internal Revenue Service House Ways & Means Subcommittee on Oversight

Hearing on Return Preparer Program, July 28, 2011………………………......4, 13

26 C.F.R. § 1.6107-1(a)(2)…………………………………………………………7

26 CFR §301.6109-(a)(ii).………………………………………………………...44

26 CFR §301.6109-2(d) …………………………………………………………..26

26 C.F.R. §1.6109-2(e)…………………………………………………………….8

User Fees Relating to Enrollment and Preparer Identification Numbers, 75 Fed.

Reg., No. 141………………………………………………………………9, 10, 13

User Fees Relating to Enrollment and Preparer Identification Numbers, 75 Fed.

Reg., No. 189…………………………………………………………………10, 13

IRS Newsletter Issue Number IR-2011-47…………………………………..11, 36


xiv

Other Authorities and Publications (continued)

Regulations Governing Practice Before the Internal Revenue Service; Final Rule;

Fed. Reg. Vol. 176, No. 107…………………………………………………..14, 15

IRS Notice 2011-80…………………………………………………………...14, 17

GAO Federal User Fees, A Design Guide, GAO-08-386SP, May 2008……...14, 20

West’s Tax Law Dictionary (Robert Sellers Smith, 2009 ed.)……………………27


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STATEMENT OF JURISDICTION

The U.S. District Court had subject matter jurisdiction pursuant to 28 U.S.C.

§1331, 5 U.S.C. §§702 and 706. This Court has jurisdiction over this direct appeal

from the final judgment of the District Court pursuant to 28 U.S.C. § 1291. An

appeal from the District Court’s grant of motion for summary judgment on

December 4, 2013 was timely filed on January 31, 2014. This appeal is from a

final judgment that disposes of all parties’ claims.


xvi

STATEMENT OF THE ISSUES

I. WHETHER THE DISTRICT COURT ERRED BY RULING THAT A

‘SPECIAL BENEFIT’ WAS GRANTED TO APPELLANTS IN THE FORM OF

THE RIGHT TO PREPARE TAX RETURNS BY THE U.S. TREASURY

DEPARTMENT WHEN IT ISSUED AN IDENTIFICATION NUMBER TO

ALLEN BUCKLEY THAT DOES NOT CHANGE, THUS PERMITTING

ANNUAL USER FEES TO BE CHARGED.

II. WHETHER THE FEES BEING CHARGED ARE EXCESSIVE, WHEN THE

ALLEGED BASIS FOR THE FEES IS TO PAY FOR ACTIVITES BEYOND

THE STATUTORY AUTHORITY WITH RESPECT TO WHICH THE FEES

WERE PROMULGATGED.


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STATEMENT OF THE CASE

1. Course of Proceedings and Disposition Below

On January 24, 2013, in the United States District Court for the Eastern

District of Tennessee, Chattanooga Division, Plaintiffs-Appellants Allen Buckley

and Allen Buckley LLC filed suit asserting that the United States Treasury

Department ("Treasury") had no authority to charge a fee and annual renewal fees

of tax return preparers for a Preparer Tax Identification Numbers ("PTIN"). In the

alternative, it was argued that, if lawful, the fees are excessive. (Doc. 2)1 On

April 5, 2013, the Defendant filed a motion to dismiss for Improper Venue. In the

alternative to dismissal, the Defendant requested that the case be transferred to the

Northern District of Georgia. After briefing, on May 21, 2013, the U.S. District

Court for the Eastern District of Tennessee transferred the case to the U.S. District

Court for the Northern District of Georgia. Thereafter, Defendant filed an answer

to the complaint. (Doc. 3) Although Plaintiff attempted to conduct discovery, the

Defendant objected and the U.S. District Court for the Northern District of Georgia

granted Defendant’s request to defer discovery. Thus, no discovery was taken.

Both sides filed motions for summary judgment. On December 4, 2013, the U.S.

District Court ruled in favor of the Defendant as to all matters. (Doc. 1)

1 There is only one volume in the record of this case. Therefore, all references to

the record herein are to Volume 1.


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2. Statement of the Facts

The pertinent facts are lengthy. They follow.

Allen Buckley is a Georgia attorney and licensed Certified Public

Accountant (CPA). As an attorney and CPA, Mr. Buckley has passed the Georgia

Bar examination and the Georgia CPA examination. For decades, he has also

annually taken continuing legal education (CLE) courses necessary for him to be

able to practice law and continuing professional education (CPE) courses

necessary for him to retain his CPA license. He is required to pay annual fees to

the State Bar of Georgia and bi-annual fees to the Georgia Secretary of State to

maintain his rights to practice law and accounting.

In 2010, Allen Buckley paid the U.S. Treasury $64.25 to acquire a Preparer

Tax Identification Number (“PTIN”). The PTIN was acquired because Mr.

Buckley prepares some income tax returns for compensation, and a regulation

issued by the U.S. Treasury Department (“Treasury”) in 2010 required that paid

tax return preparers acquire, pay for, annually renew and annually pay to renew, a

PTIN in order to prepare tax returns for compensation. In 2011, Allen Buckley

LLC, a Georgia limited liability company wholly-owned by Allen Buckley, paid

the U.S. Treasury $63 as a PTIN renewal fee.

Applicable Statutory Authorities. There are two federal statutes the

meanings of which are pertinent to the regulations in issue in this case. They are


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31 U.S.C. §330 and 26 U.S.C. § 6109(a)(4). Hereafter, 26 U.S.C. is referred to as

“Code,” meaning the Internal Revenue Code. In pertinent part, 31 U.S.C. §330

provides:

Subject to section 500 of title 5, the Secretary of the Treasury may – (1)

regulate the practice of representatives of persons before Treasury; and

(b) before admitting a representative to practice, require the

representative demonstrate . . . (D) competency to advise and assist

persons in presenting their cases . . .

Code § 6109(a)(4) is provided and discussed infra.

Publication 4832. In 2009, the Internal Revenue Service (IRS) undertook a

study of the tax return preparation industry. The study culminated with the release

of IRS Publication 4832 in January of 2010, titled “Return Preparer Review.”

Publication 4832 is purely an IRS product.

Publication 4832 recommended substantial regulation of the tax return

preparation industry in a manner never before attempted, including testing to

determine competency to prepare returns for people who are not CPAs, attorneys

or enrolled agents and annual continuing education for such persons, along with

fees for testing and annual education. Additionally, Publication 4832

recommended that tax return preparers be required to obtain a PTIN from Treasury

for a fee, and be further required to renew PTINs for a fee every three years.2

2 See IRS Publication 4832, p. 33. A copy of Publication 4832 is attached as

Exhibit A to Plaintiffs’ Brief in Support of Plaintiffs’ Motion for Summary Judgment (hereafter, “Plaintiffs’ Brief”), Doc. 4. In this regard, Publication 4832 may have taken its conclusions from GAO’s March 2008 Report to the


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Substantively, a licensing and registration regime was recommended. After 1976

but prior to 2011, tax return preparers could use their Social Security number

(SSN) to identify themselves on prepared returns or use a PTIN acquired from the

IRS at no cost.

Importantly, the first sentence of IRS Publication 4832 (following the

Executive Summary on page 1) provides: "Currently, any person may prepare a

federal tax return for any other person for a fee."3 (Emphasis supplied.) The

statement is consistent with all previous IRS statements and positions on the

subject.4 On July 28, 2011, David R. Williams, Director of the Return Preparer

Office of the Internal Revenue Service (IRS) said before the House Ways & Means

Subcommittee: “ . . .[A]ny person can prepare a federal tax return for any other

person for a fee.”5

Subcommittee on Oversight, Committee on Ways and Means, House of Representatives titled INTERNAL REVENUE SERVICE Fiscal Year 2009 Budget Request and Interim Performance Results of IRS’s 2008 Tax Filing Season. On p. 3, this report provides: “Because of the lack of a single identification number, IRS has limited ability to identify paid preparers. This complicates tax law enforcement and limits IRS’s ability to conduct research on how paid tax return preparers affect taxpayer compliance. According to IRS officials, requiring a single identification number could improve the situation but IRS has not analyzed the usefulness or cost of options to do so.” 3 The same is said on page 8.

4The IRS had never previously taken the position that it could regulate tax return

preparers under “Circular 230,” the publication relating to representatives of taxpayers before the IRS. See, e.g., Internal Revenue Service, IRS Publication 947, Practice Before the IRS and Power of Attorney at 2 (Rev. April 2009), available at http://www.irs.gov/pub/irs-utl/publication_947_practice_before_the_irs_and_poas_rev_4_09.pdf. (“Just preparing a tax return . . . is not practice before the IRS. These acts can be performed by anyone.”) 5 See Written Testimony of David R. Williams, Director, Return Preparer Office,

Internal Revenue Service House Ways & Means Subcommittee on Oversight


www.irs.gov/pub/irs-utl/publication_947_practice_before_the_irs_and_poas_rev_4_09.pdf

www.irs.gov/pub/irs-utl/publication_947_practice_before_the_irs_and_poas_rev_4_09.pdf

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IRS Publication 4832 specifically noted failed legislative attempts to

regulate the tax return preparation industry, including S. 1219 (110th Cong.), the

Taxpayer Protection and Assistance Act of 2007. If enacted, this bill would have

amended 31 U.S.C. §330 to permit Treasury and the IRS to regulate tax return

preparers and require testing of many preparers and charging of fees largely in a

manner contemplated by Publication 4832.6

Other failed legislative attempts that would have done the same as the

Taxpayer Protection and Assistance Act of 2007 are The Taxpayer Protection and

Assistance Act of 2005, S. 832, 109th Cong., § 4(a) (2005), The Taxpayer Bill of

Rights Act of 2008, H.R. 5716, 110th Cong. § 4(a) (2008) and The Taxpayer Bill of

Rights Act of 2010, H.R. 5047, 111th Cong., § 202(a) (2010). The Taxpayer Bill

of Rights Act of 2010 was considered and rejected by a Democratic Congress in

2010. As discussed below, although these bills were rejected by Congress,

Treasury implemented the changes through regulations in issue.

Hearing on Return Preparer Program, July 28, 2011, p.2. A copy of this transcript is attached as Exhibit B to Plaintiffs’ Brief, Doc. 4. 6 Specifically, Section 4 of the Taxpayer Protection and Assistance Act of 2007

would have amended paragraph (a)(1) of 31 U.S.C. § 330 by inserting "(including compensated preparers of Federal tax returns, documents, and other submissions)" after "representatives," in the following sentence: “Subject to section 500 of title 5, the Secretary of the Treasury may – (1) regulate the practice of representatives of persons before Treasury; and (b) before admitting a representative to practice, require the representative demonstrate . . . (D) competency to advise and assist persons in presenting their cases . . .” Section 4 would also have permitted charging of fees. The Taxpayer Protection and Assistance Act of 2007 described the proposed change as an amendment to existing law. In contrast, Section 3 of this Act referred to a change relating to enrolled agents as a "clarification."


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The primary objective of Publication 4832’s recommendations was to help

the IRS crack down on tax return preparers who file incorrect or fraudulent tax

returns. On pages 6, Publication 4832 provides: “The findings and

recommendations of this review, which are outlined in this report, are intended to

better leverage the tax return preparer community with the twin goals of increasing

taxpayer compliance and ensuring uniform and high ethical standards of conduct

for tax return preparers.” Publication 4832 states that the reason for changing the

preparer identification system (discussed below) was to aid the IRS. On page 33,

Publication 4832 provides:

The use of more than one number by any signing tax return preparer,

however, makes it more difficult for the IRS to collect accurate tax

return preparer data and to identify an individual tax return preparer.

The IRS, therefore, intends to require all individuals who prepare returns

for compensation and are required to sign those returns to register and

obtain a preparer tax identification number.

In his testimony before Congress, David R. Williams of the IRS thoroughly

described how the proposed system was designed to help the IRS. (See page 5 of

Exhibit B of Plaintiffs’ Brief, Doc.4). Finally, contrary to what the IRS had said

consistently for decades, page 33 of Publication 4832 provides: “The IRS believes

that increased oversight of paid tax return preparers does not require additional

legislation.”


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Regulatory Implementation of Publication 4832. Shortly after the issuance

of Publication 4832, Treasury acted to implement the IRS's recommendations.

Treasury did so by using Code §6109(a)(4) and 31 U.S.C. §330.

Enacted in 1976 as part of the Tax Reform Act of 1976, Code § 6109(a)(4)

provides in pertinent part: "Any return or claim for refund prepared by a tax return

preparer shall bear such identifying number for securing the proper identification

of such preparer, his employer, or both, as may be prescribed." It is important to

note that this section is purely an identification requirement that Treasury may

utilize. It has no other purpose and no authority is granted to Treasury to do

anything except require an identification number be placed on prepared returns.

Code §6109(c) authorizes Treasury to acquire such information as may be

necessary to assign an identifying number to any person. Since 1976, Treasury has

required identification numbers to be placed on returns.

Early in 2009, Treasury issued a regulation that permitted return preparers to

omit their SSN or PTIN from the copy of the tax return supplied to the taxpayer.7

This regulation continues to apply. Thus, the prior system protected return

preparers from identity theft.

Under Code § 6109(d), for purposes of § 6109(a)(4), except as otherwise

provided by regulations, an individual's SSN is his identifying number. Since each

7See Treas. Reg. § 1.6107-1(a)(2), as amended by T.D. 9436, December 15, 2008

(corrected January 28, 2009). (Under Code § 6107, a return preparer must supply a copy of the completed return to the taxpayer.)


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individual has his own unique SSN, there is no substantive need for an alternative

identification system to identify tax return preparers. Treasury could have

simplified the system by requiring everyone to use his SSN as his identifying

number. An individual’s PTIN is sourced from his SSN. Practically, all that is

needed to identify a person under federal law is a name and a SSN. There may be

many a John Smith, but every John Smith has a unique SSN.

On March 26, 2010, Treasury issued proposed regulations under Code §

6109(a)(4) to implement the PTIN part of Publication 4832’s recommendations.

According to the preamble: “The principal objective of the proposed regulations is

to enable the IRS to more accurately identify tax return preparers and the tax

returns and refund claims associated with each tax return preparer.”8 Although,

once issued, a PTIN does not change, the proposed regulations provided that IRS

could designate an expiration date for a PTIN.9 The final regulations adopted this

expiration rule.10

Thus, a PTIN must now be renewed every year, with annual

renewal fees.

8Furnishing Identifying Number of Tax Return Preparer, 75 Fed. Reg., No. 58,

14542 (March 26, 2010). The Preamble also states that tax-compliance checks are intended to establish whether a return preparer has timely filed required personal and business tax returns and has paid taxes that are due or made acceptable arrangements for payment. This licensing-type action is inconsistent with the limited purpose of Code § 6109(a)(4). 9 Id. at 14544 (Prop. Reg. §1.6109-2(e)). See Doc. 3, Answer, ¶4, p. 2, regarding a

PTIN not changing. 10

Treas. Reg. §1.6109-2(e); Fed. Reg. Vol. 75, No. 189, p. 60315 (Sept. 30, 2010).


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Comments with respect to the proposed regulations questioned the legality

of charging fees. Treasury responded to the comments by stating in the preamble

to the proposed regulations that it had the power to charge:

Individuals who obtain a PTIN receive the ability to prepare all or

substantially all of a tax return or claim for refund. The ability to

prepare all or substantially all of a tax return or claim for refund is a

special benefit.

No legal authority was cited for this quid pro quo conclusion that conflicts with

prior IRS statements that anyone can prepare tax returns.11

The significance of a

“special benefit” is discussed below.

On July 23, 2010, proposed regulations were issued under 26 CFR Part 300

to specify PTIN issuance and renewal fees. Without specification of costs to be

covered, a $50 fee and annual renewal fees of $50 were proposed.12

On September 30, 2010, the regulations providing for fees for issuance and

renewal of a PTIN were finalized. The final regulations followed the proposed

regulations, and called for a PTIN issuance fee of $50 and annual renewal fees of

$50. Again, no breakdown of the costs was provided. The preamble to the final

regulations provided:

11

Id. at 43112. 12

User Fees Relating to Enrollment and Preparer Identification Numbers, 75 Fed. Reg., No. 141, 43110-43111 (July 23, 2010). On page 43111, the Preamble states that tax compliance and suitability checks, which had not previously been performed, would be performed with respect to applicants. Again, these licensing-type activities are inconsistent with the limited purpose of Code § 6109(a)(4) (i.e., securing identification).


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A PTIN confers a special benefit because without a PTIN, a tax return

preparer could not receive compensation for preparing all or

substantially all of a federal tax return or claim for refund.

Again, no legal authority was cited for this bizarre claim.13

As noted above, the first sentence of IRS Publication 4832, that follows the

Executive Summary on page 1, provides: "Currently, any person may prepare a

federal tax return for any other person for a fee." This statement contradicts the

quotes of the proposed and final regulations supplied in the preceding paragraphs,

unless the IRS can take away someone's right to make a living by preparing tax

returns simply by requiring a PTIN be supplied on prepared returns. As discussed

below, no law was enacted at any time that would have permitted Treasury to

take away a person’s right to prepare tax returns for compensation without

going to Court and proving certain wrongs had been done repeatedly.

Regarding reasoning, the preamble to the proposed fee regulations provided:

PTINs will now be used to collect and track data on tax return preparers.

This data will provide important benefits to the IRS, such as allowing the

IRS to track the number of persons who prepare returns, track the

number of returns each person prepares, and, when instances of

misconduct are detected, locate and review returns prepared by a specific

tax return preparer."14

Thus, the PTIN system was designed to help the IRS.

13

User Fees Relating to Enrollment and Preparer Identification Numbers, 75 Fed. Reg., No. 189, 60317, 60318 (September 30, 2010) (to be codified at 26 CFR Part 300). 14

User Fees Relating to Enrollment and Preparer Identification Numbers, 75 Fed. Reg., No. 141, 43113 (July 23, 2010).


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In IRS Newsletter Issue Number IR-2011-47, the IRS announced it was

taking steps to prevent certain preparers from preparing returns by refusing to issue

PTINs to them. Accordingly, the PTIN system has been used as a licensing

mechanism by the IRS.

The Code includes numerous penalties applicable to tax return preparers.

Under Code § 6695(c), failure to include a PTIN (or other identifying number) on a

prepared return is subject to a monetary penalty of $50 per return, not to exceed

$25,000 per year. Other penalties potentially apply for taking a position without

substantial authority for the position (§6694), for doing or failing to do any one of

several things enumerated in Code §6695 and for disclosing taxpayer information

(§6713). Under Code §§7203, 7206 and 7216, return preparers are potentially

subject to criminal penalties, including imprisonment.

Under Code § 7407, Treasury may file a lawsuit to enjoin a tax return

preparer to do certain things, including placing an identification number on

prepared tax returns. When certain (bad) conduct is engaged in continuously or

repeatedly, including penalization for failure to include one’s PTIN on prepared

returns, Treasury can request the court to issue an injunction that prevents an

individual from being able to prepare returns.

As a practical matter, no service provider derives advantage by placing an

identification number on a product he will create for his client that will be sent to


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the IRS, when the product is a tax return and there is a host of penalties potentially

applicable to the preparer with respect to the product if it is not prepared in a way

acceptable to the IRS. Preparers identify themselves because they are required to

do so and substantial penalties potentially apply to failures to do so.

The IRS has profited from the new PTIN system. According to Carol A.

Campbell, Director of the Return Preparation Office of the IRS, through 2012, the

IRS had received more than $105,000,000 in PTIN fees, while incurring about

$54,000,000 in costs, on the return preparer program.15

Treasury sells the PTIN

database to vendors, thus causing returns preparers to receive emails solicitations.16

On June 3, 2011, for the first time (i.e., after Treasury issued the PTIN

regulations requiring $50 annual fees), Treasury estimated revenue from the user

fees charged for PTINs and specified the costs and things to be done for the fees.

It did so in the preamble to amendments to the “Circular 230” regulations issued

under 31 U.S.C § 330; not Code § 6109(a)(4). The main thrust of these regulations

15

See Declarations of Carol A. Campbell, attached hereto as Exhibits C and D of Plaintiffs’ Brief, Doc._4. Ms. Campbell said, in her declaration of January 23, 2013 (Exhibit C, ¶7), that the ongoing activities in implementing the PTIN application for return preparers include, among others, reviewing the application, conducting tax compliance and suitability checks, running a call center, providing communications and customer support. Given that all that is needed to identify a person in the U.S. is name and SSN, most of these activities are unwarranted. In her February 25, 2013 declaration, Ms. Campbell reported a tremendous overlap between the PTIN system and the IRS’s (recently struck down-see infra) testing and continuing education system. She also said the costs covered preparer assistance, complaint processing, compliance and enforcement oversight and a multitude of other actions unrelated to identification. See Exhibit D of Plaintiffs’ Brief, ¶¶7, 12. 16

See Tennessee Society of CPAs article titled “Several PTIN Sites Go Live; Be Wary of Providing Profile Information,” attached as Exhibit F to Plaintiffs’ Brief, Doc. 4.


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was to expand the regulatory scope of Circular 230 to cover tax return preparation,

so that Treasury could determine who could prepare tax returns for compensation.

Generally, these regulations require tax return preparers who are not attorneys,

CPAs or enrolled agents to take and pass an IRS test, take IRS-approved annual

education courses, acquire a PTIN and pay fees for the test, the education

(annually) and the PTIN (annually). As explained infra, they also state that only

persons with a PTIN, including attorneys, CPAs and enrolled agents, can prepare

tax returns for compensation. Recently, this expansion was ruled to be an

unlawful, ultra vires action, and a permanent injunction was issued to prevent

implementation with respect to testing and continuing education requirements

applicable to individuals who are not CPAs, attorneys or enrolled agents.17

The preamble to the Circular 230 regulations provided that anticipated

annual costs to preparers and revenues to the Defendant from an anticipated

800,000 to 1,200,000 PTINs were $51 million to $77 million.18

Importantly, the

anticipated expenses payable to vendors "to administer the PTIN application and

renewal process" was $11 million to $17 million. On a per preparer basis, the

vendor charge was set at $14.25 for PTIN issuance and annual renewal. Later, the

17

See Loving v. Internal Revenue Service, 2013 U.S. Dist. LEXIS 7980, aff’d D.C. Cir. No. 13-5061 (2014). A copy of the Loving opinion of the U.S. Court of Appeals for the D.C. Circuit is attached hereto as Exhibit A. 18

Regulations Governing Practice Before the Internal Revenue Service; Final Rule; Fed. Reg. Vol. 176, No. 107, 32295-32296, (June 3, 2011) (to be codified at 31 CFR 10).


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vendor renewal charge was reduced to $13 per preparer. Thus, the actual cost to

issue a PTIN is $14.25.

$59,427,633 of remaining costs was listed as relating to: (1) costs of

administering registration cards or certificates for each registered tax preparer; (2)

costs associated with prescribing forms, instructions, or other guidance with

respect to registered tax preparers; and (3) tax compliance and suitability checks.

These actions were “part and parcel” of the expansion of Treasury’s power over

the return preparation industry.19

While a payment acknowledgement letter with a 2 x 3 inch cut-out area with

the PTIN and other information on page 2 was provided in 2012, registration cards

or certificates have not been issued to return preparers who have paid the PTIN

fees.20

The PTIN is applied for either online or by filling out and mailing a short

form (W-12). There is no statutory authority for the IRS to be running "suitability

checks" in connection with PTIN issuance or renewal or denying anyone a PTIN

based on his personal tax compliance record.21

Suitability checks have not been

performed.22

As noted, there is a host of penalties applicable to return preparers.

19

For example, the suitability check (including prior tax compliance record) was part of the IRS’s means of determining whether someone was fit to prepare returns. See USCA Case #13-5061, Document #1428076, pp. 13-14, 28, a copy of which is attached as Exhibit G to Plaintiffs’ Brief, Doc. 4. 20

See Declaration of Allen Buckley, attached as Exhibit H to Plaintiffs’ Brief, Doc. 4. 21

In IRS Notice 2011-80, the IRS decided Code §6109(c) granted it the power to fingerprint people to help identify them. It designated these procedures as part of its suitability check. According to the Treasury Inspector General for Tax


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As noted, Treasury used 31 U.S.C. §330 and Code §6109(a)(4) to implement

its plan. The amended Circular 230 regulations (issued under 31 U.S.C. §330 as

part of implementation of the recommendations of IRS Publication 4832) provide

in answer to the question “Am I affected by this regulation?”:

If you are an attorney or certified public accountant, then the

amendments to §§10.3, 10.4, 10.5, 10.7 and 10.9 of Circular 230 (rules

regarding registered tax return preparers) do not apply to you. If you are

not an attorney or certified public accountant and you prepare, or assist

in preparing, all or substantially all of a tax return or claim for refund for

compensation, then you may be affected by this regulation.23

Section 10.5(d) relates to compliance and suitability checks. The tax compliance

check is an inquiry whether the applicant has filed all returns due and paid all taxes

he owes. The suitability check is an inquiry into whether an applicant has engaged

in conduct that would justify suspension or disbarment from being able to

Administration, validation and suitability checks include: (1) verification that the applicants are at least 21 years of age and not using the identity of a deceased person, (2) verification that applicants are either U.S. citizens or legal aliens with authorization to work in the U.S.; (3) questions on the application regarding felony convictions (a background check is also performed); (4) questions regarding tax compliance (an automated tax compliance check is performed on an ongoing basis to ensure all required tax returns are filed and paid and to identify fraud and preparer penalties); and (5) verification of Not-For-Profit status. See It Will Take Years to Implement the Return Preparer Program and to Realize Its Impact, September 30, 2010, Ref. No. 2010-40-127. There is no statutory basis for an age 21 requirement applicable to return preparation, and none of this information is needed to issue a PTIN. A copy of Form W-12 is attached to the Plaintiffs’ Brief (Doc. 4) as Exhibit I thereto. 22

See attached Exhibits J and K, both of which can be found on the IRS website at www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Fingerprinting-Requirements, and www.irs.gov/Tax-Professionals/IRS-Statement:-Selection-of-Vendors-for-Return-Preparer-Testing-and-Fingerprinting-Programs. 23

Regulations Governing Practice Before the Internal Revenue Service; Final

Rule; Fed. Reg. Vol. 176, No. 107, p. 32287, (June 3, 2011) (to be codified at 31

CFR 10).


http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Fingerprinting-Requirements

http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Fingerprinting-Requirements

http://www.irs.gov/Tax-Professionals/IRS-Statement:-Selection-of-Vendors-for-Return-Preparer-Testing-and-Fingerprinting-Programs

http://www.irs.gov/Tax-Professionals/IRS-Statement:-Selection-of-Vendors-for-Return-Preparer-Testing-and-Fingerprinting-Programs

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represent taxpayers before the IRS. Thus, although attorneys and CPAs were not

supposed to be impacted by the regulation, they are required to pay for part of the

costs. However, as noted, certificates have not been issued and suitability checks

have not been performed.

31 U.S.C. §330 is, by its terms, subject to 5 U.S.C. §500. Under subsections

(b) and (c) of 5 U.S.C. §500, attorneys and CPAs have the right to represent their

clients before the IRS. Wright v. Everson, 543 F.3d 649, 656 (11th Cir. 2008).

Thus, Treasury could not utilize 31 U.S.C. §330 to potentially prevent attorneys

and CPAs from representing their clients in tax controversy matters. And, 31

U.S.C. §330 relates to representing persons before Treasury, not tax preparation.

See Loving v. Internal Revenue Service, U.S. Dist. LEXIS 7980 (2013), aff’d D.C.

Cir. No. 13-5061 (2014), (Exhibit A hereto), discussed infra.

Finally, in conjunction with the regulations issued to implement IRS

Publication 4832, in 2011, the IRS issued IRS Notice 2011-6. This document

exempts employees of many large tax return preparation firms other than CPA

firms (e.g. H&R Block) from the testing and continuing education requirements

that were set forth in the Circular 230 regulations, provided the PTIN fees are paid

with respect to these employees and the work of these employees is supervised by

a person who is a CPA, attorney or an enrolled agent. Noteworthy in regard to the

new regulations and this guidance is a Washington Examiner article by Timothy P.


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Carney of January 15, 2010, noting that the (recently – December 2007) former

CEO of H&R Block (Mark Ernst) had been hired by the Obama Administration as

deputy commissioner of the Internal Revenue Service, and that Mr. Ernst acted as a

“co-leader” of the new regulations project.24

SUMMARY OF THE ARGUMENT

With respect to the first issue, a special benefit must be provided in order for

user fees to be charged, and the special benefit must be the benefit specified in the

regulation authorizing the fee (or in the preamble thereto). The alleged special

benefit here, granting of the right to prepare tax returns for compensation, is bogus

because American citizens have the right to prepare tax returns for compensation.

With respect to the second issue (that is argued in the alternative), fees in excess of

the initial cost to issue a PTIN ($14.25) are excessive and thus cannot be charged

because the statutory authority in issue only permits Treasury to issue

identification numbers and the services alleged to be performed for the fees are not

necessary to issue an identification number that does not change.

THE ARGUMENT

1. The First Issue. The first issue is whether the following provision (Code 24

See http://washingtonexaminer.com/timothy-p.-carney-revolving-door-spins-at-

obamas-irs/article/33018. A copy of the article is attached hereto as Exhibit B. It

should also be noted that, in IRS Notice 2011-80, the IRS announced that certain

tax return preparers would be subjected to fingerprinting. Fees would be charged

for fingerprinting. The IRS has not (yet) implemented such a requirement.


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§6109(a)(4)) provides that Treasury has the power to decide who can prepare tax

returns for compensation (i.e. a licensing power): “Any return or claim for refund

prepared by a tax return preparer shall bear such identifying number for securing

proper identification of such preparer, his employer, or both, as may be

prescribed.” Relying on precedent from this Court, the District Court ruled that

this provision so provides. Appellants disagree.

Pertinent Existing Law: First Issue. Absent a constitutional law enacted by

Congress or a state or local government prohibiting someone from doing

something, an American citizen can do as he or she wishes. Thorne v. Maggio,

765 F.2d 1270, 1274 (5th Cir. 1985)(“Whatever is not forbidden on our blessed

shores is permitted.”) Under Article I of the U.S. Constitution, only Congress can

enact federal laws and only Congress can tax. Federal statutes must be interpreted

by giving words their ordinary meanings, with words, phrases and sentences

examined in context. Food & Drug Admin. v.Brown & Williamson Tobacco, 529

U.S. 120 (2000); MCI Telecommunications Corp. v. American Telephone,

Telegraph Co., 512 U.S. 218 (1994); Demarest v. Manspeaker, 498 U.S. 184

(1991). The reason given by the agency for its actions is what must be analyzed to

determine whether regulatory action is lawful. Motor Vehicle Manufacturers

Association v. State Farm Mutual Automobile Co., 463 U.S. 29, 50 (1983).

If each of the sentences of the preceding paragraph is correct with respect to


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U.S. law, then Appellants should win this appeal because the above-quoted

provision of §6109(a)(4) does not grant Treasury the power to decide who can

prepare tax returns for compensation, and fees are being charged annually for

activities that have nothing to do with issuance of an identification number that

does not change. As explained below, this is so because Congress never granted

Treasury the power to decide who can prepare tax returns for compensation, and

the “special benefit” allegedly granted by Treasury in exchange for the user fees in

issue is the right to prepare tax returns for compensation.25

Why the District Court Erred With Respect to the First Issue. The user fee

statute, 31 U.S.C. §9701, is in issue because the fees in issue were charged

pursuant to it. In pertinent part, 31 U.S.C. § 9701 provides: “The head of each

agency . . . may prescribe regulations establishing the charge for a service or thing

of value provided by the agency.” Regulations prescribed are subject to policies

prescribed by the President that must be as uniform as possible, and the charges

must be fair and based on (A) the cost to the government; (B) the value of the

service or thing of value to the recipient; (C) public policy or interest served; and

(D) other relevant facts.

25

As will be noted infra, the legislative history of §6109(a)(4) shows that this

provision was not meant to do anything more than serve as the optional

identification requirement described in the Code.


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In addition to the foregoing statutory requirements, the U.S. Supreme Court

ruled in National Cable Television Association, Inc. v. U.S., 415 U.S. 336 (1974)

and Federal Power Commission v. New England Power Company, 415 U.S. 345

(1974) that in order for a user fee to be charged under the user fee statute, the payer

must receive a “special benefit” and fees must be paid voluntarily. A special

benefit is akin to consideration in the contract context — receiving something of

value to which one is not entitled.

Case law holds that a special benefit exists, and thus user fees can be charged

by federal agencies, for things like federal land use by ranchers, right-of-ways

granted to utility companies, and the costs involved in issuing a license. See

Alaskan Artic Gas Pipeline Co. v. U.S., 831 F.2d 1043 (D.C. Cir. 1987); GAO

Federal User Fees, A Design Guide, GAO-08-386SP, May 2008, p. 12. ”In

general, a user fee is related to some voluntary transaction or request for

government goods or services above and beyond what is normally available to the

public, such as a request that a public agency permit an applicant to practice law or

medicine or construct a house or run a broadcast station. Id., p. 4.26

26

See also Commonwealth Edison Co. v. U.S. Nuclear Regulatory Commission,

830 F.2d 610 (7th Cir. 1987)(nuclear facilities operating licenses); Mississippi

Power & Light Co. v. NRC, 601 F.2d 223 (5th Cir. 1979) (nuclear facilities

operating licenses); Oceanair of Florida, Inc. v. U.S. Department of Transportation,

876 F.2d 1560 (11th Cir. 1989)(airline regulation). Numerous other such cases

exist.


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Importantly, other than Brannen v. U.S., 682 F.3d 1316 (11th Cir. 2012),

cert. den’d __U.S.__, 133 S. Ct. 587 (2012), Appellants have found no case that

permits such fees to apply in a situation where a regulatory requirement with an

expiration date and a penalty enforcement scheme exists, and fees are charged

annually to comply with the requirement. At the District Court, Defendant (now

Appellee) cited no such case. Brannen is discussed infra.

The special benefit allegedly granted in this case, as specified in the

regulations in issue without citing any authority therefor, is the right to prepare tax

returns. Thus, substantively, a licensing power is alleged to exist. The statute

upon which this alleged grant of the right to work preparing tax returns is Code

§6109(a)(4). No other authority is, or has been, cited for granting this power.

Again, in pertinent part, this section provides: “Any return or claim for refund

prepared by a tax return preparer shall bear such identifying number for securing

proper identification of such preparer, his employer, or both, as may be

prescribed.” This statute does not confer licensing power. It only grants Treasury

the power to require an identification number be placed on prepared returns.

Without licensing power, Treasury cannot charge to issue or renew a PTIN

that does not change. As thoroughly explained below, the legislative history is

consistent with the statutory language — §6109(a)(4) is only a requirement

designed to help the IRS identify tax return preparers.


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Congress knows how to grant licensing power to agencies. With respect to

nuclear power, in order to build and operate a nuclear power plant, a company

must be licensed and must receive a permit. 42 U.S.C. §2133 provides: “. . . The

Commission is authorized to issues licenses to persons . . .” In the tax area, Code

§7001(a) provides: “LICENSE.— All persons undertaking as a matter of business

or for profit the collection of foreign payments of interest or dividends by means of

coupons, checks, or bills of exchange shall obtain a license from the Secretary and

shall be subject to such regulations enabling the Government to obtain the

information required under Subtitle A (relating to income taxes) as the Secretary

shall prescribe.” Congress would not have granted such an important power in

such a cryptic manner. Cf. Food and Drug Admin. v. Brown & Williamson

Tobacco Corp., 529 U.S. 120 (2000).

While Code §6109(a)(4) does not grant a licensing power or anything akin

to a licensing power, it is a requirement that people must satisfy if Treasury

requires an identification number be placed on returns.27

Treasury does not grant

anything when it issues a PTIN, and thus there is no “special benefit.” Rather, it is

fulfilling its part of a requirement that it placed on people who have a right to earn

27

One can imagine how language that Treasury claims exists would read. If the

alleged power existed, presumably the statute would read along the lines of Code

§7001(a) and provide: “In order to prepare tax returns, a tax return preparer must

acquire a license from the Secretary.”


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a living by preparing tax returns for compensation.

Legislative History. Code §6109(a)(4) was enacted by the Tax Reform Act

of 1976 (“TRA ’76”). The legislative history of TRA’ 76 explains that the sole

reason for enactment of §6109(a)(4) was to help the IRS locate unscrupulous

preparers. The following provisions of the legislative history of § 6109(a)(4) state

that this law was enacted solely to help the IRS identify return preparers:

General reasons for change

. . . The rapid growth of the business of professional and commercial

preparation of tax returns has led to a number of problems for the

Internal Revenue Service. . . . Under present law, it is difficult for the

IRS to detect any individual case of improper preparation because the

tax preparer may not sign the return. Thus, the IRS has no way of

knowing whether the return was prepared by the taxpayer or by a

preparer who may be engaging in abusive practices involving a

number of returns.

Explanation of Provisions

. . . The bill also requires that any income tax return preparer retain

a copy of all returns . . . This provision, plus the requirement that the

preparer place his identification number on the return itself, is to enable

the IRS to identify all returns prepared by a specific individual in cases

where the IRS has discovered some returns improperly prepared by that

individual.28

Code § 6103(k)(5), also added to the Code by TRA ‘76, permits sharing of

tax return preparer ID and penalty information by the IRS with state and local

agencies in charge of “ . . . licensing, registration, or regulation of tax return

28

(Emphasis supplied.) (H.R. Rep. No. 94-658, at 274-282 (1975), reprinted in U.S.C.C.A.N. 2897, 3170-3173. See also S. Rep. No. 94-938-PART I at 349-356 (1976), reprinted in U.S.C.C.A.N. 3439, at 3778-3784.


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preparers,” to be used “ . . . only for purposes of the licensing, registration or

regulation of tax return preparers.” The previously-described licensing provisions

of Code §7001(a) were amended in a minor way by TRA ’76.29

A review of the

legislative history of TRA ‘76 relating to §§6109(a)(4), 6103(k)(5) and 7407

shows the Congress understood that it was creating disclosure requirements and

related penalties under Code §6109(a)(4), while distinguishing licensing powers

§under §6103(k)(5) and injunctive power under §7407 (in respective order,

below):

To aid the Internal Revenue Service in detecting incorrect returns

prepared by tax return preparers, and to deter preparers from engaging in

improper conduct, your committee’s bill includes a number of provisions

requiring tax return preparers to disclose information and subjecting

them to penalties for improper conduct. . . . Finally, the bill permits the

IRS to give State or local governing bodies charged with licensing,

registering or regulating income tax preparers information contained on

the annual information reports submitted to the Internal Revenue Service

which identifies tax return preparers or which indicates any penalties

which may have been assessed. . . . . Power to seek injunctions.—The

bill grants the Secretary the power to seek an injunction in any district

court of the United States prohibiting an income tax preparer from

engaging in specific practice or from acting as an income tax preparer. . .

.30

Given a choice, preparers would prefer not to fulfill the PTIN identification

29

TRA ’76, P.L. 94-455, §1906(b)(13)(A) (substituting “Secretary” for “Secretary

or his delegate,” effective February 1, 1977).

30H.R. Rept. No. 94-658, at 275, 278 and 281 (1975), reprinted in U.S.C.C.A.N.

2897, 3171, 3174, 3177.


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(ID) requirement. They do so because they have to in order to comply with the

legal requirement and avoid the penalties that potentially apply under Code §6695.

Congress’s Scheme v. Treasury’s Scheme. There are two different

regulatory schemes that have been created with respect to tax return preparers:

Congress’s scheme and Treasury’s scheme.

Congress’s Scheme. Congress’s scheme was created by Congress, and

signed into law by a U.S. president. Congress’s Scheme involves many potential

penalties for preparers who fail to act in a manner specified by Congress. Code

§7407 provides the ultimate backbone of Congress’s scheme. Under Code §7407

(like §6109(a)(4), enacted as part of TRA ’76), Treasury may file a legal action to

enjoin certain conduct. Under §7407(b)(1)(A), a return preparer who fails to

include his PTIN on prepared returns can be required by court order to include his

PTIN. Also, if the court finds that a return preparer has continually or repeatedly

failed to include his PTIN on prepared returns and determines that an injunction is

insufficient to prevent the continued failure, the court may enjoin the person from

acting as a tax return preparer. Penalties coupled with §7407 enforcement is

Congress’s sole method of enforcing many of the Code’s requirements, including

the PTIN requirement. Under Congress’s scheme, the only way a person can be

prevented from preparing tax returns for compensation is if the IRS takes the

person to court and the court rules that the person cannot prepare returns.


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Thus, a PTIN does not grant return preparation authority, and Treasury’s

broadening of its powers beyond those granted by Congress is unlawful. MCI

Telecommunications Corp. v. American Telephone, 512 U.S. 218 (1994).

Treasury’s Scheme. Treasury’s scheme is outlined above. It was created

based on Treasury’s twisted interpretation of two statutes that had been in

existence for many years—statutes that were never meant to grant licensing powers

to anyone. Treasury’s scheme is based on IRS Publication 4832, which

summarizes the IRS’s beliefs on how the tax return preparation industry should be

regulated. Congress had no involvement whatsoever in Treasury’s scheme.

It is apparent that Treasury decided to create a licensing scheme without

statutory authority to do so. 31 U.S.C. §330 was meant to serve as the licensing

mechanism, and Code §6109(a)(4) was meant to provide the license. The license

would justify annual fees. In order to generate significant recurring revenues, the

regulations issued under Code §6109(a)(4) provide for annual expiration of the

PTIN. And, the applicable regulations issued under Code §6109(a)(4) make clear

that the licensing fee was premised on the licensing scheme under Circular 230. In

this regard, 26 CFR §301.6109-2(d) provides the following regarding PTINs and

fees:

Beginning after December 31, 2010, all tax return preparers must have a

preparer identification number or other prescribed identifying number

that was applied for and received at the time and in the manner,

including the payment of a user fee, as may be prescribed by the Internal


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Revenue Service in forms, instructions, or other appropriate guidance.

Except as provided in paragraph (h) of this section, beginning after

December 31, 2010, to obtain a preparer tax identification number or

other prescribed identifying number, a tax return preparer must be an

attorney, enrolled agent, or registered tax return preparer authorized to

practice before the Internal Revenue Service under 31 U.S.C. 330 and

the regulations thereunder.

The problems with Treasury’s scheme are: (a) 31 U.S.C. §330 does not cover

tax return preparation (and the IRS had so admitted on many occasions over many

years); (b) Code §6109(a)(4) is merely a requirement; and (c) Congress didn’t

authorize it. These problems were disregarded, and regulations were issued

beginning in 2010 to implement Publication 4832’s recommendations.

The licensing (i.e., 31 U.S.C. §330) portion of Treasury’s scheme was struck

down in Loving v. Internal Revenue Service, 2013 U.S. Dist. LEXIS 7980, aff’d

D.C. Cir. No. 13-5061 (2014). There can be no license without licensing authority.

In the tax world, there are a few different types of work. They include

compliance, collections, controversy and planning. According to West’s Tax Law

Dictionary (Robert Sellers Smith, 2009 ed., p. 1054), tax compliance work is

“response of the taxpayer to the tax laws, including filing appropriate tax returns

and paying the taxes due in a timely manner.” West’s defines tax controversy work

as a “distinguishable dispute with respect to a tax matter, usually between a

taxpayer and a taxing authority, such as the I.R.S. . . . “At its most expansive

reasonable interpretation, 31 U.S.C. §330 applies to tax controversy work, but not


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to tax compliance work. Under 5 U.S.C. §500, attorneys and CPAs have the right

to represent persons before the IRS in tax controversy matters. Enrolled agents

(EAs) acquire that right by taking an IRS test, meeting other IRS requirements and

paying fees to the IRS. Loving ruled consistently with this line of reasoning.

In Loving, three tax return preparers who were not CPAs, attorneys or

enrolled agents attacked the licensing scheme that required them to take the IRS’s

test, pay related fees and, if the test was passed, take IRS-approved annual CPE

courses and pay related fees. The District Court for the D.C. Circuit ruled in favor

of the plaintiffs, striking down the entire scheme. The IRS appealed. On appeal,

the U.S. Court of Appeals for the D.C. Circuit affirmed the ruling of the District

Court. A copy of the opinion of the Court of Appeals for D.C. Circuit is attached

as Exhibit A.

Conclusions from the D.C. Court of Appeals decision in Loving pertinent to

the present case are:

In determining whether a statute is ambiguous and in ultimately

determining whether the agency’s interpretation is permissible or

instead is foreclosed by the statute, a court must employ all the tools of

statutory interpretation, including “text, structure, purpose and

legislative history[,].” (citing including Chevron U.S.A. Inc. v. NRDC,

467 U.S. 837 (1984); see page 5 of Exhibit A);


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“It is a fundamental canon of statutory construction that the words of a

statute must be read in their context and with a view to their place in

the overall statutory scheme[,]” (citing Roberts v. Sea-Land Services,

Inc., __ U.S.___, 132 S. Ct. 1350, 1357 (2012); see page 13 of Exhibit

A);

Over the years, Congress has enacted a number of targeted provisions

specific to tax-return preparers, covering precise conduct ranging from

a tax-return preparer’s failing to sign returns to knowingly understating

a taxpayer’s liability. . . . Each of those statutory proscriptions comes

with corresponding civil penalties. . . . Under the IRS’s view, however,

all of Congress’s statutory amendments would be unnecessary. The

IRS, by virtue of its heretofore undiscovered carte blanche grant of

authority from Section 330, would already have had free rein to impose

an array of penalties on any tax-return preparer . . . (see page 14 of

Exhibit A);

The Supreme Court has stated that courts should not lightly presume

congressional intent to implicitly delegate decisions of major economic

or political significance to agencies[,](citing Brown & Williamson, 529

U.S. at 160 (2000); see page 15 of Exhibit A).

Prior to the D.C. Circuit’s February 2014 ruling in Loving, incoming IRS


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Commissioner John Koskinen had suggested that a voluntary testing system should

be considered of return preparers who are not CPAs, attorneys or EAs if the IRS

lost the Loving case on appeal. Following the loss, Commissioner Koskinen

discussed what he might have in mind in the first answer of “Answers from the

New Commissioner,” as reported by Roger Russell in Tax Pro Today’s enewsletter

of February 20, 2014. Noteworthy is Commissioner Koskinen’s position that what

would be required would be less rigorous than what is required of an EA, and that

it would not be at a level necessary for them to be able to practice before the IRS.

A copy of this enewsletter is attached as Exhibit C.

Part of Treasury’s plan that was implemented in the new Circular 230 (31

U.S.C. §330) regulations was to convert an ordinary requirement, that a return

preparer obtain a PTIN, into the license. Accordingly, the June 2011 Circular 230

regulations provided in § 10.831

:

Any individual who for compensation prepares or assists with the

preparation of all or substantially all of a tax return or claim for refund

must have a preparer tax identification number. Except as otherwise

prescribed in forms, instructions, or other appropriate guidance, an

individual must be an attorney, certified public accountant, enrolled

agent or registered tax return preparer to obtain a preparer tax

identification number.

Thus, the new regime prohibited anyone from being able to prepare tax returns,

and used the PTIN as the licensing device. By voiding the entire concept of a

31

31 CFR Part 10 (June 3, 2011).


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registered tax return preparer, Loving left the PTIN regulation as the simple

requirement it was meant to be. Even if Treasury’s scheme is better than

Congress’s scheme, it cannot be applied. MCI Telecommunications Corp. v.

American Telephone, 512 U.S. 218, (last sentence of opinion) (1994). However,

Brannen ruled that Treasury has a licensing power based on Code §6109(a)(4) in

itself—beyond even Treasury’s expectations.

The only benefit of obtaining a PTIN is potential avoidance of penalties.

Based on Appellants’ scouring of the user fee cases, the user fee statute has never

been applied to a requirement with a penalty enforcement scheme. Relief from

potential applicability of penalties under 26 U.S.C. §6695 or possible injunctive

action under 26 U.S.C. § 7407 cannot form part or all of a "special benefit."

Otherwise, it would mean a legal requirement with a penalty scheme could produce

a special benefit when an identical legal requirement without a penalty scheme,

that otherwise did not produce a special benefit, could not produce a special

benefit. Since Congress chose to enforce the legal requirement with a penalty

scheme, being able to add a fee in addition would override the specific

enforcement mechanism designed by Congress. Even if Treasury’s system is

better, it cannot apply because it is not Congress’s system. MCI

Telecommunications Corp. v. American Telephone, 512 U.S. 218 (last sentence of

opinion)(1994). Furthermore, it is illogical that a requirement without a penalty


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could not be subject to the user fee statute when an identical requirement with a

penalty scheme could be, since the provision without a penalty scheme would have

no teeth for enforcement, while the requirement with the penalty scheme would

essentially permit the government to get people "coming and going." Finally,

while the identification system changed, the penalty scheme has not changed.

Treasury should not be permitted to place itself in a better position to charge fees

by adding a new regulatory requirement designed solely to help itself.

Again, the reason given by the agency for its actions is what must be

analyzed to determine whether regulatory action is lawful. Motor Vehicle

Manufacturers Association v. State Farm Mutual Automobile Co., 463 U.S. 29, 50

(1983). The reason given was the right to prepare returns was being granted.

The Brannen Case. It issuing its opinion in this case, the District Court

relied on Brannen. In pertinent part, Brannen substantively ruled that Code

§6109(a)(4) grants Treasury licensing powers. For all of the above reasons, the

Brannen case was incorrectly decided.32

Brannen read Code §6109(a)(4) as doing two things: First, it permits

Treasury to prescribe by regulation the particular identifying number required as

32

Also, on the first page of the Brannen decision, the Court stated that the

appellants in Brannen challenged the PTIN requirement. An examination of the

record from the Brannen case shows no such challenge was made.


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may be prescribed. Second, it requires that any return prepared bear such number.

Appellants believe these conclusions are correct. However, Brannen thereafter

concludes that an individual cannot prepare returns for others for compensation

without having such a number. Thus, according to Brannen, the privilege of

preparing returns is granted, supplying the ‘special benefit’ needed to charge

annual fees.

The problem with the Brannen conclusion is that Congress never meant for

Code §6109(a)(4) to serves as a licensing mechanism, or to provide for a means to

extract annual fees from people in order to prepare tax returns for compensation.

People can prepare returns for others for compensation because Congress has never

taken away that right or given any agency the power to take away that right. Yes,

an individual could potentially be penalized by the IRS for failing to include a

PTIN on a prepared return. But, no reported case has ruled that a requirement with

a penalty provision gives rise to a special benefit. Rather, a special benefit is

something of value to which one is not entitled such as a license.

A license grants someone the power to do something. Without the license, a

person breaks the law by doing the thing that the law requires a license in order to

do. Here, absent a court action under Code §7407 as discussed supra, anyone can

prepare returns because Congress never prohibited anyone from being able to

prepare returns or created a law that would permit an agency to prohibit anyone


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from preparing returns. Yes, if someone repeatedly did not include a PTIN on

returns, the IRS could repeatedly penalize him, and later (if penalization did not

induce compliance) take him to court and attempt to prevent him from being able

to prepare tax returns. But, the fact remains that §6109(a)(4) is only a requirement.

It is not, and was never intended by Congress to be, a licensing mechanism.

Treasury unlawfully converted it into a licensing mechanism so it could extract

annual fees.

Throughout the U.S. Code, there are many requirements that must be

satisfied, but the requirements don’t give agencies the power to prevent people

from doing things. They simply place burdens on people. Similar to Code

§6109(a)(4), there are many registration requirements in the Code that do not

produce licensing powers. For example, under Code § 6036, a receiver in an

insolvency proceeding must give notice of his qualifications in a manner specified

by regulations.33

Potential criminal penalties exist under Code §7203 for failure to

comply. Regulations issued under §6306 require action to be taken by a receiver.

However, no person is prohibited from serving as a receiver due to Code §6036.

Under Code § 6057, through regulations issued by Treasury, an administrator of a 33

The pertinent statutory language provides: “Every receiver, trustee in a case

under Title 11 of the United States Code, assignee for benefit of creditors, or other

fiduciary, and every executor (as defined in section 2203), shall give notice of his

qualification as to the Secretary in such manner and at such time as may be

required by regulations of the Secretary.”


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pension plan must annually file a registration statement with Treasury.34

Penalties

exist under Code §§ 6652(d) and 6690 for failure to comply. However, these

provisions do not authorize Treasury to decide who can maintain a pension plan.

Under the Brannen rationale, annual fees could be required to fulfill these

requirements if Treasury created regulations so requiring.

An analogy can be made to speed laws for vehicles. State and federal laws

set minimum and maximum speed requirements for certain roads. If someone fails

to maintain a minimum speed, he can potentially be ticketed for doing so. If an

individual received many tickets, he could potentially lose his license to drive if he

was taken to court and the court revoked his license. However, an individual

cannot potentially lose his driver’s license simply by driving too slow or too fast.

Here, as in Loving, liberty is at stake. And, in Betancur v. State of Florida

Department of Health, 296 Fed. Appx. 761, 763 (2008), cert. den’d 555 U.S. 1213

(2009), the U.S. Court of Appeals for the Eleventh Circuit noted: “States retain the

police power to regulate professions, such as the practice of medicine.” As

previously noted, Congress recognized that states (not the federal government) has

licensing power over tax return preparers in Code § 6103(k). It is disconcerting

34

The pertinent statutory language provides: “Within such period after the end of

a plan year as the Secretary may by regulations prescribe, the plan administrator . .

. of each plan to which the vesting standards . . . applies for such plan year shall

file a registration statement with the Secretary.”


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that Brannen held that a simple identification requirement designed to help the IRS

grants licensing power to Treasury.

Because anyone can prepare tax returns, anyone can acquire a PTIN.35

Preparers don’t want to fulfill this requirement because there is nothing in it for

them. They do so because they are required to do so and to avoid the possibility of

penalization. In this regard, the requirement is similar to the individual health care

mandate under “Obamacare.”36

In any event, there is no justification for annual

recurring fees because licensing powers were never granted by Congress.

As noted in the District Court’s opinion, Brannen only dealt with the initial

fee. For reasons set forth below, even if a fee could be charged for initial issuance

of a PTIN, the only fee that can be charged is the $14.25 fee paid to an outside

vendor to issue a PTIN. Thereafter, no other fees can lawfully be charged.

However, the District Court carried the Brannen decision further and concluded

that it could apply to renewal fees. It did so by relying on Brannen’s conclusion,

that was originally found in the preamble to the 2010 Code §6109(a)(4) regulations

(without citing any authority so providing) that the right to prepare tax returns was

35

However, as noted, the IRS has treated a PTIN as a license, and refused to grant

PTINs to certain persons. See IRS Newsletter Issue Number IR-2011-47,

described supra. Presumably, IRS could not penalize someone who it refused a

PTIN for failing to include such nonexistent PTIN on prepared tax returns.

36 Imagine if participation in Obamacare was conditioned upon receipt of an

identification number, and annual fees were charged to renew the number.


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being granted in exchange for the fees.

There are exceptions to stare decisis. And, courts make mistakes. Probably

the most important exception is for “intervening developments in the law.”

In Hubbard v. U.S., 514 U.S. 695 (1995), the U.S. Supreme Court overruled

its prior decision in U.S. v. Bramblett, 348 U.S. 503 (1955) because lower courts

had properly questioned it and created a reasonable exception, and there were no

significant reliance interests at stake in adhering to Bramblett. The statute in issue

was criminal in nature, and the question was whether the federal courts are an

agency or department of the government. Bramblett held that the federal courts are

a department of the federal government.

The first case to challenge Bramblett was Morgan v. U.S., 309 F.2d 234

(D.C. Cir. 1962). Thereafter, many courts followed Morgan, and ruled that

Bramblett didn’t apply to courts’ judicial functions. In determining that the lower

courts had acted appropriately by refusing to follow Bramblett, the Supreme Court

said: “Although the judicial function exception has not been adopted by this

Court, our review of Bramblett supports the conclusion that the cases endorsing the

exception almost certainly reflect the intent of Congress.” Hubbard at 713. In

other words, the Supreme Court recognized it had erred and corrected itself.

Here, no other court has considered Brannen’s rationale, and there clearly

are no reliance interests at stake by failing to adhere to Brannen. Regarding


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rationale, Morgan was the first case that began the string of lower court cases that

created the exception to Bramblett. Justice came from a lower court and the U.S.

Supreme Court accepted it. While it would be easy for the Court to follow

Brannen, justice requires otherwise. Furthermore, Loving is an intervening

development that eliminated Treasury’s ability to determine who can prepare

returns. The main point of Loving is that Treasury’s grant of power to itself to

decide who can prepare tax returns was unlawful. If 31 U.S.C. §330 does not grant

licensing power, then, a fortiori, § 6109(a)(4) does not do so. Thus, a PTIN cannot

grant power to prepare returns. If justice is the overriding objective, the erroneous

conclusion reached in Brannen won’t be applied.37

Loving struck down the intended licensing component of Treasury’s scheme

by holding that 31 U.S.C. §330 does not grant Treasury licensing powers. By

basing its decision in Brannen solely on Code §6109(a)(4), this Court did not

invoke the licensing scheme Treasury apparently intended to apply: 31 U.S.C.

37

At the Eleventh Circuit Court of Appeals, the undersigned provided most of the

oral argument in the Brannen case. At oral argument, the undersigned and co-

counsel (former Assistant U.S. Attorney) Jerry Froelich, Jr. argued the case with

Judge Anderson. Combined, the other two judges said relatively little. Judge

Anderson argued that §6109(a)(4) granted licensing power. The undersigned

contested the conclusion, to no avail. Few questions were asked of the

Government’s attorney, who used approximately half of his allotted 15 minutes to

speak. (Every other attorney who spoke that morning used his fully-allotted 15

minutes.) Judge Anderson issued the opinion.


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§330. In doing so, it avoided a potential problem if Loving was decided against the

IRS (as it was). However, Code §6109(a)(4) does not confer licensing powers. In

substance, an agency is charging an occupation tax.

Even if (contrary to Loving) licensing power exists under 31 U.S.C. §330, it

would only permit costs to be charged to issue licenses. Under 5 U.S.C. §500,

attorneys and CPAs are exempt from any potential licensing under 31 U.S.C. §330.

The only legitimate cost is the $14.25 initial cost to issue the PTIN. Because there

is no special benefit, not even this amount can lawfully be charged.

2. The Second Issue. The second issue is, assuming user fees can be

charged with respect to issuance of a PTIN and renewal of a PTIN, whether fees

can be charged in excess of those fees incurred to issue an identification number

that does not change. This issue was not considered in Brannen.

The District Court accepted Defendant’s argument that Treasury has not yet

completed implementation of its regulatory scheme, and thus future costs may be

incurred that justify fees charged in excess of costs incurred to date. The District

Court erred by failing to recognize that the things outlined by Treasury to be done

to justify the fees cannot lawfully be done now or in the future under applicable

statutory authorities. In other words, they are ultra vires actions.

Pertinent Existing Law: Second Issue. Because regulations may only be

issued to regulate activity authorized by Congress, user fees under 31 U.S.C.


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§9701 can be charged only with respect to services necessary to fulfill statutorily-

authorized activities. Seafarers Int’l Union of North America v. U.S. Coast Guard,

81 F.3d 179 (D.C. Cir. 1996); FDA v. Williamson Tobacco Corp., 529 U.S. 120,

161 (2000); Lying v. Payne, 476 U.S. 926, 937 (1986).

As noted, the justification for the fees in issue was not supplied in the Code

§6109(a)(4) regulations (issued in 2010) that provide for the fees. Rather, it was

provided in the preamble to the 2011 amended Circular 230 regulations that were

struck down in Loving. Case law requires that the cost basis for each fee must be

provided, along with (inter alia): (a) a public explanation of the specific expenses

included in the cost basis for the particular fee; and (b) exclusion of expenses

incurred to serve an independent public function. See National Ass’n of

Broadcasters. F.C.C., 554 F. 2d 1118, 1133 (C.A.D.C. 1976); Electronic Industries

Ass’n, Consumer Electronics Group v. F.C.C., 554 F. 2d 1109, 1114-1116

(C.A.D.C. 1976). Specific expenses to be incurred were not listed in either the

Code §6109(a)(4) regulations or the Circular 230 regulations. Rather, only a

listing of the activities to be undertaken was supplied. Treasury chose the $50 fee

in 2010 and produced the justification in 2011.

The Electronic Industries Ass’n, Consumer Electronics Group case involved

fees charged for franchise rights. Thus, a special benefit existed. The FCC

specified direct and indirect costs, multiplied the costs by a percent of the bureau’s


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activities devoted to application processing or tariff filing and added a portion of

other costs. The Court found the procedures deficient, and remanded the case for

recalculation of the fees. Here, there was no such detailed numerical analysis.

Rather, Treasury merely included figures in the preamble to the Circular 230

regulations. Thus, the present case for deficiency is stronger.

If the defects outlined in the two preceding paragraphs are not be terminal,

the fact remains that Code §6109(a)(4) only relates to issuing an identification

number. Code §6109(c) provides that Treasury “is authorized to require such

information as may be necessary to assign an identification number to any person.”

The only information necessary to identify a person in the U.S. is name and Social

Security number. Perhaps an address can be required as well, but the licensing-

type activities set forth in the Circular 230 regulations struck down in Loving are

beyond this scope.

Fees can only be charged for statutorily-justified activities. Seafarers Int'l

Union of North America v. U.S. Coast Guard, 81 F.3d 179 (D.C. Cir. 1996).

Seafarers involved a case where a federal agency had licensing power, and at issue

was what could be charged in connection with license issuance. (Here, there is no

licensing power, but Seafarers is significant with respect to what could be charged

for a PTIN if a special benefit was granted.) On page 185, Seafarers provides:


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Therefore, a reviewing court, in deciding whether an agency may extract

a fee in connection with a particular licensing scheme, need not pause to

weigh the relative public and private interests underlying the scheme, but

can instead turn to the relevant statute to determine the substantive

requirements underlying the license. Then, the proper inquiry is whether

the actual licensing procedures adopted by the agency are sufficiently

related to statutory criteria to justify assessing a fee.

On page 186, Seafarers provides:

Government counsel asserted that the agency should be permitted to

charge a fee for any procedures, such as inspection of boats, so long as

those procedures are conducted as part of the requirements for obtaining

a license. The Government's contention is absurd, for the Supreme

Court in NCTA and NEPCO made it clear that an agency cannot load

expenses in the guise of collecting licensing fees. . . . In other words, a

user fee for license applicants is only permissible if the procedures in

question are related to the qualifications set forth in the licensing

statute. . . . Moreover, it should be clear that an agency is not free to add

extra licensing procedures and then charge a user fee merely because

the agency has general authority to regulate in a particular area.

(Emphasis supplied.) Here, if a fee could be charged (which it cannot because

there is no special benefit in this case), the only legitimate fee would be the $14.25

initial administrative issuance fee because the applicable statute (§6109(a)(4)) was

enacted solely to help the IRS better identify return preparers.

On page 185, Seafarers also provides: "In short, the measure of fees is the

cost to the government of providing the service, not the intrinsic value of the


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service to the recipient."38

If costs could be charged here, PTIN initial issuance

costs are all that could be charged.

In Electronic Industries Ass’n, Consumer Electronics Group v. F.C.C., 554

F. 2d 1109, 1115 (C.A.D.C. 1976), the Court of Appeals for the D.C. Circuit said

the FCC could only charge franchise issuance fees for expenses “necessary to

service the applicant or grantee.” The Court specified:

A hypothetical example will illustrate our meaning. If the Commission,

in granting an equipment type approval under 47 U.S.C. § 302a (1970)

47 C.F.R. § 2.803 (1975), is required to incur expenses for testing or

inspection, such expenses can be charged in full to the applicant. These

activities have undisputed private benefit although they may also create

incidental public benefits as well. But if the agency were to engage in

further activity to determine whether a piece of equipment which has

already been found to have no potential for creating ‘harmful

interference’ under section 302a meets standards for consumer safety it

would be doing so to satisfy some independent public interest, and the

charge for these additional expenses could not be included in the fees

imposed on equipment owners.

The three things listed in the preamble to the Circular 230 regulations as

justifying the fees — (1) costs of administering registration cards or certificates for

38

See Yosemite Park and Curry Company v. U.S., 686 F.2d 925, 931 (Ct. Cl.

1982) (“The cost standard laid down by the Supreme Court refers to those direct

and indirect costs to the government . . .”). There may be instances where cost

analysis might be inappropriate, such as when the federal government incurs no

costs (e.g., cattle grazing on federal land). Such is not the case here. See also

Electronic Industries Ass’n, Consumer Electronics Group v. F.C.C., 554 F. 2d

1109, 1118 (C.A.D.C. 1976) (fees assessed cannot exceed cost of service rendered

and expenses incurred to serve an independent public interest cannot be included).


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each registered tax preparer; (2) costs associated with prescribing forms,

instructions, or other guidance with respect to registered tax preparers; and (3) tax

compliance and suitability checks— are unnecessary to issue an identification

number. Of the three activities, the first (registration cards or certificates) is

unnecessary and has not been done. When the undersigned initially received his

PTIN, he received only a short letter, specifying the PTIN. Upon renewal in 2011,

he received an email acknowledging the filing. Nothing other than one short letter

is needed. In this regard, 26 CFR §301.6109-1(a)(ii) provides the following

regarding uses of identification numbers: “Uses.—Social Security numbers, IRS

individual taxpayer identification numbers, and IRS adoption taxpayer

identification numbers are used to identify persons.”

Concerning costs of prescribing forms and instructions, etc., there are

hundreds or perhaps thousands of forms and related instructions on the IRS

website. The undersigned has prepared tax returns for approximately 30 years. In

the experience of the undersigned, the IRS has never charged for forms or

instructions relating thereto. Guidance to tax return preparers and taxpayers has

always been made available at no charge. In recent years, guidance and

information (including all forms and instructions) is listed on www.irs.gov. The

costs of issuing IRS forms (including the two-page Form W-12) and instructions is

an ordinary cost of the IRS’s role as tax system administrator. Again, tax return


http://www.irs.gov/

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preparers would prefer not to fulfill the PTIN requirement.

Suitability checks and tax compliance checks would be lawful if a PTIN was

a license. It’s not a license. It’s an identifying number. As noted supra, attorneys

and CPAs were not supposed to be subject to suitability or tax compliance checks,

yet they are being charged for such future activities relating to others. After

Loving, there is no legal basis for performing suitability checks or tax compliance

checks in relation to the ability to prepare tax returns because no one is unsuitable

to prepare returns. If a tax return preparer owes the IRS taxes, the IRS can pursue

the preparer just like it can pursue any individual who owes taxes. Congress did

not create a system whereby tax return preparers are treated any differently than

other individuals in terms of tax investigation. The penalty and potential injunctive

relief system created by Congress to regulate tax return preparers was outlined

above, and Congress created no special means for Treasury to determine whether

return preparers are delinquent on their tax liabilities.

What could Treasury do if a CPA completed his Form W-12 by stating that

he was delinquent on his personal taxes and he had been convicted of a felony?

Under current law, it could pursue him for his unpaid taxes. However, it could do

nothing with respect to his ability to prepare tax returns. The PTIN requirement of

Code §6109 does not permit Treasury to ask these questions, because they not

pertinent with respect to an identification number that does not change. Even if


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Treasury could ask such questions under other authority, it cannot charge people

for costs of doing so.39

So, even if Treasury has only partially undertaken implementation of the

new PTIN system, the only potentially lawful fee is the initial charge of $14.25 to

issue the PTIN. Even for that activity, fees cannot be charged because no special

benefit is provided. All renewal fees are unlawful.

The fee is a revenue-raiser tied to a requirement with an annual expiration

and renewal feature and a penalty enforcement scheme—it’s an occupation tax.

Pandora’s Box. From all that has been provided, hopefully it is apparent

that, without statutory authority to do so, Treasury created a licensing scheme with

respect to the tax return preparation industry (with the IRS deciding who gets a

license). In the vernacular, what was done stinks. It is not the way our American

system of government is supposed to work.

In May of 2008, the GAO issued “Federal User Fees A Design Guide,”

39

The only other authority that might permit Treasury to ask these questions is

Code §7805(a). Under §7805(a), Treasury generally may prescribe all needful

rules and regulations for enforcement of the internal revenue laws. However, this

authority does not permit Treasury to do anything that would justify charging fees

of anyone. The U.S. Supreme Court has held twice, in U.S. v. Cartwright, 411

U.S. 546 (1973) and U.S. v. Vogel Fertilizer Co., 455 U.S. 16 (1982), that

regulations issued under this provision must be based on a specific grant of

authority from Congress. No such grant exists with respect to the information in

issue.


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(GAO-08-386SP). This document noted in the “Why GAO Did This Study”

section on page 1:

The federal government will need to make the most of its resources to

meet the emerging challenges of the 21st century. As new priorities

emerge, policymakers have demonstrated interest in user fees as a means

of financing new and existing services.

Perhaps expansion of user fees is appropriate in areas where fees can lawfully be

charged but have not been charged. The matter at hand is not one of those areas.40

It is very important to note the potential implications of ruling for the

Appellee. Agencies will copy what was done by Treasury, and add expiration

dates to requirements subject to penalty schemes, thereby justifying renewal fees.

Agencies will be able to charge taxes, as was done here. While the annual fee is

not large, absent something stopping Treasury, it will only increase over time and

it will never go away.

What Is Most Important. Without Congressional authorization, Treasury

created a licensing scheme whereby it can decide who can prepare returns and

40

The U.S. Supreme Court has ruled on numerous occasions that treasury

regulations that have continued without substantial change over a long period of

time are deemed to have received congressional approval and have the effect of

law. Cottage Saving Ass’n v. Comm’r, 499 U.S. 554, 561 (1994); Old Mission

Portland Cement Co. v. Helvering, 293 U.S. 289, 293-4 (1934). In Portland

Cement, the Supreme Court ruled that a regulation issued in 1921 could become

“law” with respect to the years 1923-1926 that were under audit. The PTIN

regulations will have been in effect since 2010. Gridlock has existed in Congress

since 2010. Certainly, the Founding Fathers never anticipated such a result.


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annually extract money from tax return preparers. This case is that simple.

Loving struck down the backbone of the licensing scheme; here lies the remainder.

The federal government is broke. Congress must solve the problem through

tax and spending changes. The fees in issue will not come close to eliminating the

deficit. In any event, justice cannot take a back seat to deficit reduction. If it does,

our system is finished. Only Congress can make law.

Between signing statements, executive orders, selective enforcement of laws

and regulations extending beyond statutorily-granted authority, the Constitution

has been trampled on by the Executive Branch of the federal government in recent

years. If Appellants lose this case, all Americans will lose because their freedom

and property has been and will be taken without approval of Congress, while the

Executive Branch of the federal government will become ever more brazen to

expand its already excessive powers. The Court has the power to uphold the

Constitution and supply justice. For the sake of our country, Appellants ask it to

please do so.

CONCLUSION

U.S. citizens and lawful residents have always had the right to prepare tax

returns for others for compensation. Treasury created regulations without statutory

authority to do so in order to expand its power and raise revenue. Without

statutory authority, it took away the right to prepare tax returns, and returned it in


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exchange for annual fees. Treasury’s new system, which was rejected by Congress

many times, includes an unlawful occupation tax in the form of annual PTIN user

fees that add an unconstitutional burden to tax return preparers.

The special benefit necessary to charge user fees under the user fee statute is

lacking in this case. Even if it somehow exists, the fees being charged are in

excessive of the statutorily-authorized activity of issuing an identification number.

For all of the above reasons, Appellants request the Court reverse the

District Court's summary judgment order in favor of the Defendant, refund

Appellant the PTIN fees in issue and his costs, and issue an injunction ordering

Treasury to stop charging annual PTIN fees.

Dated: March 5, 2014

Respectfully submitted,

/s/Allen Buckley

Georgia Bar No. 092675

Law Office of Allen Buckley LLC

Suite 100-C

2802 Paces Ferry Road

Atlanta, GA 30339

(770) 319-0110

Fax: (404) 881-8040

Fax: (770) 319-0110

[email protected]

COUNSEL FOR PLAINTIFFS-APPELLANTS


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CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(a)(7)(C), the undersigned certifies that the

foregoing Appellants' Opening Brief complies with the applicable type-volume

limitations of Fed. R. App. P. 32(a)(7)(B). This certificate was prepared in

reliance on word count of the word-processing system (Microsoft Word) used in

this brief. More specifically:

1. Exclusive of portions exempt by Fed. R. App. R. P. 32(a)(7)(B)(iii), this

brief contains 13,124 words.

2. This brief has been prepared in proportionally-spaced typeface using

Microsoft Word in Times New Roman, 14-point font.

Dated: March 5, 2014

s/Allen Buckley

Ga. Bar No. 092675


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CERTIFICATE OF SERVICE

This is to certify that on March 5, 2014, I caused a copy of the foregoing

Opening Brief of Plaintiffs-Appellants Allen Buckley and Allen Buckley LLC to

be deposited in the United States mail, First Class postage pre-paid, in an envelope

addressed to the following persons:

Anne Oliver Sally Quillian Yates

U.S. Department of Justice-Tax United States Attorney

Tax Division Richard B. Russell Buil-

Ben Franklin Station ding and U.S. Courthouse

P.O. Box 227 75 Spring Street, SW, Suite 600

Washington, D.C. 20044 Atlanta, GA 30303-3309

Counsel for Defendant-Appellee Counsel for Defendant-Appellee

Claire H. Taylor Thomas F. Koelbl

U.S. Department of Justice-Tax U.S. Department of Justice

Tax Division Tax Division

BEN FRANKLIN STATION P.O. Box 14198

P.O. Box 227 Washington, D.C. 20044-0000

Washington, D.C. 20044 Counsel for Defendant-Appellee

Counsel for Defendant-Appellee

Patrick Urda

U.S. Department of Justice-Tax Division

Appellate Section

P.O. Box 502

Washington, D.C. 20044

Counsel for Defendant-Appellee

s/Allen Buckley

Allen Buckley

Ga. Bar No. 092675


United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 24, 2013 Decided February 11, 2014

No. 13-5061

SABINA LOVING, ET AL.,

APPELLEES

v.

INTERNAL REVENUE SERVICE, ET AL.,

APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(No. 1:12-cv-00385)

Gilbert S. Rothenberg, Attorney, U.S. Department of

Justice, argued the cause for appellants. With him on the

briefs were Tamara W. Ashford, Principal Deputy Assistant

Attorney General, Richard Farber and Patrick J. Urda,

Attorneys.

David W. Foster was on the brief for amici curiae Former

Commissioners of Internal Revenue in support of appellants.

Charles Harak was on the brief for amici curiae National

Consumer Law Center, et al. in support of appellants.


2

Dan Alban argued the cause for appellees. With him on

the brief were William H. Mellor, Scott G. Bullock, and Ari S.

Bargil.

Patrick J. Smith was on the brief for amici curiae Ronda

Gordon, et al. in support of appellees.

Before: KAVANAUGH, Circuit Judge, and WILLIAMS and

SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge

KAVANAUGH.

KAVANAUGH, Circuit Judge: The federal income tax

code is massive and complicated. So it is not surprising that

many taxpayers hire someone else to help prepare their tax

returns.

In 2011, responding to concern about the performance of

some paid tax-return preparers, the IRS issued new

regulations. Among other things, the new regulations require

that paid tax-return preparers pass an initial certification

exam, pay annual fees, and complete at least 15 hours of

continuing education courses each year. The IRS estimates

that the new regulations will apply to between 600,000 and

700,000 tax-return preparers.

As statutory authority for the new regulations, the IRS

has relied on 31 U.S.C. § 330. Originally enacted in 1884,

that statute authorizes the IRS to “regulate the practice of

representatives of persons before the Department of the

Treasury.” 31 U.S.C. § 330(a)(1). In the first 125 years after

the statute’s enactment, the Executive Branch never

interpreted the statute to authorize regulation of tax-return


3

preparers. But in 2011, the IRS decided that the statute in fact

did authorize regulation of tax-return preparers.

In this case, three independent tax-return preparers

contend that the IRS’s new regulations exceed the agency’s

authority under the statute. The precise question is whether

the IRS’s statutory authority to “regulate the practice of

representatives of persons before the Department of the

Treasury” encompasses authority to regulate tax-return

preparers. The District Court ruled against the IRS, relying

on the text, history, structure, and context of the statute. 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.

I

Originally passed by Congress and signed by President

Chester A. Arthur in 1884, Section 330 of Title 31 authorizes

the Secretary of the Treasury – and by extension, the IRS, a

subordinate agency within the Treasury Department – to

“regulate the practice of representatives of persons before the

Department of the Treasury.” 31 U.S.C. § 330(a)(1). Before

admitting a person to practice as a representative, the IRS

may require the applicant to demonstrate “good character,”

“good reputation,” “necessary qualifications to enable the

representative to provide to persons valuable service,” and

“competency to advise and assist persons in presenting their

cases.” Id. § 330(a)(2). The statute also empowers the IRS to

discipline any representative who is “incompetent,”

“disreputable,” “violates regulations prescribed under”

Section 330, or who “with intent to defraud, willfully and

knowingly misleads or threatens the person being represented

or a prospective person to be represented.” Id. § 330(b).


4

Such representatives may be fined, or suspended or disbarred

from practice. Id.

In longstanding regulations implementing Section 330,

the IRS has maintained standards of competence for

attorneys, accountants, and other tax professionals appearing

in adversarial proceedings before the agency. Covered

individuals who fail to comply with those requirements may

be censured, suspended from practice, disbarred from

practice, or monetarily sanctioned.

In 2011, after an IRS review found problems in the tax-

preparation industry, the IRS issued a new rule regulating tax-

return preparers, a group that had not previously been

regulated pursuant to Section 330. See Regulations

Governing Practice Before the Internal Revenue Service, 76

Fed. Reg. 32,286 (June 3, 2011). (The rule was technically

issued by the Department of the Treasury, of which the IRS is

a part.) A tax-return preparer is a person who “prepares for

compensation, or who employs one or more persons to

prepare for compensation, all or a substantial portion of any

return of tax or any claim for refund of tax under the Internal

Revenue Code.” 26 C.F.R. § 301.7701-15(a). The new 2011

regulations require tax-return preparers to register with the

IRS by paying a fee and passing a qualifying exam. 31 C.F.R.

§§ 10.3(f)(2), 10.4(c), 10.5(b). Each year after the initial

registration, a tax-return preparer must pay an additional fee

and complete at least 15 hours of continuing education

classes. Id. § 10.6(d)(6), 10.6(e).

Plaintiffs in this case are three independent tax-return

preparers who would be subject to the new requirements.

They filed suit seeking declaratory and injunctive relief to

prevent enforcement of the new regulations. On cross

motions for summary judgment, the District Court ruled in


5

favor of the plaintiffs, concluding that “together the statutory

text and context unambiguously foreclose the IRS’s

interpretation of 31 U.S.C. § 330.” Loving v. IRS, 917 F.

Supp. 2d 67, 79 (D.D.C. 2013). The District Court

permanently enjoined the tax-return preparer regulations.

The IRS moved in the District Court for a stay of the District

Court’s decision and asked to keep the regulations in place

pending appeal. The District Court denied the stay motion.

The IRS filed a timely notice of appeal disputing the

District Court’s construction of Section 330. The IRS also

filed a stay motion in this Court to keep the regulations in

place pending appeal. That motion was denied. Loving v.

IRS, No. 13-5061, 2013 WL 1703893 (D.C. Cir. Mar. 27,

2013).

Our review of the District Court’s statutory interpretation

is de novo. See, e.g., Judicial Watch, Inc. v. FBI, 522 F.3d

364, 367 (D.C. Cir. 2008).

II

The question in this case is whether the IRS’s authority to

“regulate the practice of representatives of persons before the

Department of the Treasury” encompasses authority to

regulate tax-return preparers. 31 U.S.C. § 330(a)(1). The IRS

says it does. Under Chevron, we must accept an agency’s

authoritative interpretation of an ambiguous statutory

provision if the agency’s interpretation is reasonable. See

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984). In

determining whether a statute is ambiguous and in ultimately

determining whether the agency’s interpretation is permissible

or instead is foreclosed by the statute, we must employ all the

tools of statutory interpretation, including “text, structure,

purpose, and legislative history.” Pharmaceutical Research

& Manufacturers of America v. Thompson, 251 F.3d 219, 224


6

(D.C. Cir. 2001); see also Chevron, 467 U.S. at 843 n.9. “No

matter how it is framed, the question a court faces when

confronted with an agency’s interpretation of a statute it

administers is always, simply, whether the agency has stayed

within the bounds of its statutory authority.” City of

Arlington v. FCC, 133 S. Ct. 1863, 1868 (2013).

In our view, at least six considerations foreclose the

IRS’s interpretation of the statute.

First is the meaning of the key statutory term

“representatives.” In its opening brief, the IRS simply asserts

that there “can be no serious dispute that paid tax-return

preparers are ‘representatives of persons.’” IRS Br. 31 n.11.

Beyond that ipse dixit, however, the IRS never explains how a

tax-return preparer “represents” a taxpayer. And for good

reason: The term “representative” is traditionally and

commonly defined as an agent with authority to bind others, a

description that does not fit tax-return preparers. See, e.g.,

OXFORD ENGLISH DICTIONARY 660 (2d ed. 1989) ([4] “One

who represents another as agent, delegate, substitute,

successor, or heir”); BLACK’S LAW DICTIONARY 1416 (9th ed.

2009) ([1] “One who stands for or acts on behalf of

another . . . . See agent”); BALLENTINE’S LAW DICTIONARY

1096 (3d ed. 1969) (“An agent, an officer of a corporation or

association, a trustee, executor, or administrator of an estate,

or any other person empowered to act for another.”); 45

U.S.C. § 151 (“The term ‘representative’ means any person or

persons, labor union, organization, or corporation designated

either by a carrier or group of carriers or by its or their

employees, to act for it or them.”); U.C.C. § 1-201(b)(33)

(“‘Representative’ means a person empowered to act for

another, including an agent, an officer of a corporation or

association, and a trustee, executor, or administrator of an

estate.”).


7

Put simply, tax-return preparers are not agents. They do

not possess legal authority to act on the taxpayer’s behalf.

They cannot legally bind the taxpayer by acting on the

taxpayer’s behalf. The IRS cites no law suggesting that tax-

return preparers have legal authority to act on behalf of

taxpayers. Indeed, a tax-return preparer who tried to act on

the taxpayer’s behalf would run into trouble with the IRS:

Under the IRS regulation found at 26 C.F.R. § 601.504(a),

“representation” of a taxpayer before the IRS requires

formally obtaining the taxpayer’s power of attorney,

something tax-return preparers do not typically obtain when

preparing returns. Moreover, because a tax-return preparer is

not a representative, the taxpayer ordinarily must still sign and

submit the return in his or her own name even when the

taxpayer uses the services of a tax-return preparer.

Other IRS directives buttress the understanding that tax-

return preparers are not representatives. For example, the IRS

permits taxpayers to select any person as a “Third Party

Designee” who may talk to the IRS about questions that arise

during the processing of the taxpayer’s return. See Third

Party Authorization, Levels of Authority, IRS Publication

4019 (Oct. 2012). But as the instructions for the standard tax

return form make clear, that third-party designee status is not

the same as representative status or power of attorney: “You

are not authorizing the designee to receive any refund check,

bind you to anything (including any additional tax liability),

or otherwise represent you before the IRS. If you want to

expand the designee’s authorization, see Pub. 947 [Practice

Before the IRS and Power of Attorney].” 1040 Instructions

2012 at 77.

Of course, the meaning an agency attaches to a term in its

regulations is not always the same as the meaning Congress

intends to give that term when Congress includes it in


8

statutes. But an agency’s use of a term can be valuable

information not only about ordinary usage but also about any

specialized meaning that people in the field attach to that

term. That is particularly true when, as here, the term is one

that the agency uses in a number of contexts. Cf. FAA v.

Cooper, 132 S. Ct. 1441, 1449 (2012) (“when Congress

employs a term of art, it presumably knows and adopts the

cluster of ideas that were attached to each borrowed word in

the body of learning from which it was taken”) (internal

quotation marks omitted).

The tax-return preparer certainly assists the taxpayer, but

the tax-return preparer does not represent the taxpayer. In

light of the way the Code treats tax preparation, it would be

quite wrong to say that a tax-return preparer “represents” the

taxpayer in any meaningful legal sense. In short, the statute’s

use of the term “representative” excludes tax-return preparers.

Second is the meaning of the phrase “practice . . . before

the Department of the Treasury.” The IRS has long regulated

service professionals such as attorneys and accountants who

appear as representatives of taxpayers in adversarial tax

proceedings before the IRS. Under its new regulations,

however, the IRS expanded its definition of “practice” to

cover tax-return preparers. According to the IRS, the

“practice” of tax-return preparers consists of “preparing and

signing tax returns and claims for refund, and other

documents for submission to the Internal Revenue Service.”

31 C.F.R. § 10.3(f)(2).

To be sure, “preparing and signing tax returns” could be

considered a “practice” of sorts, particularly if the tax-return

preparer is providing advice or making judgment calls about a

taxpayer’s liability. But Section 330 does not regulate the act

of “practice” in the abstract. The statute instead addresses


9

“practice . . . before the Department of the Treasury.”

Although the exact scope of “practice before” a court or

agency varies depending on the context, to “practice before” a

court or agency ordinarily refers to practice during an

investigation, adversarial hearing, or other adjudicative

proceeding. See, e.g., 35 U.S.C. § 32 (discussing “practice

before the Patent and Trademark Office”); 26 U.S.C. § 7452

(practice before the tax court); 15 U.S.C. § 78d-3

(“Appearance and practice before” the SEC).

That is quite different from the process of filing a tax

return. As the Supreme Court has explained, “[t]he Federal

tax system is basically one of self-assessment, whereby each

taxpayer computes the tax due and then files the appropriate

form of return along with the requisite payment.” United

States v. Galletti, 541 U.S. 114, 122 (2004) (internal quotation

marks omitted). Even when the IRS disagrees with a

taxpayer’s determination of the taxes due, the tax-return

preparer is not invited to present any arguments or advocacy

in support of the taxpayer’s position. Instead, the IRS

conducts its own ex parte, non-adversarial assessment of the

taxpayer’s liability. See 26 C.F.R. § 601.104(c); 26 U.S.C.

§ 6201-6204. Not until a return is selected for an audit, or the

taxpayer appeals the IRS’s proposed liability adjustments,

does a taxpayer designate a representative to act on his or her

behalf. See 26 U.S.C. § 7521 (procedures for “taxpayer

interviews” during audits); 26 C.F.R. § 601.103(c),

601.106(c) (representation of taxpayers at appeals

“conferences”). All of this underscores that tax-return

preparers do not practice before the IRS when they simply

assist in the preparation of someone else’s tax return.

The meaning of “practice . . . before the Department” in

Section 330(a)(1) is further illustrated by the next subsection


10

of the statute, Section 330(a)(2), which provides that the

Secretary may:

before admitting a representative to practice, require

that the representative demonstrate –

(A) good character;

(B) good reputation;

(C) necessary qualifications to enable the

representative to provide to persons valuable

service; and

(D) competency to advise and assist persons in

presenting their cases.

31 U.S.C. § 330(a)(2) (emphases added). With respect to the

last clause of Section 330(a)(2)(D) – the reference to

“presenting their cases” – the District Court succinctly and

cogently explained: “Filing a tax return would never, in

normal usage, be described as ‘presenting a case.’ At the time

of filing, the taxpayer has no dispute with the IRS; there is no

‘case’ to present. This definition makes sense only in

connection with those who assist taxpayers in the examination

and appeals stages of the process.” Loving v. IRS, 917 F.

Supp. 2d 67, 74 (D.D.C. 2013).

In trying to sidestep the import of the Section

330(a)(2)(D) language, the IRS does not contend that

preparing a tax return constitutes “presenting” a “case.”

(Some outside commentators take that view, but the IRS does

not.) Rather, the IRS says that “presenting their cases” is

irrelevant because the listed criteria in Section 330(a)(2)

should be read disjunctively as if they were connected by an

“or” instead of an “and.” See IRS Br. 37-38, Reply Br. 10-12.


11

According to the IRS, not all of the criteria in Section

330(a)(2) apply to all persons regulated under that Section.

That is not a persuasive argument. Most obviously, the

statute uses the conjunctive “and” – not the disjunctive “or” –

when listing the various requirements, a strong indication that

Congress did not intend the requirements as alternatives.

The IRS’s insistence that the criteria in Section 330(a)(2)

must be read as alternatives is further undermined by

reference to the language of Section 330’s predecessor statute.

The provisions now codified as Section 330(a)(2)(A)-(D)

originally authorized the Secretary of the Treasury to require

that representatives were “of good character and in good

repute, possessed of the necessary qualifications to enable

them to render such claimants valuable service, and otherwise

competent to advise and assist such claimants in the

presentation of their cases.” Act of July 7, 1884, ch. 334, sec.

3, 23 Stat. 258, 258-59 (emphasis added). The use of the

word “otherwise” clearly indicates that, as originally

formulated, the language now contained in Section

330(a)(2)(A)-(C) is to be read in conjunction with, and in

terms of, the presentation of cases. That original language

matters, particularly because Congress, when it adopted the

current streamlined language in 1982, stated that it intended to

do so “without substantive change.” See Pub. L. No. 97-258,

96 Stat. 877, 877 (1982).

To be sure, by their plain terms, the four requirements in

Section 330(a)(2) are somewhat overlapping, as the IRS

notes. But that is not a reason for changing “and” to “or.”

After all, some overlap is common in laws of this kind that set

forth qualifications to obtain a government benefit or license.

And more broadly, lawmakers, like Shakespeare characters,

sometimes employ overlap or redundancy so as to remove any


12

doubt and make doubly sure. See Abbe R. Gluck & Lisa

Schultz Bressman, Statutory Interpretation from the Inside –

an Empirical Study of Congressional Drafting, Delegation,

and the Canons: Part I, 65 STAN. L. REV. 901, 934-35 (2013).

Interpreting Section 330(a)(2) to have some modest overlap is

far more reasonable than interpreting the statute, as the IRS

does, to mean “or” when it says “and.”

It is true, as the IRS points out, that the IRS’s authority

under Section 330(a)(2)(D) to require competence in

“presenting their cases” is discretionary; the statute provides

that the Secretary “may” do so. So we should not and do not

over-rely on this contextual point. We merely think that

Section 330(a)(2)(D) adds at least some color to the overall

statutory picture here: On balance, it suggests that Congress,

when it enacted Section 330(a)(2), envisioned that practice

before the agency would involve traditional adversarial

proceedings.

Third is the history of Section 330. The language now

codified as Section 330 was originally enacted in 1884 as part

of a War Department appropriation for “horses and other

property lost in the military service.” Act of July 7, 1884, ch.

334, sec. 3, 23 Stat. 258. It stated:

[T]he Secretary of the Treasury may prescribe rules

and regulations governing the recognition of agents,

attorneys, or other persons representing claimants

before his Department, and may require of such

persons, agents and attorneys, before being recognized

as representatives of claimants, that they shall show

that they are of good character and in good repute,

possessed of the necessary qualifications to enable

them to render such claimants valuable service, and


13

otherwise competent to advise and assist such

claimants in the presentation of their cases.

Id. at 258-59 (emphases added).

That original language plainly would not encompass tax-

return preparers. Even after tax-return preparation became a

significant industry, moreover, Congress did not broaden the

language. On the contrary, when Congress re-codified the

statute in 1982, Congress simplified the phrase “agents,

attorneys, or other persons representing claimants,” to the

current “representatives of persons.” But importantly, as we

have noted, Congress made clear in the statute itself that it

intended no change to the statute’s scope: The title of the

amending legislation states that the 1982 Act was designed

“[t]o revise, codify, and enact” the amended provisions

“without substantive change.” See Pub. L. No. 97-258, 96

Stat. 877, 877 (1982) (emphasis added).

The fact that Congress used the words “agents,”

“attorneys,” “claimants,” “otherwise,” and “presentation of

their cases” in the original version of the statute, and that

Congress then expressly stated in the statute itself that it

intended no change in meaning when it streamlined the statute

in 1982, further indicates that the statute contemplates

representation in a contested proceeding, not simply

assistance in preparing a tax return.

Fourth is the broader statutory framework. “It is a

fundamental canon of statutory construction that the words of

a statute must be read in their context and with a view to their

place in the overall statutory scheme.” Roberts v. Sea-Land

Services, Inc., 132 S. Ct. 1350, 1357 (2012) (internal

quotation marks omitted). Yet accepting the IRS’s view of

Section 330(a)(1) would effectively gut Congress’s carefully

articulated existing system for regulating tax-return preparers.


14

Over the years, Congress has enacted a number of

targeted provisions specific to tax-return preparers, covering

precise conduct ranging from a tax-return preparer’s failing to

sign returns to knowingly understating a taxpayer’s liability.

See, e.g., 26 U.S.C. §§ 6694, 6695, 6713. Each of those

statutory proscriptions comes with corresponding civil

penalties. Congress has continued to revise those statutes.

See, e.g., Pub. L. No. 112-41, § 501(a), 125 Stat. 428, 459

(2011) (amending 26 U.S.C. § 6695(g) to increase penalties).

Under the IRS’s view here, however, all of Congress’s

statutory amendments would have been unnecessary. The

IRS, by virtue of its heretofore undiscovered carte blanche

grant of authority from Section 330, would already have had

free rein to impose an array of penalties on any tax-return

preparer who “is incompetent,” “is disreputable,” “violates

regulations prescribed under” Section 330, or “with intent to

defraud, willfully and knowingly misleads or threatens the

person being represented or a prospective person to be

represented.” 31 U.S.C. § 330(b). And that would have

already covered all (or virtually all) of the conduct that

Congress later spent so much time specifically targeting in

individual statutes regulating tax-return preparers.

It is true that the views or understanding of later

Congresses – such as those Congresses that enacted the

targeted statutes regulating tax-return preparers – are not

dispositive and sometimes can be a hazardous basis for

interpreting the meaning of an earlier enacted statute such as

Section 330. See Central Bank of Denver, N.A. v. First

Interstate Bank of Denver, N.A., 511 U.S. 164, 185 (1994).

That said, as the Supreme Court has reasoned in similar

circumstances, we 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. As the


15

Supreme Court has stated, “the meaning of one statute may be

affected by other Acts, particularly where Congress has

spoken subsequently and more specifically to the topic at

hand.” FDA v. Brown & Williamson Tobacco Corp., 529

U.S. 120, 133 (2000). So it is here.

Fifth is the nature and scope of the authority being

claimed by the IRS. The Supreme Court has stated that courts

should not lightly presume congressional intent to implicitly

delegate decisions of major economic or political significance

to agencies. See Brown & Williamson, 529 U.S. at 160 (“we

are confident that Congress could not have intended to

delegate a decision of such economic and political

significance to an agency in so cryptic a fashion”).

If we were to accept the IRS’s interpretation of Section

330, the IRS would be empowered for the first time to

regulate hundreds of thousands of individuals in the multi-

billion dollar tax-preparation industry. Yet nothing in the

statute’s text or the legislative record contemplates that vast

expansion of the IRS’s authority. This is the kind of case,

therefore, where the Brown & Williamson principle carries

significant force. Here, as in Brown & Williamson, we are

confident that the enacting Congress did not intend to grow

such a large elephant in such a small mousehole. In short, the

Brown & Williamson principle strengthens the conclusion that

Section 330 does not encompass tax-return preparers.

Sixth is the IRS’s past approach to this statute. Until

2011, the IRS never interpreted the statute to give it authority

to regulate tax-return preparers. Nor did the IRS ever suggest

that it possessed this authority but simply chose, in its

discretion, not to exercise it. In 2005, moreover, the head of

the IRS’s Criminal Investigation Division testified to

Congress that “[t]ax return preparers are not deemed as


16

individuals who represent individuals before the IRS.” Fraud

in Income Tax Return Preparation: Hearing Before the

Subcommittee on Oversight of the House Committee on Ways

and Means, 109th Congress (2005) (testimony of Nancy J.

Jardini). At the same hearing, the National Taxpayer

Advocate – the government official who acts as a kind of IRS

ombudsperson – stated to Congress that “the IRS currently

has no authority to license preparers or require basic

knowledge about how to prepare returns.” Id. (testimony of

Nina E. Olson). The IRS issued a guidance document in 2009

that likewise emphasized that “[j]ust preparing a tax return

[or] furnishing information at the request of the IRS . . . is not

practice before the IRS. These acts can be performed by

anyone.” Practice Before the IRS and Power of Attorney, IRS

Publication 947, at 2 (April 2009).

The IRS is surely free to change (or refine) its

interpretation of a statute it administers. See FCC v. Fox

Television Stations, Inc., 556 U.S. 502, 515 (2009). But the

interpretation, whether old or new, must be consistent with

the statute. And in the circumstances of this case, we find it

rather telling that the IRS had never before maintained that it

possessed this authority. Cf. Financial Planning Association

v. SEC, 482 F.3d 481, 490 (D.C. Cir. 2007) (“an additional

weakness” in SEC’s interpretation of statute was that it

“flouts six decades of consistent SEC understanding of its

authority under” statute). In light of the text, history,

structure, and context of the statute, it becomes apparent that

the IRS never before adopted its current interpretation for a

reason: It is incorrect.

* * *

In our judgment, the traditional tools of statutory

interpretation – including the statute’s text, history, structure,


17

and context – foreclose and render unreasonable the IRS’s

interpretation of Section 330. Put in Chevron parlance, the

IRS’s interpretation fails at Chevron step 1 because it is

foreclosed by the statute. In any event, the IRS’s

interpretation would also fail at Chevron step 2 because it is

unreasonable in light of the statute’s text, history, structure,

and context. 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 “role

of this Court is to apply the statute as it is written – even if we

think some other approach might accord with good policy.”

Burrage v. United States, __ S. Ct. __ (2014) (internal

quotation marks and brackets omitted). The IRS may not

unilaterally expand its authority through such an expansive,

atextual, and ahistorical reading of Section 330. As the

Supreme Court has directed in words that are right on point

here, the “fox-in-the-henhouse syndrome is to be

avoided . . . by taking seriously, and applying rigorously, in

all cases, statutory limits on agencies’ authority.” City of

Arlington v. FCC, 133 S. Ct. 1863, 1874 (2013). We affirm

the judgment of the District Court.

So ordered.


18

APPENDIX

§ 330. Practice before the Department

(a) Subject to section 500 of title 5, the Secretary of the

Treasury may —

(1) regulate the practice of representatives of

persons before the Department of the Treasury;

and

(2) before admitting a representative to practice,

require that the representative demonstrate —

(A) good character;

(B) good reputation;

(C) necessary qualifications to enable the

representative to provide to persons

valuable service; and

(D) competency to advise and assist

persons in presenting their cases.

(b) After notice and opportunity for a proceeding, the

Secretary may suspend or disbar from practice before

the Department, or censure, a representative who —

(1) is incompetent;

(2) is disreputable;

(3) violates regulations prescribed under this

section; or

(4) with intent to defraud, willfully and

knowingly misleads or threatens the person being

represented or a prospective person to be

represented.


19

The Secretary may impose a monetary penalty on

any representative described in the preceding

sentence. If the representative was acting on behalf

of an employer or any firm or other entity in

connection with the conduct giving rise to such

penalty, the Secretary may impose a monetary

penalty on such employer, firm, or entity if it knew,

or reasonably should have known, of such conduct.

Such penalty shall not exceed the gross income

derived (or to be derived) from the conduct giving

rise to the penalty and may be in addition to, or in

lieu of, any suspension, disbarment, or censure of the

representative.


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