A federal judge has dismissed a lawsuit against the Internal Revenue Service by the American Institute of CPAs over its new program offering voluntary education and testing of non-CPA tax preparers.
Judge James Boasberg, the same judge who handed down the Loving v. IRS ruling last year invalidating the IRS’s attempt to impose mandatory testing and continuing education of non-credentialed tax preparers, issued a ruling in the new case Monday. The ruling last year ended the IRS’s efforts to regulate the tax preparation profession through a Registered Tax Return Preparer designation that would require registration, testing and continuing education of tax preparers who are not already subject to such requirements as CPAs, enrolled agents or attorneys. In the case, Loving v. IRS, three independent tax preparers—Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wisc.—sued the IRS, represented by the libertarian law firm the Institute for Justice, which argued that the IRS had exceeded its statutory authority in trying to impose mandatory testing and education of preparers. Boasberg ruled in favor of the preparers.
After the IRS lost the case on appeal earlier this year, the IRS instead introduced a voluntary program, known as the Annual Filing Season Program, in June in an effort to give independent tax preparers more training and an online database that taxpayers could consult to find qualified preparers (see IRS Offers Voluntary Tax Preparer Education Program). However, the AICPA filed suit to stop the program in July, arguing that the new voluntary program was also an unlawful exercise of government power, representing what AICPA president and CEO Barry Melancon called an “end run” around the Loving v. IRS decision (see AICPA Sues IRS over Voluntary Program for Tax Preparers).
“By implementing a purportedly 'voluntary' program that is mandatory in effect, the rule is an end-run around Loving v. IRS, a federal court ruling which struck down the IRS’s earlier attempt to regulate tax return preparers,” Melancon said in July. “The IRS simply does not have the authority to proceed with the new rule. By doubling the number of categories of tax return preparers to eight, the rule will also confuse consumers. Worse yet, the new rule will do nothing to address the problem of unethical or fraudulent tax return preparers—which should be a top priority.” The AICPA also argued that the IRS had circumvented the normal process of issuing a notice and soliciting comments and feedback before proceeding with the program.
In his ruling Monday, Boasberg said the AICPA lacked standing and would not be harmed by a voluntary program. “Arguing that AICPA and its members have suffered no harm from the program, Defendants IRS and the IRS Commissioner have now moved to dismiss the suit for lack of standing. Agreeing, the Court will grant Defendants’ Motion,” wrote Boasberg.
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