Summary
The United States Court of Appeals for the District of Columbia Circuit held that 31 U.S.C. § 330 does not authorize the Internal Revenue Service to regulate tax-return preparers through certification, registration fees, and continuing-education requirements. Applying traditional tools of statutory interpretation and the Chevron framework, the court concluded that tax-return preparers are not representatives who practice before the Treasury Department within the meaning of the statute. The court affirmed the district court’s judgment permanently enjoining the regulations.
Questions Presented
- Whether 31 U.S.C. § 330 authorizes the IRS to regulate paid tax-return preparers.
- Whether the IRS's interpretation of § 330 survives Chevron step one and, alternatively, Chevron step two.
Holdings
- Section 330 does not authorize the IRS to regulate tax-return preparers because tax-return preparers are not statutory representatives of taxpayers and preparing tax returns is not practicing before the Department of the Treasury.
- The IRS's interpretation fails Chevron step one because § 330 forecloses it and would also fail Chevron step two because it is unreasonable in light of the statute's text, history, structure, and context.
Factual background
In 2011, the IRS issued regulations requiring paid tax-return preparers to register, pay annual fees, pass an initial certification examination, and complete at least fifteen hours of continuing education each year. The IRS estimated that the regulations would apply to 600,000 to 700,000 preparers. Three independent preparers challenged the regulations, arguing that 31 U.S.C. § 330 authorized regulation only of representatives practicing before the Treasury Department and did not reach tax-return preparation.
Procedural history
The United States District Court for the District of Columbia granted summary judgment to the plaintiffs, concluding that the text and context of 31 U.S.C. § 330 unambiguously foreclosed the IRS's interpretation, and permanently enjoined the tax-return-preparer regulations. The IRS's request for a stay was denied by the District Court and then by the Court of Appeals. The Court of Appeals affirmed.