Loving v. Internal Revenue Service
408 U.S. App. D.C. 281
| D.C. Cir. | 2014Background
- In 2011 the Treasury/IRS issued regulations requiring many paid tax-return preparers to register, pass an exam, pay fees, and take continuing education (affecting ~600,000–700,000 preparers).
- The IRS relied on 31 U.S.C. § 330 (authority to “regulate the practice of representatives of persons before the Department of the Treasury”) as statutory basis for the preparer rules.
- Three independent tax-return preparers challenged the rule, seeking declaratory and injunctive relief; the district court enjoined enforcement, concluding § 330 did not authorize regulation of preparers.
- The government appealed; the D.C. Circuit reviewed statutory interpretation de novo and considered Chevron deference principles.
- The court affirmed the district court, holding § 330 does not reasonably extend to ordinary tax-return preparers based on text, statutory context, history, structure, prior agency practice, and the major-questions principle.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 330’s authority to “regulate the practice of representatives of persons before the Department of the Treasury” covers paid tax-return preparers | § 330’s terms ("representatives"; "practice before") exclude preparers because preparers do not act as agents who present cases before the IRS | § 330 is ambiguous and reasonably read to include preparers who prepare and sign returns submitted to the IRS; Chevron deference supports IRS interpretation | Held for plaintiffs: § 330 does not encompass ordinary tax-return preparers; IRS interpretation fails at Chevron step 1 (and is unreasonable at step 2) |
| Whether the statutory phrase “representatives” includes non-agent preparers | Preparers are not agents with authority to bind taxpayers; statutory and regulatory schemes distinguish representation (power of attorney) from preparer assistance | IRS contended common meaning and agency practice permit treating preparers as "representatives" of taxpayers | Held that ordinary meaning, IRS’s own definitions and other IRS rules treat representation as distinct from mere preparation; "representatives" excludes typical preparers |
| Whether “practice…before the Department of the Treasury” covers return preparation (ex parte, self-assessment filing) | Preparing and filing returns is not "practice before" the Department because there is no adversarial presentation or "case" at filing time | IRS argued preparing and signing submissions to the IRS constitutes practice before the Department | Held that "practice before" ordinarily refers to adversarial/representational proceedings (examinations, appeals); preparing returns is not practice before the Department |
| Whether historical, structural, and policy considerations permit a broad reading of § 330 to regulate hundreds of thousands in a major industry | Statutory history, targeted tax-return preparer statutes, long-standing IRS practice, and the major-questions canon show Congress did not delegate such broad authority implicitly | IRS urged deference and claimed regulatory need and statutory ambiguity to justify expansion | Held that history, targeted statutes, prior consistent agency practice, and the major-questions principle foreclose the IRS’s expansive reading; Congress, not the IRS, must enlarge authority |
Key Cases Cited
- Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (established two-step framework for reviewing agency statutory interpretation)
- City of Arlington v. FCC, 133 S. Ct. 1863 (clarified courts must ensure agencies stay within statutory bounds)
- United States v. Galletti, 541 U.S. 114 (describing federal tax system as self-assessment)
- FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (major-questions principle — courts should not lightly infer agencies’ authority over significant economic/political questions)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (agency can change position but the new interpretation must be consistent with statute)
- Judicial Watch, Inc. v. FBI, 522 F.3d 364 (D.C. Cir. standard for de novo statutory interpretation)
- Financial Planning Ass’n v. SEC, 482 F.3d 481 (reliance on long-standing agency practice as indication of proper statutory construction)