Loving v. Internal Revenue Service, 917 F. Supp. 2d 67

IRS began regulating non-attorney, non-CPA preparers in 2011 via Rule under Circular 230; registration includes fee, exam, and 15 hours of CE annually.
Tax-return preparers are regulated under 31 C.F.R. § 10.3 and 26 C.F.R. § 301.7701-15; the Rule extends coverage to preparers who prepare for compensation.
Plaintiffs are three paid preparers previously unregulated: Loving (Chicago), Kilian (home-based), Gambino (financial planner); they face registration costs and ongoing compliance.
Plaintiffs sued the IRS Commissioners and the United States under APA and Declaratory Judgment Act for lack of statutory authority; they seek injunctive and declaratory relief.
Court analyzes whether § 31 U.S.C. § 330 authorizes regulation of preparers who only prepare and submit returns, not present cases, under Chevron review; holds interpretation foreclosed.
Court grants summary judgment for plaintiffs, declaratory relief, and permanent injunction against enforcement of the Rule against tax-return preparers.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 330 unambiguously forecloses IRS interpretation	Loving argues preparers are not 'representatives' who 'practice' before the IRS	IRS contends preparers fall within 'practice' under § 330	§ 330 unambiguously forecloses IRS interpretation
Chevron step-one applicability given § 330 text	Statutory text context limits agency discretion	Agency’s interpretation should be permissible if reasonable	Court finds § 330 unambiguous at Chevron step one
Impact of broader statutory context on penalties and injunctions	§ 330(b) would allow broad penalties conflicting with Title 26 penalties	§ 330(b) authorizes disbarment and penalties across practice	§ 330(b) does not authorize handling of preparers under § 7407; conflicts with comprehensive Title 26 scheme
Remedies: declaratory judgment and injunction appropriate?	Regulatory regime is invalid and injunctive relief warranted	Remedies limited or unavailable under APA	Declaratory relief granted and permanent injunction issued under four-factor test

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment standard; material facts)
Brown v. Gardner, 513 U.S. 115 (U.S. 1994) (statutory ambiguity context matters)
Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S. Ct. 1670 (U.S. 2012) (statutory interpretation in context)
RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065 (U.S. 2012) (canon of specific vs general in statutory interpretation)
Mayo Foundation for Med. Educ. & Research v. United States, 131 S. Ct. 704 (U.S. 2011) (Chevron step-two permissible construction)
Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044 (D.C. Cir. 1997) (contextual approach to statutory interpretation)
FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (U.S. 2000) (context governs ambiguity and agency interpretation)
Barzingus v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (summary judgment standard analogue in regulatory review)
Cent. Bank & Trust v. First Interstate Bank of Denver, 511 U.S. 164 (U.S. 1994) (legislative history caution; failed proposals not controlling)
Monsanto Co. v. Geertson Seed Farms, 130 S. Ct. 2743 (U.S. 2010) (equitable injunction standards; forward-looking harm)