200 F. Supp. 3d 217
D.D.C.2016Background
- Plaintiffs are compensated tax return preparers who paid initial and/or renewal PTIN (Preparer Tax Identification Number) user fees charged by the IRS since 2010 and seek declaratory relief and restitution (refund of fees).
- Treasury/IRS regulation required preparers to obtain a PTIN and pay a user fee; fees were initially ~$64.25 (2010) and later reduced by temporary regulation (2015).
- Plaintiffs allege the IRS lacks authority to charge the PTIN fee or, alternatively, that the fee exceeds the amount permitted by 31 U.S.C. § 9701 (excessive user fee).
- Plaintiffs moved to certify a class: “All individuals and entities who have paid an initial and/or renewal fee for a PTIN” (with limited exclusions), proposing a hybrid certification (Rule 23(b)(2) for declaratory relief; 23(b)(3) for monetary relief).
- The court initially certified the class only as to declaratory relief but denied certification for restitution because it questioned whether the APA waived sovereign immunity for monetary relief.
- On reconsideration, the court held that the APA waives sovereign immunity for plaintiffs’ restitution claim (following America’s Community Bankers v. FDIC) and certified the class for both declaratory and monetary relief (23(b)(2) for declaratory; 23(b)(3) for restitution).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the APA waives sovereign immunity for plaintiffs’ request to recover PTIN fees (restitution) | Plaintiffs: refund of improperly collected fees is equitable "restitution," not money damages, so §702 waives immunity | United States: recovery of paid fees is compensatory money damages outside APA waiver | Held: APA waiver applies—refund request is restitution (equitable), following America’s Community Bankers; court has jurisdiction under APA |
| Whether class certification is appropriate for declaratory relief (Rule 23(b)(2)) | Plaintiffs: IRS acted on grounds generally applicable to class; class cohesiveness exists | United States: heterogeneity among attorneys/CPAs/enrolled agents/unlicensed preparers defeats cohesion | Held: Class certified under 23(b)(2) for declaratory relief; IRS’s uniform fee/cost basis supports commonality and cohesion |
| Whether class certification is appropriate for monetary relief (Rule 23(b)(3)) | Plaintiffs: IRS treats cost of issuing PTIN uniformly; class-wide issues predominate | United States: individual issues (different subgroups’ circumstances) predominate | Held: Class certified under 23(b)(3) for restitution; class-wide predominance satisfied because fee cost is uniform |
| Whether America’s Community Bankers (and related precedent) controls characterization of requested relief | Plaintiffs: America’s Community Bankers requires treating statutory refunds as specific equitable relief | United States: tries to distinguish America’s Community Bankers as limited to ongoing-relationship adjustments or injunctive relief | Held: Court finds America’s Community Bankers controlling and rejects government’s distinctions; refund is specific equitable relief |
Key Cases Cited
- America’s Community Bankers v. FDIC, 200 F.3d 822 (D.C. Cir. 2000) (refunds of improperly collected government assessments characterized as specific equitable relief under the APA)
- Bowen v. Massachusetts, 487 U.S. 879 (U.S. 1988) (distinguishing money damages from equitable relief; reimbursement to restore plaintiffs to what they were entitled to)
- Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (U.S. 1998) (subject-matter jurisdiction is threshold issue)
- Md. Dep’t of Human Res. v. Dep’t of Health & Human Servs., 763 F.2d 1441 (D.C. Cir. 1985) (framework for distinguishing specific relief from money damages adopted in Bowen)
- Webman v. Fed. Bureau of Prisons, 441 F.3d 1022 (D.C. Cir. 2006) (consent of the United States to suit is a jurisdictional prerequisite)