On Feb 11th in the Washington, DC Court of Appeals according to the Examiner in Washington, the court ruled and against the Obama administration, specifically on a regulation on tax preparer’s. The IRS asserted regulatory authority over tax preparer’s and the background (always interesting the behind the scenes BS) information is this:
Obama names the former H&R Block CEO Mark Ernst as the deputy IRS Commissioner. Ernst then turned around and crafted new regulations for tax preparers, of which he was the CEO of one company that does that. The rules he drafted required paid tax preparers to be licensed, pay fees, undergo federally approved training every year. No big deal for H&R Block! But anybody trying to break into the business and compete with H&R Block, it could be a major problem.
So Ernst goes into the government, promulgates rules that are going to make it easier for his former company to make even more money and harder for people to get into the business of tax preparing and compete with H&R Block. Using the government to feather the nest of this private corporation brings up two legal issues: ethics and authority.
Obama appointees were barred from “participating in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients including regulations and contracts.” In other words, if you take an appointment in the Obama administration, and this is true of every administration, you have got to stay away from conflicts of interest. H&R Block supplied the CEO for the deputy IRS Commissioner slot, and then supported, of course, the regulations when they were published in the Federal Register for public comment. Ernst was only an assistant IRS Commissioner for two years, he was there to write the regulations and then leave- go back to CEO of H&R Block.
The problem here illegally is, that Congress never gave the IRS authority to regulate tax preparers. There is no legal authority for this. The IRS cannot just regulate somebody without Congress giving them the power to do it, otherwise we don’t have a Constitution at all we just have a tyranny. Although this has now become the order of the day in the Obama administration, they just do whatever they want. Pretending that a federal law exists giving you the authority to regulate tax preparers doesn’t make it so.
The IRS said wait a minute there is a congressional law that authorizes this. It was passed in 1884. Just to give you some background, in case you didn’t catch that the first time around, in 1884 there was no income tax, there was no IRS.
So knowing that now, the 1884 law says that the treasury has authority to “regulate the practice of representatives of persons before the Department of the Treasury.” For the first hundred twenty five years of its existence, anyone who knew about this law knew what it meant. The treasury department and its divisions, including the IRS, could set standards for tax lawyers, accountants or agents who represent taxpayers in battles with the IRS in an audit, or Tax Court case or any appeal. It was very clear that was what it covered. It did not cover somebody who was not battling the IRS but simply helping you prepare your tax return.
The Institute for Justice files suit on behalf of these ‘mom and pop’ tax preparers, arguing that the IRS cannot make regulations on an issue that Congress did not authorize them to make. AND THEY WON!
The IRS of course appealed. The appeals court handed down a unanimous decision on 2/13/14. The court ruled that the IRS has no authority to regulate tax preparers “nothing in the statute’s text or the legislative record contemplates the vast expansion of the IRS’s authority.”
Obama lost, the IRS lost, YOU WON ONE!