No Loving for Dead Horses in DC Court of Appeals

While I was enjoying Texas, the DC Circuit Court of Appeals heard the IRS’s appeal of Loving v. IRS. This is the case that stopped the IRS from regulating tax preparers. The IRS argued that the circuit court got the decision wrong; the Institute for Justice (who represented the original plaintiffs) argued that the lower court was right. Just so you know my bias in this matter, I joined an amicus curiea brief supporting the original plaintiffs (Loving, et. al.) in the case. By all accounts things did not go well for the IRS.

When the IRS decided to regulate tax preparers, they had to find justification. Congress must delegate authority for an agency to issue a regulation; if Congress does so, the agency has what is called “Chevron deference” in their regulations. (The “Chevron” comes from a Supreme Court case that established this doctrine.) Based on news reports it wasn’t a good day for the IRS.

The major problem that the IRS has in this case is that the law hasn’t changed recently. Congress didn’t enact a new law in 2010 allowing tax preparer regulation. The IRS found a law written in 1884. Yes, you read that correctly: A law written 30 years prior the 16th Amendment (you know, the one that allows for the IRS) to regulate tax preparers to the IRS. The 1884 law is the “Enabling Act of 1884,” but it’s more popular name (thanks, Kelly Erb) is the Horse Act of 1884. That act related to claims over dead horses from the Civil War. I should point out that this same law allows for Enrolled Agents.

The Oral Arguments are now available; be advised that the mp3 file runs about 45 minutes. My non-lawyer take agrees with all the coverage I’ve seen: The judges had no loving for the IRS’s arguments.

A decision could happen as quickly as two months, or it could be sometime in 2014 before the decision is announced.

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