Two days ago, the U.S. Court of Appeals heard oral arguments from IRS attorneys appealing its authority to regulate non-attorney, non-CPA tax return preparers. The regulation would require tax preparers to pass an annual exam, pay an annual fee, and take 15 hours of continuing-education courses every year.
A decision from the Appeal Court will be handed down in a few months and the judges gave no clear sign of how they will rule. But they did seem unsure of why the IRS cited an 1884 law to defend its intent to regulate tax return preparers.
The “Enabling Act of 1884” also referred as “Horse Act of 1884” was passed by congress following the Civil War to stop suspicious claims for highly valuable property, often dead or missing horses. It had become evident that claims values were being fraudulently inflated.
As a result, the government granted the Secretary of Treasury the authority to regulate the admission of attorneys and agents who represented claimants before the Treasury Department and to take disciplinary action against those who failed to comply with the regulations or who were incompetent.
After the oral arguments were presented, the court was mostly skeptical of the fact that the statute at issue was passed originally in 1884, yet 130 years went by without the IRS proclaiming the authority to regulate paid return preparers under that statute.
The case has broad implications for the tax industry. But its outcome will mainly affect the ability to work for tens of thousands of tax preparers as well as access to affordable tax return preparation services to millions of low-income taxpayers.
What is your take on this issue? Do you think the Internal Revenue Service has the right to regulate tax preparers?