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IRS Lacks Power to License Tax Preparers, Judge Rules

Jan. 19 (Bloomberg) -- The U.S. Internal Revenue Service doesn’t have the authority to license hundreds of thousands of tax preparers, a federal judge ruled, throwing out a regulatory system that the agency was introducing in stages.

The licensing rules are invalid because the IRS stretched a law allowing it to regulate people who “advise and assist persons in presenting their cases” before the agency to cover tax preparers, U.S. District Judge James Boasberg in Washington wrote in a decision yesterday.

“Filing a tax return would never, in normal usage, be described as ‘presenting a case’,” Boasberg said.

The IRS regulations, which had been scheduled to take effect over the next several years, required tax-return preparers to pass a competency test and meet continuing education requirements.

“Congress never gave the IRS the power to license tax preparers,” said Scott Bullock, senior attorney with the Institute for Justice, a nonprofit advocacy group in Arlington, Virginia that brought the case. “If the IRS wants this to happen, it has to come from Congress.”

The IRS retains the authority to investigate and prosecute tax preparers for violations under existing laws, Bullock said.

Dean Patterson, an IRS spokesman, declined to comment on the ruling.

The rule would have covered “600,000 to 700,000 new tax-return preparers who were previously unregulated at the federal level,” Boasberg wrote, citing an agency estimate.

Attorneys, certified public accountants and enrolled agents were exempt from the new requirements.

The case is Loving v. Internal Revenue Service, 12-cv-00385, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Andrew Zajac in Washington at

To contact the editor responsible for this story: Michael Hytha at

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