This is an important case for a number of reasons. First, it shows that once in a while a court will override a government agency. That’s good. Second, it shows that the court doesn’t care how important or powerful (real or perceived) that agency might be. Third, it gives great encouragement to people in the freedom fight who are concerned about the growth of government agencies in general.
The case was simple. From the case itself, we read,
To close a gap in the federal oversight of tax professionals…
We can’t have gaps, no siree. That would be un-American. Often I picture freedom as tiny green shoots forcing their way up through a crack – a gap – in the concrete slab of government, seeking and finding a way to breathe and enjoy a little sunlight.
Anyway, back to the case:
To close a gap in the federal oversight of tax professionals, in 2011 the Internal Revenue Service began regulating hundreds of thousands of non-attorney, non-CPA tax-return preparers who prepare and file tax returns for compensation.
Those are the ones the IRS doesn’t like, operating like that in the free market, “for compensation” no less, and without licenses! Just who do they think they are? The horror!
The new regulations require each such preparer to pass a qualifying exam, pay an annual application fee, and take fifteen hours of continuing-education courses each year.
These requirements must make those who have large practices and can afford the time and the money to keep the IRS happy with such requirements very pleased: it limits their competition, and likely invites them to increase their rates as a result of that reduced competition. Not that they would, you understand, I’m just saying…
More from the case:
Agency action, however, requires statutory authority.
Yup, we have to justify our misbehavior in some way. So here’s what the IRS did:
The IRS interpreted an 1884 statute as enabling these new regulations.
That’s not 1984, that’s 1884! Had to look long and hard to find that, I’ll bet. But, hey, we’ve got to find justification somewhere, somehow.
After looking things over the court, in its 22-page ruling, said to the IRS: Nuts to you! Take a hike!
The lead attorney for the Institute for Justice, Scott Bullock, was understandably delighted:
Through these regulations, the IRS set itself up as king and sought to license hundreds of thousands of tax preparers without being authorized to do so under the law.
This is one decision, of course, and the IRS can appeal it. But it’s a victory for the good guys nevertheless. Justice: 1; IRS: 0.