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State Board Report

February 2013

Three tax preparers brought together by the Institute for Justice, an advocacy group, have scored a victory – at least temporarily – against the Internal Revenue Services’ Tax Return Preparers Registration Program. On January 18, U.S. District Judge James E. Boasberg ruled against the IRS and in favor of Giovanni Gambino of Hoboken, NJ, Ernest Killian of Eagle, WI, and Sabrina Loving of Chicago, IL, and enjoined the IRS from enforcing its Registered Tax Return Preparer requirements. However, on February 1 the court modified its order to clarify that the IRS’s requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN) is not affected by this decision. Information about the reopened online PTIN system can be found on

Mr. Gambino, Mr. Killian and Ms. Loving, the tax preparers who filed the suit against the IRS in the U.S. District Court for the District of Columbia (see sbr 5/12), argued that the IRS’s interpretation of an 1884 statute, U.S.C. § 330, giving it the authority to regulate “representatives” who “practice” before it was being incorrectly applied to cover all tax return preparers. Attorneys, CPAs and enrolled agents are otherwise regulated by the IRS.

Judge Boasberg wrote in his decision that he considered Section 330(a)(1) and 330(a)(2) and saw they describe the “practice” of “representatives” is to “advise and assist persons in presenting their cases.”

The judge concluded in his decision: “Filing a tax return would never, in normal usage, be described as ‘presenting a case.’ At the time of filing, the taxpayer has no dispute with the IRS; there is no ‘case’ to present. This definition makes sense only in connection with those who assist taxpayers in the examination and appeals stages of the process.”

In granting the plaintiffs’ motion for summary judgment, Judge Boasberg stated: “With an invalid regulatory regime on the IRS’s side of the scale and a threat to plaintiffs’ livelihood on the other, the balance of hardships tips strongly in favor of plaintiffs. Finally, the public interest would be served by a permanent injunction because the IRS’s new Rule is ultra vires. The Court will therefore grant permanent injunctive relief as well.” (Civil Action No. 12-385 (JEB) U.S. District Court for the District of Columbia).

According to a statement released by the IRS: “The IRS continues to have confidence in the scope of its authority to administer the program and is working with the Department of Justice to address all options, including a planned appeal.”

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