Listen to the Loving Case Arguments in the U.S. Court of Appeals for the District of Columbia Circuit Website

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Written by Daniel Erasmus | Posted in United States

Gavel[1] I started listening to the arguments presented by the DoJ in the Loving case. See the link below.

My take is that the Appeal judges were really questioning the DoJ/IRS and gave their Counsel a ‘grilling’. Why has it taken a 100 years for the IRS to decide that representatives should include tax return preparers.

They then ‘grill’ Counsel on the qualities/characteristics of tax representers set out in a,b,c and d where DoJ/IRS argues ‘and’ actually means ‘or’.

Take a listen – if you have the time – it’s interesting, and see what you think.

The NATP made the following announcement today:

On Tuesday, September 24, oral arguments were heard in the Loving v. IRS case. The IRS was first to present their arguments, followed by representatives of Loving et al. The IRS finished with a rebuttal. Both sides were questioned by the judges on a variety of topics, including:

Definition and history of the terms “representation” and “presenting a case”

Intent of the regulations

Whether or not paid preparers are the biggest problem of inaccurate prepared returns

Why volunteer preparers (VITA) are not included in the regulations

Power of Attorney requirements

The oral arguments, in its entirety, are available as recordings on the U.S. Court of Appeals for the District of Columbia Circuit website. An opinion is expected to be issued before year-end.

In accordance with Circular 230 Disclosure

Daniel N Erasmus

International Tax Attorney, EA, US Tax Court Practitioner in the USA, Counsel of the High Court in South Africa, adjunct Professor of International Tax at Thomas Jefferson School of Law.

Post Views: 2,175

Daniel Erasmus

September 27, 2013 at 3:49 pm

Here is great summary posted by NAEA earlier today:
E@lert arrived at courtroom 11 of the DC Circuit Court of Appeals, presided over by a three judge panel: Judges Kavanaugh, Williams, and Sentelle. All three, for what it is worth, are GOP appointees, and the latter two are senior status. Ultimately, the oral arguments ended up a cringe-inducing clock cleaning. E@lert understands the kids have a term for such things: epic fail.

While the audio recording is available for those of you who would like to listen to the whole thing, here’s how it played out. IRS was represented by a 30 year DoJ veteran, Gil Rothenberg, chief of the DoJ’s Tax Division appellate section. He was joined at the government’s table by Carol Campbell and Karen Hawkins as well as by the latest US Tax Court nominee, Tamara Ashford (in her current DoJ capacity). Otherwise, the courtroom was crawling with IRS staff and attorneys (and we think we saw former IRS commissioner Larry Gibbs, as well).

Ms. Loving et al. were represented by Dan Alban, of the Institute for Justice.

Before we go into further details, I think it is important to remember what the crux of the issue is (or should have been): does IRS have the authority to regulate all paid return preparers?

IRS needed to demonstrate in the appeals court that regulating paid return preparers through Circular 230 is not regulatory overreach, that it in fact has legal authority to institute the return preparer oversight program. In order to do that, it needed to demonstrate the language at 31 USC § 330 (the code section that creates the right to practice before Treasury) is ambiguous enough to allow for the agency’s interpretation.

Alban needed to impress upon the panel that 31 USC § 330 does not provide the basis to regulate return preparers, that return preparers are not representatives and that preparing returns is not “presenting a case.”

The oral argument is structured to allow each side 15 minutes plus a short period for rebuttal at the end. The government, as the appellant (that is, the side that is appealing the lower court’s decision), presented its arguments first. Rothenberg didn’t make it a minute and a half into his statement before he was broadsided by a fusillade of questions from the judges.

Amongst the questions:
Is there any case language that defines usage of the word “representative” to characterize the function of filling out a form?
Is there any usage of the terms “the case” or “representative” in public discourse that includes return preparation?
If IRS is trying to stop bad returns, why does the regulation apply only to paid preparers?
If the biggest problem is paid preparers, how does IRS know this to be true?
Isn’t Circular 230 only for advocacy, for standing in the place of taxpayers?
Why doesn’t return preparation require a Form 2848?
Why did it take IRS almost 130 years (since the original 1884 statute) to exercise its authority to regulate return preparers?
The responses, in the main, appeared unpersuasive to the panel of judges.
Then Alban took the microphone for his 15 minutes. He started strongly, asserting (or, more accurately, reasserting, as this has been his argument from the time he initially filed the case) Congress never gave IRS authority to regulate preparers and IRS cannot give itself authority to do so.

Alban argued that IRS’ position is essentially “anything that is not forbidden is allowed” (note to readers: if the panel agrees with this, IRS is sunk). He also stated:

1) Tax preparers are not representatives;
2) Preparing a return is not presenting a case.

Possibly most interesting was an interchange between Alban and Judge Kavanaugh. Kavanaugh stated IRS is arguing that 31 USC § 330 is ambiguous — so why does Ms. Loving think the language is not ambiguous?

Rothenberg, in attempting to answer the Judges’ questions, never found his way back to what we can only presume was an argument that indicated in some form or fashion that IRS was not overreaching its authority. Interestingly, he also seemed to miss a few opportunities to score meaningful points:

1) The simple act of preparing a return created limited practice rights: prior iterations of Circular 230, at §10.7(c)(1)(viii) specified “an individual who prepares and signs a taxpayer’s tax return as the preparer…may represent the taxpayer before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service…”

2) Return preparation is specifically permitted to all, not restricted to Circular 230: until 2011, Circular 230 included §10.7(e), which specified “any individual may prepare a tax return…” Why would IRS state it was not regulating return preparation with Circular 230 unless it believed it had the right to do so?

Alban suggested that the plain meaning of the words leads one to the conclusion that preparers are not representatives; preparers are merely saying the return is accurate. Preparing a return is offering a service, not representation per se. Further, preparers cannot sign a return on behalf of a client.

While one would have been hard-pressed to find someone leaving the court room believing that it was a good day for IRS, we all need to remember:

1) Judges tend to pick on weaknesses in arguments, not to discuss the points with which they agree;
2) The oral argument does not tell all.

We quite possibly will see a decision from the court by the end of the year. The decision is what matters, not the oral argument.

Still, given the tough draw (the judges, particularly Sentelle, are not known for taking positions friendly to the one IRS is taking) and the oral arguments, it appears the odds (at least for the moment) are not with the government.

1 comment on “Listen to the Loving Case Arguments in the U.S. Court of Appeals for the District of Columbia Circuit Website”

Daniel Erasmus
September 27, 2013 at 3:49 pm
Here is great summary posted by NAEA earlier today:
E@lert arrived at courtroom 11 of the DC Circuit Court of Appeals, presided over by a three judge panel: Judges Kavanaugh, Williams, and Sentelle. All three, for what it is worth, are GOP appointees, and the latter two are senior status. Ultimately, the oral arguments ended up a cringe-inducing clock cleaning. E@lert understands the kids have a term for such things: epic fail.

While the audio recording is available for those of you who would like to listen to the whole thing, here’s how it played out. IRS was represented by a 30 year DoJ veteran, Gil Rothenberg, chief of the DoJ’s Tax Division appellate section. He was joined at the government’s table by Carol Campbell and Karen Hawkins as well as by the latest US Tax Court nominee, Tamara Ashford (in her current DoJ capacity). Otherwise, the courtroom was crawling with IRS staff and attorneys (and we think we saw former IRS commissioner Larry Gibbs, as well).

Ms. Loving et al. were represented by Dan Alban, of the Institute for Justice.

Before we go into further details, I think it is important to remember what the crux of the issue is (or should have been): does IRS have the authority to regulate all paid return preparers?

IRS needed to demonstrate in the appeals court that regulating paid return preparers through Circular 230 is not regulatory overreach, that it in fact has legal authority to institute the return preparer oversight program. In order to do that, it needed to demonstrate the language at 31 USC § 330 (the code section that creates the right to practice before Treasury) is ambiguous enough to allow for the agency’s interpretation.

Alban needed to impress upon the panel that 31 USC § 330 does not provide the basis to regulate return preparers, that return preparers are not representatives and that preparing returns is not “presenting a case.”

The oral argument is structured to allow each side 15 minutes plus a short period for rebuttal at the end. The government, as the appellant (that is, the side that is appealing the lower court’s decision), presented its arguments first. Rothenberg didn’t make it a minute and a half into his statement before he was broadsided by a fusillade of questions from the judges.

Amongst the questions:
Is there any case language that defines usage of the word “representative” to characterize the function of filling out a form?
Is there any usage of the terms “the case” or “representative” in public discourse that includes return preparation?
If IRS is trying to stop bad returns, why does the regulation apply only to paid preparers?
If the biggest problem is paid preparers, how does IRS know this to be true?
Isn’t Circular 230 only for advocacy, for standing in the place of taxpayers?
Why doesn’t return preparation require a Form 2848?
Why did it take IRS almost 130 years (since the original 1884 statute) to exercise its authority to regulate return preparers?
The responses, in the main, appeared unpersuasive to the panel of judges.
Then Alban took the microphone for his 15 minutes. He started strongly, asserting (or, more accurately, reasserting, as this has been his argument from the time he initially filed the case) Congress never gave IRS authority to regulate preparers and IRS cannot give itself authority to do so.

Alban argued that IRS’ position is essentially “anything that is not forbidden is allowed” (note to readers: if the panel agrees with this, IRS is sunk). He also stated:

1) Tax preparers are not representatives;
2) Preparing a return is not presenting a case.

Possibly most interesting was an interchange between Alban and Judge Kavanaugh. Kavanaugh stated IRS is arguing that 31 USC § 330 is ambiguous — so why does Ms. Loving think the language is not ambiguous?

Rothenberg, in attempting to answer the Judges’ questions, never found his way back to what we can only presume was an argument that indicated in some form or fashion that IRS was not overreaching its authority. Interestingly, he also seemed to miss a few opportunities to score meaningful points:

1) The simple act of preparing a return created limited practice rights: prior iterations of Circular 230, at §10.7(c)(1)(viii) specified “an individual who prepares and signs a taxpayer’s tax return as the preparer…may represent the taxpayer before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service…”

2) Return preparation is specifically permitted to all, not restricted to Circular 230: until 2011, Circular 230 included §10.7(e), which specified “any individual may prepare a tax return…” Why would IRS state it was not regulating return preparation with Circular 230 unless it believed it had the right to do so?

Alban suggested that the plain meaning of the words leads one to the conclusion that preparers are not representatives; preparers are merely saying the return is accurate. Preparing a return is offering a service, not representation per se. Further, preparers cannot sign a return on behalf of a client.

While one would have been hard-pressed to find someone leaving the court room believing that it was a good day for IRS, we all need to remember:

1) Judges tend to pick on weaknesses in arguments, not to discuss the points with which they agree;
2) The oral argument does not tell all.

We quite possibly will see a decision from the court by the end of the year. The decision is what matters, not the oral argument.

Still, given the tough draw (the judges, particularly Sentelle, are not known for taking positions friendly to the one IRS is taking) and the oral arguments, it appears the odds (at least for the moment) are not with the government.