The IRS didn’t exceed its authority in charging tax return preparers a fee to obtain and renew their preparer tax identification numbers, the U.S. Court of Appeals for the District of Columbia Circuit ruled March 1.
In 2010, the Internal Revenue Service began charging a fee—$50, later lowered to $33—for the unique identifying number that must be listed on any return they prepare. The IRS said the fee would be used to cover costs associated with the PTINs—for example, personnel used to evaluate compliance issues.
A group of tax return preparers filed a class action, arguing that the IRS’s decision to charge the fee was arbitrary and capricious. The U.S. District Court for the District of Columbia agreed and ruled in June 2017 that the agency lacked authority to charge the fee. It ordered the IRS to stop the charge and refund previously collected fees. The IRS appealed.
Vacating the district court, the circuit court panel agreed with the IRS that it had authority under the Independent Offices Appropriations Act to charge a fee. And the agency’s decision wasn’t arbritary and capricious, because the IRS explained the the costs of generating and maintaining PTINs, the panel said.
The circuit court remanded the case with instructions for the district court to assess “whether the amount of the PTIN fee unreasonably exceeds the costs to the IRS to issue and maintain PTINs.”
The ruling returns things to the way they were before, Cindy Hockenberry, director of tax research and government relations at the National Association of Tax Professionals in Appleton, Wis., said.
“Absent any change from Congress to allow the IRS to regulate preparers and have minimum competencies for them, this simply allows the IRS to keep what they collected in the past, and resume doing so,” she said.
“Given the ruling, we would hope Congress would provide the IRS with the authority to regulate and require a minimum level of competency,” Hockenberry said, alluding to the circuit court’s 2014 ruling in Loving v. IRS, which killed the agency’s effort to establish a credentialing and competency-testing system for tax preparers.
Chief Judge Merrick B. Garland and Judges Sri Srinivasan and Patricia A. Millet sat on the panel.
Jonathan E. Taylor represented the tax return preparers. Christopher S. Rizek, another of the group’s attorneys, declined to comment on the decision.
The IRS didn’t respond to a request for comment.
The case is Montrois v. U.S., D.C. Cir., No. 17-05204, 3/1/19.