An Appellate Court has overturned a ruling made last year that stopped the American Institute of Certified Public Accountants (AICPA) from challenging the Internal Revenue Service’s (IRS) new voluntary program to “credential” tax preparers.
Initially, U.S. District Court Judge James E. Boasberg (yes, the same Judge Boasberg who wrote the Loving opinion that barred the IRS from regulating tax preparers) dismissed the lawsuit brought against the IRS by the AICPA. The AICPA filed suit after the IRS announced the implementation of its Annual Filing Season Program (AFSP). Under the AFSP, an uncredentialed tax preparer (meaning, basically, those without initials like JD, LLM, CPA, or EA at the end of their names) may opt to register with the IRS, take 18 hours of continuing education each year, and sit for a comprehension test of 100 questions; in exchange, the preparer would receive a certificate of completion and be listed on the IRS website.
The AICPA had initially called the program “unlawful and improper” and sent a strongly worded letter of opposition to IRS Commissioner Koskinen (downloads as a pdf). The organization voiced concern that the program “would cause significant legal problems that may ultimately frustrate the IRS’ goals, confuse the public, and lead to litigation” and alleged that the IRS did not have the statutory authority to move ahead with the program. In July 2014, the AICPA officially filed suit (downloads as a pdf) to stop the program, calling it “an illegitimate exercise of government power” and saying that it “also represents an impermissible end run around Loving v. IRS.”
The IRS argued that the case should be dismissed for lack of standing. Standing is a legal term which alludes to the ability of a party to bring a suit against the other party. Not everyone is entitled to challenge every action by bringing suit in court: can you imagine what a muddle that would make of the legal system? A party must prove that they have both the right to bring a lawsuit and that have brought the lawsuit in the right place.
To have standing in federal court, the plaintiff must have suffered an “injury in fact” – meaning an actual or imminent injury and not one that is hypothetical. Additionally, “there must be a causal connection between the injury and the conduct” and it must be “likely” that the injury would be remedied with a favorable decision of the court. If the plaintiff meets all of that criteria, the case can go forward: if the plaintiff fails on any one of those criteria, there’s no standing.
Judge Boasberg initially argued that the AICPA did not meet the criteria and thus, denied standing. The AICPA was “surprised and disappointed by the ruling” and eventually appealed. The appeal was heard at the Court of Appeals for the DC Circuit Court in front of Circuit Judge Tatel and Senior Circuit Judges Edwards and Ginsburg.
The Appellate Court found, contrary to Judge Boasberg’s ruling, that the AICPA “has adequately alleged the program will subject its members to an actual or imminent increase in competition” and thus “it therefore has standing to pursue its challenge.” The IRS credential from the AFSP is intended to make preparers “stand out from the competition by giving them a recognizable record of completion that they can show to their clients” (per Commissioner Koskinen). However, the AICPA says that this will “dilute the value of a CPA’s credential in the market for tax-return-preparer services” and permit unenrolled preparers to more effectively compete with and take business away from presumably higher-priced CPAs. The Appellate Court found that the AFSP is “clearly intended to offer competitive benefits to those unenrolled preparers who participate in the Program.” That competition could cause harm and therefore, the court reversed the lower court’s decision and agreed that the AICPA has standing to proceed.
You can read the opinion here.
To be clear, that doesn’t mean that AICPA has won. They didn’t have to prove their case just yet. Procedurally, they only needed to make the argument that their argument was sufficient enough to move forward. That means there’s another challenge yet to come: now they need to prove their case. Stay tuned.
