IRS Loses in Court

Victory for economic freedom

If you have a neighborhood guy or gal who helps you sort your receipts every April, you'll be happy to know they can breathe a little easier this tax season. In 2012, the Internal Revenue Service (IRS) decided unilaterally to impose new continuing education and licensing requirements on tax prep companies, threatening to put little guys out of business, while protecting giants like H&R Block. The libertarian legal outfit Institute for Justice (I.J.) helped mom-and-pop tax prep firms challenge the new rules.

In February, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the IRS had no legal authority to impose a nationwide licensing scheme on tax-return preparers, affirming the decision of the district court. "Both courts rejected the agency's shocking claim that tax-preparer licensure was authorized by an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses," an I.J. press release explained.

Here's what the D.C. Circuit Court had to say: "The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of [the statute]." Harsh words for a formal court decision.

Had the new rules been enforced, they would have endangered the livelihoods of tens of thousands of small businessmen and entrepreneurs, not to mention the sanity of thousands of people faced with the prospect of prepping their own taxes.