I think I have
been insulted.
I am reading
this morning that the Court of Appeals for the D.C. Circuit is hearing the IRS
appeal of the Loving decision.
That decision concerned the recent effort by the IRS to regulate tax
preparers, and the IRS lost the case. There were three parts to the IRS effort:
- a unique preparer identification number, called a PTIN (“pea tin”). The PTIN would allow – in theory - the IRS to track which individuals prepared which returns. I say “in theory” because it is not uncommon for larger returns to have two or more preparers and one or more reviewers. Traditionally the highest-ranking last person in the chain is considered the official preparer, but the IRS did not write its regulations that way.
- a competency test. CPAs, enrolled actuaries, attorneys and enrolled agents were exempt, as their credentialing already includes a competency test.
- a continuing education requirement. Tax laws change frequently, so the IRS thought that continuing education would be a good idea. It is.
Here is the
rub: where does the IRS get the authority to make these proclamations? I know
it sounds a bit quaint to talk about “government of laws rather than of men” in
the current political environment, but there are a few sticklers out there who still
believe in the concept. One of them was Judge Boasberg in the Loving
decision.
Yesterday the
IRS trotted out its attorneys, arguing that they have the right to regulate whatever
they want under the “Horse Act of 1884.” Folks, that is “18” 84.
Do you
remember the following words?
The Congress shall have power to lay and collect taxes on
incomes, from whatever source derived, without apportionment among the several
States, and without regard to any census or enumeration.”
This is the 16th amendment, creating
the income tax and ratified in February 1913. That is “19”13. Which comes after
“18”84, for most people. Let’s be blunt here: how can a law from the 1800’s
give the IRS any authority over income tax preparers when the income tax was
not even created until 1913?
I have to
admit, I had to look up the Horse Act of 1884. We must have missed that bright
shiny in high school American History. After the Civil War, people brought
claims against the U.S. for dead or missing horses. Makes sense, as horses were
required to work the farm or for transportation, and their loss would have been
keenly felt. Always seeking a vacuum, fraudsters soon appeared to help people
press horse claims against the government. Soon all horses were thoroughbreds,
and the government was facing more actions than there were horses lost in the
Civil War. The government realized they were being scammed by con men and, in
defense, starting regulating those people. The government even used the term “enrolled
agent,” a term still used today for a class of preparer who has passed a
competency examination given by the IRS itself.
So the IRS attorneys
are arguing that tax CPAs like me are akin to fraudsters who inflated the value
of dead or missing horses in action against the government following the Civil
War?
As I said, I
think I have been insulted.
I am also
reading that Lois Lerner, the former head of the IRS Exempt Organizations Division,
is retiring. You may remember that she invoked the Fifth Amendment when
appearing before Congress on May 22, 2013. She was the political hack from the
Federal Elections Commission who somehow wound up at the IRS reviewing and
delaying applications from conservative groups, especially Tea Party
organizations, seeking 504(c)(4) status in time for the 2012 presidential
election. Good thing she was there too or the election may have gone a
different way. She was quite happy to initially throw a few Cincinnati IRS employees
under the bus, saying they had gone “rogue.” Later investigation, including e-mails,
put a rest to that lie. Congress could have instead spoken with a few
practicing tax CPAs, and we could have told them the same thing.
She has been
on “administrative” leave since then, drawing an approximate $170,000 salary.
Now she gets to retire. It’s a nice retirement too, as she able to look for
another government position and still collect her retirement pay, estimated over
$50,000 annually.
I would love
a deal like that. Unfortunately, the IRS thinks of me as a con man.