The American Institute of CPAs is appealing a district court that it lacked standing to sue the IRS about the IRS tax preparer program. Of course, the underlying reason the suit was originally filed is the AICPA claim that the tax preparer program is hurting the accounting group's business by giving the impression that all tax preparers are equal.
The district court in October 2014 held that the AICPA lacked standing to bring the case and dismissed it under Federal Rule of Civil Procedure 12(b)(1).
In its brief filed this week in the U.S. Court of Appeals for the District of Columbia Circuit, the accounting group said the IRS's annual filing season program "harms its members by distorting the competitive marketplace," in addition to saddling them with new administrative tasks.
In its lawsuit, the accounting group focused on the fact that the IRS has said preparers who obtain a record of completion and are listed in an IRS directory "stand out from the competition because they will have a recognizable record of completion that they can show their clients," and that IRS Commissioner John Koskinen has said these preparers "will stand out from the competition."
The AICPA alleged that the program is invalid because the IRS lacks statutory authority to adopt it; because the IRS denied the public its notice and comment rights under the Administrative Procedures Act; and because the guidance related to it is arbitrary and capricious, including the fact that the IRS failed to consider "the important fact that the program will confuse consumers."
Although the program is presented as if it were voluntary, the AICPA said it is de facto mandatory in part because "preparers face overwhelming competitive incentives to comply with it to avoid losing business."
However, the court said the agency's competitive harm argument was without foundation and speculative, and that there is nothing inherently confusing about a new, voluntary designation that allows so-called unenrolled tax preparers—those without CPA, attorney or enrolled agent credentials—to distinguish themselves in relation to other unenrolled preparers.