Am. Inst. Accountants v. Comm'r
| Decision Date | 14 August 2018 |
| Docket Number | No. 16-5256,16-5256 |
| Parties | AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, APPELLANT v. INTERNAL REVENUE SERVICE AND JOHN A. KOSKINEN, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF INTERNAL REVENUE SERVICE, APPELLEES |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from the United States District Court for the District of Columbia
Douglas R. Cox argued the cause for appellant. With him on the briefs were Russell B. Balikian and Matthew S. Rozen.
Gilbert S. Rothenberg, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Francesca Ugolini, Jonathan S. Cohen, and Bethany B. Hauser, Attorneys.
Noel L. Allen was on the brief for amicus curiae The National Association of State Boards of Accountancy in support of neither party.
Before: ROGERS and GRIFFITH, Circuit Judges, and GINSBURG, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge GINSBURG.
GINSBURG, Senior Circuit Judge: This case concerns a longstanding Internal Revenue Service effort to address perceived problems in the market for tax preparation services. In 2011, the IRS adopted a sweeping rule that would have regulated all tax preparers for the first time. That rule was challenged and the bulk of it was enjoined by the district court in Loving v. IRS, 917 F. Supp. 2d 67 (D.D.C. 2013) (Loving I), vacated in part, 920 F. Supp. 2d 108 (D.D.C. 2013) (Loving II), affirmed, 742 F.3d 1013 (D.C. Cir. 2014) (Loving III).
In the wake of the Loving litigation, the IRS instituted a voluntary scheme known as the Annual Filing Season Program. See REV. PROC. 2014-42, 2014-29 I.R.B. 192 (2014). The Program allows certain tax preparers, known as "unenrolled preparers" to distinguish them from those "enrolled" to practice before the IRS, to get a limited right to represent taxpayers in IRS audits of tax returns. See id. § 2.
The American Institute of Certified Public Accountants (AICPA) challenged the Program in district court, asserting violations of the Administrative Procedure Act (APA). The district court initially dismissed the case for lack of constitutional standing. Am. Inst. of Cert. Pub. Accnts. v. IRS, No. 14-1190, 2014 WL 5585334 (D.D.C. Oct. 27, 2014) (AICPA I). We reversed. Am. Inst. of Cert. Pub. Accnts. v. IRS, 804 F.3d 1193 (D.C. Cir. 2015) (AICPA II). On remand the IRS moved for judgment on the pleadings, arguing that the AICPA lacked statutory standing, and the district court granted the motion. Am. Inst. of Cert. Pub. Accnts. v. IRS, 199 F. Supp. 3d 55 (D.D.C. 2016) (AICPA III). The AICPA now appeals.
We reverse, concluding the AICPA has constitutional and statutory standing to challenge the validity of the Program because its members employ unenrolled preparers. Continuing to the merits, we hold the Program does not violate the APA in any of the ways the AICPA alleges.
There are four categories of persons who may assist taxpayers with their returns: attorneys, certified public accountants (CPAs), IRS-credentialed preparers called "enrolled agents," and unenrolled preparers. AICPA III, 199 F. Supp. 3d at 57. Unenrolled preparers were not subject to any licensing requirements until 2011, when the IRS adopted a rule requiring them to become "registered tax return preparers," which entailed paying a fee, passing "a one-time competency exam," and completing a prescribed course of continuing education each year. See Regulations Governing Practice Before the Internal Revenue Service, 76 Fed. Reg. 32,286, 32,287 (June 3, 2011) (final rule); 31 C.F.R. §§ 10.4(c), 10.5(b)-(c), 10.6(e)(3) (2012).
The district court invalidated that rule in Loving I because the IRS lacked statutory authority to regulate unenrolled preparers. 917 F. Supp. 2d at 73-79. That court enjoined enforcement of the rule, id. at 80-81, but stayed the injunction in part to allow the IRS to continue operating "its testing and continuing-education centers" as long as the IRS did not require any tax preparer to take a test, enroll in continuing education, or pay a fee for either of those services. Loving II, 920 F. Supp. 2d at 112. We affirmed the judgment of the district court, Loving III, 742 F.3d 1013, and the IRS opted to continue with testing and continuing education as parts of a voluntary Annual Filing Season Program.
The IRS established the Program by issuing Revenue Procedure 2014-42, 2014-29 I.R.B. 192 (2014), which it did without notice and comment. Although open to all categories of tax preparers, the program is designed for unenrolled preparers.
The Program grants an annual "Record of Completion" to any participant who has obtained a preparer tax identification number, taken the annual "federal tax filing season refresher course," passed a comprehension test, completed a minimum of eighteen hours of continuing education, and "consent[ed] to be subject to the duties and restrictions relating to practice before the IRS in subpart B and section 10.51 of Circular 230 for the entire period covered by the Record of Completion." Id. § 4.05(1)-(4).
The IRS offers two incentives to participate in the Program. First, the IRS lists unenrolled agents with a Record of Completion in its online directory of tax preparers alongside attorneys, CPAs, and enrolled agents. Second, the IRS gives them the "limited practice right" to represent a taxpayer in the initial stages of the audit of a return he or she prepared; for this the unenrolled agent must have a Record of Completion for both the year of the return and the year the IRS initiated the audit. Id. § 6. Before the Program was established, all unenrolled agents had this limited practice right.
The AICPA brought a suit challenging the authority of the IRS to conduct the Program. The district court initially dismissed the case on the ground that the AICPA lacked constitutional standing. AICPA I, 2014 WL 5585334. We reversed and remanded the case to the district court, holding the AICPA had constitutional standing as the representative of competitors to unenrolled agents with a Record of Completion. AICPA II, 804 F.3d 1193. We did not address the other standing theories advanced by the AICPA. See id. at 1199.
On remand the IRS argued the AICPA did not have statutory standing because it did not come within the zone of interests protected or regulated by the relevant statute. The district court agreed, holding: (i) "the competitive-harm-by-brand-dilution injury is . . . the only relevant 'grievance' for determining whether [the] AICPA satisfies the zone-of-interests test," AICPA III, 199 F. Supp. 3d at 64; (ii) the relevant statute for the zone of interest test is the substantive statute under which the IRS claims authority, viz., 31 U.S.C. § 330(a) and portions of § 330(b), rather than the APA, AICPA III, 199 F. Supp. 3d at 66; (iii) the Congress enacted §§ 330(a) and (b) "to protect consumers in need of tax services," id. at 67; and (iv) the AICPA is not a suitable challenger for APA purposes because its interest "in avoiding intensified competition as a result of the [challenged regulation]" sets it on a "collision course with Congress's interest in safeguarding consumers." Id. at 69 (internal quotation marks omitted). It therefore entered judgment on the pleadings for the IRS and dismissed the case for want of statutory standing pursuant to Federal Rule of Civil Procedure 12(c). Id. at 73.
We review the judgment of the district court de novo. Fox v. District of Columbia, 794 F.3d 25, 29 (D.C. Cir. 2015). As explained below, we address both the AICPA's standing to bring this challenge and the underlying merits.
Because the AICPA is an association, its standing turns upon whether at least one of its members has the requisite standing "to sue in her or his own right." AICPA II, 804 F.3d at 1197 (quoting Am. Library Ass'n v. FCC, 401 F.3d 489, 492 (D.C. Cir. 2005)). The AICPA asserts it has standing for four independent reasons, any one of which is sufficient to satisfy the constitutional and statutory standing tests.
First, the AICPA argues its members suffer harm as competitors because the Program created a new credential, the Record of Completion, that "confuses" consumers and causes them to patronize unenrolled preparers instead of licensed CPAs. Second, the AICPA argues its members suffer harm as employers because the Program withdrew the limited practice right unenrolled preparers had previously enjoyed and therefore limits how its members may use the unenrolled preparers in their employ. Third, the AICPA argues its members suffer harm as employers because the Program imposed new supervisory requirements on firms that employ unenrolled preparers who hold a Record of Completion. Fourth, the AICPA argues its members incur compliance costs to the extent they absorb the time and cost of unenrolled preparers in their employ who choose to participate in the Program.
The IRS no longer disputes that the AICPA has constitutional standing based upon its competitive injury. It argues instead the AICPA cannot establish statutory standing on any of its proffered theories because neither it nor its members are regulated or protected by the applicable statute. As explained below, we think it clear that a member of the AICPA incurs a supervisory burden that confers both constitutional and statutory standing.1
Constitutional standing is "an indispensable part of the plaintiff's case" that must persist through the "successive stages of the litigation." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); see Univ. Med. Ctr. of S. Nevada v. Shalala, 173 F.3d 438, 441-42 (D.C. Cir. 1999) (). In order to satisfy "the irreducible constitutional minimum of standing," a party must (1) have suffered an injury in fact, (2)...
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