Wright v. Everson
| Decision Date | 15 August 2008 |
| Docket Number | No. 07-13167.,07-13167. |
| Citation | 539 F.3d 1319 |
| Parties | Patrick H. WRIGHT, Plaintiff-Appellant, v. Mark W. EVERSON, Defendant, United States of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Patrick H. Wright, Maitland, FL, pro se.
Andrea R. Tebbets, Teresa T. Milton, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S.
Appeal from the United States District Court for the Middle District of Florida.
Before BIRCH and DUBINA, Circuit Judges, and GOLDBERG,* Judge.
Patrick H. Wright ("Wright") appeals from the district court's grant of summary judgment in favor of the government on his declaratory judgment action. Wright challenged the validity of 31 C.F.R. § 10.7(c)(1)(viii), claiming that it unlawfully and arbitrarily limits his right to represent taxpayers before the Internal Revenue Service ("IRS"). The district court found that 31 C.F.R. § 10.7(c)(1)(viii) is valid, because it is a reasonable regulation promulgated by the IRS pursuant to an express delegation of authority from Congress under 31 U.S.C. § 330(a)(1), and that it is not arbitrary, capricious, or manifestly contrary to the statute. Upon review of the record and the parties' briefs, and with the benefit of oral argument, we AFFIRM.
Wright served as a revenue officer with the IRS from 1981 to 1983. He then became a self-employed tax consultant, and he is registered with the IRS as an unenrolled tax return preparer. Wright provides various services including: preparing and filing tax returns; advising clients engaged in prospective or ongoing tax issues with the IRS; requesting IRS transcripts and interpretations when representing clients before the IRS; filing hardship applications with the Office of the Taxpayer Advocate; filing offers in compromise and refund claims; and representing clients in interviews with the IRS. Wright stated that he has routinely secured powers of attorney and tax information authorizations from his clients, which authorize him to represent his clients before the IRS. Since 1998, however, IRS officers and employees often have refused Wright permission to represent clients in matters before the IRS because he is not a "practitioner" as that term is defined by 31 C.F.R. § 10.2(a).
Through counsel, Wright filed a declaratory judgment action pursuant to 28 U.S.C. § 2201, challenging that 31 C.F.R. § 10.7(c)(1)(viii) unlawfully and arbitrarily limited his ability to represent taxpayers before the IRS. According to Wright, the IRS violated his constitutional due process rights and 26 U.S.C. § 7521 by promulgating, applying, and implementing 31 C.F.R. § 10.7(c)(1)(viii), which restricts to "practitioners" the ability to represent a taxpayer before appeals officers, revenue officers, counsel, or similar officers or employees. Wright contended that 31 C.F.R § 10.7(c)(1)(viii) contravened the statutory requirement of 26 U.S.C. § 7521, enacted in 1988, "that the taxpayer be able to have a person permitted to practice represent him in any interview." R-19 at 6. Wright maintains that a representative may be admitted to practice before the IRS if he has a good character and reputation, the necessary qualifications, and is competent. He sought a declaration that he was entitled to represent taxpayers pursuant to the United States Constitution, 26 U.S.C. § 7521, 31 U.S.C. § 330, the Internal Revenue Code and Regulations, and the Internal Revenue Manual, and that the IRS has unconstitutionally interpreted relevant statutes and enforced certain regulations.
Wright argued that 31 C.F.R. § 10.7(c)(1)(viii) is an interpretive regulation, rather than a legislative regulation, because, while Congress explicitly authorized the Secretary to regulate the practice of persons before the IRS, Congress's delegation was broad and unspecific. As a result, he contended that the regulation was entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), only if it implemented the intent of Congress in a reasonable manner. According to Wright, the regulation was unreasonable because no legitimate basis existed for treating an unenrolled tax preparer differently from other unenrolled representatives. He asserted that none of the restrictions provided in 31 C.F.R. § 10.7(c)(1)(viii) relate to knowledge, education, training, or experience, and the only restriction on other unenrolled representatives required them to have a special relationship with the taxpayer. Wright further noted that 31 C.F.R. § 10.7(c) permits a taxpayer to be represented by an immediate family member, an employer to be represented by an employee, an individual to represent an individual or entity outside the United States when the representation occurred outside the United States, and that these disparities in who could represent a taxpayer were not justified. Wright conceded that under 5 U.S.C. § 500 and 31 U.S.C. § 330, the Secretary of the Treasury ("Secretary") could completely prohibit all persons other than attorneys and certified public accountants ("CPAs") from practicing before the IRS, but he argued that the Secretary had not done so because 26 U.S.C. § 7521 operated "to prevent the Secretary from interfering with the representation of a taxpayer by any person permitted to practice whom the taxpayer authorizes to represent him." R1-19 at 17. Wright posited that if he was found to be incompetent as a representative, the IRS could suspend or disbar him pursuant to 31 U.S.C. § 330(b) and 31 C.F.R. § 10.50, but could not circumvent 26 U.S.C. § 7521 and preclude him from practicing before the IRS in the name of protecting taxpayers.
The government responded that Congress has not spoken on the questions of who, in addition to attorneys and CPAs, can represent a taxpayer before the IRS, and whether and when a tax preparer can represent a taxpayer before the IRS. The government maintained that the Secretary's authority to issue regulations regarding taxpayer representation arose from 31 U.S.C. § 330, not 26 U.S.C. § 7521. Even so, the government argued that under § 7521, the language "any other person permitted to represent the taxpayer before the Internal Revenue Service" does not establish that any person with a written power of attorney can represent a taxpayer before the IRS, and no conflict exists between § 7521 and applicable regulations. The government asserted further that the regulations define "those `other people' who are permitted to engage in such representation." R-21 at 5.
The government asserts that the regulations at issue are legislative, and not interpretive, because Congress expressly granted to the Secretary the authority to regulate who may act as a representative before the IRS in 31 U.S.C. § 330. Further, the government maintains that, if Congress had intended that a taxpayer could choose anyone to represent him before the IRS, Congress would not have delegated authority to the Secretary to regulate practice before the IRS. The government argued that the regulations are not arbitrary or capricious because they help to ensure that taxpayers are represented by qualified individuals, which benefits the taxpayers, the IRS, and the general public. The government acknowledged that some lay representatives, such as an immediate family member or full-time employee, may represent taxpayers during the audit of a return prepared by the representative, but they may not represent a taxpayer in the unfettered manner sought by Wright for himself. The government submitted that the special relationship between these lay representatives and the taxpayer increases the likelihood of fair representation, warned of the dangers of permitting incompetent or unscrupulous lay representatives to set up cottage tax industries, and noted that the current regulatory scheme protects the integrity of the revenue system while protecting the public and providing options to employ less expensive representatives than licensed professionals. The government also noted that Wright could apply to become an enrolled agent, which would permit him to engage in a broader scope of representation.
The district court denied Wright's motion for summary judgment and granted the government's motion for summary judgment. The district court framed the issue by stating that Wright sought a declaration that 31 C.F.R. § 10.7(c)(1)(viii) was void, and the government's interpretation of certain statutes and enforcement of relevant regulations was unconstitutional. The district court found that Congress had not spoken directly on whether an unenrolled agent could represent taxpayers in any proceeding. According to the district court, 31 C.F.R. § 10.7(c)(1)(viii) implements 31 U.S.C. § 330, and the latter grants authority to the Secretary to regulate the practice of representatives. Although 31 U.S.C. § 330 is subject to 5 U.S.C. § 500, section 500 notes only that attorneys and CPAs may represent individuals before the IRS. The district court rejected Wright's argument that 26 U.S.C. § 7521(a)(1) permits an unenrolled agent to represent a taxpayer in any interview.
The district court next addressed whether Congress delegated authority to the Secretary to decide whether an unenrolled agent may represent a taxpayer in any proceeding. The court found that Congress expressly delegated to the Secretary the authority to regulate the practice of taxpayer representatives and, therefore, the challenged regulation was legislative. Accordingly, the court reviewed the regulation to determine whether the regulation was arbitrary, capricious, or manifestly contrary to statute, and not for reasonableness. The court found that the regulation was not arbitrary, capricious, or manifestly contrary to statute because (1) it aimed to protect taxpayers and the integrity of the internal revenue system; (2) a representative could demonstrate his qualifications through the enrollment...
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Wright v. Everson
...Before BIRCH and DUBINA, Circuit Judges, and GOLDBERG,* Judge. PER CURIAM: The previous opinion issued in this case, Wright v. Everson, 539 F.3d 1319 (11th Cir.2008), is hereby VACATED. In its place, on petition for rehearing, we file this revised opinion. The petition for rehearing is othe......