Federal court strikes down PTIN fees, upholds PTINs: the numbers confer no special benefit to preparers, a district court holds as it orders refunds.

Author:Schreiber, Sally P.
Position:Preparer tax identification numbers
 
FREE EXCERPT

A federal district court held that the IRS has the authority to require tax return preparers to obtain preparer tax identification numbers (PTINs) but that it cannot charge a user fee for issuing them, lhe plaintiffs in the case, tax return preparers, brought a class action suit against the IRS claiming that it lacks legal authority to require preparers to obtain PTINs and to charge a fee for issuing them.

The IRS originally began charging a user fee for issuing a PTIN in connection with its tax return preparer registration program, which required tax return preparers who were not CPAs, attorneys, or enrolled agents to pass an exam and register with the IRS. That program was invalidated in Loving, 742 F.3d 1013 (D.C. Cir. 2014). The fee initially was $64.25 for first-time registration or 163 for renewal (a $50 user fee plus a vendor fee). After Nov. 1, 2015, the fee was $50 (a $33 user fee plus a vendor fee) for both first-time registration and renewal.

Regarding the IRS's authority to require the use of PTINs, the district court applied the standard of review of agency action found in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), and Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983). The court found that the IRS had the authority to require PTINs under Chevron because Sec. 6109(d) specifically and unambiguously gives the IRS the power to require the use of a PTIN. Further, as required by State Farm, the IRS's decision to use PTINs was not arbitrary or capricious, the court held, because "[t]he IRS has articulated satisfactory explanations for its actions" (slip op. at 13).

The plaintiffs argued that the IRS could not charge PTIN fees because a PTIN is not a "service or thing of value," which is required for agencies to validly impose fees (31 U.S.C. [section] 9701). According to the Supreme Court, under the "service or thing of value" requirement, agencies may impose fees for bestowing on individuals special benefits not shared by the general public.

According to the court, because the court in...

To continue reading

FREE SIGN UP