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June 8, 2017

Tax return preparers owed more than $250 million for paying unlawful fees assessed by the IRS and U.S. Treasury Department

A class of U.S. tax return preparers, represented by Motley Rice LLC and co-counsel, received a favorable and precedent-setting decision on June 1, 2017, when U.S. District Judge Royce C. Lamberth struck down a Preparer Tax Identification Numbers (PTIN) fee that the Treasury Department and IRS had for years required tax preparers to pay, finding that the plaintiffs should be issued a full refund.  

The Court’s ruling was issued in response to a plaintiffs’ motion for summary judgment filed in the District of Columbia. The plaintiffs argued the IRS had no authority to charge fees for PTINs and that the class – consisting of more than a million CPAs, tax attorneys, enrolled agents, and non-licensed preparers across the country – should be refunded the roughly $250 million paid since the fees were first implemented in 2010. The litigation is Adam Steele, et al. v. United States of America, Case No. 1:14-cv-01523-RCL. Motley Rice is lead counsel in the class action, and is working with co-counsel Law Office of Allen Buckley LLC, Gupta Wessler PLLC, and Christopher Rizek of Caplin & Drysdale, Chartered. 

“This ruling recognizes this fee as an unlawful attempt to regulate tax preparers without the legal authority to do so.” said Motley Rice attorney Meghan Oliver. “We are pleased that the nation’s tax preparers had the opportunity to be heard and will not be subject to this unlawful fee moving forward.”   

In an amended complaint filed Aug. 7, 2015, the plaintiffs alleged that the PTIN fee was an unlawful attempt by the IRS to regulate the nation’s tax preparers after Congress had repeatedly failed to pass legislation that would grant such licensing authority to the agency. Despite not having the legal backing, the IRS began charging tax preparers an initial registration fee in December 2010 to obtain the PTINs, as well as an annual renewal fee to remain in good standing. Prior to 2010, the IRS provided preparers with a PTIN for free, and that PTINs did not expire or change.

In 2014, in Loving v. IRS, 742 F.3d 1014 (D.C. Cir. 2014), the D.C. Circuit that held that tax return preparation is not subject to regulation. That ruling dismantled much of the IRS’s attempted regulatory scheme, but it did not address the PTIN fees. While the Court’s latest ruling issued by Judge Lamberth agreed with the defendant that the IRS can require tax preparers to obtain PTINs, the Court ruled in favor of the plaintiffs that the agency cannot charge fees to obtain PTINs under the Independent Offices Appropriations Act, 31 U.S.C. § 9701. 

Read the memorandum opinion.

Read the full order.