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“The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of” the law. The Court of Appeals for the District of Columbia Circuit used these words in a Feb. 11 ruling that struck down an Obama administration regulation on tax preparers.
Federal judges should copy this phrase and be ready to paste it into rulings — sometimes replacing “IRS” with “Health and Human Services” — as President Obamacontinues to act as legislator in chief, making and amending laws as he sees fit, separation of powers be damned.
In the same week Obama illegally delayed the employer mandate and out of thin air created a bizarre loyalty oath to administer to companies suffering from Obamacare, a federal court unanimously smacked down his IRS for executive overreach.
The latest IRS case wraps in a tight ball all of the defects of Obama’s governing style — the constantly revolving door between private and public sectors, a rogue IRS, skirted ethics rules, burdensome regulations that crush Mom and Pop and favor big business, and, above all, the usurpation of Congressional prerogatives by the executive branch.
In 2009, Obama named former H&R Block CEO Mark Ernst as deputy IRS commissioner. Ernst helped lead the crafting of new regulations for tax preparers. The rules required paid tax preparers to be licensed, pay fees and undergo federally approved training every year. This was no big deal for big tax-prep companies or full-time preparers, but it would drive out of business the Mom and Pop tax preparers who hang out a shingle a few weeks a year and make a few thousand dollars helping people with their taxes.
Besides the problematic corporatism of the rules, there were two legal issues here: ethics and authority. Obama appointees were barred from “participat[ing] in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.” H&R Block, of course, was the leading tax preparer — it supported the new rules.
Obama skirted this rule by hiring Ernst as a “civil servant” rather than a political appointee. (Ernst’s civil service career didn’t last two years.)
More importantly, Congress never gave the IRS the authority to regulate tax preparers. It just didn’t. To create these new regs, the Obama administration had to do what it has done with Obamacare again and again: Pretend federal law says something it doesn’t.
The IRS is part of the Treasury Department. Congress in 1884 gave Treasury authority to “regulate the practice of representatives of persons before the Department of the Treasury.”
Everyone who has ever spoken or written about this law for its first 125 years of existence understood its meaning: Treasury and its divisions (such as the IRS) could set standards for the tax lawyers, accountants or agents who represent taxpayers in battles with the IRS: audits, tax-court cases and appeals.
“Just preparing a tax return [or] furnishing information at the request of the IRS … is not practice before the IRS,” the IRS wrote in 2009, before Ernst and crew had finished the new regs.
More obviously, a paid tax-preparer is not “representing” a taxpayer by helping him fill out his tax forms.
The libertarian public-interest law firm Institute for Justice filed suit on behalf of a couple of Mom and Pop tax preparers, arguing that the IRS can’t make regulations Congress didn’t authorize the IRS to make.
In 2013, IJ and the small preparers won in district court — a defeat for the IRS, H&R Block and Intuit, maker of TurboTax.
The IRS appealed to the circuit court, which handed down a unanimous decision Tuesday. The court ruled that the IRS has no authority to regulate tax preparers: “[N]othing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority,” the court wrote.
The Obama administration’s argument was absurd, and the unanimous opinion was appropriately blistering: “In light of the text, history, structure, and context of the statute,” judge Brett Kavanaugh wrote, “it becomes apparent that the IRS never before adopted its current interpretation for a reason: It is incorrect.”
But this is what the Obama administration does. Frustrated that Republicans control the House and can filibuster in the Senate, Obama has tried to become a superlegislator. Obama has — illegally — delayed the employer mandate twice, discarded the income-verification requirement for exchange subsidies, extended subsidies to state-run exchanges and allowed employer subsidies for congressional staff. And that’s just on Obamacare.
Maybe the circuit court ruling on the tax-prep rules will remind Obama he’s not a lawmaker anymore.
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at[email protected]. His column appears Sunday and Wednesday on washingtonexaminer.com.
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