Return Preparers Urge D.C. Circuit to Affirm District Court in Preparer Oversight Case

B. Rulings under Review. Except for the following, references to the rulings at issue correctly appear in the Brief for the Appellants. The initial order and memorandum opinion of the district court (Judge James E. Boasberg) were dated January 18, 2013.

C. Related Cases. To the best of their knowledge, counsel for Plaintiffs-Appellees are not aware of any previous or pending related cases in this Court.

                          TABLE OF CONTENTS

A. Collection.

Collection involves the preparing and filing of tax returns along with the payment or withholding of taxes or estimated taxes, and any penalties, as well as enforcement. 26 C.F.R. §§ 601.103(a), 601.104. "The Federal tax system is basically one of self-assessment. In general each taxpayer . . . is required to file a prescribed form of return which shows the facts upon which tax liability may be determined and assessed." 26 C.F.R. § 601.103(a); see also 26 U.S.C. §§ 6011-12. In other words, taxpayers simply report the financial figures used to calculate their tax liability, as well as the results of their calculations, in the manner dictated by the tax-return form. Tax returns do not present any arguments or advocacy for the taxpayer, nor do they typically present any original evidence supporting the financial figures reported. Taxpayers are not required to provide the underlying receipts supporting the financial figures reported in their tax return (but may present such evidence if the matter proceeds to the "controversy" stage).

After a taxpayer's return is filed, the IRS may conduct its own internal assessment of the taxpayer's tax liability (and any penalties due). See 26 C.F.R. § 601.104(a); 26 U.S.C. §§ 6201-6204.⁴ After an assessment, the IRS collects any unpaid taxes or penalties. See 26 C.F.R. § 601.104(c)(1); see also 26 U.S.C. §§ 6301-6306. The IRS's assessment of a taxpayer's tax liability is conducted in an "ex parte, non-adversarial manner" where there is no entitlement to a hearing and no role for a taxpayer's representative.⁵See 26 C.F.R. § 601.104(c).

B. Examination.

After returns are filed and assessed by the IRS, some returns are selected for examination (audit). 26 C.F.R. §§ 601.103(b), 601.105(a). At this stage, a return departs the realm of tax "compliance" and enters the world of tax "controversy." See J.A. 53. Examinations may be conducted by correspondence or by "taxpayer interview." 26 C.F.R. § 601.105(b)(2); see also 26 U.S.C. § 7521 (procedures for "taxpayer interviews"). During examination, a taxpayer may consult with, and be represented before the examiner, by an attorney, CPA, or other representative. See 26 C.F.R. § 601.105(b)(1); 26 U.S.C. § 7521(b)(2). "Representation" of a taxpayer requires obtaining that taxpayer's power of attorney (usually by completing IRS Form 2848, Power of Attorney and Declaration of Representative). 26 C.F.R. § 601.504(a).

C. Appeals.

If a taxpayer disagrees with adjustments proposed by the IRS during an examination, she may appeal to an IRS Appeals Office. 26 C.F.R. §§ 601.103(b), 601.106. An Appeals Officer will hear the taxpayer's appeal at a "conference" if the office has jurisdiction. 26 C.F.R. § 601.103(c). In some cases a written "protest" is required to obtain Appeals consideration. 26 C.F.R. §§ 601.106(a)(1)(iii)(c)-(e). During Appeals proceedings, taxpayers may designate a qualified representative to act on their behalf. 26 C.F.R. § 601.106(c). The same power-of-attorney requirement for "[r]epresentation" of taxpayers applies. See 26 C.F.R. § 601.504(a).

A. In 1884, Congress authorized the Secretary to regulate "agents, attorneys, or other persons representing claimants before his Department."

On July 7, 1884, in response to mounting complaints about misconduct by unscrupulous attorneys and claims agents who represented soldiers with claims for lost horses, and others with claims for military-related compensation from the federal government, Congress passed a War Department appropriations bill containing a proviso to an appropriation for "horses and other property lost in the military service":

This Act is currently codified at 31 U.S.C. § 330 ("Section 330"). It was subject to a purely stylistic revision in 1982; "when the Act of 1884 was recodified . . . Congress explicitly stated that it was simplifying the language without making any substantive changes in meaning." Poole v. United States, 1984 WL 742, at *2, 1984 U.S. Dist. LEXIS 15351, at *5 (D.D.C. 1984) (citing H.R. Rep. No. 651, 97th Cong., 2d Sess. 19 (1982)). Among the 1982 stylistic revisions, "the words 'representatives of persons' [were] substituted for 'agents, attorneys, or other persons representing claimants before his department' to eliminate unnecessary words."⁷

Section 330 governs "practice" before Treasury and authorizes the Secretary to "regulate the practice of representatives of persons before the Department of the Treasury." Section 330(a)(1). Section 330(a)(2)(D) describes the type of "practice" of "representatives" contemplated by the statute: "advis[ing] and assist[ing] persons in presenting their cases." As referenced in Section 330(a), attorneys and CPAs are permitted to "practice" before the IRS under 5 U.S.C. §§ 500(b)-(c), which governs administrative practice before federal agencies, but are still subject to regulation under Section 330.

B. Regulation of "practice" under Circular 230 prior to August 2, 2011.

Under the authority of Section 330, the IRS began regulating the "practice" of "representatives" before the IRS under a set of regulations known as Treasury Department Circular No. 230 ("Circular 230"), 31 C.F.R. pt. 10, first published in 1921. J.A. 64. In addition to regulating the "practice" of CPAs and attorneys before the IRS, the IRS offered special categories of licensure under Circular 230 to various types of "enrolled agents" ("EAs"), enabling those who were not attorneys or CPAs to be enrolled to "practice" before the IRS by representing taxpayers in IRS proceedings, as their qualifications permit. 31 C.F.R. §§ 10.3-10.6; see also Administrative Record ("A.R.") at 000143-44.

As described in Part III.D, from 2005 to the present, Congress has considered a series of bills that would have amended Section 330 to authorize the IRS to license tax-return preparers, but has not passed any of them. After several of these bills floundered, the IRS announced in its December 2009 Return Preparer Review report that it had reversed its interpretation of Section 330, and now interpreted "practice" to include tax-return preparation. See Part III.E. In summer 2011, the IRS promulgated new Circular 230 regulations purporting to authorize the IRS to license tax-return preparers, as detailed infra in Part IV.

A. Definition of "tax return preparer."

"Tax return preparer" is defined by federal statute, in relevant part, as "any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by this title or any claim for refund of tax imposed by [Title 26]." 26 U.S.C. § 7701(a)(36)(A).⁸ This statutory definition has existed, with minor changes, since 1976.

B. For over a century prior to the recent regulatory change, neither Treasury nor the IRS had interpreted Section 330 as authorizing it to license tax-return preparers.

From the passage of the Act of 1884 up until the December 2009 publication of the Return Preparer Review, neither Treasury nor the IRS interpreted Section 330 as authorizing the federal licensure of tax-return preparers. See J.A. 66; A.R. at 000127, 000143. For the nearly 100-year history of the modern income tax (prior to December 2009), the IRS did not view "tax return preparers" to be "representatives" of taxpayers, and specifically rejected that interpretation in congressional testimony and official guidance.⁹ Nor did the IRS consider the preparation of a tax return for compensation to constitute "practice" before the IRS.¹⁰ Indeed, as recently as April 2009, the official IRS publication regarding "Practice Before the IRS" stated that, "[j]ust preparing a tax return [or] furnishing information at the request of the IRS . . . is not practice before the IRS. These acts can be performed by anyone."¹¹ Thus, the IRS did not view "tax return preparers" as engaged in "practice" under Section 330 (or Circular 230) unless they were also attorneys, CPAs, or EAs who actually represent taxpayers in proceedings before the agency.¹² J.A. 66; A.R. at 000127, 000143. As a result, prior to August 2, 2011 (when the RTRP licensing scheme became effective), most tax-return preparers were unlicensed by the IRS, and were not generally regulated under Circular 230. J.A. 66; A.R. at 000127, 000143.

C. Congress developed a statutory scheme for limited regulation of tax-return preparers by statutory penalties and injunctions.

Although most tax-return preparers were unlicensed by the IRS before August 2, 2011, Congress nonetheless authorized their conduct to be regulated under a number of federal civil and criminal statutes governing tax-return preparation; these statutes prohibited misconduct ranging from knowingly preparing a return that understates the taxpayer's liability to failing to sign or provide an identification number on a tax return they prepare. See, e.g., 26 U.S.C. §§ 6694, 6695, 6700, 6701, 6702, 6707A, 6713, 7201, 7206, 7207, 7213, 7216, 7407; see also A.R. at 000127, 000143-144. The earliest of these statutes were passed in 1954, see, e.g., 26 U.S.C. §§ 7201, 7206, 7207, 7213, and Congress continues to amend these statutes to this day, most recently amending 26 U.S.C. § 6695(g) in 2011 to raise the penalty from $100 to $500 per occurrence for failure to exercise due diligence on returns claiming an earned income credit.¹³ Taxreturn preparers are regulated by these statutes today. The penalties for violating these statutes include fines of up to $100,000 per occurrence and even felony conviction and imprisonment of up to five years. See, e.g., 26 U.S.C. §§ 7201, 7206, 7213. Repeat offenders may also be enjoined from further preparing returns. See 26 U.S.C. § 7407.

D. Congress declines to authorize the IRS to license tax-return preparers under Section 330.

From 2005 to the present, Congress has considered at least nine bills that would have amended Section 330 to specifically grant authority to Treasury (and thus, the IRS) to regulate "tax return preparers."¹⁴ To date, none of these bills has passed.

E. The IRS reverses its longstanding interpretation of Section 330.

In December 2009, after several of the proposed bills had failed, the IRS announced that it had reversed its interpretation of Section 330 in Publication 4832, the Return Preparer Review report. Citing Section 330, the IRS simply stated that, "[t]he IRS believes that increased oversight of paid tax return preparers does not require additional legislation." A.R. at 000159. It provided no explanation for this major change in its interpretation of the statute. See id.; see also J.A. 68 (no explanation for reversal in final regulations).

The new RTRP licensing regulations were published in the Federal Register on June 3, 2011 and became effective on August 2, 2011. See J.A. 66. These regulations amended 31 C.F.R. pt. 10, the current version of which is Circular No. 230 (Rev. 8-2011). Under this new version of Circular 230, the IRS purported to license the preparation of tax returns by "tax return preparers" under the authority of Section 330 because it defined "Practice before the Internal Revenue Service" as including "preparing documents; filing documents." 31 C.F.R. § 10.2(a)(4); see J.A. 68; A.R. at 000159.

Under this new licensing scheme, "tax return preparers" who were not attorneys, CPAs, or EAs had to become an RTRP in order to file tax returns for compensation. 31 C.F.R. §§ 10.3(f), 10.4(c). Under Circular 230, "[p]ractice as a registered tax return preparer is limited to preparing and signing tax returns and claims for refund, and other documents for submission to the Internal Revenue Service." 31 C.F.R. § 10.3(f)(2).

To become an RTRP, one had to pass a written examination approved by the IRS. 31 C.F.R. § 10.4(c). To renew one's status as an RTRP, one had to pay a renewal application fee and certify that one has satisfied the annual CE requirements. 31 C.F.R. §§ 10.6(d)-(e). A minimum of 15 hours of CE credit, including two hours of ethics or professional conduct, three hours of federal tax law updates, and 10 hours of federal tax law topics, had to be completed each registration year. 31 C.F.R. § 10.6(e)(3).

The nonrefundable fee for the RTRP exam was $116. Defs.' Answer, ECF No. 8, ¶ 44.¹⁶ This was in addition to the costs of taking 15 hours of CE courses, the cost of taking an exam-preparation course, and any expenses for travel, lodging, and meals incurred in order to take the exam and attend the CE courses (or the exam-preparation course), which could total over a thousand dollars annually. Id. at ¶¶ 44-46.

Plaintiff Sabina Loving owns Loving Tax Services, Inc., a relatively new tax-preparation business in an impoverished neighborhood on the South Side of Chicago where there is high unemployment and many homes and businesses are boarded up. Loving Decl. ¶¶ 2, 7. Loving Tax Services is the first business to occupy its storefront since at least 2000, and serves the residents of its community, many of whom are low-income. Id. ¶ 7. Prior to starting Loving Tax Services, Sabina Loving worked as an accountant for approximately 12 years for several large businesses while earning her Master's degree. Id. ¶ 3. She is a member of the American Institute of Professional Bookkeepers and has been preparing taxes professionally for the past four years. Id. She prepared approximately 100 tax returns in 2012. Id.

Sabina Loving objects to the new licensing regulations as unfairly burdensome on small tax businesses like hers that meet clients in person and provide personalized service. Id. ¶ 15. Complying with the RTRP licensing regulations would be costly, forcing her to increase the fees she charges her customers, thereby making her less competitive with large tax-preparation firms, particularly those exempted from the regulations. Id. ¶¶ 13-14. In addition, she would like to hire and oversee "supervised preparers" to assist her during tax season, but only CPAs, attorneys and EAs may oversee "supervised preparers" under the RTRP scheme Id. ¶¶ 9, 16; J.A. 69. Although she has worked as an accountant for a dozen years, she is not a CPA and would not be able to supervise other tax preparers even if she were an RTRP. Id. ¶¶ 3, 9, 16; J.A. 69. Before the RTRP regulations, an unenrolled signing preparer could supervise non-signing preparers. See, e.g., 26 C.F.R. § 301.7701-15(b).

Plaintiff Elmer Kilian is an 81-year-old retired Korean War veteran living in the small village of Eagle, Wisconsin, where he has a wooden shingle outside his house advertising his business, Eagle Tax Services. Kilian Decl. ¶¶ 2, 3, 8. He began preparing taxes on a part-time basis after studying to become a bookkeeper at a vocational school. Id. ¶ 4. He has been preparing taxes part-time and seasonally on his dining room table for about 30 years. Id. He prepares about 80 to 100 paid tax returns per year for people in his community, many of them longtime customers. Id. ¶¶ 4, 8, 9.

Elmer Kilian prides himself on providing low-cost tax preparation services to the residents of Eagle, and prepares a number of free returns for charitable reasons. Id. ¶ 9. He objects to the costs imposed by the RTRP licensing scheme, which would force him to either substantially raise the fees he charges his customers or go out of business altogether. Id. ¶ 14. Since it is very unlikely that any CE courses would be offered in Eagle, his travel time and costs could be substantial. Id. ¶ 13. Because he is not willing to substantially raise his fees, he will have to close his tax business if forced to comply with the RTRP licensing regulations. Id. ¶¶ 15, 17.

Plaintiff John Gambino is a Certified Financial Planner ("CFP") and registered investment advisor in Hoboken, NJ who works primarily on assisting his clients with wealth management. Gambino Decl. ¶ 2. Gambino also offers taxreturn preparation as a convenient service for his clients, and has done so since 2004. Id. ¶ 6. He prepares approximately 50 tax returns for compensation annually. Id. He holds Bachelor's and Master's degrees from the Massachusetts Institute of Technology, and worked as an equity analyst on Wall Street from 2001 to 2003. Id. ¶ 4. He has passed the two-day CFP exam and takes 30 hours of CE courses every two years to maintain his CFP certification. Id.

John Gambino objects on principle to the RTRP licensing regulations; he believes they are an infringement on his right to earn an honest living free from unreasonable government intrusion. Id. ¶ 14. He also thinks that these licensing regulations harm consumers (including his clients) by reducing their choices in tax preparers and increasing the cost of tax preparation. Id. ¶ 15. The time and opportunity cost of compliance with the RTRP regulations will make it no longer profitable for him to continue preparing tax returns. Id. ¶ 16. He stopped taking new tax clients when the RTRP regulations took effect and plans to close his tax preparation business if the RTRP licensing scheme is reimposed. Id. ¶¶ 17, 18.

The district court correctly interpreted the text and structure of Section 330, which unambiguously forecloses the IRS's interpretation of the statute. Although the IRS suggests that the statute is ambiguous because statutory terms are undefined, its position is contrary to clear precedent. Instead, the context provided by Section 330(a)(2)(D) indicates that the nature of "practice" contemplated by the statute involves "advis[ing] and assist[ing] persons in presenting their cases," a description which excludes tax-return preparation, as even the IRS itself admits. In addition, the IRS's claim that Section 330(a)(2)(C) would be rendered surplusage by the district court's interpretation fails because the IRS misinterprets Section 330(a)(2), ignoring its language and structure. Finally, the IRS fails to give ordinary meaning to the key term "representative(s)" in Section 330, and instead wrongly assumes that tax-return preparers are "representatives" under Section 330 with no explanation.

The district court also appropriately analyzed the overall statutory scheme to help determine the meaning of Section 330. That analysis demonstrated that Congress has not given the IRS plenary authority to regulate tax-return preparers, but instead has provided tightly controlled grants of statutory authority under Title 26 to impose penalties for specific violations and seek injunctions in Article III courts. If the IRS's interpretation of Section 330 was followed, it would enable the IRS to bypass the strict limitations imposed by Title 26 penalty provisions. The IRS's argument that such statutory "overlap" is permissible ignores the appropriate analysis under Chevron step one, which requires courts to interpret statutes so that they form a coherent and harmonious regulatory scheme in which no statutory provision is rendered a nullity. But contrary to the IRS's claims, if Section 330 was interpreted to include tax-return preparers, the injunction remedy available under 26 U.S.C. § 7407 would effectively be displaced by the "disbarment" penalty of Section 330(b). In addition, the IRS fails in its attempt to argue that 26 U.S.C. § 7408 shows that Congress was not concerned about statutory overlap, because the limited injunction against future illegal acts under that statute provides a wholly different remedy from any of the remedies available under Section 330(b).

In addition, the legislative history and purpose of Section 330, as well as the IRS's long-held interpretation of the statute, buttress the district court's findings. Congress could not have intended for Section 330 to authorize the licensure of taxreturn preparers when it passed the original Act in 1884, nor has Congress since amended the statute to include tax-return preparers. Instead, Congress has repeatedly declined to pass proposed legislation that would amend Section 330 to authorize the IRS to license tax-return preparers. In addition, the agency's century-long interpretation of the statute as not authorizing the licensure of taxreturn preparers is persuasive evidence of the true meaning of Section 330. The IRS's failure to explain its sudden reversal in interpretation indicates the agency is impermissibly attempting to use regulations to amend the statute.

When an ultra vires challenge is brought under the APA, as it was here, "appellate courts review the agency's actions under the two-step process from Chevron." Am. Airlines, Inc. v. TSA, 665 F.3d 170, 176 (D.C. Cir. 2011). Under Chevron step one, a reviewing court must determine whether "the intent of Congress is clear."¹⁷Vill. of Barrington v. Surface Transp. Bd., 636 F.3d 650, 659 (D.C. Cir. 2011) (internal quotation omitted). A court thus determines "whether Congress has unambiguously foreclosed the agency's statutory interpretation . . . either by prescribing a precise course of conduct other than the one chosen by the agency, or by granting the agency a range of interpretive discretion that the agency has clearly exceeded."¹⁸Id. (internal quotation omitted).

This case was properly resolved by the district court under Chevron step one. No deference is owed to the agency during this first step of the Chevron inquiry. See id. at 660. Only if Congress's intent is ambiguous does a court turn to Chevron step two, and ask, "whether the agency's answer is based on a permissible construction of the statute." Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 843 (1984).

As the district court recognized, this case is a dispute over the interpretation of a single federal statute, Section 330, which provides in pertinent part:

The language of this statute "simply will not bear the meaning the [agency] has adopted." Pittston Coal Grp. v. Sebben, 488 U.S. 105, 113 (1988). Although Section 330 does not even mention tax returns or tax-return preparers -- it was originally drafted in 1884, well before modern income tax returns even existed, and has never since been amended to include tax-return preparers -- the IRS interprets the statute as authorizing the agency to impose a licensing scheme on tax-return preparers. The IRS's strained reading of the statute ignores the clear statutory context indicating that the "practice of representatives" which Congress is authorizing the IRS to regulate involves "advis[ing] and assist[ing] persons in presenting their cases" rather than mere preparation of tax returns. It also necessitates ignoring the ordinary meaning of statutory terms such as "representative," "practice," and "disbar." This unduly expansive interpretation of Section 330 stretches the language (and purpose) of the statute well past its breaking point, as the district court conclusively found, and as Plaintiffs will demonstrate below.

To determine whether Section 330 will bear the sweeping new meaning adopted by the IRS, this Court must also examine the statute under Chevron step one.¹⁹ To do so, a court must "exhaust the traditional tools of statutory construction . . . [in] a search for the plain meaning of the statute." Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997) (internal citations and quotations omitted). The traditional tools of statutory construction include an examination of (1) the statute's text and structure, viewed in context, (2) the place of the statute in the overall statutory scheme, and (3) the statute's legislative history and purpose. See id. at 1047, 1049.

As shown in Part I, the district court correctly found that the text of Section 330, as well as the context provided by its structure, unambiguously forecloses the IRS's interpretation. As explained in Part II, the district court also correctly found that the context provided by the overall statutory scheme regulating tax-return preparers runs counter to the IRS's interpretation of Section 330. In Part III, Plaintiffs demonstrate that the district court's ruling is also supported by both the legislative history and purpose of Section 330 -- including proposed amendments that Congress has declined to enact -- and the IRS's previous century-long interpretation of the statute.

A. The district court correctly rejected the IRS's argument that a statute is ambiguous unless it expressly defines statutory terms.

As it argued before the district court, the IRS argues before this Court that Section 330 is ambiguous because it fails to define its terms. See IRS Br. 16, 22, 26. The district court was correct to reject this argument. Statutes are not required to expressly define their terms in order to have unambiguous meaning.

As the district court noted, under Chevron step one, "[t]he plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." J.A. 19 (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)). In the world of statutory interpretation, "[a]mbiguity is a creature not of definitional possibilities but of statutory context." J.A. 19 (quoting Brown v. Gardner, 513 U.S. 115, 118 (1994)).²⁰

Moreover, as the district court noted in rejecting this argument below, "the D.C. Circuit has specifically rejected the argument that a statute is ambiguous when it fails to define a broad term." J.A. 19 (citing and quoting Goldstein v. SEC, 451 F.3d 873, 878 (D.C. Cir. 2006) ("The lack of a statutory definition of a word does not necessarily render the meaning of a word ambiguous, just as the presence of a definition does not necessarily make the meaning clear.")).

B. The district court correctly found that Section 330(a)(2)(D) unambiguously forecloses the IRS's new interpretation of Section 330.

The district court wasted no time zeroing in on a key flaw in the IRS's new interpretation of Section 330: "the text of § 330(a)(2)(D) defines the 'practice of representatives' in a way that does not cover tax-return preparers." J.A. 19. As the district court correctly noted, "while the 'practice of representatives' may not be defined in § 330(a)(1), the very next subsection of § 330 provides critical guidance on what the term means." J.A. 20. Indeed, Section 330(a)(2)(D) "tell[s] us what the representatives do -- what their 'practice' is, in the words of both subsections: representatives 'advise and assist persons in presenting their cases.'" J.A. 20.

Having recognized that Section 330(a)(2)(D) is the Rosetta Stone for interpreting Section 330, the district court found that the IRS's attempt to expand the statute's language to cover tax-preparer licensing was bizarre and nonsensical:

By failing to give ordinary meaning to Section 330(a)(2)(D), the IRS's interpretation is at odds with a fundamental canon of statutory interpretation. "[A]ll words in a statute are to be assigned meaning, and . . . nothing therein is to be construed as surplusage." Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d 638, 644 (D.C. Cir. 2000) (internal quotations omitted). The IRS's interpretation of 31 U.S.C. § 330 as permitting the IRS to license all "tax return preparers" ignores much of Section 330(a)(2)(D), effectively treating the words as surplusage. The words "presenting their cases" in Section 330(a)(2)(D) indicate an advocacy role for the representative in tax "controversy" matters that goes well beyond the role of a "tax return preparer" as defined by statute. See 26 U.S.C. § 7701(a)(36)(A).

As the district court noted, preparing a tax return is nothing like "presenting" a "case." A tax return is informational, and does not contain advocacy or argument. It is simply a (mandatory) self-assessment of one's tax liability that reports financial information, such as income, tax payments, and charitable contributions, as well as any relevant life events, such as a change in marital status, a change of job, or children, and shows the calculations made to determine one's tax liability. Indeed, even the IRS's initial assessment of penalties and taxes is non-adversarial and ex parte. See 3M Co., 17 F.3d at 1459 n.11. Taxpayers simply have no "case" to "present" until they enter the world of tax "controversy" (Examination and Appeals). See supra Statement of Facts, Part I.

Moreover, as the district court recognized, "[t]he IRS seems to accept that tax-return preparers are not advising and assisting in presenting a case." J.A. 20. As in the district court, the IRS on appeal has only argued that preparation of a tax return amounts to "practice" before the agency under Section 330(a)(1); the agency has never argued that preparing a return is "presenting" a "case" under Section 330(a)(2)(D), and in fact repeatedly indicates that presenting a case is mutually exclusive with preparing a return. See IRS Br. 21-22, 31, 37-38.²¹

Therefore, as the district court correctly found, the IRS's interpretation of Section 330 is foreclosed by the plain meaning of the statute when one properly assigns ordinary meaning to each statutory provision, including Section 330(a)(2)(D).

C. The IRS misinterprets Section 330(a)(2)(C).

The IRS argues that Section 330(a)(2)(C) undercuts the district court's interpretation of Section 330 because it claims that Section 330(a)(2)(C) presents an alternative type of "practice" to that described in Section 330(a)(2)(D). Therefore, the IRS claims, Section 330(a)(2)(C) "demonstrates that Congress regarded the term practice before the Treasury Department as also including representatives providing other valuable services." IRS Br. 35. The IRS further claims that the district court "entirely overlooked" Section 330(a)(2)(C) and "issued a decision that renders that provision meaningless" because of purported redundancy with Section 330(a)(2)(D). IRS Br. 39.

But this argument is unavailing; the IRS has made crucial interpretive errors that have caused it to misread Section 330(a)(2)(C). First, the agency wrongly conflates "necessary qualifications" and "competency" to reach its erroneous conclusion that the district court's interpretation of Section 330(a)(2)(D) renders Section 330(a)(2)(C) superfluous. Second, the IRS fails to consider the context provided by the structure of Section 330(a)(2) and ignores critical statutory language.

For the sake of convenience, here is the text of 31 U.S.C. § 330(a):

As an initial matter, Section 330(a)(2)(C)-(D) are connected by the word "and" at the end of Section 330(a)(2)(C), which indicates that the two provisions are intended to be read in conjunction, not as alternative options. Moreover, despite the IRS's claim of redundancy, Sections 330(a)(2)(C) and 330(a)(2)(D) authorize Treasury to verify different qualities about prospective practitioners. Section 330(a)(2)(C) authorizes Treasury to verify that representatives have "necessary qualifications," while Section 330(a)(2)(D) authorizes Treasury to verify "competency." These two terms are not identical and permit Treasury to require a demonstration of different attributes before admitting a representative to practice before Treasury. For example, one may be a very skilled and experienced lawyer who is fully competent to represent clients in a particular type of proceeding, but until one is admitted to the bar of a particular court, one does not have the necessary qualifications to represent someone in that court. Thus, even on their face, these two terms do not have the same meaning. Sections 330(a)(2)(C) and 330(a)(2)(D) are therefore not redundant.

This is reinforced by the original statutory language that existed prior to the wholly stylistic 1982 revision. See supra note 7 and accompanying text. As passed in 1884, the provisions now codified as Section 330(a)(2)(C)-(D) authorized Treasury to require that prospective representatives show that they were "possessed of the necessary qualifications to enable them to render such claimants valuable service, and otherwise competent to advise and assist such claimants in the presentation of their cases." J.A. 56 (emphasis added). The use of "otherwise" further demonstrates that Congress intended the provisions now codified as Sections 330(a)(2)(C) and 330(a)(2)(D) to be read in conjunction -- not as alternatives, as the IRS claims -- and also accounts for any possible overlap between "necessary qualifications" and "competency" in the current version of the statute.

The IRS's interpretation thus essentially views the four subsections under Section 330(a)(2) -- or at least Subsections 330(a)(2)(C) and (D), since it fails to mention (A) and (B) -- as categories of practitioners. So, under the IRS's interpretation of Section 330(a)(2), some taxpayers might merely obtain the "valuable services" of a Section 330(a)(2)(C) practitioner, while other taxpayers might need a Section 330(a)(2)(D) practitioner to "advise and assist [them] them in presenting their cases."

However, the IRS has critically misinterpreted Section 330(a)(2)(C) by failing to consider its language and its context within Section 330(a)(2). See Am. Petroleum Inst. v. EPA, 52 F.3d 1113, 1119-20 (D.C. Cir. 1995) (noting that "[an agency] cannot uncouple the first sentence of [a statutory section] from the rest of the section in order to expand its authority beyond the aims and limits of the section as a whole").²² Viewed in context, the IRS's interpretation of Section 330(a)(2) makes little sense given that subsections (A) and (B) under Section 330(a)(2) are "good character" and "good reputation," respectively. They are plainly not categories of representation, and there is no obvious answer why these provisions should be read any differently than subsections (C) and (D). In addition, the word "and" at the end of Section 330(a)(2)(C) indicates that the four subsections of Section 330(a)(2) are intended to be read in conjunction, and not as alternatives. Thus, Section 330(a)(2) is clearly not an à la carte list of potential services that Treasury practitioners may offer (and for which the IRS may require a demonstration of proficiency), but a list of attributes that may be required of each and every practitioner before Treasury. Indeed, as the district court correctly noted -- in a clear indication it did not overlook this subsection -- Section 330(a)(2) "allows the IRS to require certain qualifications before admitting a 'representative to practice.'" J.A. 21.

D. The IRS fails to assign ordinary meaning to the statutory term "representative(s)."

Section 330 authorizes the Secretary to "regulate the practice of representatives of persons before the Department of the Treasury." Importantly, the IRS's interpretation of Section 330 fails to give ordinary meaning to the key term "representative(s)," even though it appears multiple times in relevant parts of the statute, including in the key phrase, "the practice of representatives of persons before the Department of the Treasury." Instead, the IRS baldly asserts in a footnote that "[t]here can be no serious dispute that paid tax-return preparers are 'representatives of persons.'" IRS Br. 31 n.11. The IRS offers no explanation for this conclusory claim, even though this was a key issue of dispute (and briefing) before the district court. See, e.g., Defs.' Mem. Supp. Mot. Summ. J., ECF No. 13-1, at 32-34. Tax-return preparers are not "representatives" and the IRS has recognized this in official statements and publications.

Despite its attempt to gloss over this issue, the IRS's failure to give ordinary meaning to the term "representative(s)" in Section 330, coupled with its own recognition that "tax return preparers" are not actually "representatives," shows that its interpretation of Section 330 is foreclosed by the plain meaning of the statute.

A. The IRS's new interpretation of Section 330 sidesteps the existing Title 26 statutory scheme that comprehensively regulates penalties that may be imposed on tax-return preparers.

In this section, Plaintiffs first explain why the district court correctly found that the IRS's expansive new interpretation of Section 330 would impermissibly enable it to use the penalty provisions of Section 330(b) to bypass Congress's tightly controlled regime of statutory penalties for tax-return preparers. Second, Plaintiffs demonstrate how tightly Congress controls and frequently fine-tunes the statutory scheme regulating tax-return preparers. Third, Plaintiffs respond to the IRS's arguments that such statutory "overlap" is permissible.

Noting the statutory canon that specific statutes override general statutes, even when "when both statutes authorize similar action," the court observed that the general/specific canon holds "particularly true where . . . Congress has enacted a comprehensive scheme and has deliberately targeted specific problems with specific solutions." J.A. 24 (quoting RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2071 (2012)). The district court concluded that the IRS's expansive interpretation of Section 330 is foreclosed "[b]ecause the U.S. Code already sets forth a comprehensive scheme targeting specific problems with specific solutions" which would be too easily bypassed if the IRS could use disciplinary proceedings under Section 330(b) to evade those specific limitations and requirements. J.A. 24.

Congress also frequently adjusts the specific powers granted to the IRS to regulate tax-return preparers. In November 2009, Congress mandated the use of e-filing by all tax-return preparers who file 10 or more tax returns beginning in January 2011.³⁰ Congress also found it necessary to give specific statutory authorization to the Secretary to require the use of PTINs (unique identification numbers) by tax-return preparers.³¹ If Congress thought it had already given the IRS plenary power to regulate tax-return preparers under Section 330, it would not have needed to pass these specific statutory provisions.

Here, the district court identified a number of subsequently enacted statutory provisions in Title 26 that specifically regulate tax-return preparers. Following the general/specific canon of statutory construction, the court found that the more recent and specific statutes regulating tax-return preparers in Title 26 give context for the proper interpretation of the older and more general Section 330. See J.A. 24. Applying the general/specific canon of statutory construction, the district court found that assigning the IRS's interpretation to Section 330 would render many of the Title 26 penalties superfluous, J.A. 23-24, a result that runs against a cardinal rule of statutory interpretation. See RadLAX, 132 S. Ct. at 2071; see also Hawke, 211 F.3d at 644. Thus, the court properly applied the canons of statutory construction in order to discern what context the overall statutory scheme could provide for understanding the meaning of Section 330, and to ensure that it gave full meaning and effect to each statute in that scheme.

B. The district court correctly observed that the IRS's new interpretation of Section 330 would displace 26 U.S.C. § 7407, a federal statute that provides for injunctions against tax-return preparers.

The district court also found that the expansive IRS interpretation of Section 330 would effectively displace another Title 26 statute designed to help regulate tax-return preparation, 26 U.S.C. § 7407 ("Section 7407"), which allows the IRS to seek injunctions in an Article III court to prevent tax-return preparers from further engaging in tax-return preparation. J.A. 25-27. Below, Plaintiffs first explain why the court was right to identify this problem. Next, Plaintiffs address the superficial distinctions the IRS relies on in attempting to counter this concern. Finally, Plaintiffs debunk the IRS's attempt to use 26 U.S.C. § 7408 ("Section 7408") to show that there already was statutory overlap between Section 330(b) and a statutory injunction provision.

The Section 7407 problem further demonstrates how the IRS's broad interpretation of Section 330 is fatally at odds with the statutory scheme that Congress enacted to regulate the field of tax-return preparation. The IRS's overly broad interpretation of Section 330 raises the question: Why would Congress have bothered to pass Section 7407 (or the other Title 26 statutes regulating tax-return preparation) if Treasury already had equal or greater powers under Section 330? It would not, as the district court concluded. The IRS's interpretation of Section 330 would swallow the statutory scheme that Congress has put in place to regulate the field of tax-return preparation.

Although Section 7408 does provide "remedies against the same people" as Section 330(b), IRS Br. 44, it provides an entirely different remedy from Section 330(b). Under Section 7408, a court may only enjoin someone from "further engaging in specified [illegal] conduct." Such a narrow, targeted prohibition against only future illegal conduct is simply unavailable under Section 330(b), because penalties such as disbarment or suspension prevent "representatives" from further engaging in the otherwise legal conduct of "practice." This stands in stark contrast to Section 7407, which authorizes injunctions against future tax-return preparation, a remedy that would effectively be identical to disbarment under Section 330(b) if the term "representatives" in Section 330 were interpreted to included tax-return preparers, as the IRS urges.

A. The legislative history and purpose of Section 330 also foreclose the IRS's new interpretation and support the district court's ruling.

The legislative history and purpose of Section 330 also foreclose the IRS's interpretation of Section 330. Congress could not have contemplated empowering the IRS to regulate tax-return preparers when it originally passed the statute in 1884, nor has Congress since made any substantive amendments to the statute that would expand the scope of persons who may be regulated beyond the statute's original meaning. In fact, in the past eight years, Congress has considered nine bills that would amend Section 330 to give the IRS authority to license tax-return preparers, but it has not passed any of them. This is telling; not only does Congress apparently not believe it has already granted this authority to the IRS, but it also seems to be aware that the statutory text would need to be amended to allow for tax-preparer licensing.

Here, placing the statute in context by examining its overall purpose and legislative history forecloses the interpretation assigned by the IRS. The Act eventually codified as Section 330 was passed in an era when Congress could not possibly have intended to empower the IRS to license tax-return preparers -- it was passed nearly 30 years before the modern income tax³³ -- and instead only gave Treasury the authority to regulate those who engaged in advocacy before it on behalf of others, much like a court. Congressional intent has never been altered by the amendments to the statute since that time -- indeed, the only changes to the operative clauses of Section 330(a) have been stylistic modifications.

After the Civil War, a large number of claims were brought by soldiers against the federal government for lost horses and other property. J.A. 63. Many attorneys and claims agents competed to present these claims, sometimes in unscrupulous ways, burdening federal departments with resolving related disputes. Id. In response, Congress passed the Act of July 7, 1884, giving the Secretary the power to regulate, recognize, and disqualify those representing claimants before Treasury, as a proviso to an appropriation for "horses and other property lost in the military service." J.A. 55-56, 64. See supra Statement of Facts, Part II.A.

The text of the June 6, 1884 floor debate on the proviso confirms that its purpose was to regulate attorneys and claims agents who were advocating for clients before officers of the Treasury. See J.A. 58-61 (particularly the remarks of Rep. Townshend). For example, Rep. Keifer of Ohio noted the importance of having representatives who can "present the claims properly and intelligently before the proper officers of the Government." J.A. 60. Rep. Townshend explained that problems arose because many soldiers are "unable to be here in person" to attend to their claims. J.A. 61. These remarks, among others, indicate that the "practice of representatives" to be regulated under the 1884 Act involved advocacy in a live "in person" hearing, to prevail in claims against the government for property lost due to military action. Representatives in such proceedings, unlike tax-return preparers, plainly engaged in advocacy on behalf of their clients and "present[ed] their cases."

In view of this legislative history, it is hard to imagine how Congress could be said to have contemplated and authorized the sweeping changes imposed by the RTRP licensing scheme under Section 330. In evaluating a claim under Chevron step one, a reviewing court "must be guided to a degree by common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency." Brown & Williamson, 529 U.S. at 133 (rejecting FDA's attempt to regulate tobacco because it required a strained interpretation of "safety" and ignored the plain implications of subsequent tobacco-specific legislation). Thus, an interpretation should be rejected when "Congress could not have intended to delegate a decision of such economic and political significance to an agency in so cryptic a fashion." Id. at 160. The same logic applies here. If Congress had intended for a statute governing tax controversy work to also delegate authority to the IRS to license hundreds of thousands of tax-return preparers engaged in tax compliance work, it would not likely have done so "in so cryptic a fashion," Id., particularly given the frequency and specificity with which Congress amends the relevant statutes governing taxreturn preparer regulation, see supra Part II.A.2, as well as Section 330 itself, as discussed next.

This language is typical of these proposed amendments to Section 330:

The most recent proposed bill would add a new subsection (e) to Section 330, authorizing the IRS to "regulate tax return preparers who do not practice as representatives of persons before the Department of the Treasury." Taxpayer Protection and Preparer Fraud Prevention Act of 2013, H.R. 1570, 113th Cong. § 2(a) (emphasis added). The remainder of the proposed Section 330(e) generally follows the language of Section 330(a) except that it allows Treasury to require that a tax preparer demonstrate "competency to perform the functions of a tax return preparer" (rather than Section 330(a)(2)(D)'s "competency to advise and assist persons in presenting their cases"). The language of this bill, which was introduced several months after the district court decision in this case, indicates agreement with the district court's interpretation of Section 330 and an understanding that an additional grant of authority would be required for the IRS to license tax-return preparers.

These proposed amendments would hardly be necessary if Congress believed it had already authorized the IRS to license tax-return preparers under the existing language of Section 330. After all, "Congress cannot be presumed to do a futile thing." Halverson v. Slater, 129 F.3d 180, 185 (D.C. Cir. 1997); see also Hawke, 211 F.3d at 644. Rather, the existence of these bills indicates that Congress does not believe it has granted such licensing authority to the IRS, and the failure of the bills to pass indicates that Congress has not reached any consensus to grant such authority. The IRS simply has not received congressional authorization to license tax-return preparers in this manner.

B. The IRS's contrary interpretation of Section 330 for the past century is indicative of the statute's true meaning and the IRS's failure to explain the sudden reversal in its interpretation is telling.

The fact that the IRS's stated policies and actions for the past century directly contradict its current interpretation is persuasive evidence that Section 330 does not empower the IRS to license tax-return preparers. See Fin. Planning Ass'n v. SEC, 482 F.3d 481, 490-91, 498 (finding an agency's "own actions for the last 65 years suggest[ive]" of the true meaning of the statute, and citing as a weakness in an agency's interpretation of a statute that it "flouts six decades of consistent [agency] understanding of its authority"); see also Ry. Labor Execs.' Ass'n, 29 F.3d at 669 (explaining that "[w]e find it telling that only in the last five years of its sixty-year history has the Board claimed [new authority under the statute]," and describing the agency's recent regulatory changes as "much more than a midstream change in course"). Indeed, it is quite peculiar that the IRS has employed its expertise in this area for such a long time before finally "realizing" it has statutory authority to implement these regulations without any legislative change whatsoever.

As the district court found, "Plaintiffs seem to be correct that the new Rule contradicts previous interpretations of § 330 . . . the Court could find no explanation for the IRS's flip-flop in the new Rule." J.A. 29.³⁵ For over a century, Treasury had never taken the position that the IRS was entitled to license tax-return preparers under Section 330, and the IRS repeatedly stated -- to Congress and the American public -- that Section 330 did not grant it power to regulate tax-return preparers. See supra notes 9-12. The IRS then abruptly reversed its position in December 2009 without any explanation for the change. See A.R. at 000159; see also J.A. 68.

This sudden, unexplained reversal in the agency's century-long interpretation of Section 330, which was issued after the failure of several proposed bills amending Section 330 to give the IRS the same authority, indicates that the IRS is impermissibly engaging in "a wholesale attempt to rewrite the statute and history." Ry. Labor Execs.' Ass'n, 29 F.3d at 669.

RESPECTFULLY SUBMITTED this 17th day of May, 2013.

² Citations to the Code of Federal Regulations are to the 2012 edition, unless otherwise indicated.

³See, e.g., J.A. 52-53, West's Tax Law Dictionary 1054 (Robert Sellers Smith ed., 2009 ed.) (defining "Tax Compliance" as "[r]esponse of a taxpayer to the tax laws including filing appropriate tax returns and paying the taxes due in a timely manner"; defining "Tax Controversy" as "[d]istinguishable dispute with respect to a tax matter, usually between a taxpayer and taxing authority, such as the I.R.S. A concrete case admitting of an immediate and definitive determination of legal rights of parties upon facts involving tax issues or claims.").

⁴See also United States v. Galletti, 541 U.S. 114, 122 (2004) ("In most cases, the Secretary accepts the self-assessment and simply records the liability of the taxpayer. . . . [W]here the Secretary rejects the self-assessment of the taxpayer or discovers that the taxpayer has failed to file a return, the Secretary calculates the proper amount of liability and records it in the Government's books.").

⁵3M Co. v. Browner, 17 F.3d 1453, 1459 n.11 (D.C. Cir. 1994) (noting that "[a]n [IRS] assessment of a penalty (or tax), however, is an ex parte act. It is merely the determination of the amount of the penalty and the official recording of the liability. Indeed, the taxpayer is not even entitled to a pre-assessment hearing . . .") (quoting United States v. Capozzi, 980 F.2d 872, 874 (2d Cir. 1992)); see also Fmr. Comm'rs. Amicus Br. 8-9 (repeatedly acknowledging that the collection stage does not involve a contested proceeding).

⁶See also J.A. 58-61 (48 Cong. Rec. H5219-22 (daily ed. June 16, 1884) (especially statements of Rep. Townshend)); J.A. 63-65 (George M. Morris, Growth and Regulation of Treasury Bar, 8 A.B.A. J. 742, 743 (1922)).

⁷ Historical and Revision Notes, 31 U.S.C. § 330. Since the 1982 recodification, the statute has been amended four more times. See id. None of these changes have expanded the scope of Treasury's authority over more than "the practice of representatives of persons before [Treasury]." 31 U.S.C. § 330(a)(1).

⁸ When the term "tax return preparer(s)" appears in quotes in this brief, it is a reference to this statutory definition of the term in the Internal Revenue Code.

⁹See, e.g., Testimony of Nancy J. Jardini, IRS, Chief, Criminal Investigations Division, Hearing before the Subcommittee on Oversight of the Committee on Ways and Means, U.S. House of Representatives, (July 20, 2005), available at http://waysandmeans.house.gov/media/transcript/10164.html#Jardini. ("Tax return preparers are not deemed as individuals who represent individuals before the IRS. . . ."); Rev. Proc. 68-29, 1968-2 C.B. 913, § 2.01 (guidance issued in 1968 -- and still current -- explaining that, during a tax examination, a tax return preparer who prepared the return in question is a factual witness, and not a "representative").

¹⁰See, e.g., Taxpayer Advocate Service, IRS, National Taxpayer Advocate FY 2003 Report to Congress at 296-97 (Dec. 31, 2003) (hereinafter "2003 Report to Congress"), available at http://www.irs.gov/pub/irsutl/nta_2003_annual_update_mcw_1-15-042.pdf (official response of IRS to Taxpayer Advocate's 2002 legislative proposal explaining that licensing has historically been the domain of the states, the IRS only regulates the "representational activity" of "practice before the IRS," and Congress has recognized the rights of states and localities to regulate tax preparers independent of the federal government).

¹¹ IRS Publication 947, Practice Before the IRS and Power of Attorney at 2 (Rev. April 2009), available at http://www.irs.gov/pub/irsutl/publication_947_practice_before_the_irs_and_poas_rev_4_09.pdf. Current Treasury regulations still reflect this. See 26 C.F.R. § 301.7701-15(d) ("[a] person may be a tax return preparer without regard to educational qualifications and professional status requirements").

¹² Also indicative are the admissions of the National Taxpayer Advocate: "[T]he IRS currently has no authority to license preparers or require basic knowledge about how to prepare returns." Testimony of Nina E. Olson, National Taxpayer Advocate, IRS, before the Subcommittee on Oversight of the Committee on Ways and Means, U.S. House of Representatives, (July 20, 2005) (emphasis added), available at http://waysandmeans.house.gov/media/transcript/10164.html; see also Taxpayer Advocate Service, IRS, National Taxpayer Advocate FY 2002 Report to Congress at 71, (Dec. 31, 2002), available at http://www.irs.gov/pub/irsutl/nta_2002_annual_rpt.pdf ("Until the IRS is able to regulate this group of [unenrolled return] preparers . . .").

¹³ United States-Korea Free Trade Agreement Implementation Act of 2011, Pub. L. 112-41, Title V, § 501(a), 125 Stat. 428, 459.

¹⁴See A.R. at 000151; see also S. 832, 109th Cong. § 4 (2005); H.R. 5047, 111th Cong. § 202 (2010); S. 3215, 111th Cong. § 202 (2010); H.R. 6050, 112th Cong. § 202 (2012); S. 3355, 112th Cong. § 202 (2012); H.R. 1570, 113th Cong. § 2 (2013).

¹⁵ The IRS had previously imposed a mandatory identity number (PTIN) requirement on all tax-return preparers in January 2011 under the authority of 26 U.S.C. § 6109(a)(4). See A.R. at 000022-35; 26 C.F.R. § 1.6109-2. Obtaining a PTIN simply involved filling out a brief form and paying a fee; there was no testing or continuing education ("CE") requirement. Plaintiffs do not challenge the PTIN requirement.

¹⁶ Citations to Defendants' Answer should be construed to include the corresponding allegations in Plaintiffs' Complaint.

¹⁷ Both amicus curiae briefs submitted in support of the IRS rely primarily on policy arguments -- such as tax code complexity or anecdotal allegations of taxpreparer errors -- which are improper for this Court to consider in evaluating an ultra vires challenge to agency regulations. See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000) ("[A]n administrative agency's power to regulate in the public interest must always be grounded in a valid grant of authority from Congress"). Moreover, neither brief offers any evidence that the harms alleged are unique to preparers subject to the RTRP regulations or that the RTRP regulations would solve the various alleged problems. Notably, both briefs conspicuously ignore a 2011 Treasury study which found a 61 percent error rate on returns prepared by IRS-trained-and-certified volunteer preparers in the VITA program. Treasury Inspector General for Tax Information, Accuracy of Tax Returns, the Quality Assurance Processes, and Security of Taxpayer Information Remain Problems for the Volunteer Program, at 6 (Aug. 26, 2011) available at http://www.treasury.gov/tigta/auditreports/2011reports/201140094fr.pdf. The only legal argument raised by the former IRS Commissioner amici is both untenable and has been waived by the IRS itself, as explained infra at Argument, Part I.B.

¹⁸ The IRS posits that "the Secretary was authorized to issue regulations" because "Congress was silent." IRS. Br. 45. However, administrative agencies are only permitted to exercise authority that has been expressly granted by Congress by statutory provision, and cannot manufacture their own authority based on Congress's failure to expressly withhold such authority. "To suggest, as the [agency] effectively does, that Chevron step two is implicated any time a statute does not expressly negate the existence of a claimed administrative power (i.e. when the statute is not written in 'thou shalt not' terms), is both flatly unfaithful to the principles of administrative law . . . and refuted by precedent." Ry. Labor Execs.' Ass'n v. Nat'l Mediation Bd., 29 F.3d 655, 671 (D.C. Cir. 1994) (emphasis in original).

¹⁹ Contrary to the IRS's claim, see IRS Br. 46, the Plaintiffs have not waived their arguments under Chevron step two. Rather, Plaintiffs brought arguments under both steps of Chevron in the district court, but did not restate them for the sake of brevity. See Pls.' Br. Supp. Mot. Summ. J., ECF No. 12, at 16 n.12 ("Plaintiffs assert these same arguments under step two of Chevron, as demonstrating that the IRS's interpretation is not 'based on a permissible construction of the statute[s].'"). Nonetheless, with one exception -- see infra note 35 and accompanying text -- Plaintiffs focus this brief on arguments brought under Chevron step one.

²⁰ "Unless otherwise defined, statutory terms are generally interpreted in accordance with their ordinary meaning." BP Am. Prod. Co. v. Burton, 549 U.S. 84, 91 (2006).

²¹ The IRS has thus waived the novel argument raised in the amicus curiae brief filed by five former IRS Commissioners that preparing a tax return is somehow "presenting" a "case." See, e.g., McCleskey v. Zant, 499 U.S. 467, 523 n.10 (1991) (recognizing that courts should not consider arguments not advanced by a party to the case).

²² In fact, Section 330(a) was all part of a single sentence when passed in 1884. See J.A. 55-56.

²³ The term "representative" is ordinarily defined as "[o]ne that serves as a delegate or agent for another." The American Heritage Dictionary of the English Language, http://www.ahdictionary.com/word/search.html?q=representative (last visited May 15, 2013); see also Black's Law Dictionary 1328 (8th ed. 2004) ("[o]ne who stands for or acts on behalf of another . . . See AGENT").

²⁴ The statutory definition of "tax return preparer" excludes employees who prepare tax returns for their regular employer, as well as anyone who prepares a return as a fiduciary. See 26 U.S.C. § 7701(a)(36)(B)(ii)-(iii).

²⁵ Further underscoring the difference between unenrolled tax-return preparers (designated as RTRPs in the latest revision of Circular 230) and "representatives" historically regulated under Circular 230, the IRS determined that the confidentiality privilege for "federally authorized practitioners" under 26 U.S.C. § 7525 will not apply to RTRPs "because the advice a registered tax return preparer provides ordinarily is intended to be reflected on a tax return and is not intended to be confidential or privileged." J.A. 68.

²⁶ Congress knows how to clearly delegate broad licensing authority to Treasury, which looks very different from the statutory scheme for tax-return preparers. See, e.g., 26 U.S.C. § 7001 (persons collecting foreign payment of interest or dividends "shall obtain a license from the Secretary and shall be subject to such regulations . . . as the Secretary shall prescribe").

²⁷ United States-Korea Free Trade Agreement Implementation Act of 2011, Pub. L. No. 112-41, Title V, § 501(a), 125 Stat. 428, 459.

²⁸ Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, Title VII, § 7733(a)-(d), 103 Stat. 2105, 2402-03.

²⁹Id. at 2404; U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007, Pub. L. No. 110-28, Title VIII, § 8246(b), 121 Stat. 112, 203; Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, Title V, § 506(a), 122 Stat. 3765, 3880.

³⁰ Worker, Homeownership, and Business Assistance Act of 2009, Pub. L. No. 111-92, § 17, 123 Stat. 2984, 2996 (codified at 26 U.S.C. § 6011(e)(3)).

³¹ IRS Restructuring and Reform Act of 1998, Pub. L. No. 105-206, § 3710(a), 112 Stat. 685, 779 (codified at 26 U.S.C. § 6109(a)(4)).

³² Both of the cases quoted by the IRS on this point are inapposite because neither are applying Chevron analysis -- instead, they are simply noting permissible overlap between two statutes that are not mutually exclusive.

³³See Revenue Act of 1913, Pub. L. No. 63-16, ch. 16, 38 Stat. 114.

³⁴ American Jobs Creation Act of 2004, Pub. L. No. 108-357, § 822(a), 118 Stat. 1418, 1586-87.

³⁵ As explained supra in note 19, Plaintiffs presented arguments before the district court under both steps of Chevron. This argument is particularly well-presented under Chevron step two. An unexplained reversal of an agency's long-held interpretation fails the reasonableness inquiry under Chevron step two. See Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 981 (2005) (an agency's change in policy is not invalidating if "the agency adequately explains the reasons for a reversal of policy," which the IRS has not done here.).