Loving v. IRS: What to Know

UPDATE TO THIS ARTICLE: A federal court ruled that the IRS does in fact have the authority to provide tax credits to individuals purchasing health insurance on the health insurance exchange.

Get the full story on Accounting Today here.


While the discussion of whether tax preparers should be regulated and tested continues, the decision of the three-judge panel on the Loving et al vs. IRS appeal looms.

The Case

What the IRS is asking for is that tax preparers register with them, pass a competency test, pay a fee, and meet continuing education requirements. These regulations won’t apply to all tax preparers though – CPAs, lawyers, EAs and a few others are exempt. There are three independent tax preparers (Sabina Loving, John Gambino, and Elmer Kilian) contesting that the IRS has no grounds to regulate independent tax preparers.

The IRS Defense

The IRS is arguing that they have the authority to regulate preparers because of an 1884 statute called the “Enabling Act of 1884,” (also referred to as the “Horse Act of 1884″). This statute granted the Secretary of the Treasury the authority to regulate claims for the value of dead horses and other property lost during the Civil War. The reason the statute was enacted by Congress was because claimants were abusing the system. This new law required that certified “agents” could represent claimants and had to abide by the set regulations set forth. This is said to be the rise of the modern day Enrolled Agent (EA).

In the original case, the judge issued an opinion that would bar the IRS from regulating tax preparers. The IRS appealed this decision – which is where we are now. A decision by the Appeals Court isn’t expected for a few months but it is unlikely that the IRS will win its appeal. What is more likely is that the IRS will obtain the needed authority from Congress or possibly the President. If the IRS does get the necessary authority, the regulations would not be effective until 2014 at the earliest and would not affect the 2014 tax season.

Stay tuned to our social media channels for updates on the case, or join in on a discussion in our LinkedIn Group. We’d love to hear your thoughts on the case. Feel free to leave a comment below and tell us what you think.