The Obama administration may very well be beating a dead horse to defend its regulation of the tax return preparation business – citing 19th century legislation designed to stop overinflated Civil War loss claims – a problem the insurance industry is all-too familiar with today.
Citing the “Horse Act of 1884”, the government is basing its case on 19th century law dealing with horses lost or killed during the Civil War, following a challenge brought by libertarian lawyers challenging the administration.
Said Justice Department Tax Division lawyer Gilbert Rothenberg to reporters this week, “I hate to beat a dead horse, especially one from the Civil War era,” but explained that the administration says the post-Civil War Act provides ample authority for the U.S. Internal Revenue Service to regulate the tens of thousands of tax preparation businesses in that country.
During the aftermath of the Civil War, many Americans brought war loss claims against the U.S. government, often for dead or missing horses. A cottage industry emerged, as agents would press war loss claims for a fee, usually for a percentage of the claim collected. Soon however, claim values were being fraudulently inflated.
The government at the time responded by regulating these intermediaries, barring unscrupulous ones and certifying honest ones as “enrolled agents.”
Rothenberg argued before the court that the IRS should be allowed to force tax return preparers – who are currently unregulated – to pass a competency test and begin taking continuing education classes on an annual basis.
The Institute for Justice, a libertarian advocacy law firm, disagreed with the government’s position in its counter-argument.
“Congress never gave the IRS authority to regulate tax preparers,” said Dan Alban, an attorney for the institute.
The IRS is arguing that tax return preparers represent their customers in much the same way that enrolled agents do, so the agency should be able to expand regulation to include preparers.
But the Institute for Justice is arguing that tax return preparers do not carry out the same level of representation, but rather merely provide a paid service for clients.
The Institute sued in March 2012 to block the IRS's regulations and won a district court ruling in January halting parts of the agency's program. The IRS appealed.
A decision from the three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit is not expected for months.
