Excerpts of Transcript of Oral Argument inLoving v. IRS,

No. 13-5061 (D.C. Cir. argued Sept. 24, 2013).


[Setting the stage:  Three return preparers challenged the statutory basis for the Registered Tax Return Preparer ("RTRP") regulations.  These regulations required return preparers to register with the government, pay an initial fee, pass a qualifying exam, and then complete continuing education and pay another fee each year thereafter.  The plaintiffs contended that, based on the plain language of 31 U.S.C. § 330, return preparers were not "representatives" who "practice" before the Department of the Treasury.  In the D.C. district court, Judge James Boasberg held that Treasury and the IRS did not have the statutory authority to promulgate the RTRP regulations because (i) the statute defined the "practice of representatives" in a way that did not cover return preparers, (ii) Congress had already created a detailed statutory scheme to penalize return preparers who engage in several categories of misconduct, and (iii) if the court were to accept the IRS's interpretation, then section 7407, which allows the government to seek a permanent injunction on abusive practice by certain return preparers, "would be relegated to oblivion."  Accordingly, the district court permanently enjoined the IRS from enforcing the RTRP regime.  The government appealed, and a D.C. Circuit panel consisting of Judges Sentelle, Kavanaugh, and Williams heard oral argument on September 24, 2013.]



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[The following excerpt is located in the transcript on page 2 line 4 through page 5 line 5.  This exchange illustrates several important aspects of oral argument, including: (i) clearly defining the issue and developing a theme; (ii) being prepared for an active conversation with the judges; and (iii) thoroughly knowing the facts and arguments in the brief.]


Mr. ROTHENBERG: May it please the Court. This case presents a question of exceptional importance for the administration of tax laws. Can the Secretary of Treasury regulate the practice of tax return preparers in an effort to weed out those preparers, who are unscrupulous or unethical. The District Court held that Congress in enacting 31 U.S.C. 330 has unambiguously foreclosed the Commissioner from doing so - that decision is wrong and it should be reversed.


Judge SENTELLE: That's one way of phrasing it. You are looking at it from very negative approach though the question would first be, has Congress empowered, not whether the Congress has foreclosed, but whether the Congress has given you…


Mr. ROTHENBERG: You clearly have to have that first and then you look…


Judge SENTELLE: Yes, I understandCity of Arlingtonsays, we don't cover jurisdictional but we still have to determine did Congress leave an ambiguity that empowered you to make that determination.


Mr. ROTHENBERG: Well the way…


Judge SENTELLE: You don't have all the power in the world unless Congress unambiguously takes it away and it seems to be the way you were approaching it in your brief as well as here.


ROTHENBERG: Well I think the way to approach is the way this Court has approached it when its addressing step one and that is look at this Court in the en banc decisionMediation Boardhas identified four things to look at: text, structure, overall statutory scheme, and the problem Congress sought to solve. And when you look at those, we think it's clear that subsection (a)(1) of section 330 permits the Treasury to do exactly what it did.


Judge WILLIAMS: One thing we often start with is ordinary language and it seems to me a striking omission from your brief was any effort to cite…any usage of words like these regulate the practice of representative of persons before a particular agency, which were taken to encompass the kind of relationship that's involved here. You don't try it in the brief. I assumed you looked but couldn't find...


ROTHENBERG: There's not a lot of…well there's very little law on what…how you define representative, how do you define practice…?


Judge WILLIAMS: No but you say…just ordinary language, did you find any usage in any published place perhaps even in an unpublished, but certainly published would be better, in which words like that were used to characterize people whose only function was to help other people fill-in a form that they were required by law to fill-in.


ROTHENBERG: Well I think preparers do much more than just fill out the form, they…


Judge WILLIAMS: I'm sure many of them do.


ROTHENBERG: They put their PTIN number down there and they say, "We have looked…", essentially they say, "this is the amount that this taxpayer owes in tax or this is the amount this taxpayer is entitled to claim a refund for." I mean when you…


Judge WILLIAMS: In other words they fill in the form. They help the taxpayers fill in the form.


ROTHENBERG: Well they're not mere scriveners, they have to know what…


Judge WILLIAMS: No. No one suggested they were mere scriveners. But it doesn't sound to me, and so I'd be interested in any case where these words were used to communicate such a meaning.


ROTHENBERG: We could not find a case comparable to this one.


Judge WILLIAMS: I'm not talking about legal cases. I'm talking about anything in public discourse.


ROTHENBERG: Well the operative words would be representatives, practice, and certainly the…


Judge SENTELLE: Before…before…


Judge SENTELLE: The case.




Judge SENTELLE: None of those is like filling in a form.


Judge KAVANAUGH: And the representative is usually an agent, right?


ROTHENBERG: Well no… Actually no. If you look at the … we'll go back to 1884, the words Congress used were agents, attorneys, or other persons and when Congress recodified it in 82 it used the word representatives…didn't use those three words.


Judge SENTELLE: That's the one I offered you, right?


ROTHENBERG: Right, that's the operative one and it said these changes were stylistic only. So "representative" has to mean more than agent because the original words were agents, attorneys, and other persons. And clearly tax return or preparers are other persons.


Judge KAVANAUGH: And what about the cross-reference, which the District Court relied on, to (a)(2)(D), "advise and assist persons in presenting their cases," that is not helpful for your position obviously.


ROTHENBERG: Well, it's not helpful but it's also incorrect way to interpret the statute. The operative provision is (a)(1). (a)(2) essentially imposes admission requirements on those who are admitted to practice. And if you look at the exemption, attorneys and CPAs clearly practice, they are exempt from those admission requirements.


Judge SENTELLE: How many years were these words on the books from the original version until the Treasury decided one day that it could regulate tax preparers?


ROTHENBERG: The 1884 words were there I believe until the recodification.


Judge SENTELLE: Right. And that's how many years?


ROTHENBERG: That's about a century.


Judge SENTELLE: And after a century, the Secretary suddenly decides these words empower us to do this or the Commissioner…


Judge KAVANAUGH: Another 30 years...


ROTHENBERG: Well actually…


Judge SENTELLE: Another 30 years on top of that, right?


ROTHENBERG: Well what I would like to do is mention that this Court en banc, in again theMediation Boardcase they said, "The mere fact the board has never before claimed the authority does not mean that such authority if granted by Congress has ceased to exist." I mean this is…


Judge SENTELLE: Doesn't make it irrelevant either, counsel. 130 years of not thinking that it gave you that power might make it a little less convincing when you say it does.


ROTHENBERG: Well, we think the whole point of administrative regulation and Chevron deference is that it's an evolving process, it's not…


Judge WILLIAMS: Which is an evolving process?


ROTHENBERG: The ability of the administrative agency to determine what it can and cannot do

under the governing statute. Now admittedly until recently the Internal Revenue Service did not choose to have tax return preparation by itself by a non-enrolled agent, attorney, or CPA come within Circular...


Judge KAVANAUGH: Did the IRS say that it had the authority but was exercising its discretion not to?


ROTHENBERG: It didn't say anything.


Judge KAVANAUGH: Yes, right.


ROTHENBERG: And again you can have a prior Secretary of the Treasury decide not to exercise…


Judge KAVANAUGH: Sure and that's…


ROTHENBERG: …and you can have it later when you decide, okay…


Judge SENTELLE: Yes, but certainly I realize that "arbitrary and capricious" is more APA language thanChevronlanguage but certainly arbitrary and capricious does overlap here and to make a change without acknowledging that a change has been made and without explaining the change - why things were different? That would be arbitrary and capricious, wouldn't it?


ROTHENBERG: Well the Secretary clearly did all that…he did explain the changes - the whole study.


Judge SENTELLE: Okay.

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[The following excerpt is located in the transcript on page 8 line 17 through page 9 line 5.  This exchange illustrates (i) the importance of choosing your words carefully and articulating your points with precision and (ii) ensuring that you have sufficient support for the statements made in your brief.]


ROTHENBERG: And the biggest problem is the paid preparer returns, the …


Judge SENTELLE: It is the biggest problem?


ROTHENBERG: I'm sorry?


Judge SENTELLE: Has there been a comparison?


ROTHENBERG: I do not believe there has been a comparison…


Judge SENTELLE: Right. But you know it's the biggest problem.


ROTHENBERG: On the non-paid versus paid?


Judge SENTELLE: Yes.


ROTHENBERG: I don't remember reading that in the…


Judge SENTELLE: How do you know it's the biggest problem if there's been no comparison then?


ROTHENBERG: Well again it's…what does IRS think is the biggest problem and would…can they tackle. And the biggest problem was paid preparers in the sense that there are people that market to car dealers. Hey, prepare tax returns too, you can make a little extra money on the side. IRS would like to think that they would prepare returns that are accurate.



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[The following excerpt is located in the transcript on page 15 line 23 through page 16 line 20.  This exchange illustrates the importance of (i) fully preserving issues and (ii) the interaction of briefing and oral argument.]


Judge WILLIAMS: Quite apart from ambiguity or unambiguity, you argued that you have not given up the reasonableness argument and that argument rests on the proposition that can take you from the outset, briefed it with reference to reasonableness, although I guess you didn't mention the magic and some circles, prong two, right?


ALBAN: Well…Your Honor, we did argue under bothChevronStep 1 and Step 2 and we did explain that in both our briefs in the lower Court and our briefs in this Court.


Judge SENTELLE: You briefed here, I believe I'm correct. The only reference is toChevron2 are in footnote, correct?


ALBAN: It's…that is correct, Your Honor. However…


Judge SENTELLE: So they're only marginally even in your brief before us, is that enough to preserve?


ALBAN: Yes, it is Your Honor. Certainly, the focus of our brief is on Chevron Step 1, but the arguments that we are making, that the plain language of the statute forecloses the agency's interpretation, those also apply inChevronStep 2 that the agency's interpretation is unreasonable. As a matter of brevity, we preserve those arguments in the footnote but we made them under both steps of theChevrontest and at this Court has done on…


Judge SENTELLE: You know…our former colleague Abner Mikva used to say, "If you want us to read it, put it up where our eyes are…" If God meant for us to read footnotes, he would have put our eyes on the vertical plain not the horizontal.


ALBAN: Yes, Your Honor, I agree with that entirely. And that's why we made the arguments in

the body of the brief but merely noted that we were making them under Step 1 and Step 2 and a footnote.

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