IRS does not have authority to enact rules that are in conflict with federal law.

Loving v IRS, 2014 U.S. App. LEXIS 2512
Three strikes and you’re out? When the Internal Revenue Service (IRS) decided to regulate independent tax preparers in 2011, it claimed its authority to impose a licensing regimen came from a statute from 1884 and said it wanted to protect the public from bad apples in the tax preparation industry.

But three independent tax preparers, the Loving plaintiffs, vigorously attacked the proposed initiative and succeeded at every step in their legal challenge. First, the U.S. District Court (D.C.) enjoined the licensing scheme, finding that the IRS lacked the necessary statutory authority. Second, the U.S. Court of Appeals rejected the IRS’s request to lift the injunction while its appeal was pending. Now, that very court agreed with the District Court that ”the IRS’s statutory authority under Section 330 cannot be stretched so broadly as to encompass authority to regulate tax-return preparers.” Cite Business Valuation Law News 2014

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