The Eleventh Circuit held that the fee the IRS charges to issue preparer tax identification numbers (PTINs) to tax return preparers, who are required to use the PTINs on returns they prepare, is valid because the PTIN confers a special benefit on the preparers: the privilege to prepare tax returns for others for compensation (Jesse E. Brannen, III, P.C., No. 11-14138 (11th Cir. 6/7/12), aff’g No. 4:11-cv-00135-HLM (N.D. Ga. 8/26/11)).
The plaintiff, an attorney and CPA who prepares tax returns, argued that Sec. 6109, which requires PTINs for tax return preparers, did not authorize a user fee to be charged for the PTINs. The court, however, explained that 31 U.S.C. Section 9701, the Independent Offices Authorities Act, permits agencies to charge a fee for a service or thing of value the agencies provide. A fee is distinguishable from a tax, which agencies may not levy because taxes are the exclusive domain of the legislature. A fee, however, cannot be charged if the service or thing of value benefits the general public; it must confer a special benefit on the person being charged the fee (Federal Power Comm’n v. New England Power Co., 415 U.S. 345 (1974)).
After reviewing the history of the term “tax return preparer” under Sec. 7701(a)(36) and the development of the requirement to use a PTIN instead of a Social Security number to prepare tax returns under Sec. 6109, the court concluded that the issuance of PTINs bestowed on tax return preparers the ability to prepare tax returns for others for compensation, which is the type of special benefit that qualifies under New England Power “above and beyond those which accrue to the public at large.” It also held that imposing a fee after none had been charged was permissible and that nothing in the statutes supported the plaintiff’s argument that it was not.
—Sally P. Schreiber (email@example.com) is a JofA senior editor.