Preparer regulation after Loving v. IRS (brief) | Research Credit Integrity Alliance

Key points

In Loving v. IRS the D.C. Circuit held in 2014 that Treasury's authority to regulate representatives practicing before it does not reach paid tax return preparers, and that wider regulation is for Congress.1
Any person with a preparer tax identification number may prepare a federal return or refund claim for a fee; the number costs $18.75 and needs no examination.23
The Code's preparer penalties and injunctions apply to every paid preparer, but the rules that restrict contingent fees bind only practitioners and AICPA members.4567
Treasury has proposed removing the registered preparer rules from Circular 230 and has asked Congress for explicit authority to regulate all paid preparers.89
Form 6765 does not identify the person who prepared the credit computation, and no form asks how that person was paid.1011

The decision

In 2011 Treasury and the IRS issued rules requiring paid tax return preparers to pass an initial certification exam, pay annual fees and complete at least 15 hours of continuing education each year.1 Three independent preparers challenged them. On 11 February 2014 the Court of Appeals for the District of Columbia Circuit held that the IRS's authority under 31 U.S.C. 330 to "regulate the practice of representatives of persons before the Department of the Treasury" does not extend to tax return preparers.112

The court reasoned that preparers are not agents and cannot bind the taxpayer, that filing a return is not practice before an agency in the sense of presenting a case, and that Congress has its own targeted penalties for preparers.1 It added that more stringent regulation of preparers might be wise policy, "But that is a decision for Congress and the President to make if they wish by enacting new legislation."1

Later in 2014, in Ridgely v. Lew, a district court applied the same reasoning to Circular 230's contingent fee rule and held that the IRS lacks authority to regulate the preparation and filing of refund claims made before an audit.13 A research credit missed on the original return is commonly claimed in that way.

Who may prepare a research credit claim today

A tax return preparer is anyone who prepares a return or refund claim, or a substantial portion of one, for compensation, and a person whose advice leads to an entry that is a substantial portion of a return is regarded as having prepared it.1415 An adviser who prepares a research credit computation for a fee will often fall within that definition.

The IRS states that anyone who prepares federal returns for compensation must have a preparer tax identification number, and that any tax professional with one is authorized to prepare federal tax returns.23 Representation is different: enrolled agents, certified public accountants and attorneys may represent clients on any matter, participants in the voluntary Annual Filing Season Program have limited rights, and other PTIN holders have none for current returns.3

Who prepares the claim	Code penalties	Circular 230 fee rule	AICPA fee rule
CPA who is an AICPA member	Apply	Applies, except to refund claims before an audit	Applies
Attorney or enrolled agent	Apply	Applies, except to refund claims before an audit	Only if a member
PTIN holder with no credential	Apply	Outside Treasury's practice authority	Only if a member

Which federal rules reach a paid preparer. A general summary, not advice on any case.4567113

Since 2014

Treasury and the IRS proposed in December 2024 to remove the registered preparer rules, which they said are no longer enforceable after Loving, and to replace the contingent fee rule with one that treats such fees for preparing returns and refund claims as disreputable conduct by practitioners.8 A search of the Federal Register on 11 October 2026 found no final rule.16

Treasury's fiscal year 2025 revenue proposals asked Congress for "explicit authority to regulate all paid preparers of Federal tax returns, including by establishing mandatory minimum competency standards", and for a penalty on taxpayers who fail to disclose the use of a paid preparer and the fees paid.9 A bill introduced in March 2025, H.R. 1983, would extend Section 330 to the practice of tax return preparers.17

The case for the present approach

The arguments for leaving things as they are carry weight. Loving rests on the statute's text, history and structure, and the Code's penalties already apply to every preparer.14 Entry rules impose costs. Success fees let a business claim without paying in advance, place the cost of unsuccessful work on the adviser and can give smaller businesses access to specialists. Nothing in this brief suggests that advisers who charge them act improperly.

The answer is about reach and incentive. Penalties apply after the fact and only where an understatement results from an unreasonable position.4 The fee rules depend on the preparer's credential and membership, so two preparers doing the same work can be subject to different rules.56 The court left wider regulation to Congress, and a statutory rule on fees in research credit engagements would not depend on the scope of Section 330.1

Our position

Congress should prohibit contingent fees, commonly called success fees, in federal research and development tax credit engagements under Section 41, so that advisers are paid for the work they perform rather than for the size of the claim they produce, whatever their credential. Swanson Reed, which publishes this brief, is a fixed-fee R&D tax adviser with a direct commercial interest: it does not charge success fees, and a ban would remove a pricing model it competes against.

References

US Court of Appeals for the District of Columbia Circuit, Loving v. Internal Revenue Service, No. 13-5061, decided 11 February 2014, slip opinion pages 2 to 17. https://media.cadc.uscourts.gov/opinions/docs/2014/02/13-5061-1479431.pdf (accessed 11 October 2026). Back
Internal Revenue Service, PTIN requirements for tax return preparers (page last reviewed or updated 16 October 2025). https://www.irs.gov/tax-professionals/ptin-requirements-for-tax-return-preparers (accessed 11 October 2026). Back
Internal Revenue Service, Understanding tax return preparer credentials and qualifications (page last reviewed or updated 29 January 2026). https://www.irs.gov/tax-professionals/understanding-tax-return-preparer-credentials-and-qualifications (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6694, Understatement of taxpayer's liability by tax return preparer, subsections (a), (b) and (e), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6694.htm (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (b) and (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026). Back
American Institute of CPAs, AICPA Code of Professional Conduct (updated for all official releases through September 2026), ET 1.510.001 Contingent Fees Rule, paragraph .01. https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7407, Action to enjoin tax return preparers, subsections (a) and (b), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap76-subchapA-sec7407.htm (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, 89 FR 104915 (26 December 2024), Background part A and Explanation of Provisions parts A and B. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026). Back
Department of the Treasury, General Explanations of the Administration's Fiscal Year 2025 Revenue Proposals (11 March 2024), pages 206 to 208. https://home.treasury.gov/system/files/131/General-Explanations-FY2025.pdf (accessed 11 October 2026). Back
Internal Revenue Service, Instructions for Form 6765 (Rev. December 2025), read in full. https://www.irs.gov/instructions/i6765 (accessed 11 October 2026). Back
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction (page last reviewed or updated 1 October 2026). https://www.irs.gov/businesses/corporations/research-credit-claims-section-41-on-amended-returns-frequently-asked-questions (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 31 U.S.C. 330, Practice before the Department, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title31/html/USCODE-2024-title31-subtitleI-chap3-subchapII-sec330.htm (accessed 11 October 2026). Back
US District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565 (CRC), Memorandum Opinion, 16 July 2014, pages 1, 9 and 15. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7701, Definitions, subsection (a)(36), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap79-sec7701.htm (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, 26 CFR 301.7701-15, Tax return preparer, paragraphs (a), (b)(2)(i) and (b)(3)(i). https://www.ecfr.gov/current/title-26/section-301.7701-15 (accessed 11 October 2026). Back
Office of the Federal Register, Federal Register documents filed under agency docket REG-116610-20 (search result: one document, the proposed rule of 26 December 2024). https://www.federalregister.gov/api/v1/documents.json?conditions%5Bdocket_id%5D=REG-116610-20 (accessed 11 October 2026). Back
US House of Representatives, H.R. 1983, Tax Return Preparer Accountability Act of 2025, 119th Congress, introduced 10 March 2025, section 2. https://www.congress.gov/119/bills/hr1983/BILLS-119hr1983ih.pdf (accessed 11 October 2026). Back