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Feb 4, 2013, Vol. 18, No. 20
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Federal courts no longer check federal power. That’s been the disappointing truth of contemporary America, culminating in the Supreme Court’s timorous ruling upholding Obamacare last year. But 2013 could be very different. The first month of the year saw a number of cases that suggest the judicial branch might again start doing the job James Madison tasked it with over two centuries ago.

Treasury Internal Revenue Service

The nation’s most important federal appeals court foiled two government power grabs on January 25. The U.S. Court of Appeals for the D.C. Circuit ruled that the president violated the Constitution in making three recess appointments to the National Labor Relations Board while the Senate was not actually in recess. And a different three-judge panel concluded that part of the Environmental Protection Agency’s rules requiring refiners to use biofuels went “in excess of the agency’s statutory authority.”

Add an anti-IRS ruling the week before—these things come in threes, it seems—and The Scrapbook is almost ready to allow that America is not going to hell in a handbasket. Almost. Because no case is certain until the Supreme Court has its say.

Still, there’s much cause for celebration in the U.S. District Court for the District of Columbia’s decision in Loving v. IRS that licensing requirements the IRS developed in 2011 constituted “an invalid regulatory regime” that would threaten the livelihood of independent tax preparers. Judge James Boasberg didn’t even need to hear oral arguments to rule for the Institute for Justice and the three preparers it represents, ordering an immediate halt to the IRS program. He agreed with IJ attorney Dan Alban, who says simply, “Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.”

But the IRS last week submitted a motion to stay the injunction. This last-ditch effort confirms the agency’s primary goal here is to enrich itself—and friendly special interests. The arguments of the Obama functionaries on behalf of the IRS are comically weak. The IRS maintains that its new licensing requirements—tax preparers would have to pay user fees, take an exam, complete continuing education annually, and obtain IRS permission to practice—should stand because they’ve proven so profitable, with “almost $4 million more in user fees this month alone” and over $100 million in total. The agency complains it has put $50 million into launching the program and would have to spend $238,000—nearly a quarter of a million dollars!—to notify preparers that the regulations are illegal.

Imagine the reaction if a private corporation asked a federal court to let it continue breaking the law so it could keep extracting millions of dollars from hapless consumers.

The IRS also cited in its brief a press release in which the makers of TurboTax declared “disappointment” in the decision. Did the young DoJ attorney writing that line do so with a straight face? TurboTax is not subject to the new regulations. Neither are attorneys and CPAs, or the employees they supervise. Of course TurboTax (and H&R Block, Jackson Hewitt, et al.) is disappointed: These onerous requirements raised the bar to entry in a $9 billion tax-return preparation industry. Former H&R Block CEO Mark Ernst, who left the company after it lost over a billion thanks to subprime mortgages, oversaw the writing of the new rules.

The Scrapbook hopes the clearheaded Judge Boasberg, an Obama appointee, stands his constitutional ground.

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