Ted Cruz’s tribute to Dr. Seuss, Darth Vader, and White Castle hamburgers wasn’t the only verbal display last week that exemplified the growing clash between Washington’s self-seeking old guard and its ambitious upstarts. Just a few hours earlier, lawyers argued in the U.S. Court of Appeals for the D.C. Circuit whether the most-hated of government agencies had the power to create an entirely new, and burdensome, regulatory scheme without congressional approval.
The D.C. Circuit heard oral argument in Loving v. IRS, in which independent tax preparers represented by the Institute for Justice are suing over licensing rules that would require them to, among other things, obtain IRS permission to practice. The U.S. District Court for D.C. in January declared the decree—which could put thousands of mom-and-pop preparers out of business—“an invalid regulatory regime,” and the IRS appealed.
The agency’s main argument involved the “Horse Act of 1884.” You read that right: The IRS maintains that a law passed to regulate representatives of war veterans seeking Treasury compensation for lost horses allows it to set licensing requirements for those helping Americans file their mandatory tax returns. “I hate to beat a dead horse, especially one from the Civil War era,” Justice Department lawyer Gilbert Rothenberg told the court before doing just that.
One member of the three-judge panel, David Sentelle, asked why the IRS had such power for 130 years but only decided to exercise it two years ago. Rothenberg didn’t have much of an answer to that—or any of the other questions the judges asked. The man who has spent his entire career in the DOJ’s Tax Division while teaching at American University’s law school for a quarter-century stammered in answering such reasonable—and not unexpected—questions. His adversary, IJ attorney Dan Alban, was born three years after Rothenberg graduated from law school but smoothly presented his case that the IRS “turns administrative law on its head by presuming that anything not forbidden by Congress is authorized.” Alban incited the biggest laugh of the morning when Judge Sentelle said to him, after an earnest polemic on agency overreach, “We spend our day in sweeping regulations.”
The decision isn’t expected for a few months. But it seems clear what the judges thought of the seasoned government lawyer’s assertion that the IRS’s tactics were constitutional because they were not “unambiguously foreclosed by the statute.”