Steele Vs. U.S.

Update on Case July, 2025

The district court ruled in March of 2025 that return preparers are entitled to recover $169 million of the $305 million collected from 2010 to 2017. Co-counsel to the return preparers, Allen Buckley, believes this amount is grossly inadequate, as he believes the IRS is only allowed to charge for the costs of issuing and renewing PTINs (and maintaining the list of PTINs). (His belief is based on the 2019 Montrois decision of the D.C. Court of Appeals.) Since PTINs are permanent identification numbers, logic suggests the amount cannot possibly be $136 million (i.e., $305m - $169m) over those years, given there are roughly 725,000 PTIN holders each year. If you’ve renewed your PTIN online, you know most of the questions are already filled in by a computer program.  (The IRS basically continued its licensing activities after the Loving case ruled the IRS does not have licensing power, as evidenced by the little change in Form W-12 over the years.)

Rather than continue on with the district court, preparers’ counsel inquired whether the IRS would be willing to immediately allow the case to be appealed to the D.C. Court of Appeals. (In 2019, the D.C. Court of Appeals remanded the case to the district court to determine the costs of issuing and renewing PTINs.) After 2019, rather than holding a trial, etc. that would require evidence to prove the costs, the district court allowed the IRS to determine the costs. Unsurprisingly, the figures it came up with are huge. The IRS didn’t explain how it came up with its costs, and estimated Accenture’s costs by basically dividing the number of sentences in the Accenture contract mentioning a licensing activity by total sentences (to calculate the impermissible percent). The district court allowed both. Counsel for the IRS agreed to allow the case to immediately be appealed. The district court permitted the immediate appeal. Counsel for the preparers filed an appeal raising numerous issues. Counsel for the IRS then filed its own cross-appeal, basically claiming that the IRS can charge PTIN fees for the years it was enjoined from charging fees (basically 2017-2019). Since there is no lawful authority for the IRS to require PTIN renewal, Mr. Buckley thinks the IRS won’t have much luck with its cross-appeal. And he thinks the preparers have a strong case to substantially increase the refund amount.

The parties agreed to try to mediate a resolution to the case. It’s possible the case will be resolved via mediation. The mediation should take place sometime in 2025.

One thing to keep in mind is the federal government is broke. How much this weighs on the litigation is not quantifiable. But Mr. Buckley believes that in recent years, the IRS has gotten all the close calls in the case and a related case that was filed and dismissed. (That case challenged PTIN renewals and, in the alternative, excess questioning on Form W-12).

Adam Steele was the named plaintiff in both cases. Regrettably, he recently passed away. He was instrumental in this cause. 

Update on Case January, 2023

In January of 2023, the U.S. District Court issued a ruling largely spelling out what fees could lawfully be charged. The DOJ was directed to work with the IRS to produce costs thereunder. The DOJ was required to provide monthly progress reports. Plaintiffs were allowed to include information in such reports. By June, Allen Buckley, an attorney/CPA (and class co-counsel) had produced an estimate of the costs that could be charged. The June notice to the court so reported. Since then, monthly notices have noted plaintiffs have estimated the costs. In the September notice, plaintiffs asked the court to require the DOJ/IRS to produce their costs figures no later than late November, if the numbers were not produced by late October. Also in September, the court issued a ruling stating the IRS did not have to currently pay back $81 million it had conceded (in addition to the roughly $28 million it has already given to plaintiffs via concession--that money is invested in Treasury notes pending resolution of the case). It also ruled against the plaintiffs with respect to two other relatively small clarification issues. In late September, the IRS set the 2023-24 PTIN fee at $19.75. Given inflation and the fact that the fee started in excess of $60, progress has been made.

Update on Case September, 2022