Here's the article in the Journal of Accountancy which summarizes the six reasons given by the D.C. Circuit Court of Appeals for striking down the regulations:http://www.journalofaccountancy.com/News/20149583.htm
The appeals court explained that it had six reasons for invalidating the regulations. First, the term “representatives” in Section 330 meant agents who had authority to bind others, which tax return preparers clearly do not do—they do not have the legal authority to act on a taxpayer’s behalf without being specifically authorized by a taxpayer to do so. Second, the word “practice” does not mean, as the IRS asserts, preparing and signing tax returns, but instead refers to traditional adversarial proceedings before a court or agency. The language in Section 330(a)(2)(D), which refers to the requirement that representatives demonstrate competency to advise and assist persons in presenting their cases, further supports this interpretation, the court said.
The court next examined the original language of Section 330 (enacted in 1884), referring to “agents, attorneys, and others representing claimants,” which clearly did not encompass tax return preparers. Once the statute was amended to simplify the language by referring simply to representatives, there was no indication that Congress meant to change to whom the law applied.
The fourth reason involved the statutory provisions that Congress has added to the Code to regulate return preparers, among them Secs. 6694, 6695, and 6713. The court found that interpreting Section 330 as the IRS suggested would “effectively gut Congress’s carefully articulated existing system for regulating tax-return preparers” (slip op. at 13).
The very broad nature and scope of the authority the IRS is claiming underlay the court’s fifth reason for overturning the program. Under the IRS’s interpretation, it is empowered to regulate for the first time hundreds of thousands of tax return preparers in the “multi-billion dollar” tax return preparation industry; nothing in the statute’s history or text can support such a vast undertaking. The sixth reason is somewhat related to the fifth—in the many years since Section 330 was enacted, the IRS apparently did not think that it had the authority to regulate preparers before it did so in 2011.
In affirming the lower court’s decision, the appeals court explained that the regulatory scheme failed both parts of the test from Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), that the Supreme Court applies to agency interpretations of statutes because the rule is foreclosed by the statute, and the IRS’s interpretation was unreasonable in light of the statute’s text, history, structure, and context.
"Never try to teach a pig to sing. It wastes your time and annoys the pig." - Robert Heinlein