The AICPA ended up on the losing side of their case challenging the IRS's program to grant a credential to certain unenrolled preparers when the case returned to the US District Court for the DIstrict of Columbia on remand. (American Institute of Certified Public Accountants v. IRS et al.; No. 1:14-cv-01190, USDC DC, 8/3/16)

The IRS initially was successful in having the AICPA lawsuit dismissed. The ruling (American Institute of Certified Public Accountants v. IRS, et al., DC Dist Col, 114 AFTR 2d ¶2014-5386) held that the AICPA did not have standing to challenge the program. However the ruling was overturned on appeal to the DC Circuit (Docket No. 14-5309) with the appellate Court finding that the AICPA had shown the issuance of this registration could cause an actual or imminent increase in competition from CPAs due to the new government program, with the listing allowing them to compete more effectively against CPAs and potentially take business away. Thus, the panel found, the AICPA had competitor standing to challenge the program.

The return to the District Court did not turn out favorably for the AICPA, as the case was again dismissed, but this time because the AICPA claim failed the “zone-of-injury” test for the statute under which they filed the suit.

As the opinion explains:

As the Supreme Court articulated in Lujan v. National Wildlife Federation, 497 U.S. 871 (1990), the grievance or interest relevant to the "zone of injury" inquiry is a precise one: "[T]he plaintiff must establish that the injury he complains of (his aggrievement, or the adverse effect upon him) falls within the [relevant statute's] ‘zone of interests.’” Id. at 883 (emphasis in original). Elaborating on this point, the D.C. Circuit has clarified that "on any given claim[,] the injury that supplies constitutional standing must be the same as the injury within the requisite ‘zone of interests.’” Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir. 1996) (emphasis added); accord Texas v. United States, 809 F.3d 134, 163 (5th Cir. 2015) (“Texas satisfies the zone-of-interests test not on account of a generalized grievance but instead as a result of the same injury that gives it Article III standing.”), aff’d by equally divided court sub nom. United States v. Texas, 136 S. Ct. 2271 (2016). This limitation is quite important here, as the only injury that currently supplies AICPA with constitutional standing -- competitive injury by way of brand dilution -- is a narrow one indeed.

The District Court on remand noted that the Court of Appeals had only granted the AICPA standing based on a “brand dilution” possibility under the program, even though the AICPA had primarily argued for “consumer confusion” as a harm under the program. The Court of Appeals had rejected the idea that “consumer confusion” had any impact on this case.

The District Court rejected the AICPA’s arguments of harm via consumer confusion and the requirement to supervise unenrolled preparers, finding the Court of Appeals had not found issue with the Court’s original conclusion that those do not give rise to a harm. Rather, the Court looks solely at the “dilution of the brand” concept for CPAs.

The Court held that the only valid theory would be that AICPA members are protected against unenrolled preparers by 5 USC §330(a). The Court then found that Congress’s primarily goal in enacting the limitations on practice before the IRS found in 5 USC §330(a) was to protect consumers and not the preparers allowed to practice.

The Court continues:

On the surface, it seems difficult to square AICPA's interest in dismantling the IRS's program with Congress's goal of safeguarding consumers. In creating the AFS Program, the IRS aimed to improve unenrolled preparers' knowledge of federal tax law, thereby “protecting taxpayers from preparer errors.” Rev. Proc. 2014-42, § 2. This objective appears closely aligned with Congress's goal of ensuring taxpayers are provided “valuable service.” 31 U.S.C. § 330(a)(2)(C). AICPA does not impugn the IRS's motive in creating the program or otherwise argue that, apart from the risk of “consumer confusion” -- i.e., that consumers might confuse a more-qualified but higher-priced CPA with a less-qualified but cheaper unenrolled preparer -- the AFS program does not flow logically from Congress’s objective of protecting consumers. Rather, it seeks to eliminate the Program notwithstanding its potential benefit to consumers precisely because the program’s “‘government-backed credential[ ]’” renders “unenrolled preparers . . . ‘better able to compete against other credentialed preparers,’ ‘uncredentialed employees of [AICPA] members,’ and ‘CPAs and their firms.’” Opp. at 10 (quoting AICPA II, 804 F.3d at 1197-98).

…AICPA has not offered “the slightest reason to think that [its members’] interest in getting more revenue by” eliminating the brand-diluting effect of the government’s credential “will serve [ § 330(a)’s] purpose of protecting [consumer welfare].” HWTC IV, 885 F.2d at 924.

This may not be the final word on this issue, as the AICPA seems likely to attempt to return to the Court of Appeals with this matter one more time. As well, the Court indicated that, due to how the IRS moved, it is possible other parties with consumer protection standing might be able to challenge the program—but it’s not clear who that party would be—and certainly not how the AICPA could craft an objection that would allow that organization to move forward if relief does not come on appeal.