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Steele v. United States

United States District Court, District of Columbia

December 18, 2017

Adam Steele, et al.,
United States of America, Defendant.



         Before the Court is the government's motion for a stay of this Court's order enjoining the Internal Revenue Service ("IRS") from charging fees to issue a preparer tax identification number ("PTIN"). Upon consideration of the pleadings, the record, and the relevant law, the Court will DENY the motion for a stay.

         I. BACKGROUND

         As explained in detail in this Court's prior memorandum opinion, ECF No. 78, this case concerns 2010-2011 regulations promulgated by the Treasury Department and the IRS regarding tax return preparers. Plaintiffs challenged the government's legal authority to require PTINs and PTIN fees. On June 1, 2017, this Court issued its opinion and order on the parties' cross-motions for summary judgement. ECF Nos. 78-79. The Court found that although the IRS had the legal authority to require PTINs, it may not charge fees for issuing PTINs. The Court explained that the IRS's PTIN regulations were interrelated to the regulations concerning exam and education requirements for tax preparers that were struck down in Loving v. I.R.S., 742 F.32d 1013 (D.C. Cir. 2014). Charging fees for PTINs is the equivalent of imposing a regulatory licensing scheme-an authority that the Loving court established the IRS does not have. Loving, 742 F.3d at 1015. Moreover, the Court found that obtaining a PTIN number is no longer a "service or thing of value"-the standard required to impose a fee under the Independent Offices Appropriations Act of 1952 ("IOAA")-because anyone can now obtain a PTIN thanks to Loving. On July 10, 2017, the Court entered its final judgment in this matter, permanently enjoining the IRS from charging PTIN fees, among other orders. ECF No. 82.

         On July 24, 2017, pursuant to Federal Rule of Civil Procedure 62, the government moved for a stay of the Court's permanent injunction during the pendency of an appeal. On September 6, 2017, the government field its notice of appeal to the D.C. Circuit.


         Under Federal Rule of Civil Procedure 62(c), "[w]hile an appeal is pending from [a] ... final judgment that grants ... an injunction, the court may suspend [or] modify [the] ... injunction on ... terms that secure the opposing party's rights." The D.C. Circuit has made clear that a "court's decision to stay its final judgment pending appeal is an extraordinary remedy that constitutes an 'intrusion into the ordinary process of... judicial review."' Friends of Capital Crescent Trail v. Federal Transit Administration, 2017 WL 2781446 (D.D.C. 2017) (quoting Men v. Holder, 556 U.S. 418, 427 (2009).

         In determining whether to grant a stay pending an appeal, the Court must consider the following four factors: "(1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and (4) the public interest in granting the stay." Cuomo v. Nuclear Regulatory Comm'n, 772 F.2d 972, 974 (D.C. Cir. 1985).

         The D.C. Circuit traditionally evaluated these four factors using a "sliding-scale" approach-meaning that a "strong showing on one factor could make up for a weaker showing on another." Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011). Although the Supreme Court in Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2007), suggested that the four factors should be treated independently, the D.C. Circuit has yet to hold that the sliding-scale approach should no longer be used. Sherley, 644 F.3d at 392-93.

         The government notes that in the context of a stay proceeding it can establish likelihood of success on the merits-the first factor in the test-by raising "questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberative investigation." Comm. on Judiciary of U.S. House of Representatives v. Miers, 542 F.3d 909, 911-12 (D.C. Cir. 2008) (internal quotations omitted). In other words, if the other three factors weigh heavily in favor of a stay, a lesser showing on the first factor is sufficient to meet the government's burden. Washington Metropolitan Area Transit Commission v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). The Court need not conclude whether a sliding-scale test of this sort survives Winter, as the government fails to meet its burden even under this lower standard.

         III. ANALYSIS

         A. Likelihood of Success on the Merits

         The government argues that this case raises serious questions going to the merits for three reasons:

(1) this Court's decision conflicts with decisions from the Eleventh Circuit and Northern District of Georgia; (2) the PTIN and RTRP [-the registered tax return preparer-] regulations are sufficiently independent from each other to justify both the PTIN requirement and user fee; and (3) the statute and ...

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