- - Tuesday, July 1, 2014

The heat is on at the Internal Revenue Service. Everyone is feeling it. Congressional committee chairmen — all Republicans, of course — are competing to be first to get to the bottom of the agency’s scandals. The tax man has targeted conservatives and illegally leaked information that was used to smear a presidential candidate, and then the agency conveniently “lost” the relevant emails.

Prudence and common sense suggest that now is not the time to defy a federal court order. In this administration, however, prudence is AWOL and good sense is scarce. “No” means “yes.”

The U.S. Court of Appeals for the District of Columbia Circuit was clear indeed when it concluded earlier this year that the IRS has no legal authority to regulate kitchen-table tax preparers. The agency implausibly insisted that a Civil War-era law about horses gave it the right to impose a licensing regime on small entrepreneurs. The appeals court scorched the IRS for this “expansive, atextual and ahistorical” reading of the law.

Undaunted, the IRS has repackaged the scheme as a “voluntary” program that regulates the same people the court said the agency has no power to regulate. With straight face, the IRS administrators refer to the income tax as “voluntary,” too. We urge one and all not to take the IRS literally on this occasion.

John Koskinen, the embattled commissioner of the IRS, calls the renewed scheme an “effort to improve service to taxpayers.” The entrepreneurs who would be affected, as represented by American Institute of Certified Public Accountants, call it a backdoor attack on their livelihood.

“The proposed program would contravene the results, reasoning and judicial concerns underlying the court’s opinion in Loving [v. IRS],” the group’s chairman, William Balhoff, wrote last week to Mr. Koskinen. “The proposed program is therefore an impermissible end-run around binding precedent and presents litigation risks for the IRS.”

The danger for the IRS is that the courts have seen through similar efforts to disguise agency pronouncements as voluntary. When agency dictates are “binding as a practical matter,” they are subject to all the same legal requirements as a formal rule — something that has already been struck down.

A lot of money is at stake. Americans spend about $9 billion each year to hire someone to fill out tax forms that grow ever more confusing and complicated. Major tax-preparation firms, such as H&R Block, are itching for licensing as a barrier to the kitchen-table competitors who can’t afford the time and money to obtain IRS certification for something they do on the side for a few weeks out of the year.

If the IRS wants to impose rules on tax preparers, it must go to Congress and ask, politely, for a law granting it the authority to do so. President Obama and his men are an impatient lot. They would rather skip the law and do what they want. The IRS may need new lawyers, who could tell the tax men that when a judge says “no,” he means no.