That is, it’s great if you’re in DC Circuit, the land of the Loving. The assault on IRS’ long-arm approach to roping in tax practitioners from the breaking of dawn to the fall of eventide goes on apace, the latest being the partial collapse of the §10.27 barrier to contingent fees.

You’ll recall the rule: “(b) Contingent fees — (1) Except as provided in paragraphs (b)(2), (3), and (4) of this section, a practitioner may not charge a contingent fee for services rendered in connection with any matter before the Internal Revenue Service.

(2) A practitioner may charge a contingent fee for services rendered in connection with the Service’s examination of, or challenge to —

(i) An original tax return; or

(ii) An amended return or claim for refund or credit where the amended return or claim for refund or credit was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return.

(3) A practitioner may charge a contingent fee for services rendered in connection with a claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the Internal Revenue Service.

(4) A practitioner may charge a contingent fee for services rendered in connection with any judicial proceeding arising under the Internal Revenue Code.” 31 CFR 10.27(b).

Well, Gerald Lee Ridgely, Jr., CPA, charged a contingent fee in connection with filing an “Ordinary Refund Claim”, and Jake Lew and the 1111 Constitution Avenue gang landed on Gerry Lee with both feet.

But Judge Cooper of USDCDC, home of Loving, wasn’t buying it.

Read all about it in Gerald Lee Ridgely, Jr., v. Jacob Lew, et al., Civil Action No. 1:12-cv-00565 (CRC), filed 7/16/14. And thanks to Christopher S. Rizek, Esq., for bringing this to my attention.

Judge Cooper is a man of few words. “ORDERED that Defendants lack statutory authority to promulgate or enforce the restrictions on contingent fee arrangements, as delineated in 31 C.F.R. § 10.27, with respect to the preparation and filing of Ordinary Refund Claims, where ‘preparation and filing’ precedes the inception of any examination or adjudication of the refund claim by the IRS and any formal legal representation on the part of the practitioner….” Order, p. 1.

Summary judgment to Gerry Lee.

Bottom line- until there is something adversarial or controverted, no one is representing anyone before the IRS by just filing a form, and so Circular 230 and its numerous strictures are off the table.