Court Opinion

ID: 9372467
Source: CourtListenerOpinion
Date Created: 2023-02-21 18:01:15.734873+00
Date Added: 2024-06-11T17:16:35.660596
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

 ADAM STEELE, BRITTANY
 MONTROIS, and JOSEPH HENCHMAN,
 on behalf of themselves and all others
 similarly situated,

          Plaintiffs,

 v.                                                        Case No. 1:14-cv-1523-RCL

 UNITED STATES OF AMERICA,

          Defendant.

                                  MEMORANDUM OPINION

         This case concerns the Internal Revenue Service's ("IRS" or "the agency") assessment of

fees to income tax return preparers for its issuance and renewal of Preparer Tax Identification

Numbers ("PTINs"). Plaintiffs, a class ofreturn preparers, sued the United States for declaratory,

injunctive, and monetary relief in this Court, arguing that the IRS lacked authority under the

Independent Offices Appropriations Act ("IOAA"), 31 U.S.C. § 9701, to charge those fees. This

Court agreed, granted summary judgment to plaintiffs, and enjoined the IRS from continuing to

assess fees for PTIN registrations and renewals. Steele v. United States ("Steele I"), 260 F. Supp.

3d 52, 63---67 (D.D.C. 2017). On appeal, however, the Circuit vacated this Court's judgment,

holding that that statute indeed authorized PTIN fees, and remanded for consideration of whether

the fee amounts were excessive. Montrois v. United States, 916 F.3d 1056, 1062---68 (D.C. Cir.

2019).

         Before the Court on remand are the parties' cross-motions for summary judgment, ECF

Nos. 173, 175. Plaintiffs argue that many of the expenses used to justify the amount of the PTIN

fees are unnecessary to the maintenance of the PTIN system and therefore those fees are excessive

                                                1
 in violation of the IOAA. The government moves only for partial summary judgment, conceding

 that the IRS unlawfully included certain expenses in its PTIN fee calculations but maintaining that

 the agency was within its authority to include others. The government further argues that it is

 entitled to an offset to its liability for sums it could have charged in fees while it was enjoined by

this Court from assessing them. For the reasons that follow, the Court will GRANT in part and

DENY in part plaintiffs' motion, GRANT in part and DENY in part the government's motion,

and REMAND to the IRS to determine an appropriate refund for the class in a manner consistent

with the IOAA.

                                       I.   BACKGROUND

    A. Statutory and Regulatory Background

        Both this Court and the Circuit have set out the statutory and regulatory background of this

case extensively in prior opinions. See Steele I, 260 F. Supp. 3d at 56-58; Montrois, 916 F.3d at

1058----60; Steele v. United States ("Steele III"), No. 14-cv-1523-RCL, 2020 WL 7123100, at *1-2

(D.D.C. Dec. 4, 2020). Accordingly, the Court will summarize that background here only as

necessary to resolve the pending cross-motions for summary judgment.

        The Internal Revenue Code defines a "tax return preparer" as "any person who prepares

for compensation, or who employs one or more persons to prepare for compensation, any return

of' or "claim for refund of' federal income taxes. 26 U.S.C. § 7701(a)(36)(A). While the Code

does not set professional standards or licensing requirements for return preparers, Congress

enacted a statute in 1976 authorizing the IRS to require them to list their social security numbers

for identification purposes on returns they prepared. See Tax Reform Act of 1976, Pub. L. No. 94-

455, § 1203(d), 90 Stat. 1520, 1691.

       In 1998, Congress amended that statute to authorize the IRS to permit return preparers to

list a separate identification number issued by the agency instead of a social security number. 26

                                                  2
 U.S.C. § 6109(a), (d). The IRS promulgated an implementing regulation the following year

 creating the PTIN program and allowing, but not requiring, return preparers to list the PTINs it

issued in lieu of a social security number on returns. Furnishing Identifying Number of Income

Tax Return Preparer, 64 Fed. Reg. 43,910 (Aug. 12, 1999) (codified at 26 C.F.R. pt. 1).

        In 2010 and 2011, the IRS issued a series of regulations expanding its regulatory reach

over return preparers. As a part of that effort, the IRS created a mandatory credentialing process

for preparers who are not attorneys or certified public accountants, including a background check,

a competency exam, and ongoing education requirements. See Regulations Governing Practice

Before the Internal Revenue Service, 76 Fed. Reg. 32,286, 32,286-87 (June 3, 2011 ). The IRS also

expanded the PTIN program, retooled it as a broader information-gathering system regarding

preparers, made obtaining and renewing PTINs mandatory for preparers, and began chargi_ng a fee

to obtain and renew one. See Furnishing Identifying Number of Tax Return Preparer, 75 Fed. Reg.

60,309, 60,309-10 (Sept. 30, 2010); User Fees Relating to Enrollment and Preparer Tax

Identification Numbers, 75 Fed. Reg. 60,316, 60,316, 60,319 (Sept. 30, 2010).

       To support the expanded program, the IRS organized a new Return Preparer Office

("RPO") with multiple departments, including, as relevant here, the Suitability Department, the

Compliance Department, and various departments providing support to the entire office. The

Suitability Department "was responsible for checking personal tax compliance, checking

professional designation, matching prisoner lists, checking compliance of Enrolled Agents [] and

Enrolled Retirement Plan Agents [], checking compliance with the Annual Filing Season Program

[], Former Employee EA Enrollment Applications, and matching Specially Designated Nationals

[] lists." Pls.' Statement ofUndisputed Material Facts ("PSUMF") ,r 81, ECF No. 177-30 (internal

quotation marks and citation omitted); Def' s Resp. to PSUMF ("DRPSUMF") ,r 81, ECF No. 184-

                                               3
    1. The Compliance Department performed data analytics regarding compliance with PTIN

    reporting requirements, investigated so-called "ghost preparers" who failed to use a PTIN or used

    someone else's PTIN or an invalid number, and processed disciplinary referrals of preparers.

    PSUMF ,i,i 82-85; DRPSUMF ,i,i 82-85.

           After the IRS implemented its new return preparer regulations, a group of return preparers

    sued the IRS, arguing that its new preparer credentialing process was unlawful because the statute

    that the agency used to justify it, 31 U.S.C. § 330, regarding persons practicing before the IRS, did

not reach return preparers. See Loving v. IRS, 742 F.3d 1013, 1015-16 (D.C. Cir. 2014). The

District Court granted summary judgment to the plaintiffs, invalidating the credentialing

requirement, and the Circuit affirmed. Id. at 1021-22. Loving thus invalidated many of the RPO

activities that the PTIN fees funded. However, it left undisturbed the regulations requiring all

return preparers to obtain and renew PTINs and to pay a fee for doing so.

       B. The IRS's PTIN fee calculations

           The following is a summary of the PTIN and vendor fees that the IRS charged return

preparers between Fiscal Year ("FY") 2011 and 2017 and from FY 2021 to the present, 1 as well

as the various cost models that the IRS used to set those amounts.

           1. Fees based on the 2010 Cost Model

           In 2010, the IRS completed a Cost Model estimating that the annual PTIN registration and

renewal fee should be set at $50, the amount that the agency would ultimately charge from the new

PTIN system's implementation in FY 2011 through 2015. Def. 's Statement of Undisputed Material

Facts ("DSUMF") ,i,i 66, 71-73, ECF No. 173-2; Pls.' Resp. to DSUMF ("PRDSUMF") ,i,i 66,

1
 As explained below, the IRS did not assess PTIN fees between FY 2018 and 2020 because of this Court's order
enjoining it from doing so, which the Circuit later vacated.

                                                     4
 71-73, ECF No. 187-2. The government summarizes the activities whose expected costs the IRS

 used to reach that number as follows:

                   •   Communications & Customer Support
                   •   IT Development & Implementation
                   •   Program Compliance (Professional Designation Checks
                       (PDC), Personal Tax Compliance (PTC), Criminal
                       Background Checks (CBC), and administrative support)
                   •   Management and supervisory costs (entitled OPR/PMO
                       Operations Support)
                   •   Foreign Preparer Processing

DSUMF ,r 64; see 2010 Cost Model, Ex. 13 to Defs.' Mot. for S.J., ECF No. 174-8. Plaintiffs add,

and the government does not dispute, that the "Program Compliance" component "also included

'Verify[ing] Return Preparers' Self-Reported Tax Compliance,' 'Develop[ing] processes for

Identifying and Treating Return Preparers Filing w/o PTIN or Incorrect PTIN,' and 'Verify[ing]

Return Preparers' Self Certified Continuing Education."' PRDSUMF ,r 64 (alterations in original)

(quoting Ex. U to Pls.' Mot. for S.J. at 5, ECF No. 176-21); see PSUMF      ,r 34; DRPSUMF ,r 34.
Although the IRS conducted a "biennial review" of PTIN costs and produced a 2013 Cost Model,

estimating that the PTIN fee should increase to $54.47, the IRS elected to keep the fee at $50 for

the next two years. DSUMF ,r,r 84-85; PRDSUMF ,r,r 84-85.

       The government now concedes that the IRS should not have included the personal tax

compliance, criminal background check, self-reported tax compliance, or continuing education

activities in its calculations, because those activities were invalidated by Loving. DSUMF   ,r 68.
Removing the costs associated with those items from the original calculations, the government

asserted at the time of its opening summary judgment brief that the appropriate PTIN fee based on

the 2010 Cost Model would have been $ 17. Id.      ,r,r 69-70   (citing 2010 Cost Model at 3). The

government made further concessions with respect to the 2010 Cost Model after filing its opening

brief and now only defends a PTIN fee of$14.05 for FY 2011 through 2013. See Def 's Reply at

                                               5
 10-11, ECF No. 203; Second Deel. of Carol A. Campbell ("Second Campbell Deel.")         if 6, ECF
 No. 203-1. The government makes similar concessions with respect to the 2013 Cost Model, which

 it now cites as an appropriate measure of fees for FY 2014 and 2015, and asserts that the fee for

 those years should have been $37.25. DSUMF ,r,r 86-90; Def 's Reply at 11-12.

        In addition to the PTIN fees themselves, the IRS required preparers to pay a "vendor fee"

to Accenture, a third-party contractor that the agency hired to develop, maintain, and operate the

computer system responsible for PTIN registrations. DSUMF ,r,r 112-13; PRDSUMF ,nr 112-13.

From FY 2011 to 2015, that fee was set by the contract between the IRS and Accenture at $14.25

for new PTIN registrations and $13 for PTIN renewals. DSUMF ,r,r 115-18; PRDSUMF ,r,r 115-

18, 123. The government continues to defend t~e vendor fees in full. See Def.'s Opp'n at 27-29,

ECFNo. 183.

        In sum, from FY 2011 to 2015, preparers registering for a PTIN for the first time paid a

$50 PTIN fee and a $14.25 vendor fee, for a total of $64.25; and preparers renewing their PTIN

paid a $50 PTIN fee and a $ 13 vendor fee, for a total of $63. The government now concedes that

the PTIN fee associated with each of those numbers should have been only $17 for FY 2011

through 2013 and $37.25 for FY 2014 and 2015. Thus, the government impliedly asserts that the

total amount charged should have been $31.25 for new registrants and $30 for renewing registrants

during FY 2011 through 2013 and $51.50 for new registrants and $50.25 for renewing registrants

during FY 2014 and 2015.

       2. Fees based on the 2015 Cost Model

       In 2015; the IRS completed a second biennial review and issued a new Cost Model,

estimating that the PTIN fee to be charged in FY 2016 and 2017 should be set at $3 3. 2015 Cost

Model at 1, Ex. 21 to Def.'s Mot. for S.J., ECF No. 174-12; DSUMF ,r 94; PRDSUMF ,r 94. That

                                                6
 number was lower than the original $50 fee in part because of certain activities that the Circuit

 invalidated in Loving. DSUMF ,r 95; PRDSUMF ,r 95 . The government later conceded additional

 costs in the 2015 Cost Model that it determined in a subsequent biennial review to be improper

based on Loving and now asserts that the proper PTIN fee for FY 2016 and FY 201 7 would have

been approximately $24. DSUMF ,r 103; PRDSUMF ,r 103.

        The IRS also continued to require return preparers to pay the vendor fee to Accenture. For

FY 2016, the vendor fee remained at $14 for new registrations and $13.25 for renewals. DSUMF

,r,r 120-23; PRDSUMF ,r,r 120-123. By FY 2017, a new contract between the IRS and Accenture
had taken effect, and the vendor fee increased to $1 7 for both new registrations and renewals.

DSUMF ,r,r 124-25; PRDSUMF iMf 124-25.

        In sum, in FY 2016, preparers registering for a PTIN for the first time paid a $33 PTIN fee

and a $14 vendor fee, for a total of $47; and preparers renewing their PTIN paid a $33 PTIN fee

and a $13.25 vendor fee, for a total of $46.25. In FY 2017, preparers paid a $33 PTIN fee and a

$17 vendor fee, for a total of $50, regardless of whether they were registering for the first time or

renewing their registrations. The government now concedes that the PTIN fees associated with

those numbers should have been $24. Thus, the government impliedly asserts that the total amount

charged should have been $38 for new registrants and $37.25 for renewing registrants in FY 2016

and $41 for all preparers in FY 201 7.

       3. Fees based on the 2019 Cost Model

       As explained below, this Court enjoined the assessment of PTIN fees in 2017 and the

Circuit vacated that decision in 2019. In 2019, the IRS completed another biennial review and

produced another Cost Model estimating that the PTIN fee should be approximately $21 for both

new registrations and renewals. DSUMF ,r,r 107-108; PRDSUMF iMf 107--08. The new fee of $21

                                                 7
    took effect in August 2020 and remained in effect through at least FY 2022. 2 See Preparer Tax

    Identification Number (PTJN) User Fee Update, 85 Fed. Reg. 43433 (July 17, 2020).

            The vendor fee to Accenture also remained in force. Beginning in FY 2018 and continuing to

    the present, the vendor fee is set at $14.95 for both registrations and renewals. DSUMF                     ,r 133;
    PRDSUMF ,r 133. While the aforementioned injunction was in effect and the IRS was unable to charge

    PTIN fees, the IRS itself paid the vendor fee, which was set by contract, to Accenture for each

    registration or renewal. DSUMF ,i 134; PRDSUMF ,i 134.

            In sum, in FY 2021 and 2022, preparers paid a $21 PTIN fee and a $14.95 vendor fee, for a

    total of $35.95, each year for a registration or renewal.

        C. The Present Case

            The present case began in 2014, after the Circuit's decision in Loving, when a putative

class of tax-return preparers filed an action in this Court against the United States challenging the

regulations making PTINs mandatory and imposing a fee on the issuanc.e and renewal of PTINs.

See Compl., ECF No. 1. The plaintiffs sought review of the PTIN fees under the Administrative

Procedure Act ("AP A") and requested declaratory and injunctive relief, as well as an award of

restitution refunding the PTIN fees they had paid. Id. 3 On August 8, 2016, the Court certified a

class of"[ a]ll individuals and entities who have paid an initial and/or renewal fee for a PTIN,

excluding Allen Buckley, Allen Buckley LLC, and Christopher Rizek," ECF No. 63, and

2
 Plaintiffs ask the Court to take judicial notice of an apparent decrease in the PTIN fee amount for FY 2023 by $5.20.
See Pls.' Request for Jud. Notice, ECF No. 218. For reasons explained below, later calculations are not relevant to the
excessiveness of the FY 20 J 1-2017 PTIN fees, which are the only ones at i ue in this opinion. Accordingly, the
Court will deny plaintiffs' request that it take judicial notice.
3
  Although the initial complaint did not mention the APA, plaintiffs' first amended complaint filed in August 2015,
clarified that they were challenging the PTIN fees as unlawful agency action under the Adm inistrative Procedure
Act, 5 U.S.C. § 706(2)." First Am. Compl. ,r 42.

                                                          8
    appointed Motley Rice LLC as counsel for the dass. 4 The following month, the parties cross-

    moved for summary judgment. ECF Nos. 66, 67.

             On June 1, 2017, this Court granted in part and denied in part both parties' summary

    judgment motions. Steele I, 260 F. Supp. 3d at 67-(j8, First, the Court held that the Internal

    Revenue Code authorized the IRS to require the use of PTINs, and that the agency's decision to

    do so was not arbitrary and capricious under the APA. Id. at 62-(j3. Second, the Court held that

    the IOAA did not authorize the IRS to charge a fee for the issuance or renewal of PTINs, reasoning

    that PTINs did not constitute a "service or thing of value provided by [an] agency," 31 U.S.C.

    § 9701 (b), within the meaning of that statute-the only proper basis for a fee under it, Steele I, 260

    F. Supp. 3d at 63-(j7_ The Court therefore enjoined the IRS from charging a PTIN fee going

forward. ECF No. 82. Only the government appealed. See Notice of Appeal, ECF No. 90.

            The government then filed a motion for a stay pending appeal of the Court's injunction

against charging a PTIN fee. ECF No. 84. The Court denied that motion. Steele v. United States

("Steele II"), 287 F. Supp. 3d 1, 6 (D.D.C. 2017).

            On appeal, the Circuit vacated and remanded in a March 1, 2019 decision. Montrois, 916

F.3d at 1068. The Circuit first ruled for the government on the IOAA ground, holding that the

PTIN system was a service that provided return preparers a private benefit-specifically,

"protect[ing] the confidentiality of their personal information"-and therefore that the statute

authorized the imposition of a fee to recoup the costs of "generating PTINs and maintaining a

database of PTINs." Id. at 1062-(j7. The Circuit then dispatched an alternative argument that this

Court never reached: that the decision to impose a fee was arbitrary and capricious under the AP A.

4
    As reflected on the public docket, the persons and firm excluded from the class are also plaintiffs' counsel.

                                                             9
 Id. at 1067--68. Because only the government appealed, the Circuit's decision did not disturb this

 Court's holding that the IRS was authorized to require preparers to obtain PTINs.

        On remand, this Court entered a new scheduling order and the parties commenced fact

discovery on the reasonableness of the fees charged. See ECF Nos. 100, 127. That is when

infighting among plaintiffs' counsel threatened to derail the case. Mr. Buckley, co-counsel for

plaintiffs, evidently could not reach an agreement to share control of the case with class counsel

Motley Rice LLC, and on January 23, 2020, he filed a motion to be appointed as lead counsel for

the class. ECF No. 118. The Court denied that motion. ECF No. 126.

        Without the Court's assistance in wresting control of plaintiffs' case from his co-counsel,

Mr. Buckley decided to go rogue. He filed two motions, purportedly on behalf of the class, but

against class counsel Motley Rice LLC's wishes: one for a preliminary injunction against requiring

registered preparers to renew their PTINs and another for leave to file an amended complaint

adding allegations that the PTIN renewal (as opposed to registration) requirement was unlawful

and that the PTIN fees charged after 2020 were excessive. ECF Nos. 128, 133. Both factions of

plaintiffs' counsel and the government eventually reached a stipulation regarding the latter motion,

and the government consented to the addition of allegations about the post-2020 fee amounts but

not the renewal requirement. ECF No. 139.

        On December 4, 2020, the Court denied the preliminary injunction motion and granted in

part and denied in part the motion for leave to file an amended complaint. Steele Ill, 2020 WL

7123100, at *7. The Court noted that the government stipulated to the addition of allegations about

the post-2020 fees but reasoned that the so-called "allegations" in the proposed amended complaint

were added after undue delay and that adding them to the complaint would be futile because they

were simply "naked legal conclusions" about the agency's authority to require registered preparers

                                                10
 to renew their PTINs. Id. at *5-6. Accordingly, the Court granted leave to amend the complaint

,_ with respect to the former but not the latter. Id. The Court then denied the preliminary injunction

 motion because the operative complaint contained no allegations about the legality of requiring

 registered preparers to renew their PTINs. Id. at *6-7.

          On March 23, 2022, the parties filed their cross-motions for summary judgment on the

 excessiveness of the PTIN and vendor fees. ECF Nos. 173, 177. On May 12, 2022, the parties filed

their opposition briefs, ECF Nos. 183, 185, and Mr. Buckley, still unwilling to yield his claim as

class-counsel-in-exile, filed a short supplemental brief in support of plaintiffs' motion, ECF No.

 188. 5 The parties filed their replies on July 8, 2022, ECF Nos. 203, 207-4, and one week later,

plaintiffs moved for leave to file a surreply, ECF No. 211, which the Court will GRANT. The

summary judgment, motions are now ripe for review.

                                       II.     LEGAL STANDARDS

     A. Summary Judgment and the APA

         In ordinary civil actions, summary judgment is appropriate "if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

law." Fed. R. Civ. P. 56(a). A fact is "material" ifit "might affect the outcome of the suit under

the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[S]ummary

judgment will not lie if the dispute about a material fact is 'genuine,' that is, if the evidence is such

that a reasonable jury could return a verdict for the nonmoving party." Id. A court evaluating a

summary judgment motion must "view the evidence in the light most favorable to the nonmoving

5
  Mr. Buckley also filed a motion to modify the proposed summary judgment order filed by his co-counsel. ECF No.
206. Because there is no indication on the docket that class counsel agrees to that modification, Court will DENY that
motion.

                                                         11
    party and draw all reasonable inferences in its favor." Arthridge v. Aetna Cas. & Sur. Co., 604

    F.3d 625, 629 (D.C. Cir. 2010).

           "But when, as here, the court is reviewing a final agency action under the AP A, the standard

    set forth in Rule 56(a) does not apply." Ardmore Consulting Grp., Inc. v. Contreras-Sweet, 118 F.

    Supp. 3d 388 (D.D.C. 2015). Rather, "the function of the district court is a more limited one: 'to

    determine whether or not as a matter of law the evidence in the administrative record permitted

    the agency to make the decision it did."' Id. (quoting Kaiser Found. Hosps. v. Sebelius, 828 F.

    Supp. 2d 193, 198 (D.D.C. 2011)). 6 The reviewing court must make that determination in

    accordance with the AP A's judicial review provision, which requires the court to set aside agency

action that is unlawful for any of a variety of reasons, including, as relevant here, that it is

"arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or "in

excess of statutory jurisdiction, authority, or limitations, or short of statutory right." 5 U.S.C.

§ 706(2)(A), (C).

       B. TheIOAA

           Although the AP A is the procedural vehicle for plaintiffs' challenge to the PTIN fees, the

substance of that challenge alleges that the IRS assessed those fees in excess of its statutory

authority to set user fees under the IOAA. The IOAA provides in relevant part as follows:

                  The head of each agency (except a mixed-ownership Government
                  corporation) may prescribe regulations establishing the charge for a
                  service or thing of value _provided by the agency. Regulations
                  prescribed by the heads of executive agencies are subject to policies
                  prescribed by the President and shall be as uniform as practicable.
                  Each charge shall be-
                          ( 1) fair; and
                          (2) based on-

6 The Court acknowledges that there is no administrative record in this case and that it has allowed the parties to
engage in fact discovery and produce an ordinary smnmary-judgmen.t- like record. Nevertheless, because plaintiffs
seek judicial review of an agency action-specifically, the setting of the PTIN and vendor fees----the Court will
evaluate the summary judgment motions under the standard used in AP A cases.

                                                        12
                                (A) the costs to the Government;
                                (B) the value of the service or thing to the recipient;
                                (C) public policy or interest served; and
                                (D) other relevant facts.

 31 U.S.C. § 970l(b).

         "To justify a fee under the [IOAA], ... an agency must show (i) that it provides some kind

 of service in exchange for the fee, (ii) that the service yields a specific benefit, and (iii) that the

benefit is conferred upon identifiable individuals." Montrois, 916 F.3d at 1062---63. The Circuit

has already held that "the PTIN fee satisfies those conditions." Id. at 1063.

        As for the factors to be considered in calculating the amount of the fee, decisions

interpreting the IOAA have given it a limited construction. In Nat 'l Cable Television Ass 'n, Inc.

v. United States ("NCTA I"), 415 U.S. 336 (1974), interpreting an earlier, substantially similar

version of the statute, the Supreme Court held that the "'value to the recipient' is ... the measure

of the authorized fee" under the statute, because that construction avoids a concern that by

calculating a "fee" based on the public interest or other factors, an agency would assess what is

functionally a tax, potentially usurping Congress's exclusive power of taxation. Id. at 340-43

(citing U.S. Const. Art. I, § 8); see also Fed. Power Comm 'n v. New England Power Co., 415 U.S.

345, 349-51 (1974) (companion case).

        Applying that precedent to the current version of the statute, the Circuit has identified two

constraints on the costs that agencies may pass off to users under the statute. First, "[a]n agency

may not charge more than the reasonable cost it incurs to provide a service, or the value of the

service to the recipient, whichever is less." Engine Mfrs. Ass'n v. Envt'l Protection Agency, 20

F.3d 1177, 1180 (D.C. Cir. 1994). That calculation need not be perfect-the activities charged for

need only be "reasonably related" to the cost to the agency and the value to the recipient, and the

total may include both "direct and indirect" costs associated with the service provided. Nat 'l Cable

                                                  13
 Television Ass 'n v. Fed. Comm. Comm 'n ("NCTA If') , 554 F.2d 1094, 1107 (D.C. Cir. 1976); see

 also Montrois, 916 F.3d at 1066. Second, "when the specific agency activity in question produces

 an independent public benefit, the agency must reduce the fee that it would otherwise charge by

 that portion of the agency' s costs attributable to that public benefit." Cent. & S. Motor Freight

 TariffAss'n, Inc. v. United States, 777 F.2d 722, 729 (D.C. Cir. 1985) (emphasis in original).

            For more detailed instructions on the factors to be considered when calculating costs,

 agencies typically look to an Office of Management and Budget ("OMB") guidance document

known as Circular A-25. See Office of Mgmt. and Budget, Circular A-25 (Rev.),

https://wW\v.whitehouse.gov/wp-conten uploads/2017/ 11/Cir ul ar-025.pdf(last accessed Jan. 17,

2023). Circular A-25 expresses a "[g]eneral policy" that "[a] user charge . .. will be assessed

against each identifiable recipient for special benefits derived from Federal activities beyond those

received by the general public." Id. § 6. It also lists the types of costs of carrying out an activity

that an agency should include in its estimation of that activity' s "full cost," such as "[d]irect and

indirect personnel costs," "[p]hysical overhead," "management and supervisory costs," and "[t]he

costs of enforcement, collection, research, establishment of standards, and regulation." Id.

§ 6( d)( 1). Both the Supreme Court and the Circuit have cited earlier versions of Circular A-25 with

approval, specifically for the proposition contained in its general policy statement that it is the

private benefit to an identifiable beneficiary, rather than the public benefit, that should be the

measure of an agency user fee. See New England Power Co., 415 U.S. at 349-50; Seafarers Intern.

Union ofN Am. v. US. Coast Guard, 81 F.3d 179, 183 (D.C. Cir. 1996). However, neither court

has held that an IOAA fee is automatically lawful simply because the agency followed Circular

A-25's guidance regarding the types of costs to use in estimating the full cost of carrying out an

activity.

                                                 14
                                            III.     DISCUSSION

           The Court now turns to the parties' cross-motions for summary judgment. Plaintiffs move

    for summary judgment only as to liability, arguing that the FY 2011 through 2017 PTIN and

    vendor fees were excessive as a matter of law and that the IRS may not ask any more than a basic

    list of biographical questions on the PTIN application. 7 The government seeks partial summary

judgment, conceding that portions of the FY 2011 through 2017 PTIN fees were excessive but

    continuing to defend other portions of those fees and all of the vendor fees, and arguing that it is

 entitled to an "offset" to any award of restitution based on the amount it could have charged return

preparers from FY 2017 to 2020 but was unable to because of the Court's prior injunction against

the collection of PTIN fees.

           Because the issues raised by both motions are so intertwined, the Court will discuss them

together. First, the Court will determine the extent to which the disputed fees were unlawfully

excessive under the IOAA. Second, the Court will consider the government's claimed offset to an

award of restitution. Third, the Court will briefly discuss plaintiffs' argument that the IRS may

only ask for limited biographical information on PTIN applications. Finally, the Court will

determine the appropriate remedy.

           For the reasons that follow, the Court holds that the FY 2011 through 2017 PTIN and

vendor fees were excessive as a matter of law, that the government is not entitled to an offset to

7
  Although the operative complaint includes allegations that the PTIN fees charged after Montrois, beginning in 2020,
are also excessive, see Second Am. Compl. ,r,r 55-59, plaintiffs' summary judgment motion does not address that
issue. That is apparently because the parties jointly stipulated that they would "first seek adjudication and a partial
final judgment-by way of summary judgment, trial, appeal, and/or settlement-of the disputes related to the 2010-
17 Claim." Stip. Re: Post-2019 PTIN Fees ,r 3, ECF No. 144. Nevertheless, the government's summary judgment
motion defends the post-2020 PTIN and vendor fees in full, and plaintiffs' opposition to that motion does not discuss
the issue. See Def.'s S.J. Mem. at 25-28, ECF No. 173-1; Pls.' Opp'n, ECF No. 185. Ordinarily, "[w]here a party fails
to address arguments raised by the opposing party's motion for summary judgment, the Court may treat those
arguments as conceded." Comptel v. FCC, 945 F. Supp. 2d 48, 55 (D.D.C. 2013). But given the parties' joint
stipulation, which the government seems to have disregarded, the Court will simply decline to adjudicate the
excessiveness of the post-2020 fees at this stage without deeming plaintiffs to have conceded that point.

                                                          15
 restitution for fees it was unable to charge due to the Court's prior injunction, and that plaintiffs'

challenge to the questions asked on the PTIN application is improperly raised. The Court will

remand to the IRS to determine an appropriate refund to the class.

    A. The Excessiveness of the PTIN and Vendor Fees

        Plaintiffs argue that the PTIN and vendor fees charged in FY 2011 through 2017 were

excessive because they included costs not strictly necessary to the administration of the PTIN

system. See Pls.' S.J. Mem. at 16-24, ECF No. 177-29. The government concedes that certain

costs were wrongfully included in the PTIN calculations but defends the inclusion of other costs

that plaintiffs dispute. See Def.'s SJ. Mem. at 12-25, ECF No. 173-1; Def.'s Opp'n at 8-29.

        As an initial matter, the parties disagree about the proper standard for evaluating plaintiffs'

challenge to the PTIN and vendor fee amounts. Plaintiffs argue that the Court must determine for

itself whether any given expense was "necessary" to the provision of the private benefit justifying

the imposition of the fee-here, protecting return preparers' identities-without giving any

deference to the agency's determination of that question. See Pls.' S.J. Mem. at 16-17. The

government argues that because the Circuit in Montrois held that PTINs confer a private benefit,

any direct or indirect cost "reasonably related" to the overall PTIN scheme that was not invalidated

by Loving was allowable as a basis for the PTIN fees, and the Court must give "more than mere

deference or weight" to the agency's determination of what expenses are so related. Def.'s S.J.

Mem. at I 0-12, 16-17. Both proposed standards miss the mark.

       Plaintiffs' proposed "necessary" standard takes a word from a single Circuit opinion out of

context and makes out the scope of judicial review of IOAA fees to be more aggressive than it is

supposed to be. Plaintiffs make much of the Circuit's pronouncement in Elec. Indus. Ass 'n,

Consumer Elec$. Grp. v. FCC, 554 F.2d 1109 (D.C. Cir. 1976), that "a fee [may] only charge for

                                                  16
those expenses which are necessary to service the applicant or grantee." Id. at 1115 (emphasis

added). But the next sentence of that decision, which states that"[ e]xpenses incurred to serve some

independent public interest cannot, under [NCTA I], be included in the cost basis for a fee," makes

clear that the Circuit's emphasis was not on the degree of necessity to the provision of the service,
                                          I

but on the contrast between funding the provision of private benefits and benefits to the public at

large.   Id.   In NCTA II, decided the same day, the Circuit stated that an IOAA fee "must be

reasonably related to those attributable direct and indirect costs which the agency actually incurs

in regulating (servicing) the industry," 554 F.2d at 1107 (emphasis added), language similar to

which the Circuit has repeated in subsequent decisions, see, e.g., Seafarers, 81 F .3d at 185 (holding

that IOAA fees for licensing must be "sufficiently related to the statutory criteria" for issuing the

license).

         Moreover, a test turning on the Court's own view of what expenses are strictly "necessary"

to the maintenance of an otherwise authori.z ed program providing a private benefit would usurp

for the Court a cost-estimating function that Congress textually committed, to some extent, to

agency discretion. After all, the IOAA authorizes "[t]he head of each agency" to "prescribe

regulations establishing the charge" of fees and lists the factors that agency heads are to consider

in setting them. 31 U.S.C. § 9701(b); cf Cent. & S., 777 F.2d at 729 ('-'Because Congress has

expressly delegated to the ICC the responsibility for setting these fees, the ICC in exercising that

authority is at the zenith of its powers; the ICC's fees, therefore, are entitled to more than mere

deference or weight.") (internal quotation marks and citations omitted).

         On the other hand, the government's proposed "more than mere deference or weight"

standard collapses important distinctions between quantitative and qualitative determinations and

misstates the law in two ways.

                                                 17
           First, an agency may not charge for an activity as part of an IOAA fee simply because that

activity is lawful and "reasonably related" to an overall program, part of which provides a private

benefit. The Circuit has held that "when the specific agency activity in question produces an

independent public benefit, the agency must reduce the fee that it would otherwise charge by that

portion of the agency's costs attributable to that public benefit." Cent. & S., 777 F.2d at 729

(emphasis omitted). Thus, for example, in Elec. Indus. Ass 'n, the Circuit remanded to the Federal

Communications Commission to reset or explain a fee that funded "94 percent of the annual

budget" of its "Common Carrier Bureau" because "it strain[ ed] the limits of credulity" to believe

that just "six percent of the work of that bureau had justifications independent of the services

rendered to private parties." 554 F.2d at 1109. In other words, when calculating an IOAA fee to

support a program that in part benefits private parties and in part independently benefits the agency

and the public, the agency must disaggregate with respect to each charged-for activity the cost of

providing the service to private beneficiaries from the cost of doing work that benefits the agency

and the general public. So, in this case, it is not enough that an activity be generally PTIN-related

and not invalidated by Loving. Rather, the government must be able to explain with respect to each

activity that formed the basis for the PTIN fees how that activity was reasonably related to

providing the private benefit that the Circuit identified in Montrois: a means of identifying return

preparers that protects them from identity theft. As explained below, certain PTIN-related

activities in fact provided an independent public benefit and thus should not have been charged for

in full.

           Second, the government's blanket assertion that the agency's determination of fee amounts

is due "more than mere deference or weight" blurs the lines between the type of activity performed

and the cost of carrying out that activity. The government asserts flatly that "[w ]hen an agency

                                                  18
    properly exercises its authority to charge a fee under the IOAA," the agency's "fee schedule is

    'entitled to more than mere deference or weight.'" Def.'s SJ. Mem. at 11 (quoting Cent. & S., 777

    F.2d at 729). To be sure, the Circuit has reasoned that the IOAA's commitment of fee-setting to

    agency discretion entitles the calculations themselves to significant deference. See Cent. & S., 777

    F.2d at 729. But that is only a statement about the agency's discretion to calculate the amount of

    costs and benefits associated with a given activity, not whether a specific activity is sufficiently

related to the provision of a private benefit. Determining whether an activity confers a private

benefit, with or without also conferring an independent public benefit, is a matter of applying the

IOAA, a statute that the IRS does not administer. And "[a] court does not defer to an agency's

interpretation of a statute that it is not charged with administering." Del. Riverkeeper Network v.

FERC, 857 F.3d 388,396 (D.C. Cir. 2017). 8

           In sum, any challenge to an IOAA fee amount could potentially involve two separate

inquiries, each of which requires a different level of deference to the agency. The first, and most

relevant here, is whether, as a qualitative matter, the activities whose cost is used to justify the fee

are reasonably related to the provision of the private benefit associated with the fee rather than an

independent benefit to the agency and the public. The Court need not give any special deference

to the agency in making that determination. But if the charged-for activities meet that qualitative

bar, then the other inquiry is whether, as a quantitative matter, the amount charged for carrying

them out is reasonable. And the agency's estimation of that amount is "more than mere deference

or weight." Cent. & S., 777 F.2d at 729.

8The government also suggests that compliance with Circular A-25 defmitively establishes that a fee amount is lawful
under the IOAA. See Def.'s S.J. Mem. at 15 ("Here, the IRS complied with the directives ofOMB Circular A-25, and
therefore, the PTIN user fee is reasonable under the IOAA."). But the Court need not reach that issue, because if an
agency does not distinguish between "special benefits derived from Federal activities" and "those received by the
general public," 0MB Circular A-25 § 6-the sole distinction at issue in this case-then it has not complied with
Circular A-25.

                                                        19
        In this case, that means that the Court will not defer to the IRS' s determination of whether

the activities used to justify the PTIN and vendor fees were sufficiently related to the provision of

PTINs to return preparers, but it will defer to the IRS's estimation of how much it costs to carry

out those activities. With that standard in mind, the Court will consider each of the disputed fees

in tum, considering first the FY 2011 through 2015 PTIN fees, followed by the FY 2016 and 2017

PTIN fees, and concluding with the vendor fees for the entire period of FY 2011 through 2017.

        1. The FY 2011 through 2015 PTIN fees

        Plaintiffs argue that they are entitled to summary judgment holding that the FY 2011

through 2015 PTIN fee of$50 was excessive to the extent that it was based on (1) compliance and

suitability costs, which comprised most of the costs used to justify the fee; and (2) customer

support, communication, IT, and operational support (together, "support") costs beyond certain

limited subcategories. The government concedes much ground but maintains that it permissibly

charged for certain limited activities in the first category and all activities in the second.

       As an initial matter, the parties disagree over which cost models to use in evaluating the

alleged excessiveness of the fees. The government justifies a portion of the $50 fee for FY 2011

through 2013 based on the IRS' s 2010 Cost Model and a larger portion of the same fee for FY

2014 and 2015 based on the 2013 Cost Model. De£'s S.J. Mem. at 20-23. Plaintiffs argue that

only the 2010 Cost Model is relevant to all five years. Pis.' Opp'n at 6-8. The Court agrees with

plaintiffs that the government is wrong to rely on the 2013 Cost Model to differentiate FY 2011

through 2013 from FY 2014 and 2015. Congress "expressly requir[ed] in the IOAA that fees be

prescribed by regulation." New England Power Co. v. US. Nuclear Regulatory Comm 'n, 683 F.2d

12, 16 (1st Cir. 1982); see 31 U.S.C. § 9701(b). That requirement ensures "that such fees be

communicated in advance to those who would have to bear them, thus permitting them to take

                                                  20
    intelligent action to avoid undesired consequences." Id. Whatever amount the IRS theoretically

    could have charged in FY 2014 and 2015 based on its internal 2013 Cost Model, it chose instead

    to charge the amount noticed by regulation as calculated in its 2010 Cost Model. The government

    cannot now avoid liability for any excessive fees charged in FY 2014 and 2015 based on activities

    for which it theoretically could have charged but actually did not. The Court will therefore evaluate

    the alleged excessiveness of the PTIN fees for all of FY 2011 through 2015 based on the

    justifications given in the 2010 Cost Model. 9

                   (i) Compliance and suitability costs

           Plaintiffs argue that none of the RPO Compliance or Suitability Departments' activities

    were a valid basis for the FY 2011 through 2015 PTIN fees because those activities were

invalidated by Loving. See Pls.' S.J. Mem. at 20-21. The government concedes that many costs

related to suitability activities were an invalid basis for PTIN fees for that same reason, but it

continues to defend compliance and suitability costs in four categories. See Def.'s Opp'n at 19-

24. The Court agrees with plaintiffs in part and the government in part as to the Compliance

Department and agrees with plaintiffs in full as to the Suitability Department.

           First, the government defends in full the IRS's decision to charge for the activities of the

RPO Compliance Department, which "processes taxpayer complaints against return preparers,

identifies return preparers who require enforcement, and conducts enforcement activities against

return preparers who misuse or who do not use a PTIN." Def. 's Opp'n at 19-20. Specifically, the

government asserts that the Compliance Department's activities include:

                  (1) investigating "ghost preparers" (return preparers that do not list
                  their PTINs on returns they prepared for compensation as required
                  by law); (2) handling complaints from return preparers that a client's
9
 That is not to say that the IRS may not use later cost models for assistance in calculating an eventual refund based
on a more granular breakdown of the various RPO departments' activities. But in determining how much the IRS
over-charged return preparers, the baseline must be the amount it actually charged in the first instance.

                                                        21
                 prior return preparer may have acted improperly by using a
                 compromised PTIN or committed identity theft to obtain a PTIN;
                 and (3) composing the data to refer complaint cases to IRS business
                 units outside the RPO for further enforcement if necessary.

 Def.'s Opp'n at 19. According to the government, those activities are permissible bases for an

IOAA fee because they "are reasonably related to the PTIN Program," which "advances the goals

of protecting against identity theft recognized by Montrois as a special benefit justifying the PTIN

user fee." Id.

        As explained above, the government confuses the applicable standard by discussing

whether these aptivities are reasonably related to the PTIN program overall rather than specifically

to the associated private benefit of providing return preparers with a means of identification that

protects their identity. Nevertheless, the Court agrees that the IRS permissibly charged for at least

some of the three specific categories of Compliance Department activities that the government

identifies. To the extent that they relate to misuse of PTINs, all three are reasonably related to the

provision of the private benefit that the Circuit identified in Montrois-protection of preparers'

identity-because the misuse of PTINs compromises their ability to serve as a secure means of

identification. And tellingly, plaintiffs do not expressly dispute that much in their reply brief. See

Pls.' Reply at 13-15, ECF No. 207-4.

       However, uncontroverted record evidence establishes that the Compliance Department

undertook additional activities unrelated to the misuse or nonuse of PTINs. For example, the

declaration of Diann Wensing, the former Director of RPO Compliance, which the government

cites as giving a "more complete description" of the Compliance Department's work, DRPSUMF

,r 84, states that the Compliance Department's referral groups handled a broad swath of complaints,
"includ[ing] theft of refund, preparer misconduct, RPO Program Noncompliance, Tax Preparation

Noncompliance, ... TPPS Count Mismatch, etc." Wensing Deel.          ,r 161, Ex. BH to Oliver Deel.,

                                                 22
 ECF No. 176-60. Wensing further states that the Compliance Department's Enforcement Planning

 & Direction Group undertook certain activities apparently unrelated to misuse ornonuse of PTINs,

 including "[ d]eveloping strategy recommendations for IRS Senior Management" to "Address

Unregulated Return Preparer Conduct." Id.       ,r 208.   In short, it is apparent that some of the

Compliance Department's activities concerned misconduct affecting return preparers' customers

rather than the return preparers themselves. Those activities indisputably confer an independent

public benefit, and thus their cost must be disaggregated from that of the three categories of

preparer-benefitting activities identified above.

        Accordingly, the Court holds with respect to the Compliance Department that only the

direct and indirect costs of (1) investigating ghost preparers; (2) handling complaints regarding

improper use of a PTIN, use of a compromised PTIN, or use of a PTIN obtained through identity

theft; and (3) composing the data to refer those specific types of complaints to other IRS business

units were valid bases for the corresponding amount of the FY 2011 through 2015 PTIN fees.

       Second, the government defends the IRS's decision to charge for the Suitability

Department's professional designation checks ("PDCs"), which "verify the self-reported

credentials of CPAs and attorneys" working as return preparers. Def. 's Opp'n at 20-21. Plaintiffs

argue that PDCs have nothing to do with the provision of a private benefit to return preparers

because they "were designed to confirm credentials, not identities, and were performed at

additional cost after PTIN applicants had received PTINs and had been identified." Pls.' Reply at

10. The Court agrees with plaintiffs. The government provides no explanation whatsoever as to

how verifying that an already-identified preparer's self-reported professional credentials are

accurate is reasonably related to protecting that or any other preparer's identity. Instead, the

government merely relies on "[t]he IRS['s] ... interest in verifying the identity of PTIN holders

                                                23
 and verifying this same identifying information is correctly displayed on [a] public facing website"

 that includes a directory of preparers. Defs.' Opp 'n at 21. That is an independent benefit to the

 agency and the public at large whose cost must be disaggregated from that of providing private

 benefits to return preparers. See Cent. & S., 777 F.2d at 729. Accordingly, the Court holds that the

IRS unlawfully included the cost of PDCs in its calculation of the FY 2011 through 2015 PTIN

fees.

        Third, the goven:iment defends the IRS's decision to charge for the Suitability

Department's prisoner list checks and specially designated national ("SDN") checks, which

determine whether an applicant is incarcerated or designated by the Treasury Department as being

associated with certain targeted countries or illicit activities, respectively. See Def.' s Opp'n at 21-

23. Plaintiffs argue that prisoner list and SDN checks provide no benefit to return preparers. See

Pis.' Reply at 11. The Court agrees with plaintiffs. The government asserts that prisoner list and

SDN checks help the Bureau of Prisons and Treasury Department to administer their own

programs and that "[i]t is reasonable for the IRS to determine that the PTIN Program should be

administered in compliance with, and without undermining, other important federal programs and

regulations." Def.'s Opp'n at 22. Reasonable though that determination may be, it does not justify

charging for prisoner list and SDN checks as part of the PTIN fee under the IOAA, because

facilitating other agencies' operations is not reasonably related to the private benefit of protecting

return preparers' identities. Again, that is an independent public benefit whose cost must be

disaggregated from that of the private benefit to return preparers. See Cent. & s:, 777 F.2d at 729.

Accordingly, the Court holds that the IRS unlawfully included the cost of prisoner list and SDN

checks in its calculation of the FY 2011 through 2015 PTIN fees.

                                                 24
         Fourth, the government defends the IRS's decision to charge for the Suitability

 Department's processing of suitability referrals by taxpayers or agency components of preparers

 who purportedly should not be able to obtain or maintain a PTIN-for example, because a

preparers has been "legally enjoined from return preparation and from obtaining or renewing a

PTIN." Def. 's Opp'n at 23-24. Plaintiffs point out that referrals also involved other complaints,

such as "personal tax compliance," PDCs, and prisoner list and SON checks, and argue that "[t]he

suitability checks and referrals, including referrals about enjoined preparers, were separate services

undertaken to improve tax administration, benefit[t]ing only the IRS and the public." Pls.' Reply

at 12. The Court agrees with plaintiffs. Suitability referrals were merely an intake system for the

processing of Suitability Department inquiries that either the government no longer defends or the

Court has just held provided no identifiable private benefit. Accordingly, the Court holds that the

IRS unlawfully included the cost of suitability referrals in its calculation of the FY 2011 through

2015 PTIN fees.

                (ii) Support costs

        The remainder of plaintiffs' motion with respect to the FY 2011 through 2015 PTIN fees

challenges the IRS's decision to charge for certain RPO customer support, communication, IT,

and operational support activities beyond those plaintiffs consider "necessary" to the provision of

PTINs. See Pls.' S.J. Mem. at 20-25. In the corresponding portion of its cross-motion and its

opposition, the government continues to defend a substantial portion of those costs. See Def. 's S.J.

Mem. at 20-23; Def. 's Opp'n at 24-26. The Court cannot agree with either party in full.

        Rather than identify specific support costs as being insufficiently related to the provision

of a private benefit, plaintiffs simply assert that the only "activities [that] were (and are) necessary

to provide tax-return preparers a PTIN [are] (1) a small portion of customer support costs; (2) a

                                                  25
 small portion of communication costs; (3) a small portion of IT costs; (4) a small portion of

 OPR/PMO Ops Support." Pls.' S.J. Mem. at 21 (internal quotation marks and citation omitted).

Plaintiffs then explain why some specific costs in those categories were permissible bases for a

fee under the IOAA but make no effort to explain why other support costs were not. The Court

cannot simply accept plaintiffs' unexplained assurances that support costs beyond those on their

list were not allowable.

        Still, it is undisputed that the IRS charged for support activities facilitating its entire pre-

Loving return preparer regulatory apparatus. See 2010 Cost Model at 3 (listing such broad,

department-wide support activities as "Programmatic Executive Management/Oversight" and

"Operations Support"). Some of those support activities must have facilitated substantive activities

that had nothing to do with protecting return preparers' identities, some of which were also

invalidated by Loving. The portion of the support costs associated with those activities cannot be

considered reasonably related to the provision of a private benefit and thus cannot form a valid

part of the basis for an IOAA fee.

        While the government concedes some support costs included in the 2010 Cost Model, its

concessions apparently do not reach all activities insufficiently related to the provision of a private

benefit. As summarized in a declaration by current RPO Director Carol Campbell, those

concessions do not include IT costs at all and only include communications and operational

support costs "that are not PTIN-related." Second Carol Campbell Deel.          ,r 6,   ECF No. 203-1.

Given the breadth of the RPO program before Loving and the 2010 Cost Model's failure to separate

out the different work that the supporting departments were supporting, it is virtually certain that

some RPO IT activities between FY 2011 and 2015 supported substantive activities invalidated by

Loving. Furthermore, the government makes no attempt to estimate the portion of any RPO support

                                                 26
 costs that went to providing the PTINs' associated identity-protecting benefit by issuing them and

 maintaining the PTIN database rather than other "PTIN-related activities" like PDCs which, as

 explained above, provided only an independent benefit to the agency and public. The government

has not demonstrated that all of the support costs it continues to defend were reasonably related to

the provision of a private benefit and therefore has not demonstrated its entitlement to partial

summary judgment on that issue.

        Ultimately, the determination of which support costs were allowable must come down to

the portion of those costs that went to support the provision of PTINs and maintenance of the PTIN

database, and thus the conferral of the attendant private benefit of identity protection, rather than

other RPO activities that were not PTIN-related or aspects of the PTIN program that conferred an

independent public benefit, such as the Suitability Department activities discussed above. Only the

former were valid bases for the FY 2011 through 2015 PTIN fees. As explained below, the agency

will have an opportunity to determine what portion of support costs laid out in the 2010 Cost Model

meet that bar on remand.

        2. The FY 2016 and 2017 PTIN fees

        The Court now turns to the PTIN fees for FY 2016 and 2017, which were set at $33 based

on the 2015 Cost Model. Plaintiffs argue that those fees were excessive for the same reasons argued

with respect to the FY 2011 through 2015 fees. See Pis.' S.J. Mem. at 25-27. The government

makes essentially the same concessions it did with respect to those earlier fees-defending all

compliance costs, certain suitability costs, and most support costs-and argues that it is entitled to

partial summary judgment holding that a PTIN fee of $24 was permissible under the statute for

FY 2016 and 2017. See Def. 's S.J. Mem. at 23-25.

                                                 27
         Since the same activities remain in dispute with respect to the FY 2016 and 2017 PTJN

 fees as the FY 2011 through 2015 fees, the Court's holding as to each of those activities remains

 the same. First, allowable compliance costs include only the direct and indirect costs of (1)

 investigating ghost preparers; (2) handling complaints regarding improper use of a PTIN, use of a

 compromised PTIN, or use of a PTIN obtained through identity theft; and (3) composing the data

 to refer those specific types of complaints to other IRS business units. Second, it was unlawful for

the IRS to charge for any suitability costs as part of the PTIN fees. Finally, it was only lawful for

the IRS to charge PTIN users for support costs to the extent that they funded activities supporting

the provision of PTINs, maintenance of the PTIN database, and in tum, the attendant priv_ate

benefit rather than an independent benefit to the agency and public.

        The FY 2016 and 2017 PTIN fees do differ from the FY 2011 through 2015 PTIN fees in

one relevant respect: They were determined based on the 2015 Cost Model. Thus, on remand to

the agency, that later cost model will be the yardstick against which to measure which costs were

actually allowable under the IOAA.

        3. The FY 2011 through 2017 vendor fees

        The Court will now consider the vendor fees that the IRS required PTIN users to pay

Accenture from FY 2011 to 2017. As noted above, those fees were set at $14.25 for new PTIN

registrations and $13 for PTIN renewals during FY 2011 through 2016 and $17 for both new

registrations and renewals in FY 2017.

       As an initial matter, the Court will not consider plaintiffs' argument, raised for the first

time in their reply brief, that the entire vendor fee was unlawful because it was not promulgated

by regulation as required by the IOAA. See Pls.' Reply at 16-17. Whatever the merits of that

argument, plaintiffs had every opportunity to include it in their opening summary judgment brief

                                                28
 but chose not to do so. "Arguments raised for the first time in a reply brief are waived." Nippon

 Shinyaku Co., Ltd. v. Iancu, 369 F. Supp. 3d 226,239 n.8 (D.D.C. 2019).

          What is properly before the Court is plaintiffs' argument that the amount of the FY 2011

 through 2017 vendor fees was excessive under the IOAA. As with the PTIN fees themselves,

 plaintiffs argue that only the portion of the vendor fees "necessary to providing tax-return preparers

 a PTIN" were properly included in the PTIN fee. Pls.' S.J. Mem. at 19-20. The government

 defends the FY 2011 through 2017 vendor fees in full, arguing that they were set before Accenture

updated the PTIN system to include capabilities invalidated by Loving. See Def.'s Opp'n at 27-

29. 10 The Court agrees with plaintiffs in part.

          The government does not dispute that a significant portion of the vendor fees went to fund

activities that had nothing to do with providing or maintaining PTINs and their attendant private

benefit of identity protection to return preparers. For instance, the government admits that, at least

in later releases, the PTIN system that Accenture designed and maintained had "the ability to ...

determine preparer suitability based on tax compliance history successfully, ... process continuing

education credit hours completed by calendar year, and perform case management," DRPSUMF

,r 52 (internal quotation marks and citation omitted), and that Accenture' s contract with the IRS
required it to maintain a call center to address "preparer questions related" not only to "registration

[and] renewal," but also to "testing, and [continuing education] processes and timelines," id.                     ,r 41
(internal quotation marks and citation omitted). Those activities are not reasonably related to the

10 The government also appears to argue in its opposition brief that plaintiffs lack standing to challenge the vendor fee

because it was set by a contract to which they were not a party and thus may be challenged on[y in the Court of Federal
Claims under the Administrative Dispute Resolution Act, and then only if they are "interested parties" within the
meaning of that statute. See Def. ' s Opp'n at 27 (citing Emery Worldwide Airlines, Inc. v. United States, 264 F.3d
1071, 1079 (Fed. Cir. 2001)). However, the government concedes in the very next paragraph that "the only challenge
Plaintiffs can raise in this proceeding is whether the product or service for which the IRS contracted is a direct or
indirect cost of the PTIN Program that can be charged consistent with the IOAA and 0MB Circular A-25." Id. at 28
(emphasis added). Plaintiffs only challenge the vendor fee as a user fee under the IOAA.

                                                          29
 provision of a private benefit-rather, they provided an independent public benefit that was later

 invalidated by Loving.

         Nevertheless, the government argues that none of that matters, because the fees were

 initially set by contract in 2010, before many of those capabilities were implemented, and the

 initial release of the PTIN system only had the ability to issue, renew, and maintain PTINs. See

 Def.'s Opp'n at 28-29. That argument is unpersuasive. It is not as if the IRS and Accenture

 contracted for a more limited system and Accenture then just happened to expand its capabilities

 at a later date. The 2010 contract between the IRS and Accenture, which set the vendor fee amounts

in effect during FY 2011 through 2016, expressly contemplated that Accenture would implement

capabilities beyond the issuance, renewal, and maintenance of PTINs and would maintain a call

center taking questions beyond those sub}ects. For example, the contract required Accenture to

"develop and maintain a system capable of recording self-certification of continuing education

reported by paid tax return preparers," including "capabilities to receive and electronically record

test results," IRS-Accenture Contract (eff. Sept. 10, 2010) ,r 1, Ex. AA to Pis.' Mot. for S.J., ECF

No. 177-9, and to implement support for "a tax compliance check prior to receiving a PTIN

verifying that return preparers have no outstanding obligations on their personal or business federal

tax returns" and a function "check[ing] to see if additional [continuing education] or test

requirements are necessary," id.     ,r 2.2   (internal quotation marks omitted). It also required

Accenture to "[d]evelop a service delivery program that address[ es] preparer questions related to"

not only PTIN registration and renewal, but also continuing education and testing. Id.       ,r 3.   The

vendor fees were calculated to compensate Accenture for developing and maintaining the entire

expanded PTIN system, and the government cites no authority for the proposition that the Court

should deem those fees not to include the costs of certain activities simply because those activities,

                                                  30
which were expressly contemplated by the contract from the very beginning, began some time

after the contract became effective.

        Because the FY 2011 through 2017 vendor fees went beyond funding the portions of

Accenture's work related to the issuance, renewal, and maintenance of PTINs and charged return

preparers to cover portions of that work that benefitted only the agency and the public, those fees

were excessive under the IOAA. The Court therefore holds that the IRS unlawfully required return

preparers to pay whatever portion of the FY 2011 through 2017 vendor fees was attributable to

activities unrelated to the issuance, renewal, and maintenance of PTINs and support for those

activities. As explained below, the IRS will have an opportunity on remand to estimate that portion.

    B. The Government's Claimed Offset

        In its motion for partial summary judgment, the government argues that in the event it is

found liable for some amount of restitution to the class, it is entitled to an offset in the amount of

reasonable PTIN fees it could have charged return preparers, and vendor fees it would not have

had to pay to Accenture itself, during FY 2018 through 2020 if not for this Court's 2017 injunction

against the assessment of any PTIN fees, which the Circuit reversed. See Def.'s S.J. Mem. at 28-

33. That argument is riddled with problems, and the Court cannot accept it.

       As a general rule, "[t]he right to recover what one has lost by the enforcement of a judgment

subsequently reversed is well established." Baltimore & OR. Co. v. United States, 279 U.S. 781,

786 (1929). Accordingly, courts have recognized claims in restitution to "money[] paid pursuant

to a court order that is subsequently reversed." Broadcom .Corp. v. Qualcomm Inc., 585 F. Supp.

2d 1187, 1189 (C.D. Cal. 2008). But this case presents a different scenario. The government does

                                                 31
     not actually assert a counterclaim for restitution. I I Moreover, if it did so, it would be seeking

 restitution not for money the IRS paid to plaintiffs, but for the value of the IRS's uncompensated

 work of providing and maintaining their PTINs during the injunction period.

            The government cites no case in which a court has offset a plaintiffs eventual restitution

 award based on a sum that the defendant could have charged the plaintiff for its services but for a

 later-invalidated permanent injunction. The primary case that the government does cite, Williams

 v. Wash. Metro. Area Transit Comm 'n, 415 F.2d 922 (D.C. Cir. 1968), involved an entirely

 different scenario. In that case, the Washington Metropolitan Area Transit Commission ("the

 Commission") issued an order raising transit fares that the Circuit later determined to be unlawful.

 Williams, 415 F.2d at 925-26. The Circuit ordered the Commission "to make restitution for all

 amounts collected as a consequence of the fare increas·e initially authorized by" the order, except

for a certain amount of that increase "conceded" by the plaintiffs to have been lawful. Id. at 976.

 Williams is not analogous to this case for two reasons. First, the later-invalidated order at issue

was not a court-ordered injunction, but an agency-ordered fare increase. Second, the Circuit

reduced the amount of restitution not by an amount that the agency could have charged but was

unable to, but an amount that the agency did charge and concededly was able to.

           Without any support on point, the government is asking the Court to approve a type of

offset that is, to the Court's knowledge, entirely novel. That does not automatically make it

impermissible-as the government correctly notes, the form of monetary relief plaintiffs seek is

restitution, an equitable remedy whose amount the Court may reduce if equity so requires. See

11
  Because the Court declines to order an offset for a variety of independent reasons, it need not consider plaintiffs'
argument that the government was required to plead its claimed offset as a counterclaim rather than an affirmative
defense. See Pls.' Opp'n at 20-21.

                                                         32
 Williams, 415 F.2d at 943---45. But whatever the Court's authority to order an offset as an exercise

 of equitable discretion, it declines to do so in this case for several reasons.

         For one, the period for which the government seeks an offset actually extends past the

 vacatur of the injunction, into a period during which no order of this Court was stopping the IRS

from assessing PTIN or vendor fees if it so desired. The Circuit's mandate vacating this Court's

earlier judgment issued in March 2019, see ECF No. 98, and yet the government now seeks an

offset for forgone fees extending all the way up to August 2020, when the IRS finally reinstated

the PTIN and vendor fees, see Def. 's S.J. Mem. at 30-33. The government offers no explanation

as to why the IRS did not attempt to assess PTIN or vendor fees in the intervening period of nearly

a year and a half. If any offset due to the injunction were theoretically available, it would only be

for the period during which the injunction was actually in effect: between July 2017 and March

2019.

        Moreover, even narrowing the government's claimed offset to the relevant period, an offset

to monetary relief requires the existence of mutual debts, which the government has not established

here. "The right of setoff (also called 'offset' ) allows entities that owe each other money to apply

their mutual debts against each other, thereby avoiding 'the absurdity of making A pay B when B

owes A.'" Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 19 (1995) (quoting Studley v. Boylston

Nat. Bank, 229 U.S. 523, 528 (1913)). There are two problems with applying that principle in this

case as the government requests. First, just because the government should have been able to

charge PTIN and vendor fees during the relevant period, that does not necessarily mean that return

preparers who registered or renewed during that period now owe the government the amount that

it should have been able to charge. There is no evidence in the record that the IRS ever

communicated to PTIN users during the relevant period that it intended to charge them a fee in the

                                                  33
 event that the injunction was vacated, much less that it did so in accordance with the requirements

of the IOAA, which would have been the basis for it to impose a financial obligation in exchange

for the PTIN registrations and renewals. Second, there is a problem of mutuality: It appears that

the class that the Court certified does not perfectly match up with the group of return preparers

that the government now essentially asserts owes the IRS back-fees. As noted above, the Court

certified a class of "[a]ll individuals and entities who have paid an initial and/or renewal fee for a

PTIN, excluding Allen Buckley, Allen Buckley LLC, and Christopher Rizek." ECF No. 63. It is

possible that some return preparers who paid a fee to obtain or renew a PTIN before the injunction

did not renew that PTIN during the injunction period, and that some who obtained a PTIN for the

first time during the injunction period did not subsequently renew that PTIN after the injunction

was lifted and pay a fee. While the class-action form necessarily requires some rough justice in

adjudicating the amount of monetary relief class members are due, what the government seeks

here is essentially the adjudication of an alleged mutual debt that is not, in fact, mutual to every

class member.

        Finally, an order approving the offset that the government seeks would have the effect of

imposing (albeit retrospectively) a user fee, a task that the IOAA authorizes only "[t]he head of

each agency" to carry out, and by "regulation[]" at that. 31 U.S.C. § 9701 (b ). The Court is not the

right entity, nor an order of restitution the right means, to assess under the statute a fee that was

never formally set by the agency.

       For these reasons, the Court declines to fashion an equitable remedy for plaintiffs'

restitution claim that offsets the IRS's liability by the amount of PTIN and vendor fees that it

would have charged but could not, or did not, because of this Court's subsequently invalidated

2017 injunction. To be clear, the Court expresses no opinion as to whether the IRS may claw back

                                                 34
 the forgone PTIN and vendor fees through some other means, such as an administrative process

 setting fees retroactively for return preparers who registered or renewed their PTINs during the

 relevant period, or a civil action of its own for restitution. That question is beyond the scope of the

 present proceeding. 12

     C. The Information Requested on the PTIN Applications

          Finally, plaintiffs argue that the IRS lacks statutory authority to request any information on

 the PTIN application beyond the preparer' s "name, address, telephone number, social security

number and date of birth," Pls.' S.J. Mem. at 27, and perhaps email address, id. at 28 n.12, because

that is the only information that "may be necessary to assign an identifying number," which is all

the statute authorizes the IRS to require, 26 U.S.C. § 6109. However, while one factual allegation

in the operative complaint hints at plaintiffs' belief that the IRS asks for more information than is

necessary to provide a PTIN, see Second Am. Compl.                     ,r 20   ("For more than a decade, the IRS

charged no fee to issue a PTIN and required tax return preparers to submit only their name, address,

SSN (if applicable), and date of birth."), an express claim that the IRS exceeds its statutory

authority under the PTIN statute by requesting further information is nowhere to be found in that

complaint, see id.     ,r,r 43-59 (listing claims). 13 "New claims cannot be pled in summary judgment
briefs." Cloud Foundation, Inc. v. Salazar, 999 F. Supp. 2d 117, 127 (D.D.C. 2013). That is just

12
   The government also argues that plaintiffs previously asserted that an offset would be available and are now
estopped from arguing to the contrary. See Def.' s Reply at 21. But in the pleading that the government cites, plaintiffs'
opposition to the government's motion for a stay pending appeal, ECF No. 85, plaintiffs took no such position. Rather,
plaintiffs argued that "if it prevailed on appeal, the government could attempt to recover the lo t fees through a
restitution claim against PTIN holders." Id. at 19 (emphasis added) . That assertion contemplates a separate action or
counterclaim, and besides, it says nothing of plaintiffs' view of the merits of such a claim.
13
   In its prayer for relief, the operative complaint does request "[a] judgment declaring that the IRS may only request
information from tax return preparers that is authorized by statute." Second Am. Comp!., Prayer for Relief ,i 5.
However, even there, the complaint does not identify the authorizing statute or what specific requested information
allegedly exceeds that authority. Thus, with respect to the appl ication questions, the operative complaint does not
contain "a short and plain statement of the claim showing that the pleader is enti lled to relief' as any claim must. Fed.
R. Civ. P. 8(a)(2).

                                                           35
 what plaintiffs attempt to do here. The Court therefore will not entertain plaintiffs' argument about

 the IRS's statutory authority to request additional information on PTIN applications or their

 request for a declaratory judgment on that subject.

    D. The Appropriate Remedy

        As explained above, the PTIN and vendor fees for FY 2011 through 2017 were excessive

to the extent that they were based on the following activities:

                    •   All activities already conceded by the government in this
                        case.

                    •   Any Compliance Department activities other than (1)
                        investigating ghost preparers; (2) handling complaints
                        regarding improper use of a PTIN, use of a compromised
                        PTIN, or use of a PTIN obtained through identity theft; and
                        (3) composing the data to refer those specific types of
                        complaints to other IRS business units.

                    •   All Suitability Department activities.

                    •   The portion of support activities that facilitated provision of
                        an independent benefit to the agency and the public.

                    •   The portion of Accenture's activities as a vendor that
                        facilitated provision of an independent benefit to the agency
                        and the public.

But the scope of the compliance and support activities just identified is unclear from the record. It

thus remains to be determined how that scope, and the corresponding cost amount, will be

ascertained.

        The parties have not meaningfully briefed the appropriate course of action in the event

that, following the Court's summary judgment decision, disputes remain as to the scope of the

activities at issue and the cost of carrying out those activities. Plaintiffs assume that there will be

a trial, at least on the amount ofrestitution. See Pls.' S.J. Mem. at 4 ("[P]laintiffs move only for an

order granting summary judgment as to liability ... while reserving the amount of the excess fees

                                                  36
 for trial."). The government, on the other hand, asserts for the first time in its reply brief that, "[i]n

 the unlikely event that the Court finds that the adjusted PTIN user fee is still unreasonable, remand

 is the appropriate remedy because neither the Court nor a party challenging the fee may seize the

 authority to develop the fee that has been granted to the agency by Congress." Def.' s Reply Supp.

 S.J. at 4-5. At any rate, the Court must now decide how this case will proceed following the

 adjudication of the cross-motions for summary judgment.

         This case cannot go to trial. Although the Court has permitted plaintiffs to seek the

 monetary remedy of restitution, this is still a case in which the Court is reviewing an agency

 action-the setting of IOAA fees, with an eye to whether those fees were excessive-under the

 AP A. 14 And in pushing for a trial on the extent to which the challenged fees were excessive,

plaintiffs "misunderstand the role the district court plays when it reviews agency action. The

district court sits as an appellate tribunal, not as a court authorized to determine in a trial-type

proceeding whether" an agency determination was "factually flawed." Marshall County Health

Care Auth. v. Shala/a, 988 F.2d 1221, 1225 (D.C. Cir. 1993).

         The only proper place for this case to go is back to the IRS. That is because,

notwithstanding the reviewing court's authority to determine what activities an agency may

lawfully charge for under the IOAA, that statute commits the amount to be charged to agency

discretion. See 31 U.S.C. § 9701(b); Cent. & S., 777 F.2d at 729. Judges "do not sit as a board of

auditors, steeped in accountancy and equipped to second-guess an estimate which seems on its

face to be reasonable." Id. at 738. Accordingly, when a court determines that an IOAA fee was

excessive because it charged for unallowable activities, the extent and expense of which are in

14
  As explained in the Court's August 8, 2016 Memorandum Opinion, although the APA does not waive the United
States's sovereign immunity with respect to money damages, it does in some cases waive sovereign immunity with
respect to restitution of funds paid to the agency. See ECF No. 64 at 9-14 (citing America's Community Bankers v.
FDIC, 200 F.3d 822, 830 (D.C. Cir. 2000)).

                                                       37
dispute, the proper remedy is to remand to the agency to show its work and set a new fee within

the bounds of what the law allows. See, e.g., Engine Mfrs. Ass 'n, 20 F .3d at 1184. To be sure, this

is an unusual case in which the agency will be asked to do so retrospectively. But it would be

anomalous to allow plaintiffs the opportunity to have a court set the fee and substitute its own

judgment for the agency's simply because they waited until after they had paid the fee for several

years to challenge it and seek monetary relief.

        Accordingly, the Court will remand to the IRS to determine an appropriate refund for the

class that is consistent with this Opinion and the accompanying Order. Specifically, the Court will

order the IRS to determine reasonable estimates of the portions it lawfully could have charged of

the FY 2011 through 2015 PTIN fees based on the 2010 Cost Model, the FY 2016 and 2017 PTIN

fees based on the 2015 Cost Model, and the FY 2011 through 2017 vendor fees based on the IRS-

Accenture contracts. The Court will retain jurisdiction.

                                     IV.    CONCLUSION

        For the foregoing reasons, the Court will GRANT in part and DENY in part plaintiffs'

motion for summary judgment and GRANT in part and DENY in part defendant's motion for

partial summary judgment. The Court will issue a declaratory judgment holding that the PTIN and

vendor fees for FY 2011 through 2017 were excessive to the extent that they were based on the

following activities:

                   •    All activities already conceded by the government in this
                        case.

                   •    Any Compliance Department activities other than (1)
                        investigating ghost preparers· (2) handling complaints
                        regarding improper use of a PTIN use of a compromised
                        PTli'-J', or use of a PTIN obtained through identity theft· and
                        (3) composing the data to refer those specific types of
                        complaints to other IRS business units.

                   •    All Suitability Department activities.

                                                  38
                    •   The portion of support activities that facilitated provision of
                        an independent benefit to the agency and the public.

                    •   The portion of Accenture's activities as a vendor that
                        facilitated provision of an independent benefit to the agency
                        and the public.

Furthermore, the Court will remand to the IRS and order it to determine an appropriate refund by

recalculating those fees, using the 2010 Cost Model as a benchmark for the FY 2011 through 2015

PTIN fees and the 2015 Cost Model as a benchmark for the FY 2016 and 2017 PTIN fees, and

excising a reasonable estimate of the portions of those fees that the Court has held unlawful. The

Court will retain jurisdiction. A separate Order shall issue this date.

 Date: - - -- -- -- -
                                                                     Royce C. Lamberth
                                                                     United States District Judge

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