                    FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                       No. 07-56408
                Plaintiff-Appellee,
               v.                                 D.C. No.
                                               CV-06-02136-GPS
MARTIN A. KAPP,
                                                  OPINION
             Defendant-Appellant.
                                          
        Appeal from the United States District Court
            for the Central District of California
        George P. Schiavelli, District Judge, Presiding

                  Argued and Submitted
          December 10, 2008—Pasadena, California

                        Filed May 4, 2009

 Before: Jerome Farris and Kim McLane Wardlaw, Circuit
   Judges, and William W Schwarzer, District Judge.*

                  Opinion by Judge Schwarzer




  *The Honorable William W Schwarzer, Senior United States District
Judge for the Northern District of California, sitting by designation.

                                5135
5140                 UNITED STATES v. KAPP
                          COUNSEL

Alan F. Broidy, Esq., Law Offices of Alan F. Broidy, APC,
Los Angeles, California, for the defendant-appellant.

Richard T. Morrison, Deputy Assistant Attorney General, Gil-
bert S. Rothenberg, Jonathan S. Cohen and Gretchen M. Wol-
finger, Attorneys, Tax Division, U.S. Department of Justice,
Washington, D.C., for the plaintiff-appellee.


                          OPINION

SCHWARZER, District Judge:

   Martin A. Kapp appeals the district court’s entry of a per-
manent injunction preventing him from preparing or assisting
in preparing federal tax returns that assert the position that
mariners are entitled to an unreimbursed deduction for meal
expenses while working on board a ship, when no meal
expenses are actually incurred (the “mariner’s tax deduc-
tion”). He also appeals the grant of summary judgment for the
government and the denial of his cross motion for summary
judgment. We have jurisdiction of this timely appeal under 28
U.S.C. § 1291, and affirm the judgment of the district court.

  I.   Facts and Procedural History

   Kapp is a Certified Public Accountant who specializes in
preparing federal income tax returns for individuals employed
in the transportation industry. This case relates to his prepara-
tion of federal tax returns for mariners who work on ocean-
going ships and who are at sea for long periods without
returning to port (“deep sea mariners”), and mariners who
work on tug boats and barges (“tug and barge mariners”),
which return to port more frequently. Deep sea mariners are
provided meals by their employer while working on board the
                    UNITED STATES v. KAPP                 5141
ship. Tug and barge mariners also typically do not incur meal
related expenses.

   Between approximately January 1997 and February 2006
Kapp prepared tax returns for mariners who lived on vessels
in the course of their employment that claimed the mariner’s
tax deduction. Two of these returns were for Marin Johnson
and Jim Westling, who were employed as deep sea mariners
during the tax year in question. Both individuals were pro-
vided meals at no cost, but claimed a deduction based on the
number of days at sea multiplied by the full meals and inci-
dental expenses (“M&IE”) rate.

   The Internal Revenue Service (“IRS”) disallowed the
deductions, and Johnson and Westling filed petitions in the
Tax Court. In 2000, the Tax Court held that although the mar-
iners could deduct travel expenses while working away from
home, Johnson and Westling could not deduct the full M&IE
rate because they had not actually incurred meal expenses.
Johnson v. Comm’r, 115 T.C. 210, 215 (2000); Westling v.
Comm’r, 80 T.C.M. (CCH) 373, 373 (2000). They were per-
mitted to deduct the incidental expenses portion of the M&IE
rate, however, because the mariners paid for items including
personal hygiene supplies and bottled water at the ship’s
store. Johnson, 115 T.C. at 215; Westling, 80 T.C.M. (CCH)
at 376. After these rulings, the IRS modified its Revenue Pro-
cedures and issued two Chief Counsel Advisories which con-
cluded that the taxpayer may not claim the full M&IE rate
when only incidental expenses are incurred. See, e.g., Rev.
Proc. 2002-63 § 4.05, 2002-2 C.B. 691; I.R.S. Chief Counsel
Advisory 200242038 (October 18, 2002), 2002 WL
31341876, at *13; I.R.S. Chief Counsel Advisory 200343025
(October 24, 2003), 2003 WL 22422671, at *6.

   After the Johnson and Westling decisions, Kapp wrote sev-
eral articles in a trade publication, The Professional Mariner,
discussing potential tax deductions available to mariners.
Kapp theorized about the different deductions available to
5142                    UNITED STATES v. KAPP
deep sea mariners, and acknowledged that “claiming this
additional meal deduction [when meals are provided] is con-
sidered double dipping.” He asserted that tug and barge mari-
ners were entitled to claim the full M&IE deduction, reduced
by the amount of their grocery allowance.1 Although he tem-
porarily stopped claiming deductions on behalf of deep sea
mariners, he continued to file returns claiming the deduction
on behalf of his tug and barge mariner clients.

   In November 2003 the IRS notified Kapp that he was under
investigation for conducting a tax shelter promotion. Attorney
Dennis Perez represented Kapp. Perez and Kapp met with
George Campos, the IRS agent in charge of the investigation,
several times in 2004 and 2005. In a March 2005 meeting, the
IRS informed Kapp that the mariner’s tax deduction was not
allowed under the Internal Revenue Code (“I.R.C.”). A mem-
orandum dated April 18, 2005 drafted by an attorney in
Perez’s firm concluded that little authority supported Kapp’s
position that either deep sea mariners or tug and barge mari-
ners were entitled to deduct the full M&IE amount, because
both types of mariners are typically provided meals by their
employer at no cost.2

   On May 2, 2005 Perez wrote a letter to Campos detailing
Kapp’s position on deductions for tug and barge mariners. He
followed with a second letter on July 27, 2005 which stated
that “although Mr. Kapp does not necessarily agree with the
position you articulated for the first time in our meeting last
month . . . he has agreed to cease claiming meal deductions
as he has done previously.” Campos did not respond to the
  1
     A per person grocery allowance is typically provided to the captain of
a ship to cover the costs of providing meals to the mariners while they are
working. The captain uses the money to obtain groceries for the entire
crew, and the food is cooked on board the ship.
   2
     Although Kapp may have been able to assert the attorney-client privi-
lege and work product protection, the memorandum was produced by his
counsel during discovery.
                    UNITED STATES v. KAPP                 5143
letters. After completing his investigation, Campos prepared
a final report concluding that “Mr. Kapp is instrumental in
preparing erroneous returns and incorrectly interpreting the
Internal Revenue Code.” The government filed a complaint in
April 2006 seeking an injunction that would prevent Kapp
from claiming deductions for meals that are provided to an
employee without cost.

   During the course of the litigation, Kapp was deposed by
the government. He stated that he did not routinely ask mari-
ners whether they were provided meals free of charge by their
employer before claiming a deduction on their behalf. Addi-
tionally, he acknowledged that while he stopped claiming the
full M&IE deduction for deep sea mariners after the Johnson
decision, he began claiming it again in late 2005 or early 2006
based on purported endorsement of his position by Campos,
and because he needed to be more aggressive in claiming
deductions to provide negotiating room with the IRS.

   Both parties moved for summary judgment in February
2007. Kapp asserted that he was entitled to summary judg-
ment because his position regarding the deemed substantiated
deductions for mariners was legally correct and taken in good
faith. The government argued that an injunction was proper
because Kapp continued to claim the mariner’s tax deduction
even though he knew the deduction was improper. In August
2007 the district court granted summary judgment for the
government and permanently enjoined Kapp from preparing
tax returns that claim a deduction for meals that are provided
to mariners without cost. The injunction also required that
Kapp provide a list of clients for whom he prepared returns
claiming these deductions, post a link to the court’s order on
his websites, and explain to his clients that the court deter-
mined that he had incorrectly advised them about the mari-
ner’s tax deduction.

  Subsequent to the judgment enjoining Kapp, the Tax Court
published two cases specifically addressing Kapp’s position
5144                    UNITED STATES v. KAPP
regarding tug and barge mariners. See Zbylut v. Comm’r, 95
T.C.M. (CCH) 1172, 1175 (2008); Balla v. Comm’r, 95
T.C.M. (CCH) 1090, 1093 (2008). Relying on the Johnson
decision, both cases held that tug and barge mariners could
not use the regulations that permit deemed substantiated
deductions for meals when no expense was incurred by the
taxpayer. Zbylut, 95 T.C.M. (CCH) at 1175; Balla, 95 T.C.M.
(CCH) at 1093.

  II.     Statutory Overview

   [1] The I.R.C. § 162 permits taxpayers to deduct reasonable
business expenses paid or incurred during the taxable year,
including travel expenses such as meals and lodging.3 I.R.C.
§ 162(a). However, § 274 disallows such deductions unless
the taxpayer meets strict substantiation requirements. I.R.C.
§ 274(d). Section 274(d) also contains a provision that allows
the Secretary of the Treasury (“Secretary”) to create regula-
tions that eliminate some or all of the substantiation require-
ments when the expense is below a prescribed amount. I.R.C.
§ 274(d). The applicable § 274 regulations authorize the Com-
missioner of Internal Revenue (“Commissioner”) to create
optional methods of computing travel expenses, including a
per diem deduction for meals and incidental expenses, which
satisfy the substantiation requirements of § 274(d). Treas.
Reg. § 1.274-5(j)(1).

   [2] The Commissioner issued Revenue Procedures which
specify the Federal Travel Regulations M&IE rate as the
amount that a taxpayer may deduct in lieu of substantiating
the actual cost of meals.4 Rev. Proc. 90-60, §§ 3.02, 4.03,
  3
    Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect during the years at issue.
  4
    Revenue Procedure 90-60 § 4.03 provides in relevant part:
      “In lieu of using actual expenses, employees and self-employed
      individuals, in computing the amount allowable as a deduction
                       UNITED STATES v. KAPP                        5145
1990-2 C.B. 651. The Commissioner updates these Revenue
Procedures annually, but the relevant provisions have
remained substantially the same since 2000. See, e.g., Rev.
Proc. 2000-39, 2000-2 C.B. 340; 2001-47, 2001-2 C.B. 332;
2004-60, 2004-2 C.B. 682; 2005-67, 2005-2 C.B. 729. Travel
expenses below the threshold M&IE amounts are deemed
substantiated and the taxpayer is not required to provide docu-
mentation in order to deduct the expense. Rev. Proc. 90-60,
§ 4.03, 1990-2 C.B. 651.

   [3] Additionally, the Federal Travel Regualtions provide
that the M&IE rate must be adjusted for a meal furnished to
the taxpayer (except as provided in § 301-11.17) by deducting
the appropriate amount. 41 C.F.R. § 301-11.18. However, “[a]
meal provided by a common carrier or a complimentary meal
provided by a hotel/motel does not affect your per diem.” 41
C.F.R. § 301-11.17. Ships are included within the definition
of common carriers. 41 C.F.R. § 301-10.100.

  III.   Standard of Review

   A summary judgment granting a permanent injunction is
generally reviewed for abuse of discretion. Sprint Tel. PCS,
L.P. v. County of San Diego, 490 F.3d 700, 708 (9th Cir.
2007). However, we review “any determination underlying
the grant of an injunction by the standard that applies to that
determination.” Id. (quoting Ting v. AT & T, 319 F.3d 1126,
1134-35 (9th Cir. 2003)). “Thus, we review a district court’s
findings of fact for clear error and its determinations of law
. . . de novo”. Id.

   for ordinary and necessary meal and incidental expenses paid or
   incurred for travel away from home, may use an amount com-
   puted at the Federal M&IE rate for the locality of travel for each
   calendar day . . . the employee or self-employed individual is
   away from home.” Rev. Proc. 90-60, § 4.03, 1990-2 C.B. at 653.
5146                UNITED STATES v. KAPP
   The determination that there are no genuine issues of mate-
rial fact that preclude the entry of summary judgment is
reviewed de novo, viewing the evidence in the light most
favorable to the nonmoving party. See United States v. Ala-
meda Gateway Ltd., 213 F.3d 1161, 1164 (9th Cir. 2000).

  IV.    Entry of the Injunction

    A.    Standard for injunctive relief.

   [4] The district court enjoined Kapp from preparing tax
returns claiming the mariner’s tax deduction under I.R.C.
§ 7407. An injunction is proper under § 7407 if the court finds
that the tax preparer has engaged in conduct subject to penalty
under § 6694, and an injunction is appropriate to prevent
recurrence of the violation. Section 6694 provides that a tax
return preparer is subject to penalty if he prepares a return
with understated liability due to an unreasonable position not
supported by substantial authority. I.R.C. § 6694.

   [5] The applicable regulations further define what conduct
is subject to penalty under § 6694. The regulations provide
that a person has a reasonable basis for his position “if a rea-
sonable and well-informed analysis by a person knowledge-
able in tax law would lead such a person to conclude that the
position has approximately a one in three, or greater, likeli-
hood of being sustained on the merits . . .” Treas. Reg.
§ 1.6694-2(b)(1). Additionally, the substantial authority stan-
dard is objective, and is not affected by the taxpayer’s subjec-
tive belief in the correctness of his position. Treas. Reg.
§ 1.6662-4(d)(3)(i). The government bears the burden of
proving each element for enjoining a tax preparer by a pre-
ponderance of the evidence. See United States v. Estate Pres.
Servs., 202 F.3d 1093, 1102 (9th Cir. 2000).

  Thus, the district court properly enjoined Kapp if (1) he
prepared a return that understated liability, (2) due to an
unreasonable position, i.e., a position that objectively had a
                        UNITED STATES v. KAPP                        5147
less than one in three chance of being sustained on the merits,
and (3) an injunction is appropriate to prevent recurrence.

      B.   Kapp prepared returns that understated tax
           liability.

   Kapp argues that mariners do not have to pay or incur meal
expenses in order to claim a deduction under the regulations
that allow certain expenses to be deemed substantiated with-
out documentation. He notes that meals provided by common
carriers are not required to be subtracted from the allowed per
diem deduction amount, and that ships are included within the
definition of common carriers. C.F.R. § 301-11.17, -10.100.
Therefore, he reasons that mariners who are provided meals
while on board a ship should be allowed to claim the full
M&IE allowance for days at sea, even though no meal
expense is incurred. Kapp also creates several complicated
hypothetical examples to support his argument that under the
§ 274 regulations, certain travelers could claim a deduction
for deemed substantiated expenses when no actual costs are
incurred.

   [6] Kapp’s argument is based on a misunderstanding of the
regulations that create the deemed substantiated exception. He
essentially argues that Executive Branch agency regulations
can be manipulated to subvert provisions of the I.R.C. enacted
by Congress. The regulations are intended to interpret and
assist in the enforcement of the I.R.C., not to undermine it.
The I.R.C. gives the Secretary and the Commissioner discre-
tionary authority to issue regulations to ease the burden on
taxpayers, who would otherwise have to meet the extensive
substantiation requirements of § 274 in order to claim deduc-
tions for business related travel. I.R.C. § 274(d); see addition-
ally Balla, 95 T.C.M. (CCH) at 1092. The regulations,
however, do not eliminate the requirement in § 162 that
expenses must be paid or incurred in order to be deducted.5
  5
    Kapp points to an opinion issued by the General Counsel for the Office
of the Inspector General at the Department of Justice that examines the per
5148                    UNITED STATES v. KAPP
   [7] The regulations reflect the requirements of § 162. In the
first section outlining their purpose, the regulations state that
they “provide[ ] an optional method for employees and self-
employed individuals who pay or incur meal costs to use in
computing the deductible costs of business meal and inciden-
tal expenses paid or incurred while traveling away from
home.” Rev. Proc. 90-60, §1, 1990-2 C.B. 651 (emphasis
added). After the Johnson decision, the regulations were
altered to provide a method for computing the applicable
deduction for incidental expenses when no meal costs are paid
and incurred. See, e.g., Rev. Proc. 2002-63 § 4.05, 2002-2
C.B. 691.

  [8] Therefore, a meal provided by a common carrier need
not be deducted from the per diem M&IE rate under 41
C.F.R. § 301-11.17, but a taxpayer cannot take the per diem
deduction if he does not incur any meal related expenses. Rev.
Proc. 90-60, §1, 1990-2 C.B. 651. Additionally, Kapp’s
examples of individuals who may attempt to manipulate the
regulations to claim impermissible deductions when they do
not incur expenses does not alter the requirement in § 162 that
expenses must be paid or incurred in order to be deducted.
Because Kapp claimed deductions on behalf of mariners who
did not pay or incur meal expenses, he prepared returns that
understated liability.

     C.    Kapp’s position was unreasonable.

   Kapp argues that even if he incorrectly claimed the mari-
ner’s tax deduction for taxpayers who incurred no meal costs,
his position was not unreasonable and was supported by sub-

diem travel allowances paid to border patrol agents. He claims that the
opinion supports his position that expenses need not be paid or incurred
to be deducted. The opinion concludes that border patrol agents can accept
complimentary meals provided by their hotel without affecting their per
diem. However, the border patrol agents, unlike mariners, incur other meal
related expenses while traveling.
                    UNITED STATES v. KAPP                     5149
stantial authority. The analysis of the reasonableness of his
position differs slightly for deep sea and tug and barge mari-
ners, and we discuss each group separately.

      1.   Deep sea mariners

   [9] Kapp’s assertion that deep sea mariners were permitted
to take the mariners tax deduction is patently unreasonable in
light of the ruling in the Johnson case. In that case, which
arose from conduct nearly identical to the conduct that is the
basis of the injunction, the court stated “[w]e do not read the
revenue procedures to allow a taxpayer to use the full M&IE
rates when he or she incurs only incidental expenses.” John-
son, 115 T.C. at 227. Kapp unsuccessfully attempts to distin-
guish Johnson, but the clear implication of the holding is that
taxpayers may not deduct meal expenses when no such
expenses are incurred. Id. Kapp acknowledged as much him-
self in his The Professional Mariner articles.

   Kapp claims that he recently resumed the practice of taking
a deduction on behalf of his deep sea mariner clients based on
alleged approval of the position by Campos. In his declaration
submitted in opposition to the government’s summary judg-
ment motion Kapp stated that:

    I had a long meeting with IRS Agent George Cam-
    pos on August 12, 2005, during which I reviewed
    my legal position with him in detail . . . . At the end
    of the meeting, Mr. Campos sort of threw his arm
    around me and stated ‘Now I understand.’ Since Mr.
    Campos at no time during or after the . . . meeting
    stated that he disagreed with my position, or that my
    position was frivolous, I interpreted Mr. Campos’[s]
    statement as an endorsement of my legal position . . .

   [10] Even accepting the accuracy of Kapp’s description of
his interaction with Campos, the conduct is not an affirmation
of Kapp’s position allowing him to claim the deduction on
5150                 UNITED STATES v. KAPP
behalf of deep sea mariners, especially in light of the Johnson
ruling. Because a well-informed analysis of the issue by a per-
son knowledgeable in tax law would not lead to the conclu-
sion that Kapp’s position had at least a one in three chance of
being sustained on the merits, his position was unreasonable
and not based on substantial authority.

       2.   Tug and barge mariners

   [11] Kapp argues that claiming the mariner’s tax deduction
for tug and barge mariners was reasonable because Johnson
applied only to deep sea mariners. He contends that taking the
deduction on behalf of tug and barge mariners, who return to
port more frequently, presented novel issues. Although the
Johnson case arose from a slightly different factual situation,
the principles of the Tax Court’s holding clearly extend to tug
and barge mariners. The essence of the court’s holding is that
individuals may not deduct the full M&IE rate when they do
not incur meal expenses. Johnson, 115 T.C. at 227. By exten-
sion, if tug and barge mariners do not incur meal expenses,
they may not take a deduction. The frequency of a mariner’s
return to port is irrelevant to the holding of the case.

   [12] A memorandum prepared by an associate of Kapp’s
lawyer Perez concluded there was little support for Kapp’s
position that tug and barge mariners could deduct meal
expenses when no cost was incurred. Although Kapp claims
that he asked Perez to play “devil’s advocate” and draft a
memorandum that laid out the arguments in opposition to his
position, the memorandum presents an even-handed examina-
tion of the issues and states that “little if any authority relied
on by Mr. Kapp supports the position that he takes.” After
thoroughly analyzing a host of Tax Court cases and IRS pub-
lications, the memorandum concludes that although the “anal-
ysis does not foreclose the possibility that Mr. Kapp could
ultimately be successful on the issue . . . . it appears to me that
the weight of authority favors the Government on this issue.”
Shortly after the date of this memorandum, Perez wrote a let-
                        UNITED STATES v. KAPP                        5151
ter to Campos stating that although Kapp did not agree with
the position taken by the IRS, he agreed to stop claiming the
deduction.

   [13] Additionally, in two rulings issued after the district
court entered the injunction against Kapp, the Tax Court
rejected the contention that tug and barge mariners were enti-
tled to deduct the full M&IE allowance when no meal costs
were incurred. Zbylut, 95 T.C.M. (CCH) at 1175; Balla, 95
T.C.M. (CCH) at 1093.6 While we cannot evaluate the reason-
ableness of Kapp’s position in light of these rulings issued
after the IRS investigation, it is worth noting that the Tax
Court stated that the issues presented were not novel, and
relied heavily on the reasoning in Johnson to reach its conclu-
sion. Zbylut, 95 T.C.M. (CCH) at 1175; Balla, 95 T.C.M.
(CCH) at 1093.

   [14] Although there was no precedent at the time Kapp pre-
pared the returns that specifically stated tug and barge mari-
ners may not claim the mariner’s tax deduction, a well-
informed analysis by a person knowledgeable in tax law
would have led to the conclusion that Kapp’s position had less
than a one in three chance of being sustained on the merits.
Therefore, his position was unreasonable and not supported
by substantial authority.
  6
    Kapp argues that these cases are distinguishable because the court
found that neither taxpayer worked on board a common carrier. Therefore,
they could not benefit from the provisions of 41 C.F.R. § 301-11.17,
which provides that common carrier meals are not counted against the fed-
eral M&IE rate. As explained above, however, the common carrier excep-
tion only comes into play if the taxpayer is entitled to a per diem
deduction for travel expenses in the first place, i.e., pays or incurs some
travel related expenses.
5152                UNITED STATES v. KAPP
    D.   The injunction was necessary to prevent
         recurrence.

   The district court’s finding that an injunction is necessary
is a fact sensitive determination which we review for clear
error. See Sprint Tel. PCS , 490 F.3d at 708.

   [15] Kapp acknowledged that although he stopped claiming
the mariner’s tax deduction for deep sea mariners after the
Johnson case, he later began claiming it based on a purported
endorsement of his position by Campos, and because he
needed negotiating room with the IRS. Kapp’s weak justifica-
tion for claiming the deduction in light of clear precedent to
the contrary supports the issuance of an injunction as to deep
sea mariners.

   [16] The injunction is also appropriate as to deductions for
tug and barge mariners. Kapp asserts that he would never
claim the deduction after the Balla and Zbylut cases, unless
they are overturned on appeal, and that an injunction is not
warranted. Kapp’s conduct, however, suggests that an injunc-
tion is necessary. Although his attorney represented that Kapp
would stop claiming the deduction for tug and barge mariners,
he continued to claim these deductions. Given that Kapp acted
in a manner contrary to the assurances he provided to the gov-
ernment, and continued to claim deductions for deep sea mari-
ners in spite of clear authority to the contrary, the district
court did not abuse its discretion in issuing the injunction.

    E.   Good faith defense

   [17] A tax preparer who prepares a return that understates
liability due to an unreasonable position may still avoid a pen-
alty under § 6694 if he can show that there is reasonable cause
for the understatement and he acted in good faith. I.R.C.
§ 6694(a)(2)(B), (a)(3). The associated § 6694 regulations list
five factors to consider in evaluating whether the tax preparer
can assert the good faith defense: (1) the nature of the error,
                     UNITED STATES v. KAPP                  5153
(2) the frequency of the errors, (3) the materiality of the
errors, (4) the preparer’s normal office practice, and (5) reli-
ance on advice of another preparer. Treas. Reg. § 1.6694 2(d).
The taxpayer bears the burden of establishing a good faith
defense. I.R.C. § 6694(a)(3); Treas. Reg. § 1.6694-2(e)(2).

   Kapp argues that he is not subject to a penalty because he
acted in good faith by seeking the advice of numerous govern-
ment officials and attorneys. He asserts that he contacted sev-
eral attorneys at the main IRS office in Washington, D.C. to
seek comment on his Professional Mariner articles, and to
discuss the ability of tug and barge mariners to take the mari-
ner’s tax deduction in light of the Johnson ruling. He also
contacted a high ranking General Services Administration
(“GSA”) employee responsible for administering the Federal
Travel Regulations, to confirm his understanding that meals
provided by a common carrier need not be deducted from the
per diem M&IE amount. Additionally, he claims to have
relied on the advice of Steven Stolar and Ellin Palmer, two
private sector attorneys. Finally, he asserts that he is entitled
to assert a good faith defense because several of the returns
he prepared claiming the mariner’s tax deduction were
audited by the IRS, and the agency did not require any
changes.

   [18] Although Kapp made efforts to seek comment on and
support for his position, his efforts do not allow him to claim
the good faith defense. The government employees contacted
by Kapp do not qualify as preparers under the regulations, and
he was not entitled to rely on their advice. See Treas. Reg.
§ 301.7701-15(a); 301.7701-15(a)(6) (defining a “preparer” as
a person who prepares returns for compensation and specifi-
cally excluding IRS employees performing official duties).
Even if the government employees qualified as preparers
under the regulations, Kapp is not entitled to rely on their
advice unless he can demonstrate that they were aware of all
the relevant facts. Treas. Reg. § 1.6694-2(d)(5)(ii). The corre-
spondence between the GSA employee and Kapp does not
5154                UNITED STATES v. KAPP
demonstrate that the GSA employee was aware that the tax-
payers in question do not pay or incur any meal expenses.
Additionally, the IRS attorneys contacted by Kapp informed
him that they could not officially comment on his articles, and
that there was no procedure to set up a meeting to provide
advice specific to his situation.

   [19] Kapp also claims to have relied on the advice of pri-
vate sector attorneys Stolar and Palmer, but he has failed to
show that either attorney qualifies as a preparer. Even assum-
ing that they qualify, Kapp failed to demonstrate that either
was aware of all of the relevant facts underlying the returns
he filed claiming the mariner’s deduction. The record shows
that he had general conversations with Palmer about travel
regulations and the Johnson case, and that Stolar reviewed
and agreed with his Professional Mariner articles. General
conversations about regulations and cases and review of an
article, however, do not demonstrate that either Stolar or
Palmer analyzed the relevant facts and advised Kapp that his
position was correct. Kapp’s counsel during the investigation,
the only attorneys who appear to have analyzed his position
in light of all the relevant facts, concluded that he was not
entitled to claim the deduction.

   [20] Finally, Kapp is not entitled to rely on “no change”
determinations made in IRS audits. See I.R.C. § 6110(k)(3)
(“a written determination may not be used or cited as prece-
dent”). Therefore, Kapp is not entitled to assert a good faith
defense for his violations of § 6694, and the district court did
not err in entering the injunction against him under § 7407.

  V.   Scope of the Injunction

  Kapp argues that the injunction is vague and overbroad for
two reasons. First, he claims that it prevents him from claim-
ing deductions that other tax preparers are allowed to claim.
Second, he claims that it prevents him from claiming tax
                        UNITED STATES v. KAPP                        5155
deductions that are available to his other transportation indus-
try clients, such as airline pilots.

   [21] The district court’s injunction prevents Kapp from pre-
paring returns claiming a tax deduction for meals that are pro-
vided to mariners at no cost. The Tax Court’s decisions in
Johnson, Balla and Zbylut, however, prevent any tax preparer
from claiming such a deduction. The injunction does not place
Kapp at a unique disadvantage relative to other tax preparers.

   [22] Additionally, the injunction does not prevent Kapp
from claiming deductions for mariners that he is entitled to
claim for other clients.7 Section 162 requires that all business
expenses must be paid or incurred in order to be deducted.
The Commissioner has discretionary authority to issue regula-
tions that alter substantiation requirements under § 274. Treas.
Reg. § 1.274-5(j)(1). It is possible that some of these regula-
tions, intended to ease the burden on taxpayers, create situa-
tions where an unscrupulous taxpayer may claim a deemed
substantiated deduction when no expense is actually incurred.
The regulations do not, however, eliminate the requirement
that expenses must be paid and incurred before they can be
deducted. All taxpayers, regardless of occupation, must first
pay or incur expenses before they are entitled to take a deduc-
tion. I.R.C. § 162.

  VI.    Summary Judgment

   [23] Kapp asserts that there are several disputed material
facts related to his ability to claim a good faith defense and
  7
   Kapp notes that the regulations permit employees to receive tax-free
per diem or hourly travel allowance payments instead of deducting
expenses on their tax returns. Rev. Proc. 90-60, §§ 3.03, 4.01, 1990-2 C.B.
651. He argues that an employee, such as an airline pilot, can collect this
payment when traveling regardless of whether he pays or incurs expenses.
However, the code limits per diem allowances to the amount that the
payor reasonably anticipates will be incurred by the employee. Rev. Proc.
90-60, § 3.01(1), 1990-2 C.B. 651.
5156                UNITED STATES v. KAPP
that the district court erred in granting summary judgment for
the government. A disputed fact is material only if it can
affect the outcome of the suit under governing law. In re Bar-
boza, 545 F.3d 702, 707 (9th Cir. 2008), (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

   Kapp argues that there were disputed facts related to his
discussions with a GSA official regarding deductions for
common carrier meals, his interactions with IRS attorneys, his
reliance on the advice of his own counsel, and numerous “no
change” audit letters issued by the IRS. However, even if we
accept Kapp’s assertions, these facts are not material because
they would not entitle him to assert a good faith defense under
§ 6694 and the associated regulations. Treas. Reg. § 1.6694-
2(d). As discussed in Section IV(E), supra, the individuals
Kapp consulted do not fall within the definition of a preparer,
and he was not entitled to rely on their advice because they
were not aware of all the relevant facts. Additionally, audit
letters he relies on are not precedential. I.R.C. § 6110(k)(3).
Therefore, the district court did not err in granting summary
judgment for the government.

  AFFIRMED.
