[Federal Register Volume 75, Number 141 (Friday, July 23, 2010)]
[Proposed Rules]
[Pages 43110-43114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18198]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[REG-139343-08]
RIN 1545-B171
User Fees Relating to Enrollment and Preparer Tax Identification
Numbers
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document contains proposed amendments to the regulations
relating to the imposition of certain user fees on certain tax
practitioners. The proposed regulations establish a new user fee for
individuals who apply for or renew a preparer tax identification number
(PTIN). The proposed regulations affect individuals who apply for or
renew a PTIN. The charging of user fees is authorized by the
Independent Offices Appropriations Act of 1952.
DATES: Written or electronic comments must be received by August 23,
2010. Outlines of topics to be discussed at the public hearing
scheduled for Tuesday, August 24, 2010, at 10 a.m. must be received by
Monday, August 23, 2010.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-139343-08), Room
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
139343-08), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at http://www.regulations.gov (IRS REG-139343-08).
The public hearing will be held in the Auditorium of the Internal
Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Emily M. Lesniak at (202) 622-4940; concerning cost methodology, Eva J.
Williams at (202) 435-5514; concerning submission of comments, the
public hearing, or to be placed on the building access list to attend
the public hearing, Richard A. Hurst at
[email protected] or (202) 622-7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 330 of title 31 of the United States Code authorizes the
Secretary of the Treasury to regulate the practice of representatives
before the Treasury Department. Pursuant to section 330 of title 31,
the Secretary has published regulations governing practice before the
IRS in 31 CFR part 10 and reprinted the regulations as Treasury
Department Circular No. 230 (Circular 230). Circular 230 is
administered by the IRS Office of Professional Responsibility (OPR).
User Fee for PTINs
Section 6109 of the Internal Revenue Code (Code) authorizes the
Secretary to prescribe regulations for the inclusion of a tax return
preparer's identifying number on a return, statement, or other document
required to be filed with the IRS. Section 6109(c) further authorizes
the Secretary ``to require such information as may be necessary to
assign an identifying number to any person.'' As currently prescribed
in regulations, the identifying number of a tax return preparer who is
an individual is the tax return preparer's social security number (SSN)
or alternative number as prescribed by the IRS.
Proposed regulations under section 6109 (REG-134235-08) were
published in the Federal Register (75 FR 14539) on March 26, 2010, and
provide that, for returns or claims for refund filed after December 31,
2010, the identifying number of a tax return preparer is the
individual's PTIN or such other number prescribed by the IRS in forms,
instructions, or other appropriate guidance. The proposed regulations
under section 6109 require a tax return preparer who prepares all or
substantially all of a return or claim for refund of tax after December
31, 2010 to have a PTIN. The proposed regulations also state that the
IRS will provide through other guidance (including forms and
instructions) guidance regarding how to apply for a PTIN or other
prescribed preparer identifying number, for the regular renewal of a
PTIN or other prescribed preparer identifying number, and for the
payment of a user fee. Only attorneys, certified public accountants,
enrolled agents, and registered tax return preparers will be eligible
to apply for a PTIN. The requirements to become a registered tax return
preparer will be provided in future Circular 230 guidance.
A third party vendor will administer the PTIN application and
renewal process and will charge a reasonable fee that is independent of
the user fee charged by the government. The vendor will develop a web-
based database that individuals will use to apply for or renew a PTIN
and will process paper PTIN applications. The database also will be
used for applications to become registered tax return preparers, to
renew the registered tax return preparers' status, to self-certify
continuing professional education credits for registered tax return
preparers, and to pay applicable user fees.
Proposed Sec. 300.9 establishes a $50 user fee to apply for or
renew a PTIN. The $50 user fee is based on an annual PTIN renewal
period, and the procedures for renewing a PTIN will be provided in
other guidance, including forms and instructions. The user fee is
nonrefundable regardless of whether the applicant receives a PTIN.
PTINs were previously issued to tax return preparers solely for the
convenience of the tax return preparers, providing an alternative to
using the tax return preparers' social security numbers. Requiring
registration through the use of PTINs will enable the IRS to better
collect and track data on tax return preparers. This data will allow
the IRS to track the number of persons who prepare returns, track the
qualifications of those who prepare returns, track the number of
returns each person prepares, and more easily locate and review returns
prepared by a
[[Page 43111]]
tax return preparer when instances of misconduct are detected.
The user fee to apply for or renew a PTIN recovers the costs that
the government incurs to administer the PTIN application process. These
costs include the development and maintenance of the IRS information
technology system that interfaces with the vendor and the development
and maintenance of internal applications that will have the capacity to
process and administer the anticipated increase in applications for a
PTIN. It is anticipated that the number of individuals requesting PTINs
will increase to as many as 1.2 million individuals, and all
individuals who receive PTINs will be required to renew their PTINs.
The anticipated increase in demand for PTINs will require the IRS to
expend more resources. The user fee will recover the cost of IRS
customer service support activities, which include Web site development
and maintenance and call center staffing to respond to questions
regarding PTIN usage and renewal. The user fee also will recover costs
for personnel, administrative, and management support needed to
evaluate and address tax compliance issues of individuals applying for
and renewing a PTIN, to investigate and address conduct and suitability
issues, and otherwise support and enforce the programs that require an
individual to apply for and renew a PTIN.
The IRS currently issues PTINs to tax return preparers without
charging a user fee. The PTIN application, issuance, and renewal
process, however, will become significantly more expansive and
intricate with the implementation of the registered tax return preparer
program. Federal tax compliance checks will be performed on all
individuals who apply for or renew a PTIN. Suitability checks will be
performed. The IRS will further investigate individuals when the
compliance or suitability check suggests that the individual may be
unfit to practice before the IRS. These checks were not previously
performed as a prerequisite to obtaining a PTIN.
Additionally, the IRS will establish and implement a
reconsideration process for individuals who apply to become a
registered tax return preparer and are denied a PTIN upon initial
application or renewal. The IRS will incur costs to apply existing
Circular 230 procedures when those individuals who are certified public
accountants, attorneys, enrolled agents, or registered tax return
preparers are denied renewal of a PTIN.
Coordination With Other User Fees
Additional user fees related to the programs for regulating
enrolled agents, enrolled retirement plan agents, and registered tax
return preparers will be established in future regulations as those
programs are implemented. These future regulations will address user
fees associated with taking the registered tax return preparer
examination and providing continuing education programs. The user fee
for taking a registered tax return preparer examination will recover
the costs to the government for creating, administering, and reviewing
the examination. The user fee for providing continuing education
programs will recover the costs to the government for the review,
approval, and oversight of continuing education providers to ensure
their compliance with program requirements for continuing education
programs. The vendor also will charge a reasonable fee to take the
registered tax return preparer examination.
Future regulations also will coordinate the enrollment and renewal
user fees imposed on enrolled agents and enrolled retirement plan
agents with the PTIN user fees because the costs to the government to
process an enrollment application are substantially the same as the
costs to the government to process a PTIN application. For example, the
IRS generally may conduct only a single background check and compliance
check for an individual who applies to become an enrolled agent and
applies to obtain a PTIN, and therefore the enrollment application fee
and the PTIN application fee must be coordinated to prevent the
collection of excessive fees. It is currently anticipated that future
regulations will require enrolled agents to obtain a PTIN and pay the
associated application or renewal fee, in which case the enrollment and
renewal fees for enrolled agents will be substantially reduced.
Effective/Applicability Dates
These regulations reorganize the effective dates for the user fees
found in Treasury Regulations part 300. Currently, all of the user fee
effective dates are contained in Sec. 300.0 paragraph (c). This
reorganization relocates the effective date sections to the appropriate
regulation implementing each user fee. This relocation will simplify
the process for updating the effective dates as the user fee
regulations are revised.
Authority
The charging of user fees is authorized by the Independent Offices
Appropriations Act (IOAA) of 1952, which is codified at 31 U.S.C. 9701.
The IOAA authorizes agencies to prescribe regulations that establish
charges for services provided by the agency. The charges must be fair
and must be based on the costs to the government, the value of the
service to the recipient, the public policy or interest served, and
other relevant facts. The IOAA provides that regulations implementing
user fees are subject to policies prescribed by the President; these
policies are currently set forth in the Office of Management and Budget
Circular A-25, 58 FR 38142 (July 15, 1993) (the OMB Circular).
The OMB Circular encourages user fees for government-provided
services that confer benefits on identifiable recipients over and above
those benefits received by the general public. Under the OMB Circular,
an agency that seeks to impose a user fee for government-provided
services must calculate the full cost of providing those services. In
general, a user fee should be set at an amount that allows the agency
to recover the full cost of providing the special service, unless the
Office of Management and Budget grants an exception.
Pursuant to the guidelines in the OMB Circular, the IRS has
calculated its cost of providing services under the PTIN application
and renewal process. The government will charge the full cost of
administering these programs and will implement the proposed user fees
under the authority of the IOAA and the OMB Circular.
Proposed Effective/Applicability Date
The Administrative Procedure Act provides that substantive rules
will not be effective until thirty days after the final regulations are
published in the Federal Register (5 U.S.C. 553(d)). Final regulations
may be effective prior to thirty days after publication if the
publishing agency finds that there is good cause for an earlier
effective date.
The IRS is implementing the recommendations in Publication 4832,
``Return Preparer Review'', which was published on January 4, 2010, to
be effective for the 2011 Federal tax filing season (January-April
2011). The IRS and the Treasury Department find that there is good
cause for these regulations to be effective upon the publication of a
Treasury decision adopting these rules as final regulations in the
Federal Register.
Special Analyses
It has been determined that this notice of proposed rulemaking is a
significant regulatory action as defined in Executive Order 12866.
[[Page 43112]]
It has been determined that an initial regulatory flexibility
analysis is required for this notice of proposed rulemaking under 5
U.S.C. 603. This analysis is set forth under the heading ``Initial
Regulatory Flexibility Analysis.''
Pursuant to section 7805(f) of the Code, this notice of proposed
rulemaking has been submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
business.
Initial Regulatory Flexibility Analysis
When an agency issues a rulemaking proposal, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) (RFA) requires the agency ``to
prepare and make available for public comment an initial regulatory
flexibility analysis'' that will ``describe the impact of the proposed
rule on small entities.'' See 5 U.S.C. 603(a). Section 605 of the RFA
provides an exception to this requirement if the agency certifies that
the proposed rulemaking will not have a significant economic impact on
a substantial number of small entities. A small entity is defined as a
small business, small nonprofit organization, or small governmental
jurisdiction. See 5 U.S.C. 601(3) through (6). The IRS and the Treasury
Department conclude that the proposed rule, if promulgated, will have a
significant economic impact on a substantial number of small entities.
As a result, an initial regulatory flexibility analysis is required.
Description of the Reasons Why Action by the Agency Is Being Considered
The IRS and the Treasury Department are implementing regulatory
changes that increase the oversight of the tax return preparer industry
based upon findings and recommendations made by the IRS in Publication
4832, ``Return Preparer Review,'' which was published on January 4,
2010. These regulatory changes include implementing a registered tax
return preparer program and requiring all individuals who prepare all
or substantially all of a tax return or claim for refund to use a PTIN
as an identifying number. Except as provided in any transitional
period, only attorneys, certified public accountants, enrolled agents,
or registered tax return preparers may apply for a PTIN. Thus, only
attorneys, certified public accountants, enrolled agents, and
registered tax return preparers will be eligible to prepare all or
substantially all of a tax return or claim for refund. By limiting the
individuals who may prepare all or substantially all of a tax return or
claim for refund to individuals who have a PTIN, the IRS is providing a
special benefit to the individuals who obtain a PTIN. There are costs
to the IRS that are associated with processing a PTIN application and
providing the special benefits associated with the PTIN.
Future regulations will establish additional user fees related to
the enrolled agent and enrolled retirement plan agent program, and
registered tax return preparer program. The additional user fees will
recover the costs to the government that result from providing the
special benefits associated with taking the registered tax return
preparer examination and providing continuing education programs. The
cost to the government for administering and reviewing the registered
tax return preparer examination will be recovered in a user fee for
taking the registered tax return preparer examination. The cost to the
government to verify compliance with requirements for continuing
education programs will be recovered in a user fee for qualifying
continuing education programs. Each continuing education provider may
charge a fee to attend a qualified continuing education program. The
third party vendor also will charge a reasonable fee to take a
registered tax return preparer examination.
A Succinct Statement of the Objectives of, and Legal Basis for, the
Proposed Rule
The objective of the proposed regulations is to recover the costs
to the government associated with providing the special benefits that
an individual receives upon applying for or renewing a PTIN. These
costs include the development and maintenance of the IRS information
technology system that interfaces with the vendor; the development and
maintenance of internal applications; IRS customer service support
activities, which include development and maintenance of an IRS Web
site and call center staffing; and personnel, administrative, and
management support needed to evaluate and address tax compliance
issues, investigate and address conduct and suitability issues, and
otherwise support and enforce the programs that require individuals to
apply for or renew a PTIN. The OMB Circular encourages user fees when
special benefits are conferred on identifiable recipients. Individuals
who obtain a PTIN receive the ability to prepare all or substantially
all of a tax return or claim for refund. The ability to prepare all or
substantially all of a tax return or claim for refund is a special
benefit.
The legal basis for these requirements is contained in section 9701
of title 31.
A Description of and, Where Feasible, an Estimate of the Number of
Small Entities To Which the Proposed Rule Will Apply
The proposed regulations affect all individuals who want to become
a registered tax return preparer under the new oversight rules in
Circular 230. Only individuals, not businesses, can practice before the
IRS or become a registered tax return preparer. Thus, the economic
impact of these regulations on any small entity generally will be a
result of applicants and registered tax return preparers owning a small
business or a small entity employing applicants or registered tax
return preparers.
The proposed regulations further affect all individual tax return
preparers who are required to apply for or renew a PTIN. Only
individuals, not businesses, can apply for or renew a PTIN. Thus, the
economic impact of these regulations on any small entity generally will
be a result of an individual tax return preparer who is required to
apply for or renew a PTIN owning a small business or a small business
otherwise employing an individual tax return preparer who is required
to apply for or renew a PTIN to prepare all or substantially all of a
tax return or claim for refund.
The appropriate NAICS codes for the registered tax return preparer
program and PTINs are those that relate to tax preparation services
(NAICS code 541213), other accounting services (NAICS code 541219),
offices of lawyers (NAICS code 541110), and offices of certified public
accountants (NAICS code 541211). Entities identified as tax preparation
services and offices of lawyers are considered small under the Small
Business Administration size standards (13 CFR 121.201) if their annual
revenue is less than $7 million. Entities identified as other
accounting services and offices of certified public accountants are
considered small under the Small Business Administration size standards
if their annual revenue is less than $8.5 million. The IRS estimates
that approximately 70 to 80 percent of the individuals subject to these
proposed regulations are tax return preparers operating as or employed
by small entities.
[[Page 43113]]
A Description of the Projected Reporting, Recordkeeping and Other
Compliance Requirements of the Proposed Rule, Including an Estimate of
the Classes of Small Entities Which Will Be Subject to the Requirement
and the Type of Professional Skills Necessary for Preparation of the
Report or Record
No reporting or recordkeeping requirements are projected to be
associated with this proposed regulation.
An Identification, to the Extent Practicable, of All Relevant Federal
Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule
The IRS is not aware of any Federal rules that duplicate, overlap,
or conflict with the proposed rule.
A Description of Any Significant Alternatives to the Proposed Rule
Which Accomplish the Stated Objectives of Applicable Statutes and Which
Minimize Any Significant Economic Impact of the Proposed Rule on Small
Entities
The IOAA authorizes the charging of user fees for agency services,
subject to policies designated by the President. The OMB Circular
implements presidential policies regarding user fees and encourages
user fees when a government agency provides a special benefit to a
member of the public. As Congress has not appropriated funds to the
registered tax return preparer program or PTIN application process,
there are no viable alternatives to the imposition of user fees.
While the IRS previously issued PTINs to tax return preparers
without charging a user fee, the registered tax return preparer program
and the issuance of the new regulations under section 6109 will
increase the number of PTIN applications to as many as 1.2 million
applications and significantly increase the intricacy of the
application process. Additionally, PTINs were previously issued solely
for the convenience of tax return preparers to provide an alternative
to using the tax return preparers' social security numbers as an
identifying number on prepared returns. PTINs will now be used to
collect and track data on tax return preparers. This data will provide
important benefits to the IRS, such as allowing the IRS to track the
number of persons who prepare returns, track the qualifications of
those persons who prepare returns, track the number of returns each
person prepares, and, when instances of misconduct are detected, locate
and review returns prepared by a specific tax return preparer.
This anticipated increase in PTIN applications and the revised
purpose of a PTIN will require the IRS to develop and maintain a Web
site and train call center staff to respond to PTIN-related questions.
Further, the IRS will now perform Federal tax compliance checks and
perform suitability checks prior to the issuance of a PTIN. Previously,
neither of these checks was performed before a PTIN was issued. When
the initial compliance and suitability checks suggest that the
individual applying for a PTIN may not be fit to practice before the
IRS, the IRS will conduct an investigation. For individuals who are
found unfit to receive a PTIN, the IRS will develop and implement a
reconsideration process. Similarly, the IRS will provide due process
procedures for those individuals who are certified public accountants,
attorneys, enrolled agents, or registered tax return preparers and are
denied renewal of their PTIN.
Thus, due to the increased costs to the government to process the
application for a PTIN, the anticipated increase in PTIN applications,
and the lack of appropriated funds, there is no viable alternative to
imposing a user fee.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. The IRS and Treasury Department request comments on the clarity of
the proposed regulations and how they can be made easier to understand.
All comments that are submitted by the public will be made available
for public inspection and copying.
A public hearing has been scheduled for Tuesday, August 24, 2010,
beginning at 10 a.m. in the Auditorium of the Internal Revenue
Building, 1111 Constitution Avenue, NW., Washington, DC. Due to
building security procedures, visitors must enter at the Constitution
Avenue entrance. All visitors must present photo identification to
enter the building. Because of access restrictions, visitors will not
be admitted beyond the immediate entrance area more than 30 minutes
before the hearing starts. For information about having your name
placed on the building access list to attend the hearing, see the FOR
FURTHER INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit written or
electronic comments and an outline of the topics to be discussed and
the time to be devoted to each topic by Monday, August 23, 2010. A
period of 10 minutes will be allocated to each person for making
comments.
An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these regulations is Emily M. Lesniak,
Office of the Associate Chief Counsel (Procedure and Administration).
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping requirements, User fees.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 300 is proposed to be amended as follows:
PART 300--USER FEES
Paragraph 1. The authority citation for part 300 continues to read
in part as follows:
Authority: 31 U.S.C. 9701.
Par. 2. Section 300.0 is amended by
1. Adding paragraph (b)(9).
2. Removing paragraph (c).
The addition reads as follows:
Sec. 300.0 User fees; in general.
* * * * *
(b) * * *
(9) Applying for a preparer tax identification number.
Par. 3. Section 300.1 is amended by adding paragraph (d) to read as
follows:
Sec. 300.1 Installment agreement fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning March 16, 1995, except that the user fee for entering into
installment agreements on or after January 1, 2007, is applicable
beginning January 1, 2007.
Par. 4. Section 300.2 is amended by adding paragraph (d) to read as
follows:
Sec. 300.2 Restructuring or reinstatement of installment agreement
fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning March 16, 1995, except that the user fee for restructuring or
reinstatement of an installment agreement on or after January 1, 2007,
is applicable beginning January 1, 2007.
Par. 5. Section 300.3 is amended by adding paragraph (d) to read as
follows:
[[Page 43114]]
Sec. 300.3 Offer to compromise fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning November 1, 2003.
Par. 6. Section 300.4 is amended by adding paragraph (d) to read as
follows:
Sec. 300.4 Special enrollment examination fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning November 6, 2006.
Par. 7. Section 300.5 is amended by adding paragraph (d) to read as
follows:
Sec. 300.5 Enrollment of enrolled agent fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning November 6, 2006.
Par. 8. Section 300.6 is amended by adding paragraph (d) to read as
follows:
Sec. 300.6 Renewal of enrollment of enrolled agent fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning November 6, 2006.
Par. 9. Section 300.7 is amended by adding paragraph (d) to read as
follows:
Sec. 300.7 Enrollment of enrolled actuary fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning January 22, 2008.
Par. 10. Section 300.8 is amended by adding paragraph (d) to read
as follows:
Sec. 300.8 Renewal of enrollment of enrolled actuary fee.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning January 22, 2008.
Par. 11. Section 300.9 is added to read as follows:
Sec. 300.9 Fee for obtaining a preparer tax identification number.
(a) Applicability. This section applies to the application for and
renewal of a preparer tax identification number pursuant to 26 CFR
1.6109-2(d).
(b) Fee. The fee to apply for or renew a preparer tax
identification number is $50 per year, which is the cost to the
government for processing the application for a preparer tax
identification number and does not include any fees charged by the
vendor.
(c) Person liable for the fee. The individual liable for the
application or renewal fee is the individual applying for and renewing
a preparer tax identification number from the IRS.
(d) Effective/applicability date. This section will be applicable
on the date of publication of a Treasury decision adopting these rules
as final regulations in the Federal Register.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2010-18198 Filed 7-21-10; 4:15 pm]
BILLING CODE 4830-01-P