Amendments to the Section 7216 Regulations-Disclosure or Use of Information by Preparers of Returns, 48-54 [E9-31115]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 75, Number 1 (Monday, January 4, 2010)]
[Rules and Regulations]
[Pages 48-54]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-31115]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9478]
RIN 1545-BI86


Amendments to the Section 7216 Regulations--Disclosure or Use of 
Information by Preparers of Returns

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations that 
provide rules relating to the disclosure and use of tax return 
information by tax return preparers. These regulations provide updated 
guidance affecting tax return preparers regarding the use of 
information related to lists for solicitation of tax return business; 
the disclosure or use of statistical compilations of data under section 
7216 of the Internal Revenue Code (Code) by a tax return preparer in 
connection with, or in support of, a tax return preparer's tax return 
preparation business, including identification of additional limited 
circumstances when a tax return preparer who compiles statistical 
information may disclose the compilation without taxpayer consent, and 
the placement of additional restrictions on the content of the 
compilation that may be disclosed under those circumstances without 
taxpayer consent; and the disclosure or use of information for the 
purpose of performing conflict reviews. The text of these temporary 
regulations also serves as the text of the proposed regulations set 
forth in the notice of proposed rulemaking on this subject in the 
Proposed Rules section in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective on January 4, 
2010.
    Applicability Date: For date of applicability, see Sec.  301.7216-
2T(s).

FOR FURTHER INFORMATION CONTACT: Molly K. Donnelly, (202) 622-4940 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document amends 26 CFR part 301 to provide modified rules 
relating to the ability of a tax return preparer to use tax return 
information for the purposes of compiling, maintaining and using lists 
for solicitation of tax return business under Sec.  301.7216-2(n), 
disclose and use statistical compilations of data described in Sec.  
301.7216-1(b)(3)(i)(B) under Sec.  301.7216-2(o), and disclose and use 
tax return information for the purpose of performing conflict reviews 
under Sec.  301.7216-2(p), without taxpayer consent. These three 
paragraphs are being modified to expand the ability of tax return 
preparers to disclose or use certain limited tax return information 
under specific and limited circumstances in a manner that is expected 
to benefit taxpayers, tax return preparers, and the general public, as 
more fully described in the Explanation of Provisions section of this 
preamble. One set of these modifications, those to Sec.  301.7216-2(o), 
are being made following the issuance of Notice 2009-13 and the receipt 
of comments submitted in response to that Notice, while the 
modifications to the other two paragraphs are being made as a result of 
the Treasury Department's and the IRS's efforts to regularly review the 
effect of the recently issued final regulations on taxpayers and tax 
return preparers. In the accompanying and cross-referenced notice of 
proposed rulemaking, the Treasury Department and the IRS request 
comments on the proposed rules from all interested parties.
    On January 7, 2008, the Treasury Department and the IRS issued 
final regulations under section 7216 (TD 9375) (73 FR 1058) applicable 
to disclosures or uses of tax return information occurring on or after 
January 1, 2009. The final regulations replaced previously issued final 
regulations that remained applicable to disclosures or uses of tax 
return information occurring prior to January 1, 2009. The final 
regulations included Sec.  301.7216-1(b)(3)(i)(B) which, for 
disclosures and uses of tax return information occurring on or after 
January 1, 2009, provides that tax return information includes 
statistical compilations of tax return information. The final 
regulations included Sec.  301.7216-2(n), which provides that tax 
return preparers may use, without taxpayer consent, certain limited 
taxpayer contact information constituting tax return information for 
the purposes of compiling, maintaining, and using lists for the 
solicitation of tax return business, incorporating its predecessor, 
Sec.  301.7216-2(m), but providing a minor expansion of the contact 
information allowed to be used. The final regulations included the 
addition of new Sec.  301.7216-2(o), which describes the limited 
circumstances when a tax return preparer may use tax return information 
to produce statistical compilations, and when the preparer may use or 
disclose the produced statistical compilation without written consent. 
The final regulations included Sec.  301.7216-2(p), which provides that 
tax return preparers may disclose and use tax return information 
without taxpayer consent in the performance of quality or peer reviews, 
incorporating its predecessor, Sec.  301.7216-2(o), with only minor, 
non-technical adjustments.
    The Treasury Department and the IRS subsequently issued Notice 
2009-13 (2009-6 IRB 447 (February 9, 2009)) (see Sec.  
601(d)(2)(ii)(b)), to provide interim guidance relating to the ability 
of a tax return preparer to disclose and use statistical compilations 
of anonymous tax return information in support of a tax return 
preparer's tax return preparation business. The Notice provides 
guidance on the tax return information a tax return preparer may use to 
compile anonymous statistical information, and on the circumstances 
when the tax return preparer may disclose the anonymous statistical 
information without taxpayer consent. Notice 2009-13 sets forth rules 
to be applied by the Treasury Department and the IRS during 2009 while 
they consider whether the interim guidance should be adopted by 
regulations or further modified, taking into account public comments 
submitted in response to the Notice.
    Written comments were received in response to the Notice. All 
comments were considered and are available for public inspection upon 
request. This preamble summarizes the responsive comments received by 
the Treasury Department and the IRS.
    These temporary regulations modify the rules under Sec. Sec.  
301.7216-2(n), 301.7216-2(o), and 301.7216-2(p), and supersede the 
interim guidance provided by Notice 2009-13.

[[Page 49]]

Summary of Comments in Response to Notice 2009-13

1. Purpose and Use

    One commentator recommended that the regulations specifically 
provide that all tax preparation firms may use tax return information 
to connect taxpayers to free government programs and services, provided 
they have obtained the consent of their clients. This comment was not 
adopted. Under the regulations in force, this use would be permitted 
because the tax return preparer obtained the consent of its clients. 
Consents must conform to the requirements of Sec.  301.7216-3 of the 
regulations and any other guidance issued pursuant to Sec.  301.7216-3.

2. Disclosure Requirements

    Several commentators recommended that the prohibition on disclosing 
cells containing data from fewer than 25 tax returns be eliminated as 
long as the data is anonymous and free of all taxpayer-identifying 
information. Some commentators recommended that return preparers be 
able to disclose, without consent, all aggregate data that is stripped 
of personal identifying information, noting that volunteer tax 
preparation programs utilize aggregate data to demonstrate and track 
the tax preparation and financial service needs of their clients. 
Additional commentators recommended that the 25 tax return threshold be 
modified to allow for the disclosure of cells containing data from ten 
or more tax returns. These commentators indicated that removal of all 
taxpayer-identifying information provides sufficient taxpayer 
protection and implied that it may not be feasible for tax return 
preparers who operate small tax return preparation businesses to always 
produce a statistical compilation that meets the 25 tax return 
threshold. These recommendations were adopted in part, and the 
temporary regulations now permit the disclosure of cells containing 
data from ten or more tax returns.

3. Research and Public Policy Discussions

    One commentator recommended that, for purposes of the guidance, the 
term ``tax return preparation business'' should include ``bona fide 
research or public policy discussions (i) concerning state or federal 
taxation or (ii) utilizing data acquired during the tax return 
preparation process.'' The commentator was concerned that the interim 
guidance would inhibit tax return preparers from cooperating with 
scholars or sharing anonymous data with bona fide academic researchers 
studying consumer financial behavior because this topic arguably might 
not be viewed as supporting a tax return preparation business. This 
comment was considered and the temporary regulations now clarify that a 
tax return preparer is allowed to disclose an anonymous statistical 
compilation for bona fide research or public policy discussions 
concerning state or federal taxation or requiring data acquired during 
the tax return preparation process.
    One commentator stated that government agencies' presentation of 
aggregated refund data and other statistical compilations in press 
releases, public presentations, reports, Web sites, or other electronic 
communications should automatically fall within the meaning of bona 
fide research and public policy discussions. This recommendation was 
not adopted because it would not be appropriate in this context to 
create particularized rules for government agencies, and inclusion of 
this specific circumstance in the exception might require the creation 
of an exhaustive list of the circumstances that would be considered 
bona fide research or public policy discussions. Instead, tax return 
preparers must determine on a case-by-case basis whether a disclosure 
is in support of bona fide research or public policy discussions.

4. Sale of a Statistical Compilation

    One commentator recommended that the regulations should allow for 
the disclosure of a statistical compilation in conjunction with the 
sale or disposition of a tax return preparation business only when the 
entire tax return preparation business is being sold or disposed. This 
recommendation was not adopted because circumstances can exist when a 
tax return preparer may in good faith sell or dispose of less than the 
preparer's entire tax return preparation business.

Explanation of Provisions

1. Sec.  301.7216-2(n)

    The Treasury Department and the IRS are amending the regulations 
under section 7216 to provide a limited expansion of the information 
tax return preparers may, without taxpayer consent, use and include in 
lists for solicitation of tax return business pursuant to Sec.  
301.7216-2(n). The regulations also clarify that lists for solicitation 
of tax return business may not be used to solicit non-tax return 
preparation services. Finally, the regulations clarify the meanings of 
the phrases ``tax information'' and ``in conjunction with the sale or 
other disposition of the compiler's tax return business'' for purposes 
of the exception provided by Sec.  301.7216-2(n).
    The current regulations allow a tax return preparer to compile and 
maintain a list for solicitation of tax return business consisting 
solely of the names, addresses, e-mail addresses, and phone numbers of 
taxpayers whose tax returns the preparer has prepared or processed. The 
current regulations allow a tax return preparer to use this list to 
contact the taxpayers on the list to offer ``tax information or 
additional tax return preparation services to such taxpayers,'' and 
limit the transfer of the list to transfers occurring ``in conjunction 
with the sale or other disposition of the compiler's tax return 
preparation business.'' Section 301.7216-2(n) in its current form is 
identical to its form in prior versions of the regulations, with the 
exception that an additional type of information, e-mail addresses, was 
added to the short list of information allowed to be included in Sec.  
301.7216-2(n) lists.
    Upon further consideration, the Treasury Department and the IRS 
conclude that Sec.  301.7216-2(n) should be amended, in the form of 
temporary regulations, to provide additional flexibility to tax return 
preparers and benefits to taxpayers without compromising the rights of 
taxpayers to control the use or disclosure of their tax return 
information. These regulations expand the information that may be 
compiled and maintained in a list for solicitation of tax return 
business to include the taxpayer entity classification or type, 
including individual status, and taxpayer income tax return form number 
(for example, Form 1040, ``U.S. Individual Income Tax Return'', or Form 
1120, ``U.S. Corporation Income Tax Return''). Determining the 
information that may be used to provide targeted newsletters and 
marketing under Sec.  301.7216-2(n) requires balancing the benefits 
from taxpayers receiving the tax information most relevant to them 
against the ability of taxpayers to control the use of their tax return 
information. The Treasury Department and the IRS conclude that the 
current amendments made to Sec.  301.7216-2(n) strike the proper 
current balance between these competing interests, but also recognize 
that future information and needs may require permitting additional 
information to be included in the list maintained under Sec.  301.7216-
2(n). Accordingly, the regulations are amended to allow the IRS to 
identify additional information that may be included in the list by 
issuing guidance

[[Page 50]]

to be published in the Internal Revenue Bulletin.
    These regulations clarify the phrase ``tax information'' by 
replacing that phrase with the phrase ``tax information and general 
business or economic information or analysis for educational 
purposes.'' It is contemplated that tax information includes 
explanations of current developments in tax law. The regulations also 
clarify that a list for solicitation of tax return business may not be 
used to solicit non-tax return preparation services.
    The additions to the tax return information allowed to be compiled 
and maintained in Sec.  301.7216-2(n) lists, along with the 
clarification of the phrase ``tax information,'' will provide 
additional flexibility to tax return preparers permitting them to more 
efficiently and effectively furnish relevant tax information and lawful 
solicitations to their taxpayer clients, and will benefit taxpayers by 
helping ensure that the taxpayers receive only information that may be 
useful to them and that specifically addresses tax issues relevant to 
them, thus improving taxpayer education and awareness and reducing the 
amount of needless information being received by taxpayers. By 
expressly prohibiting the use of these lists to solicit non-tax return 
preparation services, the regulation makes clear that the exception 
provided by Sec.  301.7216-2(n) is limited to solicitations of tax 
return preparation services only. The phrase ``in conjunction with the 
sale or other disposition of the compiler's tax return preparation 
business'' is clarified to include due diligence performed in 
contemplation of a sale or other disposition of a tax return 
preparation business. The regulations also clarify that tax return 
information made available to a potential purchaser for due diligence 
purposes constitutes a disclosure of that information and not a 
transfer of that information.
    The Treasury Department and the IRS have also amended the 
regulations to clarify that a person who is a tax return preparer 
solely because he provides auxiliary services to another tax return 
preparer may not use the tax return information he receives from such 
other tax return preparer to compile and maintain for his own use a 
list of taxpayers under Sec.  301.7216-2(n). For example, a software 
company could in some cases market tax return preparation software to 
taxpayers directly and to tax return preparers. In connection with 
auxiliary services provided to tax return preparers, the software 
provider may receive information regarding the taxpayer clients of the 
tax return preparers. In such circumstances, the software provider 
could not use the tax return information it received from tax return 
preparers in the performance of auxiliary services to compile a list 
under Sec.  301.7216-2(n) to market its software directly to the 
clients of the tax return preparers.
    In light of these considerations, the Treasury Department and the 
IRS, pursuant to these regulations, amend Sec.  301.7216-2(n) of the 
final regulations published on January 7, 2008, as described in this 
preamble.

2. Sec.  301.7216-2(o)

    The Treasury Department and the IRS are amending the regulations 
under section 7216 to provide additional exceptions to the general rule 
that a tax return preparer may not disclose or use statistical 
compilations of tax return information without taxpayer consent. 
Section 301.7216-2(o) currently prohibits the disclosure of statistical 
compilations unless the disclosure is made in order to comply with 
financial accounting or regulatory reporting requirements or occurs in 
conjunction with the sale or other disposition of the compiler's tax 
return preparation business; therefore, under the current regulations, 
tax return preparers may not disclose statistical compilations for 
other purposes that may provide benefits to taxpayers generally or to 
the public as a whole.
    Responding to public comments received in response to Notice 2009-
13, the Treasury Department and the IRS conclude that Sec.  301.7216-
2(o) should be amended, in the form of temporary regulations, to allow 
a tax return preparer to disclose statistical compilations of tax 
return information without taxpayer consent for additional limited 
purposes, with certain additional requirements.
    While taxpayer consent regarding disclosure or use is a primary 
focus of the section 7216 regulations, the flexibility resulting from 
these temporary regulations will enable tax return preparers to 
disclose anonymous data for limited purposes that may provide benefit 
to both taxpayers in general and the public at large. Anonymous 
statistical data disclosed within the constraints provided by these 
temporary regulations can be used by tax return preparers for marketing 
purposes and to assist taxpayers in making informed choices about tax 
return preparers. The availability of anonymous statistical data can be 
useful from a public policy perspective, as the use and availability of 
such data can assist lawmakers, academics, non-profits, and other 
agencies in the facilitation of sound tax policy analysis and 
decisions. In addition, volunteer tax return preparers who provide free 
tax return preparation services to low- and moderate-income taxpayers 
and families would be able to demonstrate the impact of their efforts 
in order to obtain and administer funding necessary for their continued 
operation.
    One concern that has been expressed regarding the disclosure of 
statistical compilations of tax return information by tax return 
preparers is that incentives will be created that encourage 
maximization of credits or refunds at the expense of tax return 
accuracy. To address this concern, while the amendment provides 
additional limited exceptions to the requirement that taxpayer consent 
be obtained in order to disclose or use tax return information, the 
temporary regulations prohibit, in the context of marketing or 
advertising, the use or disclosure of statistical compilations, or a 
part thereof, that identify dollar amounts of refunds, credits, or 
deductions associated with tax returns, whether or not the data are 
statistical, averaged, aggregated, or anonymous. The IRS will continue 
to rely on all existing enforcement powers to address concerns 
regarding advertising and marketing claims by tax return preparers.
    In light of these considerations, the Treasury Department and the 
IRS, pursuant to these regulations, amend Sec.  301.7216-2(o) of the 
final regulations published on January 7, 2008. The temporary 
regulations require that any disclosure of a statistical compilation, 
other than to satisfy reporting requirements or in conjunction with the 
disposition of a tax return business, be anonymous as to taxpayer 
identity, meaning that it must be in a form which cannot be associated 
with, or otherwise identify, directly or indirectly, a particular 
taxpayer. Under these circumstances, the temporary regulations prohibit 
the disclosure of statistical compilations with cells containing data 
from fewer than ten tax returns. In addition to the disclosure 
exceptions set forth currently in Sec.  301.7216-2(o), the temporary 
regulations authorize the disclosure by a tax return preparer in 
conjunction with bona fide research or public policy discussions 
concerning state or federal taxation or requiring data acquired during 
the tax return preparation process, and to provide tax information to 
the public regarding tax return preparation services. The temporary 
regulations allow section 501(c) organizations whose program services 
include the free preparation of tax

[[Page 51]]

returns to disclose statistical compilations in order to comply with 
reporting requirements in connection with the receipt of grants or to 
facilitate the solicitation of grants. The temporary regulations also 
allow lawful recipients of statistical compilations to disclose or use 
such tax return information, subject to the provisions of Sec.  
301.7216-2T(o). The temporary regulations continue to allow the 
disclosure of statistical compilations in order to comply with 
financial accounting or regulatory reporting requirements or in 
conjunction with the sale or other disposition of the compiler's tax 
return preparation business. Finally, the temporary regulations 
prohibit, in the context of marketing or advertising, use or disclosure 
of statistical compilations, or a part thereof, that identify dollar 
amounts of refunds, credits, or deductions associated with tax returns, 
or percentages relating thereto, whether or not the data are 
statistical, averaged, aggregated, or anonymous.

3. Sec.  301.7216-2(p)

    The Treasury Department and the IRS are amending the regulations 
under section 7216 to clarify that tax return preparers may use and 
disclose tax return information to the extent necessary to accomplish a 
conflict of interest review undertaken to comply with the requirements 
established by any federal, state, or local law, agency, board, or 
commission, or by a professional association ethics committee or board, 
to identify, evaluate, and monitor actual or potential legal and 
ethical conflicts of interest that may arise when a tax return preparer 
or tax return preparation business is employed or acquired by another 
tax return preparer or tax return preparation business, or when a tax 
return preparer is considering engaging a new client.
    Upon further consideration, the Treasury Department and the IRS 
conclude that Sec.  301.7216-2(p) should be amended, in the form of 
temporary regulations, to clarify that tax return preparers may use and 
disclose tax return information to the extent necessary to accomplish 
conflict reviews without compromising the rights of taxpayers to 
control the use or disclosure of their tax return information. Conflict 
reviews allow tax return preparers to fulfill legal and ethical 
requirements to identify and avoid client conflicts of interest. 
Conflict reviews also benefit taxpayers because these reviews provide 
taxpayers with the knowledge and comfort that their tax return 
preparers are acting in the taxpayers' best interests when providing 
tax return preparation services to them.
    These regulations amend Sec.  301.7216-2(p) by adding an exception 
to the written consent rules to allow disclosures of tax return 
information by a tax return preparer without taxpayer consent for the 
purpose of conducting conflict reviews, but only to the extent 
necessary to accomplish the reviews. For example, if the tax return 
preparer only needs to disclose the names of taxpayers, and nothing 
more, to allow the conflict review to be completed, then the tax return 
preparer shall not disclose any tax return information other than the 
taxpayers' names.
    The regulations describe conflict reviews to include reviews that 
are undertaken to comply with requirements established by any federal, 
state, or local law, agency, board or commission, or by a professional 
association ethics committee or board, to either identify, evaluate, 
and monitor actual or potential legal and ethical conflicts of interest 
that may arise when a tax return preparer is employed or acquired by 
another tax return preparer, or to identify, evaluate, and monitor 
actual or potential legal and ethical conflicts of interest that may 
arise when a tax return preparer is considering engaging a new client. 
The regulations contemplate that the information necessary to 
accomplish a conflict review shall be disclosed to and used by only 
those persons permitted to be involved in the conflict review as 
described in the applicable law or regulations or as authorized by the 
relevant agency, board, commission, or professional association. The 
regulations also contemplate that, in order for tax return preparers to 
fulfill the required conflict reviews, circumstances may require the 
preparer to disclose the information necessary to perform a conflict 
review outside of the United States or a territory or possession of the 
United States. If disclosure outside of the United States is required 
to conduct a conflict review, the disclosure is authorized by these 
regulations provided the disclosing and receiving tax return preparers 
have procedures in place that are consistent with good business 
practices and designed to maintain the confidentiality of the disclosed 
information. The regulations also include specific restrictions on the 
further use and disclosure of information disclosed under this 
exception.
    In light of these considerations, the Treasury Department and the 
IRS, pursuant to these regulations, amend Sec.  301.7216-2(p) of the 
final regulations published on January 7, 2008, as described in this 
preamble.

4. Conclusion

    The Treasury Department and the IRS anticipate that allowing tax 
return preparers to disclose and use the limited tax return information 
and anonymous statistical compilations for the limited purposes 
previously cited should provide the taxpayer and the public the policy 
benefits discussed above. The Treasury Department and the IRS also 
conclude that the amendments to Sec. Sec.  301.7216-2(n), 301.7216-
2(o), and 301.7216-2(p) appropriately balance concerns regarding 
safeguarding of sensitive tax return information against the tax 
industry's need to evaluate and use or disclose tax return information. 
In a separate notice of proposed rulemaking published with these 
regulations, the Treasury Department and IRS invite comments on the 
proposed rules.

Effect on Other Documents

    The following publication is obsolete on or after January 4, 2010: 
Notice 2009-13 (2009-6 IRB 447).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations because they are 
excepted from the notice and comment requirements of section 553(b) and 
(c) of the Administrative Procedure Act by section 7805(e) of the 
Internal Revenue Code and under the interpretative rule and good cause 
exceptions provided by sections 553(b)(3)(A) and (B) of that Act. These 
regulations are necessary to provide tax return preparers and taxpayers 
with immediate guidance on the application of the section 7216 rules 
regarding permissible disclosures and uses without the consent of the 
taxpayer, disclosures and uses that are currently required and 
necessary to allow the ongoing and beneficial educational, 
informational, operational, and funding efforts of tax return preparers 
and taxpayers to prepare for the imminent tax filing season, and to 
allow tax return preparers to comply with all legal and ethical 
requirements placed upon them by relevant government or professional 
agencies, boards, commissions or committees. These regulations are 
intended to provide additional limited exceptions to, and relief from, 
the rules prohibiting

[[Page 52]]

disclosure of tax return information, including statistical 
compilations of tax return information and information necessary to 
accomplish conflict reviews, because these regulations provide tangible 
benefits to both taxpayers and tax return preparers and appropriately 
balance concerns regarding safeguarding of sensitive tax return 
information with appropriate disclosures and uses of that information. 
In addition, the regulations regarding Sec.  301.7216-2(o) have been 
publicly noticed and subject to comment through the publication of 
Notice 2009-13. For these reasons good cause exists for dispensing with 
notice and public comment pursuant to section 553(b) and (c) of the 
Administrative Procedure Act (5 U.S.C. chapter 5). For applicability of 
the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the 
Special Analyses section of the preamble to the cross-referenced notice 
of proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register. Pursuant to section 7805(f) of the 
Internal Revenue Code, this regulation has been submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these regulations is Molly K. Donnelly, 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read as 
follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 301.7216-0 is amended by revising the entries for Sec.  
301.7216-2, paragraphs (n), (o), and (p) to read as follows:


Sec.  301.7216-0  Table of contents.

* * * * *


Sec.  301.7216-2  Permissible disclosures or uses without consent of 
the taxpayer.

* * * * *
    (n) [Reserved]. For further guidance, see entry for Sec.  301.7216-
2T(n).
    (o) [Reserved]. For further guidance, see entry for Sec.  301.7216-
2T(o).
    (p) [Reserved]. For further guidance, see entry for Sec.  301.7216-
2T(p).
* * * * *

0
Par. 3. Section 301.7216-0T is added to read as follows:


Sec.  301.7216-0T  Table of contents.

    This section lists captions contained in Sec.  301.7216-2T.


Sec.  301.7216-2T  Permissible disclosures or uses without consent of 
the taxpayer (temporary).

    (a) through (m) [Reserved]. For further guidance, see entries for 
Sec.  301.7216-2(a) through (m).
    (n) Lists for solicitation of tax return business.
    (o) Producing statistical information in connection with tax return 
preparation business.
    (p) Disclosure or use of information for quality, peer, or conflict 
reviews.
    (q) through (r) [Reserved]. For further guidance, see entries for 
Sec.  301.7216-2(q) through (r).
    (s) Effective/applicability date.
    (t) Expiration date.

0
Par. 4. Section 301.7216-2 is amended by revising paragraphs (n), (o), 
and (p) to read as follows:


Sec.  301.7216-2  Permissible disclosures or uses without consent of 
the taxpayer.

* * * * *
    (n) [Reserved]. For further guidance, see Sec.  301.7216-2T(n).
    (o) [Reserved]. For further guidance, see Sec.  301.7216-2T(o).
    (p) [Reserved]. For further guidance, see Sec.  301.7216-2T(p).
* * * * *

0
Par. 5. Section 301.7216-2T is added to read as follows:


Sec.  301.7216-2T  Permissible disclosures or uses without consent of 
the taxpayer (temporary).

    (a) through (m) [Reserved]. For further guidance, see Sec.  
301.7216-2(a) through (m).
    (n) Lists for solicitation of tax return business. (1) A tax return 
preparer, other than a person who is a tax return preparer solely 
because the person provides auxiliary services as defined in Sec.  
301.7216-1(b)(2)(i)(B), may compile and maintain a separate list 
containing solely the names, addresses, e-mail addresses, phone 
numbers, taxpayer entity classification (including ``individual'' or 
the specific type of business entity), and income tax return form 
number of taxpayers whose tax returns the tax return preparer has 
prepared or processed. The Internal Revenue Service may issue guidance, 
by publication in the Internal Revenue Bulletin (see Sec.  
601.601(d)(2)(ii)(b)), describing other types of information that may 
be included in a list compiled and maintained pursuant to this 
paragraph. This list may be used by the compiler solely to contact the 
taxpayers on the list for the purpose of providing tax information and 
general business or economic information or analysis for educational 
purposes, or soliciting additional tax return preparation services. The 
list may not be used to solicit any service or product other than tax 
return preparation services. The compiler of the list may not transfer 
the taxpayer list, or any part thereof, to any other person unless the 
transfer takes place in conjunction with the sale or other disposition 
of the compiler's tax return preparation business. Due diligence 
conducted prior to a proposed sale of a compiler's tax return 
preparation business is in conjunction with the sale or other 
disposition of a compiler's tax return preparation business and will 
not constitute a transfer of the list if conducted pursuant to a 
written agreement that requires confidentiality of the tax return 
information disclosed and expressly prohibits the further use or 
disclosure of the tax return information for any purpose other than 
that related to the purchase of the tax return preparation business. 
The tax return information submitted for the purpose of due diligence 
as authorized in this paragraph is a disclosure of tax return 
information subject to the provisions of this section. A person who 
acquires a taxpayer list, or a part thereof, in conjunction with a sale 
or other disposition of a tax return preparation business is subject to 
the provisions of this paragraph with respect to the list. The term 
list, as used in this paragraph (n), includes any record or system 
whereby the names and addresses of taxpayers are retained. The 
provisions of this paragraph (n) also apply to the transfer of any 
records and related papers to which this paragraph (n) applies.
    (2) Examples. The following examples illustrate this paragraph (n):

    Example 1. Preparer A is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A). Preparer A's office is located in 
southeast Pennsylvania, and Preparer A prepares federal and state 
income tax returns for taxpayers who live in Pennsylvania, New 
Jersey, Maryland, and Delaware. Preparer A maintains a list of 
taxpayer clients containing the information allowed by this 
paragraph (n). Preparer A provides quarterly state income tax 
information updates to his individual taxpayer clients by e-mail or 
U.S. Mail. To ensure that his clients only receive the information 
updates that are relevant to

[[Page 53]]

them, Preparer A uses his list to direct his outreach efforts 
towards clients by zip code and income tax return form number (Form 
1040 and corresponding state income tax return form number). 
Preparer A may use the list information in this manner without 
taxpayer consent because he is providing tax information for 
educational or informational purposes and is targeting clients based 
solely upon tax return information that is authorized by this 
paragraph (n), by zip code, which is part of a taxpayer's address, 
and by income tax return form number. Preparer A also may deliver 
this information to his clients by e-mail or by U.S. Mail without 
taxpayer consent because those delivery methods use information 
authorized by this paragraph (n).

    Example 2. Preparer B is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A). Preparer B maintains a list of 
taxpayer clients containing the information allowed by this 
paragraph (n). Preparer B provides monthly federal income tax 
information updates in the form of a newsletter to all of her 
taxpayer clients by e-mail or U.S. Mail. When Preparer B hires a new 
employee, she announces each hire in the newsletter for the month 
that follows the hiring. Each announcement includes a photograph of 
the new employee, the employee's name, the employee's telephone 
number, a brief listing of the employee's qualifications, and a 
brief listing of the employee's employment responsibilities. 
Preparer B may use the tax return information described in this 
paragraph (n) in this manner without taxpayer consent because she is 
providing tax information for educational or informational purposes, 
to provide general federal income tax information updates. Preparer 
B may include the new employee announcements in the form described 
because this is considered tax information for educational or 
informational purposes, provided the announcements do not contain 
solicitations for non-tax return preparation services. Preparer B 
also may deliver this information to her clients by e-mail or by 
U.S. Mail without taxpayer consent because those delivery methods 
use information authorized by this paragraph (n).

    (o) Producing statistical information in connection with tax return 
preparation business. (1) A tax return preparer may use tax return 
information, subject to the limitations specified in this paragraph 
(o), to produce a statistical compilation of data described in Sec.  
301.7216-1(b)(3)(i)(B). The purpose and use or disclosure of the 
statistical compilation must relate directly to the internal management 
or support of the tax return preparer's tax return preparation 
business, or to bona fide research or public policy discussions 
concerning state or federal taxation or requiring data acquired during 
the tax return preparation process. A tax return preparer may not 
disclose the compilation, or any part thereof, to any other person 
unless disclosure of the statistical compilation is anonymous as to 
taxpayer identity, does not disclose cells containing data from fewer 
than ten tax returns, and is in direct support of the tax return 
preparer's tax return preparation business or of bona fide research or 
public policy discussions concerning state or federal taxation or 
requiring data acquired during the tax return preparation process. A 
statistical compilation is anonymous as to taxpayer identity if it is 
in a form which cannot be associated with, or otherwise identify, 
directly or indirectly, a particular taxpayer. For purposes of this 
paragraph, marketing and advertising is in direct support of the tax 
return preparer's tax return preparation business provided the 
marketing and advertising is not false, misleading, or unduly 
influential. This paragraph, however, does not authorize the use or 
disclosure in marketing or advertising of any statistical compilations, 
or part thereof, that identify dollar amounts of refunds, credits, or 
deductions associated with tax returns, or percentages relating 
thereto, whether or not the data are statistical, averaged, aggregated, 
or anonymous. Disclosures made in support of fundraising activities 
conducted by Volunteer Return Preparation programs and other 
organizations described in section 501(c) of the Internal Revenue Code 
(Code) in direct support of their tax return preparation businesses are 
not marketing and advertising under this paragraph. A tax return 
preparer who produces a statistical compilation of data described in 
Sec.  301.7216-1(b)(3)(i)(B) may disclose the compilation in order to 
comply with financial accounting or regulatory reporting requirements 
whether or not the statistical compilation is anonymous as to taxpayer 
identity or discloses cells containing data from fewer than ten tax 
returns.
    A tax return preparer may not sell or exchange for value a 
statistical compilation of data described in Sec.  301.7216-
1(b)(3)(i)(B), in whole or in part, except in conjunction with the 
transfer of assets made pursuant to the sale or other disposition of 
the tax return preparer's tax return preparation business. The 
provisions of paragraph (n) of this section regarding the transfer of a 
taxpayer list also apply to the transfer of any statistical 
compilations of data to which this paragraph applies. A person who 
acquires a statistical compilation, or a part thereof, pursuant to the 
operation of this paragraph (o) or in conjunction with a sale or other 
disposition of a tax return preparation business, is subject to the 
provisions of this paragraph with respect to the compilation.
    (2) Examples. The following examples illustrate this paragraph (o):

    Example 1. Preparer A is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A). In 2009, A used tax return information 
to produce a statistical compilation of data for both internal 
management purposes and to support A's tax return preparation 
business. The statistical compilation included a cell containing the 
information that A prepared 32 S corporation tax returns in 2009. In 
2010, A decides to embark upon a new marketing campaign emphasizing 
its experience preparing small business tax returns. In the 
campaign, A discloses the cell containing the number of S 
corporation tax returns prepared in 2009. A's disclosure does not 
include any information that can be associated with or that can 
identify any specific taxpayers. A may disclose the anonymous 
statistical compilation without taxpayer consent.

    Example 2. Preparer B is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A). In 2010, in support of B's tax return 
preparation business, B wants to advertise that the average tax 
refund obtained for its clients in 2009 was $2,800. B may not 
disclose this information because it contains a statistical 
compilation reflecting average refund amounts.

    Example 3. Preparer C is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A) and is a Volunteer Income Tax 
Assistance program. In 2010, in support of C's tax return 
preparation business, C submits a grant application to a charitable 
foundation to fund C's operations providing free tax return 
preparation services to low- and moderate-income families. In 
support of C's request, C includes anonymous statistical data from 
cells containing data from ten or more tax returns showing that, in 
2009, C provided services to 500 taxpayers, that 95 percent of the 
taxpayer population served by C received the Earned Income Tax 
Credit (EITC), and that the average amount of the EITC received was 
$3,300. Despite the fact that this information constitutes an 
average credit amount, C may disclose the information to the 
charitable foundation because disclosures made in support of 
fundraising activities conducted by Volunteer Income Tax Assistance 
programs and other organizations described in section 501(c) of the 
Code in direct support of their tax return preparation business are 
not considered marketing and advertising for purposes of Sec.  
301.7216-2(o)(1).

    Example 4. Preparer D is a tax return preparer as defined by 
Sec.  301.7216-1(b)(2)(i)(A). In December 2009, D produced an 
anonymous statistical compilation of tax return information obtained 
during the 2009 filing season. In 2010, D wants to disclose portions 
of the anonymous statistical compilation from cells containing data 
from ten or more tax returns in connection with the marketing of its 
financial advisory and asset planning services. D is required to 
receive taxpayer consent under Sec.  301.7216-3 before disclosing 
the tax return information contained in the anonymous statistical

[[Page 54]]

compilation because the disclosure is not being made in support of 
D's tax return preparation business.

    (p) Disclosure or use of information for quality, peer, or conflict 
reviews. (1) The provisions of section 7216(a) and Sec.  301.7216-1 
shall not apply to any disclosure for the purpose of a quality or peer 
review to the extent necessary to accomplish the review. A quality or 
peer review is a review that is undertaken to evaluate, monitor, and 
improve the quality and accuracy of a tax return preparer's tax 
preparation, accounting, or auditing services. A quality or peer review 
may be conducted only by attorneys, certified public accountants, 
enrolled agents, and enrolled actuaries who are eligible to practice 
before the Internal Revenue Service. See Department of the Treasury 
Circular 230, 31 CFR part 10. Tax return information may also be 
disclosed to persons who provide administrative or support services to 
an individual who is conducting a quality or peer review under this 
paragraph (p), but only to the extent necessary for the reviewer to 
conduct the review. Tax return information gathered in conducting a 
review may be used only for purposes of a review. No tax return 
information identifying a taxpayer may be disclosed in any evaluative 
reports or recommendations that may be accessible to any person other 
than the reviewer or the tax return preparer being reviewed. The tax 
return preparer being reviewed will maintain a record of the review 
including the information reviewed and the identity of the persons 
conducting the review. After completion of the review, no documents 
containing information that may identify any taxpayer by name or 
identification number may be retained by a reviewer or by the 
reviewer's administrative or support personnel.
    (2) The provisions of section 7216(a) and Sec.  301.7216-1 shall 
not apply to any disclosure necessary to accomplish a conflict review. 
A conflict review is a review undertaken to comply with requirements 
established by any federal, state, or local law, agency, board or 
commission, or by a professional association ethics committee or board, 
to either identify, evaluate, and monitor actual or potential legal and 
ethical conflicts of interest that may arise when a tax return preparer 
is employed or acquired by another tax return preparer, or to identify, 
evaluate, and monitor actual or potential legal and ethical conflicts 
of interest that may arise when a tax return preparer is considering 
engaging a new client. Tax return information gathered in conducting a 
conflict review may be used only for purposes of a conflict review. No 
tax return information identifying a taxpayer may be disclosed in any 
evaluative reports or recommendations that may be accessible to any 
person other than those responsible for identifying, evaluating, and 
monitoring legal and ethical conflicts of interest. No tax return 
information identifying a taxpayer may be disclosed outside of the 
United States or a territory or possession of the United States unless 
the disclosing and receiving tax return preparers have procedures in 
place that are consistent with good business practices and designed to 
maintain the confidentiality of the disclosed return information.
    (3) Any person (including administrative and support personnel) 
receiving tax return information in connection with a quality, peer, or 
conflict review is a tax return preparer for purposes of sections 
7216(a) and 6713(a). Tax return information disclosed and used for 
purposes of a quality, peer, or conflict review shall not be used or 
disclosed for any other purpose.
    (q) through (r) [Reserved]. For further guidance, see Sec.  
301.7216-2(q) through (r).
    (s) Effective/applicability date. This section applies to 
disclosures or uses of tax return information occurring on or after 
January 4, 2010.
    (t) Expiration date. The applicability of this section expires on 
or before December 28, 2012.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: December 24, 2009.
Michael Mundaca,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E9-31115 Filed 12-29-09; 4:15 pm]
BILLING CODE 4830-01-P