User Fees Relating to Enrollment and Preparer Tax Identification Numbers, 60316-60321 [2010-24652]

Download as PDF 60316 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations jdjones on DSK8KYBLC1PROD with RULES forms, instructions, or other appropriate guidance. Employee A is a tax return preparer even if Employee A relies on tax preparation software to prepare the return. Example 3. C is an employee of a firm that prepares tax returns and claims for refund of tax for compensation. C is responsible for preparing a Form 1040, ‘‘U.S. Individual Income Tax Return,’’ for a client. C obtains the information necessary for the preparation of the tax return during a meeting with the client, and makes determinations with respect to the proper application of the tax laws to the information in order to determine the client’s tax liability. C completes the tax return and sends the completed return to employee D, who reviews the return for accuracy before signing it. Both C and D are tax return preparers required to apply for a PTIN or other identifying number as the Internal Revenue Service may prescribe in forms, instructions, or other appropriate guidance. Example 4. E is an employee at a firm which prepares tax returns and claims for refund of tax for compensation. The firm is engaged by a corporation to prepare its Federal income tax return on Form 1120, ‘‘U.S. Corporation Income Tax Return.’’ Among the documentation that the corporation provides to E in connection with the preparation of the tax return is documentation relating to the corporation’s potential eligibility to claim a recently enacted tax credit for the taxable year. In preparing the return, and specifically for purposes of the new tax credit, E (with the corporation’s consent) obtains advice from F, a subject matter expert on this and similar credits. F advises E as to the corporation’s entitlement to the credit and provides his calculation of the amount of the credit. Based on this advice from F, E prepares the corporation’s Form 1120 claiming the tax credit in the amount recommended by F. The additional credit is one of many tax credits and deductions claimed on the tax return, and determining the credit amount does not constitute preparation of all or substantially all of the corporation’s tax return under this paragraph (g). F will not be considered to have prepared all or substantially all of the corporation’s tax return, and F is not a tax return preparer required to apply for a PTIN or other identifying number as the Internal Revenue Service may prescribe in forms, instructions, or other appropriate guidance. The analysis is the same whether or not the tax credit is a substantial portion of the return under § 301.7701–15 of this chapter (as opposed to substantially all of the return), and whether or not F is in the same firm with E. E is a tax return preparer required to apply for a PTIN or other identifying number as the Internal Revenue Service may prescribe in forms, instructions, or other appropriate guidance. (h) The Internal Revenue Service, through forms, instructions, or other appropriate guidance, may prescribe exceptions to the requirements of this section, including the requirement that an individual be authorized to practice before the Internal Revenue Service before receiving a preparer tax VerDate Mar<15>2010 15:07 Sep 29, 2010 Jkt 220001 identification number or other prescribed identifying number, as necessary in the interest of effective tax administration. The Internal Revenue Service, through other appropriate guidance, may also specify specific returns, schedules, and other forms that qualify as tax returns or claims for refund for purposes of these regulations. (i) Effective/applicability date. Paragraph (a)(1) of this section is applicable to tax returns and claims for refund filed after December 31, 2008. Paragraph (a)(2)(i) of this section is applicable to tax returns and claims for refund filed on or before December 31, 2010. Paragraph (a)(2)(ii) of this section is applicable to tax returns and claims for refund filed after December 31, 2010. Paragraph (d) of this section is applicable to tax return preparers after December 31, 2010. Paragraphs (e) through (h) of this section are effective after September 30, 2010. PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT Par. 3. The authority citation for part 602 continues to read as follows: ■ Authority: 26 U.S.C. 7805. Par. 4. In § 602.101, paragraph (b) is amended by revising the entry for ‘‘1.6109–2’’ in the table to read as follows: ■ DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 300 [TD 9503] RIN 1545–BI71 User Fees Relating to Enrollment and Preparer Tax Identification Numbers Internal Revenue Service (IRS), Treasury. ACTION: Final rule. AGENCY: This document contains amendments to the regulations relating to the imposition of certain user fees on certain tax practitioners. The final regulations establish a new user fee for individuals who apply for or renew a preparer tax identification number (PTIN). The final regulations affect individuals who apply for or renew a PTIN. DATES: Effective Date: These regulations are effective on September 30, 2010. Applicability Date: For dates of applicability see §§ 300.1(d), 300.2(d), 300.3(d), 300.4(d), 300.5(d), 300.6(d), 300.7(d), 300.8(d), and 300.9(d). FOR FURTHER INFORMATION CONTACT: Concerning the final regulations, Emily M. Lesniak at (202) 622–4570; concerning cost methodology Eva J. Williams at (202) 435–5514 (not toll-free numbers). SUPPLEMENTARY INFORMATION: SUMMARY: Background This document contains final regulations relating to the imposition of a user fee to apply for or renew a PTIN and the reorganization of the effective CFR part or section Current OMB date provisions under §§ 300.0 through where identified and control No. 300.8. Section 300.9 establishes a $50 described user fee to apply for or renew a PTIN. The Independent Offices * * * * * Appropriations Act of 1952 (IOAA), 1.6109–2 ....................... 1545–2176 which is codified at 31 U.S.C. 9701, authorizes agencies to prescribe * * * * * regulations establishing user fees for services provided by the agency. Regulations prescribing user fees are Steven T. Miller, subject to the policies of the President, Deputy Commissioner for Services and which are currently set forth in the Enforcement. Office of Management and Budget Approved: August 11, 2010. Circular A–25 (the OMB Circular), 58 Michael Mundaca, FR 38142 (July 15, 1993). The OMB Assistant Secretary of the Treasury (Tax Circular requires agencies seeking to Policy). impose user fees for providing special [FR Doc. 2010–24653 Filed 9–28–10; 11:15 am] benefits to identifiable recipients to calculate the full cost of providing those BILLING CODE 4830–01–P benefits. On September 30, 2010, the Treasury Department and the IRS published in the Federal Register final regulations under section 6109 (TD 9501) that § 602.101 * OMB Control numbers. * * (b) * * * PO 00000 Frm 00032 * Fmt 4700 * Sfmt 4700 E:\FR\FM\30SER1.SGM 30SER1 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations jdjones on DSK8KYBLC1PROD with RULES require tax return preparers who prepare all or substantially all of a tax return or claim for refund to use a PTIN as their identifying number. These regulations also provide that to be eligible to receive a PTIN, a tax return preparer must be an attorney, certified public accountant, enrolled agent, or registered tax return preparer. On July 23, 2010, the Treasury Department and the IRS published in the Federal Register (75 FR 43110) a notice of proposed rulemaking (REG– 139343–08) proposing amendments to part 300 of title 26 of the Code of Federal Regulations. New § 300.9 of these regulations proposed to establish a $50 user fee to apply for or renew a PTIN. These regulations do not include any fees charged by the vendor, which vendor fee is now calculated to be $14.25. Additionally, these regulations proposed to reorganize the effective date provisions of §§ 300.0 through 300.8. A public hearing regarding the proposed regulations was held on August 24, 2010. The IRS also received written public comments in response to the proposed regulations. After careful consideration of all written public comments and statements made during the public hearing, the Treasury Department and the IRS have decided to adopt without modification the proposed regulations that establish a $50 user fee to apply for or renew a PTIN, recovering the full cost to the IRS for administering the PTIN application and renewal program. The Treasury Department and the IRS also have decided to adopt without modification the proposed regulations reorganizing the effective date provisions under §§ 300.0 through 300.8. Summary of Comments Over 10,000 written comments were received in response to the notice of proposed rulemaking. The comments were considered and are available for public inspection upon request. The comments related to the $50 user fee to apply for or renew a PTIN, the related PTIN regulations under section 6109, or the proposed amendments to regulations governing practice before the IRS under 31 CFR part 10 (Circular 230). No comments were received regarding the reorganization of the effective date provisions. Many of the comments are summarized in this preamble. To the extent comments received with respect to the user fee regulation raise issues pertaining to the PTIN regulations under section 6109 or Circular 230, the Treasury Department and the IRS are considering and VerDate Mar<15>2010 15:07 Sep 29, 2010 Jkt 220001 addressing those comments in connection with the relevant regulations. Accordingly, the summary of comments below addresses only those comments that seek modification or clarification of the user fee as set forth in the proposed regulations. 1. Tax Return Preparers Who Already Are Subject to Fees The Treasury Department and the IRS received numerous comments stating that tax return preparers who are attorneys, certified public accountants, or enrolled agents already are required to maintain licenses and pay numerous fees associated with obtaining and maintaining their licenses. Some commentators also stated that regulation of currently unenrolled tax return preparers or imposing a user fee to apply for or renew a PTIN for currently unenrolled tax return preparers was acceptable, but individuals who are regulated currently should not be required to obtain a PTIN or pay a user fee. Other similar comments requested that licensed tax consultants in Oregon be grandfathered into the new regulatory scheme and that individuals who currently have a PTIN be exempt from the requirements to apply for and renew a PTIN. Having a PTIN is a special benefit that allows specified tax return preparers to prepare all or substantially all of a tax return or claim for refund for compensation. The OMB Circular encourages user fees for governmentprovided services that confer special benefits on identifiable recipients over and above those benefits received by the general public. A user fee must be set at an amount that allows the agency to recover the full cost of providing the special services unless the Office of Management and Budget grants an exception. The same special benefit is conferred on all persons who obtain a PTIN, and the cost to the government is the same for providing PTINs to attorneys, certified public accountants, and enrolled agents as it is for providing PTINs to formerly unenrolled tax return preparers. Under the OMB Circular, absent special approval, the IRS must recover the full costs for providing the special benefits associated with a PTIN. The IRS cannot charge a user fee solely to tax return preparers who are not otherwise licensed as an attorney, certified public accountant, or enrolled agent. Although many comments sought exceptions to the user fee, one commentator encouraged the Treasury Department and the IRS to maintain a uniform user fee for obtaining a PTIN. Consequently, the Treasury Department PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 60317 and the IRS are adopting the proposed regulations and requiring all tax return preparers to pay a user fee to apply for or renew a PTIN. 2. Calculation of the User Fee The Treasury Department and the IRS received a comment that the proposed regulations do not comply with the provisions of IOAA because a PTIN is not a service or thing of value to a tax return preparer. The commentator also stated that the proposed regulations do not comply with the general policies for implementing user fees, as provided in the OMB Circular, because providing a PTIN to a tax return preparer benefits the general public by tracking incompetent and unscrupulous tax return preparers and that the IRS already meets a goal of the OMB Circular because it is already selfsustaining, as the IRS collects more taxes than it costs to run the agency. 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 OMB Circular. The OMB Circular encourages user fees for governmentprovided 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. The user fee was determined to be consistent with the IOAA and the OMB Circular. A PTIN both confers a special benefit on an identifiable recipient and is a service or thing of value to a tax return preparer. A PTIN confers a special benefit because without a PTIN, a tax return preparer could not receive compensation for preparing all or substantially all of a federal tax return or claim for refund. Because only attorneys, certified public accountants, enrolled agents, and registered tax return preparers are eligible to obtain a PTIN, only a subset of the general public is entitled to a PTIN and the special benefit of receiving compensation for the preparation of a return that it confers. This analysis is consistent with the current practice of charging a user fee on individuals seeking to become enrolled agents. Being an enrolled agent confers special benefits; and, therefore, E:\FR\FM\30SER1.SGM 30SER1 60318 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations jdjones on DSK8KYBLC1PROD with RULES the IRS currently charges a user fee on applicants seeking those special benefits. Further, while it is anticipated that requiring tax return preparers to obtain a PTIN will benefit tax administration generally, only the tax return preparer who receives the PTIN can take advantage of the special benefit associated with having a PTIN. The OMB Circular provides that a government agency should recover the full cost of providing a special benefit when the general public receives a benefit as a necessary consequence of the government providing a special benefit to an identifiable recipient. The OMB Circular also provides that one of the objectives of establishing a user fee is to ‘‘ensure that each service, sale, or use of Government goods or resources provided by an agency to specific recipients be self-sustaining.’’ As described above, the issuance of a PTIN provides a special benefit to the specific tax return preparer who receives the PTIN. The administration of the PTIN application and renewal program requires the use of IRS services, goods, and resources. For the PTIN application and renewal program to be self-sustaining, the IRS must charge a user fee to recover the costs of providing the special benefits associated with PTIN. The fact that the IRS collects tax revenue for use by the government as a whole does not affect the analysis of whether the PTIN application and renewal program is self-sustaining. Thus, the Treasury Department and the IRS are complying with the provisions of the IOAA and the OMB Circular by implementing a user fee to recover the costs associated with the issuance of PTINs. 3. Renewing a PTIN Several commentators objected to renewing their PTIN on a yearly basis and requested longer renewal periods. At this time the Treasury Department and the IRS have determined that an annual renewal of a PTIN is the most effective procedure. The user fee to renew a PTIN is, however, part of the larger implementation of 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). These recommendations include revisions to Circular 230 implementing the registered tax return preparer program and revisions to the regulations under section 6109 requiring all tax return preparers to obtain and use a PTIN as their identifying number. As these programs are implemented, the IRS will VerDate Mar<15>2010 15:07 Sep 29, 2010 Jkt 220001 continually monitor their administration and make appropriate adjustments to increase effectiveness. Thus, in the future, the Treasury Department and the IRS will review the requirement to annually renew a PTIN and will make modifications, as appropriate. 4. The Amount of the User Fee Many commentators objected to the amount of the user fee. Some stated that the user fee should be smaller or that tax return preparers who prepare a limited number of returns should pay a smaller user fee. Other commentators characterized the user fee as a tax or a revenue raiser. As stated earlier in this preamble, under the OMB Circular, the IRS must recover the full cost of providing a PTIN. The full cost to the government to administer the PTIN application and renewal program was calculated to be $50 per application or renewal. The user fee does not provide funds beyond the cost to process PTIN applications. Thus, the user fee to apply for or renew a PTIN does not provide additional revenue to the IRS that can be allocated to other programs. The PTIN user fee merely offsets costs the IRS incurs to provide the special benefits associated with having a PTIN. The cost of processing PTIN applications is not affected by the number of tax returns that a tax return preparer prepares during a given tax season. For example, the cost to the IRS to process the PTIN applications of individuals who prepare over 500 tax returns per year, approximately 100 tax returns per year, or under 10 tax returns per year is the same. The IRS will perform the same tax compliance and suitability checks on these individuals and will provide these individuals with the same PTIN support services. The IRS must also maintain the same data in its PTIN database regarding these individuals and develop the same reconsideration process for these individuals in the event their PTIN applications are denied. Because the cost to the IRS is not dependent on the quantity of returns that an individual tax return preparer prepares, the final regulations adopt the $50 user fee for all tax return preparers to apply for or renew a PTIN. 5. Burden Imposed by the User Fee Some commentators stated that the $50 user fee will be a burden on their businesses or that the cost to apply for or renew a PTIN will be passed on to clients. The IRS recognizes that some individuals who prepare a small number of tax returns may stop PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 preparing tax returns or that the PTIN user fee may be passed on to clients. The IRS, however, believes that the implementation of the registered tax return preparer program and the requirement to use a PTIN as provided in the section 6109 regulations will benefit taxpayers and tax administration as a whole. The registered tax return preparer program will ensure that tax return preparers meet and maintain a minimum level of competency. The requirement to use a PTIN will provide the IRS an effective way to monitor tax return preparers and enforce the regulation of tax return preparers. The Treasury Department and the IRS believe that a user fee to apply for or renew a PTIN is necessary to recover the cost that the IRS will incur to implement and administer the PTIN application and renewal program. Other commentators suggested that the user fee to apply for or renew a PTIN would cause some tax return preparers to revert to using their social security number when preparing tax returns rather than a PTIN, which would contravene the identity protection currently provided by PTINs. The regulations under section 6109, however, require tax return preparers to use a PTIN as their sole identifying number when preparing tax returns or claims for refund for compensation. Thus, tax return preparers are not allowed to use their social security numbers as an identifying number when preparing tax returns or claims for refund. 6. Use of a Third Party Vendor Several commentators objected to providing identifying information to the third party vendor, and numerous commentators objected to paying a separate fee to the vendor. The third party vendor is statutorily and contractually obligated to protect all personally identifiable information. The vendor is subject to the confidentiality and disclosure provisions of section 6103. The vendor also must comply with the provisions of the Federal Information Security Management Act; the E–Government Act of 2002; IRS Acquisitions Procedures; the Federal Acquisitions Regulations; the Taxpayer Browsing Protection Act of 1997; and the Privacy Act of 1974, which is codified at 5 U.S.C. 552a, regarding all non-tax information. The vendor must comply with numerous policies of the Office of Management and Budget, including OMB Circular No. A–130, Security and Federal Automated Information Resources Appendix III; OMB Circular policy M–06–16, Protection of Sensitive Agency E:\FR\FM\30SER1.SGM 30SER1 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations jdjones on DSK8KYBLC1PROD with RULES Information; OMB Circular Policy M– 06–15, Safeguarding Personally Identifiable Information; and OMB Circular Policy M–06–19, Reporting Incidents Involving Personally Identifiable Information. The vendor faces significant consequences for the unauthorized inspection or disclosure of confidential tax information. These consequences include, among others, that an officer or employee of the vendor may be subject to civil damages; civil or criminal sanctions, such as sanctions imposed by 18 U.S.C. 641 and 3571; or penalties as prescribed in sections 7213, 7213A, and 7431. The vendor’s fee, currently set at $14.25, covers the costs incurred by the vendor to administer the application and renewal process. These costs are separate from the costs to the IRS for administering the PTIN application and renewal program, which are recovered in the $50 user fee. The respective fees pay for different aspects of administering the PTIN program, each of which is essential to providing PTINs to tax return preparers. Additionally, under the vendor’s contract with the IRS, the vendor’s fee is reviewed and approved by the IRS. After consideration of all of the public comments and statements made during the public hearing, the Treasury Department and the IRS have adopted the proposed regulations in full. Effective/Applicability Date The Administrative Procedure Act provides that substantive rules generally 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. This regulation is part of the IRS’ effort to implement the recommendations in the ‘‘Return Preparer Review.’’ The review concluded that obtaining more complete and accurate information on individual tax return preparers and improved IRS oversight of tax return preparers and their preparation of tax returns and claims for refund is necessary for effective tax administration. The PTIN is the mechanism that allows the IRS to obtain more complete and accurate information on tax return preparers. Thus, the issuance of a PTIN is a threshold requirement to implementing the recommendations in the report. This regulation must be effective significantly in advance of the beginning of the 2011 filing season to VerDate Mar<15>2010 15:07 Sep 29, 2010 Jkt 220001 enable the IRS to charge a user fee to recover the cost of administering the program under which all individuals who prepare all or substantially all of a tax return or claim for refund of tax are required to obtain a PTIN for use during the 2011 Federal tax filing season. For all tax return preparers to receive a PTIN prior to the 2011 filing season, the IRS must begin registering preparers as quickly as possible. Thus, the Treasury Department and the IRS 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 these final regulations are a significant regulatory action as defined in Executive Order 12866. It has been determined that a final regulatory flexibility analysis under 5 U.S.C. 604 is required for this final rule. The analysis is set forth under the heading, ‘‘Final Regulatory Flexibility Analysis.’’ Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. The Chief Counsel for Advocacy did not submit comments on the notice of proposed rulemaking. Final Regulatory Flexibility Analysis When an agency either promulgates a final rule that follows a required notice of proposed rulemaking or promulgates a final interpretative rule involving the internal revenue laws as described in 5 U.S.C. 603(a), the Regulatory Flexibility Act (5 U.S.C. chapter 6) requires the agency to ‘‘prepare a final regulatory flexibility analysis.’’ A final regulatory flexibility analysis must, pursuant to 5 U.S.C. 604(a), contain the five elements listed in this final regulatory flexibility analysis. For purposes of this final regulatory flexibility analysis, a small entity is defined as a small business, small nonprofit organization, or small governmental jurisdiction. 5 U.S.C. 601(3)–(6). The Treasury Department and the IRS conclude that the final regulations (together with other contemplated guidance provided for in these regulations) will impact a substantial number of small entities and the economic impact will be significant. PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 60319 A Statement of the Need for, and the Objectives of, The Final Rule The final regulations are necessary to recover the full cost to the IRS associated with administering the PTIN application and renewal program and providing the special benefits that are associated with obtaining a PTIN. The Treasury Department and the IRS are implementing regulatory changes that increase the oversight of the tax return preparer industry. These regulatory changes are based upon findings and recommendations made by the IRS in the ‘‘Return Preparer Review.’’ Based upon findings in the review, all individuals who prepare all or substantially all of a tax return or claim for refund will be required to use a PTIN as their 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. The objective of the final regulations is to recover the costs to the government that are associated with providing this special benefit. The costs to the government 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. Summaries of the Significant Issues Raised in the Public Comments Responding to the Initial Regulatory Flexibility Analysis and of the Agency’s Assessment of the Issues, and a Statement of Any Changes Made to the Rule as a Result of the Comments A summary of the comments is set forth elsewhere in this preamble, along with the Treasury Department’s and the E:\FR\FM\30SER1.SGM 30SER1 60320 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations IRS’ assessment of the issues raised in the comments. jdjones on DSK8KYBLC1PROD with RULES A Description and an Estimate of the Number of Small Entities to Which the Rule Will Apply or an Explanation of Why an Estimate Is Not Available The final 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 final 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 owns a small business and who is required to apply for or renew a PTIN, 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. A Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Rule, Including an Estimate of the Classes of Small Entities Subject to the Requirements and the Type of Professional Skills Necessary for Preparation of a Report or Record No reporting or recordkeeping requirements are projected to be associated with the final regulation. A Description of the Steps the Agency Has Taken To Minimize the Significant Economic Impact on Small Entities Consistent With the Stated Objectives of Applicable Statutes, Including a Statement of the Factual, Policy, and Legal Reasons for Selecting Any Alternative Adopted in the Final Rule and Why Other Significant Alternatives Affecting the Impact on Small Entities That the Agency Considered Were Rejected The Treasury Department and the IRS are not aware of any steps that could be taken to minimize the economic impact on small entities that would also be consistent with the objectives of these final regulations. These regulations do not impose any more requirements on small entities than are necessary to effectively administer the internal revenue laws. Further, the regulations do not subject small entities to any requirements that are not also applicable to larger entities covered by the regulations. The Treasury Department and the IRS have determined that there are no viable alternatives to the final regulations. 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 the PTIN application and renewal program, there are no viable alternatives to the imposition of user fees. Drafting Information 15:07 Sep 29, 2010 Jkt 220001 List of Subjects in 26 CFR Part 300 PO 00000 Frm 00036 Fmt 4700 Accordingly, 26 CFR part 300 is 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: § 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: ■ § 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 January 1, 2007. Par. 4. Section 300.2 is amended by adding paragraph (d) to read as follows: ■ § 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 January 1, 2007. Par. 5. Section 300.3 is amended by adding paragraph (d) to read as follows: ■ § 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: ■ § 300.4 fee. Special enrollment examination * The principal author of these final regulations is Emily M. Lesniak, Office of the Associate Chief Counsel (Procedure and Administration). Reporting and recordkeeping requirements, User fees. VerDate Mar<15>2010 Adoption of Amendments to the Regulations Sfmt 4700 * * * * (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: ■ § 300.5 * E:\FR\FM\30SER1.SGM Enrollment of enrolled agent fee. * * 30SER1 * * Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Rules and Regulations (d) Effective/applicability date. This section is applicable beginning November 6, 2006. ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 Par. 8. Section 300.6 is amended by adding paragraph (d) to read as follows: [EPA–HQ–OPP–2009–0616; FRL–8844–1] § 300.6 Renewal of enrollment of enrolled agent fee. Spinosad; Pesticide Tolerances * * * * * (d) Effective/applicability date. This section is applicable beginning November 6, 2006. AGENCY: Par. 9. Section 300.7 is amended by adding paragraph (d) to read as follows: SUMMARY: ■ ■ § 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: ■ § 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: ■ § 300.9 Fee for obtaining a preparer tax identification number. jdjones on DSK8KYBLC1PROD with RULES (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 is applicable beginning September 30, 2010. Steven T. Miller, Deputy Commissioner for Services and Enforcement. Approved: August 24, 2010. Michael Mundaca, Assistant Secretary of the Treasury (Tax Policy). Environmental Protection Agency (EPA). ACTION: Final rule. This regulation revises tolerances for residues of spinosad in or on hog, fat; hog, meat; hog, meat byproducts; poultry meat byproducts. Elanco Animal Health (A Division of Eli Lilly & Company) requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA). This regulation is effective September 30, 2010. Objections and requests for hearings must be received on or before November 29, 2010, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION). DATES: EPA has established a docket for this action under docket identification (ID) number EPA–HQ– OPP–2009–0616. All documents in the docket are listed in the docket index available at http://www.regulations.gov. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available in the electronic docket at http://www.regulations.gov, or, if only available in hard copy, at the OPP Regulatory Public Docket in Rm. S– 4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. The Docket Facility is open from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The Docket Facility telephone number is (703) 305– 5805. ADDRESSES: FOR FURTHER INFORMATION CONTACT: [FR Doc. 2010–24652 Filed 9–28–10; 11:15 am] Samantha Hulkower, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460–0001; telephone number: (703) 603–0683; e-mail address: hulkower.samantha@epa.gov. BILLING CODE 4830–01–P SUPPLEMENTARY INFORMATION: VerDate Mar<15>2010 15:07 Sep 29, 2010 Jkt 220001 PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 60321 I. General Information A. Does this Action Apply to Me? You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities: • Crop production (NAICS code 111). • Animal production (NAICS code 112). • Food manufacturing (NAICS code 311). • Pesticide manufacturing (NAICS code 32532). This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT. B. How Can I Get Electronic Access to Other Related Information? You may access a frequently updated electronic version of EPA’s tolerance regulations at 40 CFR part 180 through the Government Printing Office’s e-CFR site at http://www.gpoaccess.gov/ecfr. C. How Can I File an Objection or Hearing Request? Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA–HQ– OPP–2009–0616 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before November 29, 2010. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b). In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 E:\FR\FM\30SER1.SGM 30SER1

Agencies

[Federal Register Volume 75, Number 189 (Thursday, September 30, 2010)]
[Rules and Regulations]
[Pages 60316-60321]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-24652]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 9503]
RIN 1545-BI71


User Fees Relating to Enrollment and Preparer Tax Identification 
Numbers

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document contains amendments to the regulations relating 
to the imposition of certain user fees on certain tax practitioners. 
The final regulations establish a new user fee for individuals who 
apply for or renew a preparer tax identification number (PTIN). The 
final regulations affect individuals who apply for or renew a PTIN.

DATES: Effective Date: These regulations are effective on September 30, 
2010.
    Applicability Date: For dates of applicability see Sec. Sec.  
300.1(d), 300.2(d), 300.3(d), 300.4(d), 300.5(d), 300.6(d), 300.7(d), 
300.8(d), and 300.9(d).

FOR FURTHER INFORMATION CONTACT: Concerning the final regulations, 
Emily M. Lesniak at (202) 622-4570; concerning cost methodology Eva J. 
Williams at (202) 435-5514 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final regulations relating to the imposition 
of a user fee to apply for or renew a PTIN and the reorganization of 
the effective date provisions under Sec. Sec.  300.0 through 300.8. 
Section 300.9 establishes a $50 user fee to apply for or renew a PTIN. 
The Independent Offices Appropriations Act of 1952 (IOAA), which is 
codified at 31 U.S.C. 9701, authorizes agencies to prescribe 
regulations establishing user fees for services provided by the agency. 
Regulations prescribing user fees are subject to the policies of the 
President, which are currently set forth in the Office of Management 
and Budget Circular A-25 (the OMB Circular), 58 FR 38142 (July 15, 
1993). The OMB Circular requires agencies seeking to impose user fees 
for providing special benefits to identifiable recipients to calculate 
the full cost of providing those benefits.
    On September 30, 2010, the Treasury Department and the IRS 
published in the Federal Register final regulations under section 6109 
(TD 9501) that

[[Page 60317]]

require tax return preparers who prepare all or substantially all of a 
tax return or claim for refund to use a PTIN as their identifying 
number. These regulations also provide that to be eligible to receive a 
PTIN, a tax return preparer must be an attorney, certified public 
accountant, enrolled agent, or registered tax return preparer.
    On July 23, 2010, the Treasury Department and the IRS published in 
the Federal Register (75 FR 43110) a notice of proposed rulemaking 
(REG-139343-08) proposing amendments to part 300 of title 26 of the 
Code of Federal Regulations. New Sec.  300.9 of these regulations 
proposed to establish a $50 user fee to apply for or renew a PTIN. 
These regulations do not include any fees charged by the vendor, which 
vendor fee is now calculated to be $14.25. Additionally, these 
regulations proposed to reorganize the effective date provisions of 
Sec. Sec.  300.0 through 300.8. A public hearing regarding the proposed 
regulations was held on August 24, 2010. The IRS also received written 
public comments in response to the proposed regulations.
    After careful consideration of all written public comments and 
statements made during the public hearing, the Treasury Department and 
the IRS have decided to adopt without modification the proposed 
regulations that establish a $50 user fee to apply for or renew a PTIN, 
recovering the full cost to the IRS for administering the PTIN 
application and renewal program. The Treasury Department and the IRS 
also have decided to adopt without modification the proposed 
regulations reorganizing the effective date provisions under Sec. Sec.  
300.0 through 300.8.

Summary of Comments

    Over 10,000 written comments were received in response to the 
notice of proposed rulemaking. The comments were considered and are 
available for public inspection upon request. The comments related to 
the $50 user fee to apply for or renew a PTIN, the related PTIN 
regulations under section 6109, or the proposed amendments to 
regulations governing practice before the IRS under 31 CFR part 10 
(Circular 230). No comments were received regarding the reorganization 
of the effective date provisions. Many of the comments are summarized 
in this preamble.
    To the extent comments received with respect to the user fee 
regulation raise issues pertaining to the PTIN regulations under 
section 6109 or Circular 230, the Treasury Department and the IRS are 
considering and addressing those comments in connection with the 
relevant regulations. Accordingly, the summary of comments below 
addresses only those comments that seek modification or clarification 
of the user fee as set forth in the proposed regulations.

1. Tax Return Preparers Who Already Are Subject to Fees

    The Treasury Department and the IRS received numerous comments 
stating that tax return preparers who are attorneys, certified public 
accountants, or enrolled agents already are required to maintain 
licenses and pay numerous fees associated with obtaining and 
maintaining their licenses. Some commentators also stated that 
regulation of currently unenrolled tax return preparers or imposing a 
user fee to apply for or renew a PTIN for currently unenrolled tax 
return preparers was acceptable, but individuals who are regulated 
currently should not be required to obtain a PTIN or pay a user fee. 
Other similar comments requested that licensed tax consultants in 
Oregon be grandfathered into the new regulatory scheme and that 
individuals who currently have a PTIN be exempt from the requirements 
to apply for and renew a PTIN.
    Having a PTIN is a special benefit that allows specified tax return 
preparers to prepare all or substantially all of a tax return or claim 
for refund for compensation. The OMB Circular encourages user fees for 
government-provided services that confer special benefits on 
identifiable recipients over and above those benefits received by the 
general public. A user fee must be set at an amount that allows the 
agency to recover the full cost of providing the special services 
unless the Office of Management and Budget grants an exception.
    The same special benefit is conferred on all persons who obtain a 
PTIN, and the cost to the government is the same for providing PTINs to 
attorneys, certified public accountants, and enrolled agents as it is 
for providing PTINs to formerly unenrolled tax return preparers. Under 
the OMB Circular, absent special approval, the IRS must recover the 
full costs for providing the special benefits associated with a PTIN. 
The IRS cannot charge a user fee solely to tax return preparers who are 
not otherwise licensed as an attorney, certified public accountant, or 
enrolled agent. Although many comments sought exceptions to the user 
fee, one commentator encouraged the Treasury Department and the IRS to 
maintain a uniform user fee for obtaining a PTIN. Consequently, the 
Treasury Department and the IRS are adopting the proposed regulations 
and requiring all tax return preparers to pay a user fee to apply for 
or renew a PTIN.

2. Calculation of the User Fee

    The Treasury Department and the IRS received a comment that the 
proposed regulations do not comply with the provisions of IOAA because 
a PTIN is not a service or thing of value to a tax return preparer. The 
commentator also stated that the proposed regulations do not comply 
with the general policies for implementing user fees, as provided in 
the OMB Circular, because providing a PTIN to a tax return preparer 
benefits the general public by tracking incompetent and unscrupulous 
tax return preparers and that the IRS already meets a goal of the OMB 
Circular because it is already self-sustaining, as the IRS collects 
more taxes than it costs to run the agency.
    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 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.
    The user fee was determined to be consistent with the IOAA and the 
OMB Circular. A PTIN both confers a special benefit on an identifiable 
recipient and is a service or thing of value to a tax return preparer. 
A PTIN confers a special benefit because without a PTIN, a tax return 
preparer could not receive compensation for preparing all or 
substantially all of a federal tax return or claim for refund. Because 
only attorneys, certified public accountants, enrolled agents, and 
registered tax return preparers are eligible to obtain a PTIN, only a 
subset of the general public is entitled to a PTIN and the special 
benefit of receiving compensation for the preparation of a return that 
it confers. This analysis is consistent with the current practice of 
charging a user fee on individuals seeking to become enrolled agents. 
Being an enrolled agent confers special benefits; and, therefore,

[[Page 60318]]

the IRS currently charges a user fee on applicants seeking those 
special benefits.
    Further, while it is anticipated that requiring tax return 
preparers to obtain a PTIN will benefit tax administration generally, 
only the tax return preparer who receives the PTIN can take advantage 
of the special benefit associated with having a PTIN. The OMB Circular 
provides that a government agency should recover the full cost of 
providing a special benefit when the general public receives a benefit 
as a necessary consequence of the government providing a special 
benefit to an identifiable recipient.
    The OMB Circular also provides that one of the objectives of 
establishing a user fee is to ``ensure that each service, sale, or use 
of Government goods or resources provided by an agency to specific 
recipients be self-sustaining.'' As described above, the issuance of a 
PTIN provides a special benefit to the specific tax return preparer who 
receives the PTIN. The administration of the PTIN application and 
renewal program requires the use of IRS services, goods, and resources. 
For the PTIN application and renewal program to be self-sustaining, the 
IRS must charge a user fee to recover the costs of providing the 
special benefits associated with PTIN. The fact that the IRS collects 
tax revenue for use by the government as a whole does not affect the 
analysis of whether the PTIN application and renewal program is self-
sustaining. Thus, the Treasury Department and the IRS are complying 
with the provisions of the IOAA and the OMB Circular by implementing a 
user fee to recover the costs associated with the issuance of PTINs.

3. Renewing a PTIN

    Several commentators objected to renewing their PTIN on a yearly 
basis and requested longer renewal periods. At this time the Treasury 
Department and the IRS have determined that an annual renewal of a PTIN 
is the most effective procedure. The user fee to renew a PTIN is, 
however, part of the larger implementation of 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). These recommendations include revisions to 
Circular 230 implementing the registered tax return preparer program 
and revisions to the regulations under section 6109 requiring all tax 
return preparers to obtain and use a PTIN as their identifying number. 
As these programs are implemented, the IRS will continually monitor 
their administration and make appropriate adjustments to increase 
effectiveness. Thus, in the future, the Treasury Department and the IRS 
will review the requirement to annually renew a PTIN and will make 
modifications, as appropriate.

4. The Amount of the User Fee

    Many commentators objected to the amount of the user fee. Some 
stated that the user fee should be smaller or that tax return preparers 
who prepare a limited number of returns should pay a smaller user fee. 
Other commentators characterized the user fee as a tax or a revenue 
raiser.
    As stated earlier in this preamble, under the OMB Circular, the IRS 
must recover the full cost of providing a PTIN. The full cost to the 
government to administer the PTIN application and renewal program was 
calculated to be $50 per application or renewal. The user fee does not 
provide funds beyond the cost to process PTIN applications. Thus, the 
user fee to apply for or renew a PTIN does not provide additional 
revenue to the IRS that can be allocated to other programs. The PTIN 
user fee merely offsets costs the IRS incurs to provide the special 
benefits associated with having a PTIN.
    The cost of processing PTIN applications is not affected by the 
number of tax returns that a tax return preparer prepares during a 
given tax season. For example, the cost to the IRS to process the PTIN 
applications of individuals who prepare over 500 tax returns per year, 
approximately 100 tax returns per year, or under 10 tax returns per 
year is the same. The IRS will perform the same tax compliance and 
suitability checks on these individuals and will provide these 
individuals with the same PTIN support services. The IRS must also 
maintain the same data in its PTIN database regarding these individuals 
and develop the same reconsideration process for these individuals in 
the event their PTIN applications are denied. Because the cost to the 
IRS is not dependent on the quantity of returns that an individual tax 
return preparer prepares, the final regulations adopt the $50 user fee 
for all tax return preparers to apply for or renew a PTIN.

5. Burden Imposed by the User Fee

    Some commentators stated that the $50 user fee will be a burden on 
their businesses or that the cost to apply for or renew a PTIN will be 
passed on to clients. The IRS recognizes that some individuals who 
prepare a small number of tax returns may stop preparing tax returns or 
that the PTIN user fee may be passed on to clients. The IRS, however, 
believes that the implementation of the registered tax return preparer 
program and the requirement to use a PTIN as provided in the section 
6109 regulations will benefit taxpayers and tax administration as a 
whole. The registered tax return preparer program will ensure that tax 
return preparers meet and maintain a minimum level of competency. The 
requirement to use a PTIN will provide the IRS an effective way to 
monitor tax return preparers and enforce the regulation of tax return 
preparers. The Treasury Department and the IRS believe that a user fee 
to apply for or renew a PTIN is necessary to recover the cost that the 
IRS will incur to implement and administer the PTIN application and 
renewal program.
    Other commentators suggested that the user fee to apply for or 
renew a PTIN would cause some tax return preparers to revert to using 
their social security number when preparing tax returns rather than a 
PTIN, which would contravene the identity protection currently provided 
by PTINs. The regulations under section 6109, however, require tax 
return preparers to use a PTIN as their sole identifying number when 
preparing tax returns or claims for refund for compensation. Thus, tax 
return preparers are not allowed to use their social security numbers 
as an identifying number when preparing tax returns or claims for 
refund.

6. Use of a Third Party Vendor

    Several commentators objected to providing identifying information 
to the third party vendor, and numerous commentators objected to paying 
a separate fee to the vendor.
    The third party vendor is statutorily and contractually obligated 
to protect all personally identifiable information. The vendor is 
subject to the confidentiality and disclosure provisions of section 
6103. The vendor also must comply with the provisions of the Federal 
Information Security Management Act; the E-Government Act of 2002; IRS 
Acquisitions Procedures; the Federal Acquisitions Regulations; the 
Taxpayer Browsing Protection Act of 1997; and the Privacy Act of 1974, 
which is codified at 5 U.S.C. 552a, regarding all non-tax information. 
The vendor must comply with numerous policies of the Office of 
Management and Budget, including OMB Circular No. A-130, Security and 
Federal Automated Information Resources Appendix III; OMB Circular 
policy M-06-16, Protection of Sensitive Agency

[[Page 60319]]

Information; OMB Circular Policy M-06-15, Safeguarding Personally 
Identifiable Information; and OMB Circular Policy M-06-19, Reporting 
Incidents Involving Personally Identifiable Information.
    The vendor faces significant consequences for the unauthorized 
inspection or disclosure of confidential tax information. These 
consequences include, among others, that an officer or employee of the 
vendor may be subject to civil damages; civil or criminal sanctions, 
such as sanctions imposed by 18 U.S.C. 641 and 3571; or penalties as 
prescribed in sections 7213, 7213A, and 7431.
    The vendor's fee, currently set at $14.25, covers the costs 
incurred by the vendor to administer the application and renewal 
process. These costs are separate from the costs to the IRS for 
administering the PTIN application and renewal program, which are 
recovered in the $50 user fee. The respective fees pay for different 
aspects of administering the PTIN program, each of which is essential 
to providing PTINs to tax return preparers. Additionally, under the 
vendor's contract with the IRS, the vendor's fee is reviewed and 
approved by the IRS.
    After consideration of all of the public comments and statements 
made during the public hearing, the Treasury Department and the IRS 
have adopted the proposed regulations in full.

Effective/Applicability Date

    The Administrative Procedure Act provides that substantive rules 
generally 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.
    This regulation is part of the IRS' effort to implement the 
recommendations in the ``Return Preparer Review.'' The review concluded 
that obtaining more complete and accurate information on individual tax 
return preparers and improved IRS oversight of tax return preparers and 
their preparation of tax returns and claims for refund is necessary for 
effective tax administration. The PTIN is the mechanism that allows the 
IRS to obtain more complete and accurate information on tax return 
preparers. Thus, the issuance of a PTIN is a threshold requirement to 
implementing the recommendations in the report.
    This regulation must be effective significantly in advance of the 
beginning of the 2011 filing season to enable the IRS to charge a user 
fee to recover the cost of administering the program under which all 
individuals who prepare all or substantially all of a tax return or 
claim for refund of tax are required to obtain a PTIN for use during 
the 2011 Federal tax filing season. For all tax return preparers to 
receive a PTIN prior to the 2011 filing season, the IRS must begin 
registering preparers as quickly as possible. Thus, the Treasury 
Department and the IRS 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 these final regulations are a 
significant regulatory action as defined in Executive Order 12866.
    It has been determined that a final regulatory flexibility analysis 
under 5 U.S.C. 604 is required for this final rule. The analysis is set 
forth under the heading, ``Final Regulatory Flexibility Analysis.''
    Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking preceding these final regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business. The Chief Counsel for Advocacy did not 
submit comments on the notice of proposed rulemaking.

Final Regulatory Flexibility Analysis

    When an agency either promulgates a final rule that follows a 
required notice of proposed rulemaking or promulgates a final 
interpretative rule involving the internal revenue laws as described in 
5 U.S.C. 603(a), the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
requires the agency to ``prepare a final regulatory flexibility 
analysis.'' A final regulatory flexibility analysis must, pursuant to 5 
U.S.C. 604(a), contain the five elements listed in this final 
regulatory flexibility analysis. For purposes of this final regulatory 
flexibility analysis, a small entity is defined as a small business, 
small nonprofit organization, or small governmental jurisdiction. 5 
U.S.C. 601(3)-(6). The Treasury Department and the IRS conclude that 
the final regulations (together with other contemplated guidance 
provided for in these regulations) will impact a substantial number of 
small entities and the economic impact will be significant.

A Statement of the Need for, and the Objectives of, The Final Rule

    The final regulations are necessary to recover the full cost to the 
IRS associated with administering the PTIN application and renewal 
program and providing the special benefits that are associated with 
obtaining a PTIN.
    The Treasury Department and the IRS are implementing regulatory 
changes that increase the oversight of the tax return preparer 
industry. These regulatory changes are based upon findings and 
recommendations made by the IRS in the ``Return Preparer Review.'' 
Based upon findings in the review, all individuals who prepare all or 
substantially all of a tax return or claim for refund will be required 
to use a PTIN as their 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.
    The objective of the final regulations is to recover the costs to 
the government that are associated with providing this special benefit. 
The costs to the government 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.

Summaries of the Significant Issues Raised in the Public Comments 
Responding to the Initial Regulatory Flexibility Analysis and of the 
Agency's Assessment of the Issues, and a Statement of Any Changes Made 
to the Rule as a Result of the Comments

    A summary of the comments is set forth elsewhere in this preamble, 
along with the Treasury Department's and the

[[Page 60320]]

IRS' assessment of the issues raised in the comments.

A Description and an Estimate of the Number of Small Entities to Which 
the Rule Will Apply or an Explanation of Why an Estimate Is Not 
Available

    The final 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 final 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 owns a small 
business and who is required to apply for or renew a PTIN, 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.

A Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Rule, Including an Estimate of the 
Classes of Small Entities Subject to the Requirements and the Type of 
Professional Skills Necessary for Preparation of a Report or Record

    No reporting or recordkeeping requirements are projected to be 
associated with the final regulation.

A Description of the Steps the Agency Has Taken To Minimize the 
Significant Economic Impact on Small Entities Consistent With the 
Stated Objectives of Applicable Statutes, Including a Statement of the 
Factual, Policy, and Legal Reasons for Selecting Any Alternative 
Adopted in the Final Rule and Why Other Significant Alternatives 
Affecting the Impact on Small Entities That the Agency Considered Were 
Rejected

    The Treasury Department and the IRS are not aware of any steps that 
could be taken to minimize the economic impact on small entities that 
would also be consistent with the objectives of these final 
regulations. These regulations do not impose any more requirements on 
small entities than are necessary to effectively administer the 
internal revenue laws. Further, the regulations do not subject small 
entities to any requirements that are not also applicable to larger 
entities covered by the regulations.
    The Treasury Department and the IRS have determined that there are 
no viable alternatives to the final regulations.
    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 the PTIN application and 
renewal program, there are no viable alternatives to the imposition of 
user fees.

Drafting Information

    The principal author of these final 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.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 300 is amended as follows:

PART 300--USER FEES

0
Paragraph 1. The authority citation for part 300 continues to read in 
part as follows:

    Authority:  31 U.S.C. 9701.


0
Par. 2. Section 300.0 is amended by
0
1. Adding paragraph (b)(9).
0
2. Removing paragraph (c).
0
The addition reads as follows:


Sec.  300.0  User fees; in general.

* * * * *
    (b) * * *
    (9) Applying for a preparer tax identification number.


0
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 
January 1, 2007.


0
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 January 1, 2007.


0
Par. 5. Section 300.3 is amended by adding paragraph (d) to read as 
follows:


Sec.  300.3  Offer to compromise fee.

* * * * *
    (d) Effective/applicability date. This section is applicable 
beginning November 1, 2003.


0
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.


0
Par. 7. Section 300.5 is amended by adding paragraph (d) to read as 
follows:


Sec.  300.5  Enrollment of enrolled agent fee.

* * * * *

[[Page 60321]]

    (d) Effective/applicability date. This section is applicable 
beginning November 6, 2006.


0
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.


0
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.


0
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.


0
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 is applicable 
beginning September 30, 2010.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: August 24, 2010.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2010-24652 Filed 9-28-10; 11:15 am]
BILLING CODE 4830-01-P