User Fees Relating to the Registered Tax Return Preparer Competency Examination and Fingerprinting Participants in the Preparer Tax Identification Number, Acceptance Agent, and Authorized E-File Provider Programs, 59329-59334 [2011-24771]

Download as PDF Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 300 [REG–116284–11] RIN 1545–BK24 User Fees Relating to the Registered Tax Return Preparer Competency Examination and Fingerprinting Participants in the Preparer Tax Identification Number, Acceptance Agent, and Authorized E-File Provider Programs Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and notice of public hearing. AGENCY: This document contains proposed amendments to the user fee regulations. The proposed regulations would establish a new user fee for individuals to take the registered tax return preparer competency examination and a new user fee for certain persons to be fingerprinted in conjunction with the preparer tax identification number, acceptance agent, and authorized e-file provider programs. The proposed regulations also would redesignate § 300.12, Fee for obtaining a preparer tax identification number, as § 300.13. The proposed regulations affect individuals who take the registered tax return preparer competency examination and applicants and certain participants in the preparer tax identification number, acceptance agent, or authorized e-file provider programs. The charging of user fees is authorized by the Independent Offices Appropriations Act of 1952. This document also provides notice of a public hearing on these proposed regulations. DATES: Written or electronic comments must be received by October 26, 2011. Outlines of topics to be discussed at the public hearing scheduled for October 7, 2011, at 10 a.m. must be received by October 4, 2011. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–116284–11), Room 5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be handdelivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–116284–11), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at https:// www.regulations.gov/ (IRS REG– jlentini on DSK4TPTVN1PROD with PROPOSALS SUMMARY: VerDate Mar<15>2010 17:36 Sep 23, 2011 Jkt 223001 116284–11). The public hearing will be held in the Auditorium at the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Emily M. Lesniak at (202) 622–4570; concerning cost methodology, Eva J. Williams at (202) 435–5514; concerning submission of comments, the public hearing, and/or to be placed on the building access list to attend the public hearing, Richard A. Hurst at Richard.A.Hurst@irscounsel.treas.gov or (202) 622–7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background and Explanation of Provisions In June 2009, the IRS launched a Tax Return Preparer Review with the intent to propose a comprehensive set of recommendations that would increase taxpayer compliance and ensure uniform and high ethical standards of conduct for tax return preparers. In December 2009, the IRS made findings and recommendations based upon this review that would increase oversight of the federal tax return preparer community. The findings and recommendations were published in Publication 4832, ‘‘Return Preparer Review’’ (the Report), which was published on January 4, 2010. In part, the Report recommended registering all tax return preparers with the IRS and requiring tax return preparers who are not attorneys, certified public accountants, or enrolled agents to pass a competency examination before they are eligible to prepare a tax return or claim for refund. The Treasury Department and the IRS have published several documents implementing the recommendations in the Report, three of which are relevant to these proposed regulations. First, on September 30, 2010, the Treasury Department and the IRS published final regulations under I.R.C. section 6109 (75 FR 60309) providing that for returns or claims for refund filed after December 31, 2010, the identifying number of a tax return preparer is the individual’s preparer tax identification number (PTIN) or such other number prescribed by the IRS in forms, instructions, or other appropriate guidance. The section 6109 final regulations require a tax return preparer who prepares all or substantially all of a tax return or claim for refund after December 31, 2010 to have a PTIN. These regulations further provide that only attorneys, certified public accountants, enrolled agents, and registered tax return preparers are PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 59329 eligible to obtain a PTIN. Section 1.6109–2(h) of the regulations states, however, that the IRS can provide exceptions to the § 1.6109–2 regulations through forms, instructions, or other appropriate guidance. Second, on December 30, 2010, the Treasury Department and the IRS published Notice 2011–6 (2011–3 IRB 315) that, in part, creates exceptions under § 1.6109–2(h), allowing two additional classes of individuals to obtain a PTIN (provided all tax compliance and suitability checks are passed) and prepare all or substantially all of a tax return or claim for refund for compensation. Section 2a. of Notice 2011–6 permits specified individuals who are supervised by the attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary who signs the tax return or claim for refund prepared by the individual to obtain a PTIN. These supervised individuals may not sign a tax return or claim for refund. Section 2b. of Notice 2011–6 provides that individuals who certify that they do not prepare or assist in the preparation of all or substantially all of any tax return or claim for refund that is covered by a competency examination will be able to obtain a PTIN. This exception recognizes that the initial registered tax return preparer competency examination will be limited to individual income tax returns (Form 1040 series returns and accompanying schedules). Third, on June 3, 2011, the Treasury Department and the IRS published final regulations amending the regulations governing practice before the IRS (76 FR 32286). These regulations are found in 31 CFR part 10 and have been reprinted as Treasury Department Circular No. 230 (Circular 230). The amendments to Circular 230, in part, provide that practice before the IRS includes preparing for compensation a tax return, claim for refund, or other document submitted to the IRS and include registered tax return preparers as practitioners under Circular 230. Registered tax return preparers must demonstrate the necessary qualifications and competency by passing a minimum competency examination, completing annual continuing education requirements, and complying with any other applicable procedures relating to the application for registration and renewal of registration established and published by the IRS. Registered tax return preparers may prepare and sign tax returns, claims for refund, and other documents as provided in forms, instructions, or other appropriate guidance. Registered tax return E:\FR\FM\26SEP1.SGM 26SEP1 59330 Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules jlentini on DSK4TPTVN1PROD with PROPOSALS preparers also may represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during an examination if the registered tax return preparer signed the tax return or claim for refund for the time period under examination. Registered tax return prepares may not represent taxpayers before appeals officers, revenue officers, Counsel, or similar officers or employees of the IRS or the Department of the Treasury. User Fee To Take the Registered Tax Return Preparer Competency Examination To become a registered tax return preparer, applicants will be required to pass a competency examination. Proposed § 300.12 establishes a $27 user fee to take the registered tax return preparer competency examination. This user fee must be paid each time the applicant takes the competency examination and is in addition to any reasonable fee charged by the thirdparty vendor that is approved by the IRS. Applicants who pass the competency examination generally will not, however, be required to re-take the examination in the future years. There are costs to the IRS for administering the registered tax return preparer competency examination. The user fee to take the registered tax return preparer competency examination will recover these costs. These costs include the personnel, administrative, management, and information technology costs to the IRS for developing and reviewing the competency examination, overseeing the competency examination, validating the competency examination results, and establishing a review procedure for applicants who contest any portion of the competency examination. The user fee also recovers the cost to conduct background checks on employees of the third-party vendor who are involved in the administration of the examination. Individuals who pay the competency examination user fee and become registered tax return preparers will receive a special benefit from the IRS that is not received by the general public. Passing the competency examination enables registered tax return preparers to prepare and sign Form 1040 series returns (and accompanying schedules) for compensation. Registered tax return preparers also are able to represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during examination if the registered tax return preparer signed the tax return VerDate Mar<15>2010 17:36 Sep 23, 2011 Jkt 223001 for the period under examination. That representation does not include practice before appeals officers, revenue officers, Counsel, or similar officers or employees of the IRS or the Department of the Treasury. Because the competency examination initially will cover only the Form 1040 series returns, only attorneys, certified public accountants, enrolled agents, or registered tax return preparers will be able to sign a Form 1040 series return. While tax return preparers who are supervised will be able to prepare all or substantially all of a Form 1040 series tax return or claim for refund, they will not be able to sign the return or claim for refund and are not able to represent the taxpayers before the IRS. Any individual with a PTIN, however, can prepare and sign a tax return or claim for refund that is not part of the Form 1040 series. User Fee To Be Fingerprinted as Part of the PTIN, Acceptance Agent, and Authorized E-File Provider Programs The IRS intends to collect fingerprints as part of the PTIN, acceptance agent, and authorized e-file provider programs to assist in evaluating the suitability of applicants and participants in these programs. Individuals who have been or are fingerprinted in conjunction with their participation in any one of these programs after June 8, 2009, however, will not have to be re-fingerprinted to participate in these programs. Proposed § 300.13 establishes a $33 user fee on individuals who will be fingerprinted in conjunction with their application to participate or participation in these programs. This user fee is in addition to any reasonable fee charged by a third-party vendor that is approved by the IRS. The third-party vendor fee will cover the costs for obtaining the fingerprints and transmitting the fingerprints to the Federal Bureau of Investigation (FBI), where the fingerprints will be run through the FBI identification records database. The IRS fingerprinting user fee recovers the costs to the IRS to transfer the fingerprints and the results of the FBI search to the IRS; perform background checks on third-party vendor employees; modify the database used to receive, record, and store the search results; evaluate the results received from the search of the FBI database; provide internal review of circumstances when an individual is determined not to be suitable to participate in a program; and process appeals by individuals who are denied the ability to participate in a program because the individual failed this suitability check. PO 00000 Frm 00025 Fmt 4702 Sfmt 4702 Additionally, under the current proposed regulations any participant in the PTIN, acceptance agent, or authorized e-file provider programs who resides and is employed outside of the United States will not have to be fingerprinted to participate in these programs. Such persons, however, must comply with all other elements of the suitability check. In addition, the Treasury Department and the IRS continue to study what additional requirements should apply to such persons. Any additional requirements would be set forth in future guidance. Individuals who are fingerprinted as part of their application or participation in the PTIN, acceptance agent, or authorized e-file provider programs receive a special benefit that is not received by the general public. Individuals who participate in the PTIN program receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Individuals with a PTIN can charge for their tax preparation services. The regulations under section 6109 require tax return preparers to have a PTIN if they prepare all or substantially all of a tax return or claim for refund for compensation. Passing a suitability check is a prerequisite for receiving a PTIN. For most PTIN applicants, the suitability check includes, but is not limited to, fingerprinting and processing the fingerprints through the FBI identification records database. The IRS, however, does not intend to fingerprint attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries who apply for a PTIN at this time. The Treasury Department and the IRS specifically request comments on whether these individuals should be exempt from the fingerprinting process. Participants in the acceptance agent program, which includes certifying acceptance agents, also receive a special benefit from participation in the program. As provided in Revenue Procedure 2006–10 (2006–1 CB 293), acceptance agents facilitate and expedite the issuance of individual taxpayer identification numbers (ITINs) and employer identification number (EINs) by verifying the identity and foreign status of applicants. An individual who wants to obtain an ITIN must submit a Form W–7, ‘‘Application for IRS Individual Taxpayer Identification Number,’’ and documentation that evidences the individual’s identity and status as an alien. An EIN applicant must submit a Form SS–4, ‘‘Application for Employer Identification Number,’’ and any E:\FR\FM\26SEP1.SGM 26SEP1 jlentini on DSK4TPTVN1PROD with PROPOSALS Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules required supplementary statements. Section 301.6109–1(d)(3)(iv) provides that ITIN and EIN applicants may submit the application and accompanying information directly to the IRS or may use an acceptance agent. When a certifying acceptance agent is used to apply for an ITIN, the ITIN applicant is not required to submit documentation proving the applicant’s identity or status as an alien because the certifying acceptance agent certifies to these facts. This certification procedure is not available to EIN applicants. The certification is submitted to the IRS as part of the ITIN application. To become an acceptance agent, applicants must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification records database. Successful applicants receive the special benefit of being able to facilitate and expedite ITIN and EIN applications and verify the applicants’ identity and status as an alien. Certifying acceptance agents receive the additional benefit of being able to certify ITIN applicants’ identity and status as an alien, which enables ITIN applicants to retain their identification and foreign status documentation. Acceptance agents can charge a fee for their services. All individuals who apply to become an acceptance agent and who are required to be fingerprinted must pay the fingerprinting user fee. As of June 8, 2009, the IRS began storing the fingerprints of all acceptance agent applicants electronically. Prior to that time, the fingerprints of acceptance agent applicants generally were not stored electronically. Fingerprints that are not stored electronically deteriorate over time. The IRS, therefore, may require acceptance agents who were fingerprinted prior to June 8, 2009, and who are currently required to be fingerprinted, to be re-fingerprinted and pay the associated user fee. All individuals who apply to become authorized e-file providers also must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification records database. The guidelines for participation in this program are in Revenue Procedure 2007–40 (2007–1 CB 1488) and numerous publications that are tailored to specific tax or information returns. Successful applicants receive an electronic filing identification number (EFIN). Multiple persons associated with an applicant may use the same EFIN to electronically file tax and information returns. Authorized e-file providers receive the special benefit of VerDate Mar<15>2010 17:36 Sep 23, 2011 Jkt 223001 being able to electronically file specified tax and information returns with the IRS. Some e-file providers charge a fee for performing this service. All individuals who apply to become an authorized e-file provider and who are required to be fingerprinted must pay the fingerprinting user fee. Additionally, similar to the process for acceptance agents described earlier in this preamble, authorized e-file providers who were fingerprinted before June 8, 2009, the date the IRS began digitally storing all fingerprints, and are required to be fingerprinted, may be refingerprinted and required to pay the associated user fee. If the IRS has an individual’s fingerprints digitally stored due to the individual’s application to participate or participation in the PTIN, acceptance agent, or authorized e-file provider programs, the individual will not have to be fingerprinted again to participate in one of the other programs. The IRS did not charge a user fee for acceptance agents or authorized e-file providers to be fingerprinted previously because an unduly large part of the user fee would have been the cost of collecting a user fee. With the addition of many PTIN applicants as individuals who also must be fingerprinted (the number of persons being fingerprinted will increase to approximately 460,000), the cost of collecting the user fee has decreased relative to the costs associated with fingerprinting. Because the cost of collecting a user fee is no longer an unduly large part of the user fee, the IRS has determined that a user fee is now appropriate and will charge a user fee to recover the cost of fingerprinting the applicants and certain participants in the PTIN, acceptance agent, and authorized e-file provider programs. The proposed regulations also would redesignate § 300.12, Fee for obtaining a preparer tax identification number, as § 300.13. Authority The charging of user fees is authorized by the Independent Offices Appropriations Act (IOAA) of 1952, which is codified at 31 U.S.C. 9701. The IOAA authorizes agencies to prescribe regulations that establish charges for services provided by the agency. The charges must be fair and must be based on the costs to the government, the value of the service to the recipient, the public policy or interest served, and other relevant facts. The IOAA provides that regulations implementing user fees are subject to policies prescribed by the President; these policies are currently set forth in the Office of Management PO 00000 Frm 00026 Fmt 4702 Sfmt 4702 59331 and Budget Circular A–25, 58 FR 38142 (July 15, 1993) (the OMB Circular). The OMB Circular encourages user fees for government-provided services that confer benefits on identifiable recipients over and above those benefits received by the general public. Under the OMB Circular, an agency that seeks to impose a user fee for governmentprovided services must calculate the full cost of providing those services. In general, a user fee should be set at an amount that allows the agency to recover the full cost of providing the special service, unless the Office of Management and Budget grants an exception. Pursuant to the guidelines in the OMB Circular, the IRS has calculated its cost of providing services for the registered tax return preparer competency examination and for fingerprinting applicants and certain participants in the PTIN, acceptance agent, and authorized e-file provider programs. The government will charge the full cost of administering these services and will implement the proposed user fees under the authority of the IOAA and the OMB Circular. Proposed Effective/Applicability Date The Administrative Procedure Act provides that substantive rules 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’s continued effort to implement the recommendations in the ‘‘Return Preparer Review.’’ The recently published amendments to Circular 230 established registered tax return preparers as practitioners under Circular 230 and required that individuals must pass a competency examination, among other requirements, to become a registered tax return preparer. Before the competency examination can be offered, the competency examination user fee must be in place. As part of the recent amendments to the section 6109 regulations, the IRS established a requirement to pass a suitability check prior to obtaining a PTIN. To fully implement the suitability check, the regulations establishing a user fee to be fingerprinted must be finalized so the IRS can begin fingerprinting required applicants. Further, the competency examination and the fingerprinting user fees must be finalized significantly before the 2012 filing season to enable the IRS to have these aspects of the new E:\FR\FM\26SEP1.SGM 26SEP1 59332 Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules regulatory program in place for the 2012 filing season. 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 this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. It has been determined that an initial regulatory flexibility analysis under 5 U.S.C. 603 is required for this final rule. The analysis is set forth under the heading, ‘‘Initial Regulatory Flexibility Analysis.’’ Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. jlentini on DSK4TPTVN1PROD with PROPOSALS Initial Regulatory Flexibility Analysis When an agency issues a rulemaking proposal, the Regulatory Flexibility Act (5 U.S.C. chapter 6) (RFA) requires the agency ‘‘to prepare and make available for public comment an initial regulatory flexibility analysis’’ that will ‘‘describe the impact of the proposed rule on small entities.’’ See 5 U.S.C. 603(a). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. A small entity is defined as a small business, small nonprofit organization, or small governmental jurisdiction. See 5 U.S.C. 601(3) through (6). The IRS and the Treasury Department conclude that the proposed rule, if promulgated, will have a significant economic impact on a substantial number of small entities. As a result, an initial regulatory flexibility analysis is required. Description of the Reasons Why Action by the Agency Is Being Considered Based upon the finding in the Report, the IRS and the Treasury Department are implementing regulatory changes that increase the oversight of the tax return preparer industry. These regulatory changes include requiring persons who prepare all or substantially all of a tax return or claim for refund for compensation to obtain a PTIN and creating a new category of Circular 230 practitioner called registered tax return preparers. Individuals who wish to become a registered tax return preparer VerDate Mar<15>2010 17:36 Sep 23, 2011 Jkt 223001 must pass a competency examination. Individuals who pass the competency examination and become a registered tax return preparer will receive a special benefit that the general public does not receive because a registered tax return preparer is allowed to prepare and sign Form 1040 series returns (and accompanying schedules) for compensation. Under the new PTIN and Circular 230 guidance (including Notice 2011–6), only attorneys, certified public accountants, enrolled agents, or registered tax return preparers can prepare and sign all or substantially all of a Form 1040 series return for compensation. There are costs to the IRS associated with overseeing the registered tax return preparer competency examination and providing the special benefits associated with being a registered tax return preparer. These proposed regulations implement a user fee for taking the registered tax return preparer competency examination to recover these costs. PTIN holders, acceptance agents, and e-file providers also receive a special benefit from participation in the PTIN, acceptance agent, and authorized e-file provider programs. PTIN holders receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Acceptance agents receive the special benefit of being able to facilitate and expedite ITIN and EIN applications by validating the applicant’s identity and status as a foreign person. Certifying acceptance agents also receive the special benefit of being able to certify an ITIN applicant’s identity and status as an alien. Authorized e-file providers receive the benefit of being able to electronically file tax and information returns with the IRS. As a prerequisite for participation in these programs, applicants and certain participants must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification record database. There are costs to the IRS to administer and review the processing of applicant’s and certain participant’s fingerprints as part of the suitability check. These proposed regulations implement a user fee for certain individuals to be fingerprinted as part of the PTIN, acceptance agent, or authorized e-file provider programs to recover these costs. A Succinct Statement of the Objectives of, and Legal Basis for, the Proposed Rule Regarding the registered tax return preparer program, the objective of the PO 00000 Frm 00027 Fmt 4702 Sfmt 4702 proposed regulations is to recover the costs to the government associated with the registered tax return preparer competency examination. This user fee will be in addition to any reasonable fee charged by the third-party vendor that is approved by the IRS for administering the competency examination. The costs to the government include the personnel, administrative, management, and information technology costs to develop and review the competency examination, oversee the competency examination, validate the competency examination results, and establish review procedures for persons who contest the competency examination. All individuals who are not attorneys, certified public accountants, or enrolled agents and want to prepare and sign Form 1040 series tax returns (and accompanying schedules) for compensation will be required to become a registered tax return preparer and pass the competency examination. Individuals who pass the competency examination and become a registered tax return preparer will receive the special benefit of being able to prepare and sign Form 1040 series returns for compensation. Registered tax return preparers also will receive the benefit of being able to represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during examination if the registered tax return preparer signed the tax return for the period under examination. These regulations recover the costs to the government that are associated with providing this special benefit. Regarding the fingerprinting user fee to participate in the PTIN, acceptance agent, or authorized e-file provider programs, the purpose of the user fee is to recover the costs to the government for providing the special benefits associated with these programs. This user fee will be in addition to any user fee charged by the third-party vendor, which will be approved by the IRS, and covers the costs for obtaining the fingerprints and transmitting the fingerprints to the FBI. The fingerprinting user fee recovers the costs to the IRS to transfer the fingerprints and the results of the FBI database search to the IRS; perform background checks on third-party vendor employees; modify the database used to receive, record, and store the search results; evaluate the results received from the search of the FBI database; provide internal review of circumstances where an individual is found not suitable to participate in the respective program; and process appeals E:\FR\FM\26SEP1.SGM 26SEP1 Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules jlentini on DSK4TPTVN1PROD with PROPOSALS by individuals who are denied the ability to participate in their respective program because the individuals failed the suitability check. Individuals who participate in the PTIN program receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Individuals who participate in the acceptance agent program receive the special benefit of being able to facilitate and expedite the issuance of ITINs and EINs by verifying the applicant’s identity and status as an alien; certifying acceptance agents receive the additional benefit of being able to certify an ITIN applicant’s identity and status as an alien. Persons who participate in the authorized e-file provider program receive the special benefit of being able to electronically file tax and information returns. The legal basis for establishing a user fee is contained in section 9701 of title 31. A Description of and, Where Feasible, an Estimate of the Number of Small Entities to Which the Proposed Rule Will Apply The proposed regulations affect all individuals who want to become registered tax return preparers 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 owning a small business or a small entity employing applicants. The NAICS code that relates to tax preparation services (NAICS code 541213) is the appropriate code for the registered tax return preparer program. Entities identified as tax preparation services are considered small under the Small Business Administration size standards (13 CFR 121.201) if their annual revenue is less than $7 million. The IRS estimates that approximately 350,000 individuals will become registered tax return preparers. The IRS estimates that approximately 70 to 80 percent of the individuals who apply to become registered tax return preparers are operating as or employed by small entities. The proposed regulations affect certain individuals who have or want to obtain a PTIN. Only individuals, not businesses, can obtain a PTIN. Thus, the economic impact of these regulations on any small entity generally will be a result of an individual tax return preparer who is required to obtain a PTIN owning a small business or a small business otherwise employing an individual tax return preparer who is VerDate Mar<15>2010 17:36 Sep 23, 2011 Jkt 223001 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 applicants or participants in the PTIN program who will have to be fingerprinted relates to tax preparation services (NAICS code 541213). The IRS estimates that approximately 450,000 individuals who receive a PTIN will be required to pay the fingerprinting user fee. Entities identified as tax preparation services and offices of lawyers are considered small under the Small Business Administration size standards if their annual revenue is less than $7 million. The IRS estimates that approximately 70 to 80 percent of the individuals required to be fingerprinted are operating as or employed by small entities. The proposed regulations also affect individuals who are or want to become an acceptance agent. Only an individual can become an acceptance agent; thus, the regulations will economically impact any small entity that is owned by or employs an acceptance agent. The NAICS code that relates to tax preparation services (NAICS code 541213) is the appropriate code for the acceptance agent program. Entities identified as tax preparation services are considered small under the Small Business Administration size standards if their annual revenue is less than $7 million. The IRS estimates that 3,500 individuals who are not required to obtain a PTIN will be fingerprinted as part of the acceptance agent program. The IRS estimates that 80 to 90 percent of acceptance agents are operating as or employed by small entities. Finally, the proposed regulations will affect any person that is an authorized e-file provider or applies to become an authorized e-file provider. Small businesses can be authorized e-file providers. The NAICS code that relates to authorized e-file providers is data processing, hosting, and related services (NAICS code 518210). Entities identified as data processing, hosting, and related services are considered small under the Small Business Administration size standards if their annual revenue is less than $25 million. The IRS projects that 6,500 persons who are not required to obtain a PTIN will be fingerprinted as part of the authorized e-file provider program. The IRS estimates that 99 percent of authorized e-file providers are operating as small businesses. A description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the type PO 00000 Frm 00028 Fmt 4702 Sfmt 4702 59333 of professional skills necessary for preparation of the report or record. No reporting or recordkeeping requirements are projected to be associated with this proposed regulation. An Identification, to the Extent Practicable, of All Relevant Federal Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule The IRS is not aware of any federal rules that duplicate, overlap, or conflict with the proposed rule. A Description of Any Significant Alternatives to the Proposed Rule, Which Accomplish the Stated Objectives of Applicable Statutes and Which Minimize Any Significant Economic Impact of the Proposed Rule on Small Entities The IOAA authorizes the charging of user fees for agency services, subject to policies designated by the President. The OMB Circular implements presidential policies regarding user fees and encourages user fees when a government agency provides a special benefit to a member of the public. As Congress has not appropriated funds to the registered tax return preparer, PTIN, acceptance agent, or authorized e-file provider programs, there are no viable alternatives to the imposition of user fees. While the IRS previously did not charge a user fee to recover its costs in conjunction with the fingerprinting of applicants to the acceptance agent and authorized e-file programs, the number of applicants in these programs was small enough that the cost of collecting a user fee to fingerprint applicants in these programs would represent an unduly large portion of the user fee. The addition of the PTIN applicants as a group of individuals who also are required to be fingerprinted increased the number of persons required to be fingerprinted to approximately 460,000. Because the population of individuals to be fingerprinted substantially increased, the cost of collecting a user fee for fingerprinting acceptance agents and authorized e-file providers is no longer an unduly large portion of the user fee. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and the Treasury Department request comments on the clarity of the proposed regulations and how they can be made easier to understand. All comments will E:\FR\FM\26SEP1.SGM 26SEP1 59334 Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Proposed Rules be available for public inspection and copying. A public hearing has been scheduled for October 7, 2011 beginning at 10:00 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. All visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written or electronic comments and an outline of the topics to be discussed and the time to be devoted to each topic by October 4, 2011. A period of 10 minutes will be allocated to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these regulations is Emily M. Lesniak, Office of the Associate Chief Counsel (Procedure and Administration). List of Subjects in 26 CFR Part 300 Reporting and recordkeeping requirements, User fees. Proposed Amendments to the Regulations Accordingly, 26 CFR part 300 is proposed to be amended as follows: Part 300—USER FEES Paragraph 1. The authority citation for part 300 continues to read in part as follows: jlentini on DSK4TPTVN1PROD with PROPOSALS Authority: 31 U.S.C. 9701. Par. 2. Section 300.0 is amended by: 1. Redesignating paragraph (b)(12) as paragraph (b)(13). 2. Adding new paragraph (b)(12). 3. Adding paragraph (b)(14). The additions and revisions read as follows: § 300.0 * User fees; in general. * * (b) * * * VerDate Mar<15>2010 * * (12) Taking the registered tax return preparer examination. * * * (14) Fingerprinting to apply for, or participate, in the preparer tax identification number, authorized e-file provider, or acceptance agent programs. § 300.12 [Redesignated as § 300.13] Par. 3. Redesignate § 300.12 as § 300.13. Par. 4. Add new § 300.12 to read as follows: § 300.12 Registered tax return preparer competency examination fee. (a) Applicability. This section applies to the competency examination to become a registered tax return preparer pursuant to 31 CFR 10.4(c). (b) Fee. The fee for taking the registered tax return preparer competency examination is $27, which is the government cost for overseeing the examination and does not include any fees charged by the administrator of the examination. (c) Person liable for the fee. The person liable for the competency examination fee is the applicant taking the examination. (d) Effective/applicability date. This section is applicable on the date the final regulations are published in the Federal Register. Par. 5. Section 300.14 is added to read as follows: § 300.14 Fingerprinting fee to participate in the preparer tax identification number, acceptance agent, or authorized e-file provider programs. (a) Applicability. This section applies to applicants and participants in the preparer tax identification number, acceptance agent, and authorized e-file provider programs who are required to be fingerprinted as prescribed by forms, instructions, or other appropriate guidance. This section does not apply, however, to individuals who reside and are employed outside of the United States. (b) Fee. The fee to be fingerprinted is $33, which is the cost to the government for processing the fingerprints and does not include any fees charged by the vendor. (c) Person liable for the fee. The person liable for the fingerprinting fee is the person being fingerprinted. (d) Effective/applicability date. This section is applicable on the date the final regulations are published in the Federal Register. Steven T. Miller, Deputy Commissioner for Services and Enforcement. [FR Doc. 2011–24771 Filed 9–22–11; 11:15 am] BILLING CODE 4830–01–P 17:36 Sep 23, 2011 Jkt 223001 PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R06–OAR–2011–0032; FRL–9471–5] Approval and Promulgation of Air Quality Implementation Plans; New Mexico; Albuquerque/Bernalillo County; Prevention of Significant Deterioration; Greenhouse Gas Tailoring Rule Revisions Environmental Protection Agency (EPA). ACTION: Proposed rule. AGENCY: The EPA is proposing to approve a revision to the Albuquerque/ Bernalillo County, New Mexico State Implementation Plan (SIP) that was submitted by the Governor of New Mexico to EPA on December 15, 2010. The proposed SIP revision modifies Albuquerque/Bernalillo County’s Prevention of Significant Deterioration (PSD) program to establish appropriate emission thresholds for determining which new stationary sources and modification projects become subject to Albuquerque/Bernalillo County’s PSD permitting requirements for their greenhouse gas (GHG) emissions. Due to the SIP Narrowing Rule, 75 FR 82536, starting on January 2, 2011, the approved Albuquerque/Bernalillo County SIP’s PSD requirements for GHG apply at the thresholds specified in the Tailoring Rule, not at the 100 or 250 tons per year (tpy) levels otherwise provided under the Clean Air Act (CAA or Act), which would overwhelm Albuquerque/Bernalillo County’s permitting resources. This rule clarifies the applicable thresholds in the Albuquerque/Bernalillo County SIP, addresses the flaw discussed in the SIP Narrowing Rule, and incorporates state rule changes adopted at the state level into the federally-approved SIP. EPA is proposing approval of the Albuquerque/ Bernalillo County, New Mexico December 15, 2010 PSD SIP revision because the Agency has made the preliminary determination that this PSD SIP revision is in accordance with section 110 and part C of the Federal Clean Air Act and EPA regulations regarding PSD permitting for GHGs. DATES: Comments must be received on or before October 26, 2011. ADDRESSES: Submit your comments, identified by Docket ID No. EPA–R06– OAR–2011–0032, by one of the following methods: (1) https://www.regulations.gov: Follow the on-line instructions for submitting comments. SUMMARY: E:\FR\FM\26SEP1.SGM 26SEP1

Agencies

[Federal Register Volume 76, Number 186 (Monday, September 26, 2011)]
[Proposed Rules]
[Pages 59329-59334]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24771]



[[Page 59329]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[REG-116284-11]
RIN 1545-BK24


User Fees Relating to the Registered Tax Return Preparer 
Competency Examination and Fingerprinting Participants in the Preparer 
Tax Identification Number, Acceptance Agent, and Authorized E-File 
Provider Programs

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed amendments to the user fee 
regulations. The proposed regulations would establish a new user fee 
for individuals to take the registered tax return preparer competency 
examination and a new user fee for certain persons to be fingerprinted 
in conjunction with the preparer tax identification number, acceptance 
agent, and authorized e-file provider programs. The proposed 
regulations also would redesignate Sec.  300.12, Fee for obtaining a 
preparer tax identification number, as Sec.  300.13. The proposed 
regulations affect individuals who take the registered tax return 
preparer competency examination and applicants and certain participants 
in the preparer tax identification number, acceptance agent, or 
authorized e-file provider programs. The charging of user fees is 
authorized by the Independent Offices Appropriations Act of 1952. This 
document also provides notice of a public hearing on these proposed 
regulations.

DATES: Written or electronic comments must be received by October 26, 
2011. Outlines of topics to be discussed at the public hearing 
scheduled for October 7, 2011, at 10 a.m. must be received by October 
4, 2011.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-116284-11), Room 
5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
116284-11), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at https://www.regulations.gov/ (IRS REG-116284-11). 
The public hearing will be held in the Auditorium at the Internal 
Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Emily M. Lesniak at (202) 622-4570; concerning cost methodology, Eva J. 
Williams at (202) 435-5514; concerning submission of comments, the 
public hearing, and/or to be placed on the building access list to 
attend the public hearing, Richard A. Hurst at 
Richard.A.Hurst@irscounsel.treas.gov or (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    In June 2009, the IRS launched a Tax Return Preparer Review with 
the intent to propose a comprehensive set of recommendations that would 
increase taxpayer compliance and ensure uniform and high ethical 
standards of conduct for tax return preparers. In December 2009, the 
IRS made findings and recommendations based upon this review that would 
increase oversight of the federal tax return preparer community. The 
findings and recommendations were published in Publication 4832, 
``Return Preparer Review'' (the Report), which was published on January 
4, 2010. In part, the Report recommended registering all tax return 
preparers with the IRS and requiring tax return preparers who are not 
attorneys, certified public accountants, or enrolled agents to pass a 
competency examination before they are eligible to prepare a tax return 
or claim for refund. The Treasury Department and the IRS have published 
several documents implementing the recommendations in the Report, three 
of which are relevant to these proposed regulations.
    First, on September 30, 2010, the Treasury Department and the IRS 
published final regulations under I.R.C. section 6109 (75 FR 60309) 
providing that for returns or claims for refund filed after December 
31, 2010, the identifying number of a tax return preparer is the 
individual's preparer tax identification number (PTIN) or such other 
number prescribed by the IRS in forms, instructions, or other 
appropriate guidance. The section 6109 final regulations require a tax 
return preparer who prepares all or substantially all of a tax return 
or claim for refund after December 31, 2010 to have a PTIN. These 
regulations further provide that only attorneys, certified public 
accountants, enrolled agents, and registered tax return preparers are 
eligible to obtain a PTIN. Section 1.6109-2(h) of the regulations 
states, however, that the IRS can provide exceptions to the Sec.  
1.6109-2 regulations through forms, instructions, or other appropriate 
guidance.
    Second, on December 30, 2010, the Treasury Department and the IRS 
published Notice 2011-6 (2011-3 IRB 315) that, in part, creates 
exceptions under Sec.  1.6109-2(h), allowing two additional classes of 
individuals to obtain a PTIN (provided all tax compliance and 
suitability checks are passed) and prepare all or substantially all of 
a tax return or claim for refund for compensation. Section 2a. of 
Notice 2011-6 permits specified individuals who are supervised by the 
attorney, certified public accountant, enrolled agent, enrolled 
retirement plan agent, or enrolled actuary who signs the tax return or 
claim for refund prepared by the individual to obtain a PTIN. These 
supervised individuals may not sign a tax return or claim for refund. 
Section 2b. of Notice 2011-6 provides that individuals who certify that 
they do not prepare or assist in the preparation of all or 
substantially all of any tax return or claim for refund that is covered 
by a competency examination will be able to obtain a PTIN. This 
exception recognizes that the initial registered tax return preparer 
competency examination will be limited to individual income tax returns 
(Form 1040 series returns and accompanying schedules).
    Third, on June 3, 2011, the Treasury Department and the IRS 
published final regulations amending the regulations governing practice 
before the IRS (76 FR 32286). These regulations are found in 31 CFR 
part 10 and have been reprinted as Treasury Department Circular No. 230 
(Circular 230). The amendments to Circular 230, in part, provide that 
practice before the IRS includes preparing for compensation a tax 
return, claim for refund, or other document submitted to the IRS and 
include registered tax return preparers as practitioners under Circular 
230. Registered tax return preparers must demonstrate the necessary 
qualifications and competency by passing a minimum competency 
examination, completing annual continuing education requirements, and 
complying with any other applicable procedures relating to the 
application for registration and renewal of registration established 
and published by the IRS. Registered tax return preparers may prepare 
and sign tax returns, claims for refund, and other documents as 
provided in forms, instructions, or other appropriate guidance. 
Registered tax return

[[Page 59330]]

preparers also may represent taxpayers before revenue agents, customer 
service representatives, or similar officers and employees of the IRS 
during an examination if the registered tax return preparer signed the 
tax return or claim for refund for the time period under examination. 
Registered tax return prepares may not represent taxpayers before 
appeals officers, revenue officers, Counsel, or similar officers or 
employees of the IRS or the Department of the Treasury.

User Fee To Take the Registered Tax Return Preparer Competency 
Examination

    To become a registered tax return preparer, applicants will be 
required to pass a competency examination. Proposed Sec.  300.12 
establishes a $27 user fee to take the registered tax return preparer 
competency examination. This user fee must be paid each time the 
applicant takes the competency examination and is in addition to any 
reasonable fee charged by the third-party vendor that is approved by 
the IRS. Applicants who pass the competency examination generally will 
not, however, be required to re-take the examination in the future 
years.
    There are costs to the IRS for administering the registered tax 
return preparer competency examination. The user fee to take the 
registered tax return preparer competency examination will recover 
these costs. These costs include the personnel, administrative, 
management, and information technology costs to the IRS for developing 
and reviewing the competency examination, overseeing the competency 
examination, validating the competency examination results, and 
establishing a review procedure for applicants who contest any portion 
of the competency examination. The user fee also recovers the cost to 
conduct background checks on employees of the third-party vendor who 
are involved in the administration of the examination.
    Individuals who pay the competency examination user fee and become 
registered tax return preparers will receive a special benefit from the 
IRS that is not received by the general public. Passing the competency 
examination enables registered tax return preparers to prepare and sign 
Form 1040 series returns (and accompanying schedules) for compensation. 
Registered tax return preparers also are able to represent taxpayers 
before revenue agents, customer service representatives, or similar 
officers and employees of the IRS during examination if the registered 
tax return preparer signed the tax return for the period under 
examination. That representation does not include practice before 
appeals officers, revenue officers, Counsel, or similar officers or 
employees of the IRS or the Department of the Treasury. Because the 
competency examination initially will cover only the Form 1040 series 
returns, only attorneys, certified public accountants, enrolled agents, 
or registered tax return preparers will be able to sign a Form 1040 
series return. While tax return preparers who are supervised will be 
able to prepare all or substantially all of a Form 1040 series tax 
return or claim for refund, they will not be able to sign the return or 
claim for refund and are not able to represent the taxpayers before the 
IRS. Any individual with a PTIN, however, can prepare and sign a tax 
return or claim for refund that is not part of the Form 1040 series.

User Fee To Be Fingerprinted as Part of the PTIN, Acceptance Agent, and 
Authorized E-File Provider Programs

    The IRS intends to collect fingerprints as part of the PTIN, 
acceptance agent, and authorized e-file provider programs to assist in 
evaluating the suitability of applicants and participants in these 
programs. Individuals who have been or are fingerprinted in conjunction 
with their participation in any one of these programs after June 8, 
2009, however, will not have to be re-fingerprinted to participate in 
these programs.
    Proposed Sec.  300.13 establishes a $33 user fee on individuals who 
will be fingerprinted in conjunction with their application to 
participate or participation in these programs. This user fee is in 
addition to any reasonable fee charged by a third-party vendor that is 
approved by the IRS. The third-party vendor fee will cover the costs 
for obtaining the fingerprints and transmitting the fingerprints to the 
Federal Bureau of Investigation (FBI), where the fingerprints will be 
run through the FBI identification records database. The IRS 
fingerprinting user fee recovers the costs to the IRS to transfer the 
fingerprints and the results of the FBI search to the IRS; perform 
background checks on third-party vendor employees; modify the database 
used to receive, record, and store the search results; evaluate the 
results received from the search of the FBI database; provide internal 
review of circumstances when an individual is determined not to be 
suitable to participate in a program; and process appeals by 
individuals who are denied the ability to participate in a program 
because the individual failed this suitability check.
    Additionally, under the current proposed regulations any 
participant in the PTIN, acceptance agent, or authorized e-file 
provider programs who resides and is employed outside of the United 
States will not have to be fingerprinted to participate in these 
programs. Such persons, however, must comply with all other elements of 
the suitability check. In addition, the Treasury Department and the IRS 
continue to study what additional requirements should apply to such 
persons. Any additional requirements would be set forth in future 
guidance.
    Individuals who are fingerprinted as part of their application or 
participation in the PTIN, acceptance agent, or authorized e-file 
provider programs receive a special benefit that is not received by the 
general public. Individuals who participate in the PTIN program receive 
the special benefit of being able to prepare all or substantially all 
of a tax return or claim for refund for compensation. Individuals with 
a PTIN can charge for their tax preparation services. The regulations 
under section 6109 require tax return preparers to have a PTIN if they 
prepare all or substantially all of a tax return or claim for refund 
for compensation. Passing a suitability check is a prerequisite for 
receiving a PTIN. For most PTIN applicants, the suitability check 
includes, but is not limited to, fingerprinting and processing the 
fingerprints through the FBI identification records database. The IRS, 
however, does not intend to fingerprint attorneys, certified public 
accountants, enrolled agents, enrolled retirement plan agents, and 
enrolled actuaries who apply for a PTIN at this time. The Treasury 
Department and the IRS specifically request comments on whether these 
individuals should be exempt from the fingerprinting process.
    Participants in the acceptance agent program, which includes 
certifying acceptance agents, also receive a special benefit from 
participation in the program. As provided in Revenue Procedure 2006-10 
(2006-1 CB 293), acceptance agents facilitate and expedite the issuance 
of individual taxpayer identification numbers (ITINs) and employer 
identification number (EINs) by verifying the identity and foreign 
status of applicants. An individual who wants to obtain an ITIN must 
submit a Form W-7, ``Application for IRS Individual Taxpayer 
Identification Number,'' and documentation that evidences the 
individual's identity and status as an alien. An EIN applicant must 
submit a Form SS-4, ``Application for Employer Identification Number,'' 
and any

[[Page 59331]]

required supplementary statements. Section 301.6109-1(d)(3)(iv) 
provides that ITIN and EIN applicants may submit the application and 
accompanying information directly to the IRS or may use an acceptance 
agent. When a certifying acceptance agent is used to apply for an ITIN, 
the ITIN applicant is not required to submit documentation proving the 
applicant's identity or status as an alien because the certifying 
acceptance agent certifies to these facts. This certification procedure 
is not available to EIN applicants. The certification is submitted to 
the IRS as part of the ITIN application.
    To become an acceptance agent, applicants must pass a suitability 
check. As part of the suitability check, most applicants will be 
fingerprinted for processing through the FBI identification records 
database. Successful applicants receive the special benefit of being 
able to facilitate and expedite ITIN and EIN applications and verify 
the applicants' identity and status as an alien. Certifying acceptance 
agents receive the additional benefit of being able to certify ITIN 
applicants' identity and status as an alien, which enables ITIN 
applicants to retain their identification and foreign status 
documentation. Acceptance agents can charge a fee for their services.
    All individuals who apply to become an acceptance agent and who are 
required to be fingerprinted must pay the fingerprinting user fee. As 
of June 8, 2009, the IRS began storing the fingerprints of all 
acceptance agent applicants electronically. Prior to that time, the 
fingerprints of acceptance agent applicants generally were not stored 
electronically. Fingerprints that are not stored electronically 
deteriorate over time. The IRS, therefore, may require acceptance 
agents who were fingerprinted prior to June 8, 2009, and who are 
currently required to be fingerprinted, to be re-fingerprinted and pay 
the associated user fee.
    All individuals who apply to become authorized e-file providers 
also must pass a suitability check. As part of the suitability check, 
most applicants will be fingerprinted for processing through the FBI 
identification records database. The guidelines for participation in 
this program are in Revenue Procedure 2007-40 (2007-1 CB 1488) and 
numerous publications that are tailored to specific tax or information 
returns. Successful applicants receive an electronic filing 
identification number (EFIN). Multiple persons associated with an 
applicant may use the same EFIN to electronically file tax and 
information returns. Authorized e-file providers receive the special 
benefit of being able to electronically file specified tax and 
information returns with the IRS. Some e-file providers charge a fee 
for performing this service.
    All individuals who apply to become an authorized e-file provider 
and who are required to be fingerprinted must pay the fingerprinting 
user fee. Additionally, similar to the process for acceptance agents 
described earlier in this preamble, authorized e-file providers who 
were fingerprinted before June 8, 2009, the date the IRS began 
digitally storing all fingerprints, and are required to be 
fingerprinted, may be re-fingerprinted and required to pay the 
associated user fee.
    If the IRS has an individual's fingerprints digitally stored due to 
the individual's application to participate or participation in the 
PTIN, acceptance agent, or authorized e-file provider programs, the 
individual will not have to be fingerprinted again to participate in 
one of the other programs.
    The IRS did not charge a user fee for acceptance agents or 
authorized e-file providers to be fingerprinted previously because an 
unduly large part of the user fee would have been the cost of 
collecting a user fee. With the addition of many PTIN applicants as 
individuals who also must be fingerprinted (the number of persons being 
fingerprinted will increase to approximately 460,000), the cost of 
collecting the user fee has decreased relative to the costs associated 
with fingerprinting. Because the cost of collecting a user fee is no 
longer an unduly large part of the user fee, the IRS has determined 
that a user fee is now appropriate and will charge a user fee to 
recover the cost of fingerprinting the applicants and certain 
participants in the PTIN, acceptance agent, and authorized e-file 
provider programs.
    The proposed regulations also would redesignate Sec.  300.12, Fee 
for obtaining a preparer tax identification number, as Sec.  300.13.

Authority

    The charging of user fees is authorized by the Independent Offices 
Appropriations Act (IOAA) of 1952, which is codified at 31 U.S.C. 9701. 
The IOAA authorizes agencies to prescribe regulations that establish 
charges for services provided by the agency. The charges must be fair 
and must be based on the costs to the government, the value of the 
service to the recipient, the public policy or interest served, and 
other relevant facts. The IOAA provides that regulations implementing 
user fees are subject to policies prescribed by the President; these 
policies are currently set forth in the Office of Management and Budget 
Circular A-25, 58 FR 38142 (July 15, 1993) (the OMB Circular).
    The OMB Circular encourages user fees for government-provided 
services that confer benefits on identifiable recipients over and above 
those benefits received by the general public. Under the OMB Circular, 
an agency that seeks to impose a user fee for government-provided 
services must calculate the full cost of providing those services. In 
general, a user fee should be set at an amount that allows the agency 
to recover the full cost of providing the special service, unless the 
Office of Management and Budget grants an exception.
    Pursuant to the guidelines in the OMB Circular, the IRS has 
calculated its cost of providing services for the registered tax return 
preparer competency examination and for fingerprinting applicants and 
certain participants in the PTIN, acceptance agent, and authorized e-
file provider programs. The government will charge the full cost of 
administering these services and will implement the proposed user fees 
under the authority of the IOAA and the OMB Circular.

Proposed Effective/Applicability Date

    The Administrative Procedure Act provides that substantive rules 
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's continued effort to implement 
the recommendations in the ``Return Preparer Review.'' The recently 
published amendments to Circular 230 established registered tax return 
preparers as practitioners under Circular 230 and required that 
individuals must pass a competency examination, among other 
requirements, to become a registered tax return preparer. Before the 
competency examination can be offered, the competency examination user 
fee must be in place. As part of the recent amendments to the section 
6109 regulations, the IRS established a requirement to pass a 
suitability check prior to obtaining a PTIN. To fully implement the 
suitability check, the regulations establishing a user fee to be 
fingerprinted must be finalized so the IRS can begin fingerprinting 
required applicants. Further, the competency examination and the 
fingerprinting user fees must be finalized significantly before the 
2012 filing season to enable the IRS to have these aspects of the new

[[Page 59332]]

regulatory program in place for the 2012 filing season.
    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 this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563.
    It has been determined that an initial regulatory flexibility 
analysis under 5 U.S.C. 603 is required for this final rule. The 
analysis is set forth under the heading, ``Initial Regulatory 
Flexibility Analysis.''
    Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Initial Regulatory Flexibility Analysis

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) (RFA) requires the agency ``to 
prepare and make available for public comment an initial regulatory 
flexibility analysis'' that will ``describe the impact of the proposed 
rule on small entities.'' See 5 U.S.C. 603(a). Section 605 of the RFA 
provides an exception to this requirement if the agency certifies that 
the proposed rulemaking will not have a significant economic impact on 
a substantial number of small entities. A small entity is defined as a 
small business, small nonprofit organization, or small governmental 
jurisdiction. See 5 U.S.C. 601(3) through (6). The IRS and the Treasury 
Department conclude that the proposed rule, if promulgated, will have a 
significant economic impact on a substantial number of small entities. 
As a result, an initial regulatory flexibility analysis is required.
Description of the Reasons Why Action by the Agency Is Being Considered
    Based upon the finding in the Report, the IRS and the Treasury 
Department are implementing regulatory changes that increase the 
oversight of the tax return preparer industry. These regulatory changes 
include requiring persons who prepare all or substantially all of a tax 
return or claim for refund for compensation to obtain a PTIN and 
creating a new category of Circular 230 practitioner called registered 
tax return preparers. Individuals who wish to become a registered tax 
return preparer must pass a competency examination. Individuals who 
pass the competency examination and become a registered tax return 
preparer will receive a special benefit that the general public does 
not receive because a registered tax return preparer is allowed to 
prepare and sign Form 1040 series returns (and accompanying schedules) 
for compensation. Under the new PTIN and Circular 230 guidance 
(including Notice 2011-6), only attorneys, certified public 
accountants, enrolled agents, or registered tax return preparers can 
prepare and sign all or substantially all of a Form 1040 series return 
for compensation. There are costs to the IRS associated with overseeing 
the registered tax return preparer competency examination and providing 
the special benefits associated with being a registered tax return 
preparer. These proposed regulations implement a user fee for taking 
the registered tax return preparer competency examination to recover 
these costs.
    PTIN holders, acceptance agents, and e-file providers also receive 
a special benefit from participation in the PTIN, acceptance agent, and 
authorized e-file provider programs. PTIN holders receive the special 
benefit of being able to prepare all or substantially all of a tax 
return or claim for refund for compensation. Acceptance agents receive 
the special benefit of being able to facilitate and expedite ITIN and 
EIN applications by validating the applicant's identity and status as a 
foreign person. Certifying acceptance agents also receive the special 
benefit of being able to certify an ITIN applicant's identity and 
status as an alien. Authorized e-file providers receive the benefit of 
being able to electronically file tax and information returns with the 
IRS. As a prerequisite for participation in these programs, applicants 
and certain participants must pass a suitability check. As part of the 
suitability check, most applicants will be fingerprinted for processing 
through the FBI identification record database. There are costs to the 
IRS to administer and review the processing of applicant's and certain 
participant's fingerprints as part of the suitability check. These 
proposed regulations implement a user fee for certain individuals to be 
fingerprinted as part of the PTIN, acceptance agent, or authorized e-
file provider programs to recover these costs.
A Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule
    Regarding the registered tax return preparer program, the objective 
of the proposed regulations is to recover the costs to the government 
associated with the registered tax return preparer competency 
examination. This user fee will be in addition to any reasonable fee 
charged by the third-party vendor that is approved by the IRS for 
administering the competency examination. The costs to the government 
include the personnel, administrative, management, and information 
technology costs to develop and review the competency examination, 
oversee the competency examination, validate the competency examination 
results, and establish review procedures for persons who contest the 
competency examination. All individuals who are not attorneys, 
certified public accountants, or enrolled agents and want to prepare 
and sign Form 1040 series tax returns (and accompanying schedules) for 
compensation will be required to become a registered tax return 
preparer and pass the competency examination. Individuals who pass the 
competency examination and become a registered tax return preparer will 
receive the special benefit of being able to prepare and sign Form 1040 
series returns for compensation. Registered tax return preparers also 
will receive the benefit of being able to represent taxpayers before 
revenue agents, customer service representatives, or similar officers 
and employees of the IRS during examination if the registered tax 
return preparer signed the tax return for the period under examination. 
These regulations recover the costs to the government that are 
associated with providing this special benefit.
    Regarding the fingerprinting user fee to participate in the PTIN, 
acceptance agent, or authorized e-file provider programs, the purpose 
of the user fee is to recover the costs to the government for providing 
the special benefits associated with these programs. This user fee will 
be in addition to any user fee charged by the third-party vendor, which 
will be approved by the IRS, and covers the costs for obtaining the 
fingerprints and transmitting the fingerprints to the FBI. The 
fingerprinting user fee recovers the costs to the IRS to transfer the 
fingerprints and the results of the FBI database search to the IRS; 
perform background checks on third-party vendor employees; modify the 
database used to receive, record, and store the search results; 
evaluate the results received from the search of the FBI database; 
provide internal review of circumstances where an individual is found 
not suitable to participate in the respective program; and process 
appeals

[[Page 59333]]

by individuals who are denied the ability to participate in their 
respective program because the individuals failed the suitability 
check. Individuals who participate in the PTIN program receive the 
special benefit of being able to prepare all or substantially all of a 
tax return or claim for refund for compensation. Individuals who 
participate in the acceptance agent program receive the special benefit 
of being able to facilitate and expedite the issuance of ITINs and EINs 
by verifying the applicant's identity and status as an alien; 
certifying acceptance agents receive the additional benefit of being 
able to certify an ITIN applicant's identity and status as an alien. 
Persons who participate in the authorized e-file provider program 
receive the special benefit of being able to electronically file tax 
and information returns.
    The legal basis for establishing a user fee is contained in section 
9701 of title 31.
A Description of and, Where Feasible, an Estimate of the Number of 
Small Entities to Which the Proposed Rule Will Apply
    The proposed regulations affect all individuals who want to become 
registered tax return preparers 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 owning a small business or a small entity 
employing applicants. The NAICS code that relates to tax preparation 
services (NAICS code 541213) is the appropriate code for the registered 
tax return preparer program. Entities identified as tax preparation 
services are considered small under the Small Business Administration 
size standards (13 CFR 121.201) if their annual revenue is less than $7 
million. The IRS estimates that approximately 350,000 individuals will 
become registered tax return preparers. The IRS estimates that 
approximately 70 to 80 percent of the individuals who apply to become 
registered tax return preparers are operating as or employed by small 
entities.
    The proposed regulations affect certain individuals who have or 
want to obtain a PTIN. Only individuals, not businesses, can obtain a 
PTIN. Thus, the economic impact of these regulations on any small 
entity generally will be a result of an individual tax return preparer 
who is required to obtain a PTIN owning a small business or a small 
business otherwise employing an individual tax return preparer who is 
required to apply for or renew a PTIN to prepare all or substantially 
all of a tax return or claim for refund. The appropriate NAICS codes 
for applicants or participants in the PTIN program who will have to be 
fingerprinted relates to tax preparation services (NAICS code 541213). 
The IRS estimates that approximately 450,000 individuals who receive a 
PTIN will be required to pay the fingerprinting user fee. Entities 
identified as tax preparation services and offices of lawyers are 
considered small under the Small Business Administration size standards 
if their annual revenue is less than $7 million. The IRS estimates that 
approximately 70 to 80 percent of the individuals required to be 
fingerprinted are operating as or employed by small entities.
    The proposed regulations also affect individuals who are or want to 
become an acceptance agent. Only an individual can become an acceptance 
agent; thus, the regulations will economically impact any small entity 
that is owned by or employs an acceptance agent. The NAICS code that 
relates to tax preparation services (NAICS code 541213) is the 
appropriate code for the acceptance agent program. Entities identified 
as tax preparation services are considered small under the Small 
Business Administration size standards if their annual revenue is less 
than $7 million. The IRS estimates that 3,500 individuals who are not 
required to obtain a PTIN will be fingerprinted as part of the 
acceptance agent program. The IRS estimates that 80 to 90 percent of 
acceptance agents are operating as or employed by small entities.
    Finally, the proposed regulations will affect any person that is an 
authorized e-file provider or applies to become an authorized e-file 
provider. Small businesses can be authorized e-file providers. The 
NAICS code that relates to authorized e-file providers is data 
processing, hosting, and related services (NAICS code 518210). Entities 
identified as data processing, hosting, and related services are 
considered small under the Small Business Administration size standards 
if their annual revenue is less than $25 million. The IRS projects that 
6,500 persons who are not required to obtain a PTIN will be 
fingerprinted as part of the authorized e-file provider program. The 
IRS estimates that 99 percent of authorized e-file providers are 
operating as small businesses.
    A description of the projected reporting, recordkeeping, and other 
compliance requirements of the proposed rule, including an estimate of 
the classes of small entities that will be subject to the requirement 
and the type of professional skills necessary for preparation of the 
report or record.
    No reporting or recordkeeping requirements are projected to be 
associated with this proposed regulation.
An Identification, to the Extent Practicable, of All Relevant Federal 
Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule
    The IRS is not aware of any federal rules that duplicate, overlap, 
or conflict with the proposed rule.
A Description of Any Significant Alternatives to the Proposed Rule, 
Which Accomplish the Stated Objectives of Applicable Statutes and Which 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities
    The IOAA authorizes the charging of user fees for agency services, 
subject to policies designated by the President. The OMB Circular 
implements presidential policies regarding user fees and encourages 
user fees when a government agency provides a special benefit to a 
member of the public. As Congress has not appropriated funds to the 
registered tax return preparer, PTIN, acceptance agent, or authorized 
e-file provider programs, there are no viable alternatives to the 
imposition of user fees.
    While the IRS previously did not charge a user fee to recover its 
costs in conjunction with the fingerprinting of applicants to the 
acceptance agent and authorized e-file programs, the number of 
applicants in these programs was small enough that the cost of 
collecting a user fee to fingerprint applicants in these programs would 
represent an unduly large portion of the user fee. The addition of the 
PTIN applicants as a group of individuals who also are required to be 
fingerprinted increased the number of persons required to be 
fingerprinted to approximately 460,000. Because the population of 
individuals to be fingerprinted substantially increased, the cost of 
collecting a user fee for fingerprinting acceptance agents and 
authorized e-file providers is no longer an unduly large portion of the 
user fee.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and the Treasury Department request comments on the 
clarity of the proposed regulations and how they can be made easier to 
understand. All comments will

[[Page 59334]]

be available for public inspection and copying.
    A public hearing has been scheduled for October 7, 2011 beginning 
at 10:00 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. 
All visitors must present photo identification to enter the building. 
Because of access restrictions, visitors will not be admitted beyond 
the immediate entrance area more than 30 minutes before the hearing 
starts. For information about having your name placed on the building 
access list to attend the hearing, see the FOR FURTHER INFORMATION 
CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written or 
electronic comments and an outline of the topics to be discussed and 
the time to be devoted to each topic by October 4, 2011. A period of 10 
minutes will be allocated to each person for making comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Emily M. Lesniak, 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 300

    Reporting and recordkeeping requirements, User fees.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 300 is proposed to be amended as follows:

Part 300--USER FEES

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

    Authority:  31 U.S.C. 9701.

    Par. 2. Section 300.0 is amended by:
    1. Redesignating paragraph (b)(12) as paragraph (b)(13).
    2. Adding new paragraph (b)(12).
    3. Adding paragraph (b)(14).
    The additions and revisions read as follows:


Sec.  300.0  User fees; in general.

* * * * *
    (b) * * *
    (12) Taking the registered tax return preparer examination.
    * * *
    (14) Fingerprinting to apply for, or participate, in the preparer 
tax identification number, authorized e-file provider, or acceptance 
agent programs.


Sec.  300.12  [Redesignated as Sec.  300.13]

    Par. 3. Redesignate Sec.  300.12 as Sec.  300.13.
    Par. 4. Add new Sec.  300.12 to read as follows:


Sec.  300.12  Registered tax return preparer competency examination 
fee.

    (a) Applicability. This section applies to the competency 
examination to become a registered tax return preparer pursuant to 31 
CFR 10.4(c).
    (b) Fee. The fee for taking the registered tax return preparer 
competency examination is $27, which is the government cost for 
overseeing the examination and does not include any fees charged by the 
administrator of the examination.
    (c) Person liable for the fee. The person liable for the competency 
examination fee is the applicant taking the examination.
    (d) Effective/applicability date. This section is applicable on the 
date the final regulations are published in the Federal Register.
    Par. 5. Section 300.14 is added to read as follows:


Sec.  300.14  Fingerprinting fee to participate in the preparer tax 
identification number, acceptance agent, or authorized e-file provider 
programs.

    (a) Applicability. This section applies to applicants and 
participants in the preparer tax identification number, acceptance 
agent, and authorized e-file provider programs who are required to be 
fingerprinted as prescribed by forms, instructions, or other 
appropriate guidance. This section does not apply, however, to 
individuals who reside and are employed outside of the United States.
    (b) Fee. The fee to be fingerprinted is $33, which is the cost to 
the government for processing the fingerprints and does not include any 
fees charged by the vendor.
    (c) Person liable for the fee. The person liable for the 
fingerprinting fee is the person being fingerprinted.
    (d) Effective/applicability date. This section is applicable on the 
date the final regulations are published in the Federal Register.

 Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-24771 Filed 9-22-11; 11:15 am]
BILLING CODE 4830-01-P

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