[Federal Register Volume 76, Number 107 (Friday, June 3, 2011)]
[Rules and Regulations]
[Pages 32286-32312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-13666]



[[Page 32285]]

Vol. 76

Friday,

No. 107

June 3, 2011

Part III





Department of the Treasury





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31 CFR Part 10



Regulations Governing Practice Before the Internal Revenue Service; 
Final Rule

  Federal Register / Vol. 76 , No. 107 / Friday, June 3, 2011 / Rules 
and Regulations  

[[Page 32286]]


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DEPARTMENT OF THE TREASURY

Office of the Secretary

31 CFR Part 10

[TD 9527]
RIN 1545-BH01


Regulations Governing Practice Before the Internal Revenue 
Service

AGENCY: Office of the Secretary, Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations governing practice 
before the Internal Revenue Service (IRS). The regulations affect 
individuals who practice before the IRS and providers of continuing 
education programs. The regulations modify the general standards of 
practice before the IRS and the standards with respect to tax returns.

DATES: 
    Effective Date. These regulations are effective on August 2, 2011.
    Applicability Date: For dates of applicability, see Sec. Sec.  
10.0(b), 10.1(c), 10.2(b), 10.3(j), 10.4(f), 10.5(g), 10.6(n), 10.7(f), 
10.8(d), 10.9(c), 10.20(c), 10.25(e), 10.30(e), 10.34(e), 10.36(c), 
10.38(b), 10.50(e), 10.51(b), 10.53(e), 10.60(d), 10.61(c), 10.62(d), 
10.63(f), 10.64(f), 10.65(c), 10.66(b), 10.69(c), 10.72(g), 10.76(e), 
10.77(f), 10.78(d), 10.79(e), 10.80(b), 10.81(b), 10.82(h), and 
10.90(c).

FOR FURTHER INFORMATION CONTACT: Matthew D. Lucey at (202) 622-4940 
(not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in these regulations was 
previously reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)) under control number 1545-1726. The collection of information 
in these regulations is in Sec. Sec.  10.6 and 10.9. The total annual 
burden of this collection of information is an increase from the burden 
in the current regulations. This information is required in order for 
the IRS to ensure that individuals permitted to prepare tax returns are 
informed of the latest developments in Federal tax practice.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number. Books or records relating to a collection of 
information must be retained as long as their contents might become 
material in the administration of any internal revenue law.

Background

    Section 330 of title 31 of the United States Code authorizes the 
Secretary of the Treasury (the Secretary) to regulate the practice of 
representatives before the Treasury Department. The Secretary is 
authorized, after notice and an opportunity for a proceeding, to 
censure, suspend, or disbar from practice before the Treasury 
Department those representatives who are incompetent, disreputable, or 
who violate regulations prescribed under section 330 of title 31. The 
Secretary also is authorized to impose a monetary penalty against these 
individuals and the individuals' firms or other entities that employ 
them. Additionally, the Secretary may seek an injunction against these 
individuals under section 7408 of the Internal Revenue Code (Code).
    The Secretary has published regulations governing the practice of 
representatives before the IRS in 31 CFR part 10 and reprinted the 
regulations as Treasury Department Circular No. 230 (Circular 230). 
These regulations authorize the IRS to act upon applications for 
enrollment to practice before the IRS; to make inquiries with respect 
to matters under Circular 230; to institute proceedings to impose a 
monetary penalty or to censure, suspend, or disbar a practitioner from 
practice before the IRS; to institute proceedings to disqualify 
appraisers; and to perform other duties necessary to carry out these 
functions.
    Circular 230 has been amended periodically. The regulations were 
amended most recently on September 26, 2007 (TD 9359, 72 FR 54540), to 
modify various provisions relating to the general standards of 
practice. For example, the 2007 regulations established an enrolled 
retirement plan agent designation, modified the conflict of interest 
rules, limited the use of contingent fees by practitioners, and 
required public disclosure of OPR disciplinary decisions after the 
decisions become final.
    Those final regulations, however, did not finalize the standards 
with respect to tax returns under Sec.  10.34(a) and the definitions 
under Sec.  10.34(e) because of the amendments to section 6694(a) of 
the Code made by the Small Business and Work Opportunity Tax Act of 
2007, Public Law 110-28, 121 Stat. 190. Rather, the IRS and the 
Treasury Department reserved Sec.  10.34(a) and (e) in those final 
regulations and also simultaneously issued a notice of proposed 
rulemaking (REG-138637-07) in the Federal Register (72 FR 54621) 
proposing to conform the professional standards under Sec.  10.34 of 
Circular 230 with the civil penalty standards under section 6694(a) as 
amended by the 2007 Act.
    On October 3, 2008, the Tax Extenders and Alternative Minimum Tax 
Relief Act of 2008, Div. C. of Public Law 110-343, 122 Stat. 3765, 
again amended the standard of conduct that must be met to avoid 
imposition of the tax return preparer penalty under section 6694(a). 
The IRS and the Treasury Department published final regulations (TD 
9436) in the Federal Register (73 FR 78430) implementing amendments to 
the tax return preparer penalties on December 22, 2008. To generally be 
consistent with the return preparer penalty regulations, these final 
regulations provide updated rules with respect to the standards for tax 
returns under Sec.  10.34(a).
    These final regulations also provide new rules governing the 
oversight of tax return preparers. Previously, an individual tax return 
preparer generally was not subject to the provisions in Circular 230 
unless the tax return preparer was an attorney, certified public 
accountant, enrolled agent, or other type of practitioner identified in 
Circular 230. Prior to the issuance of these final regulations, any 
individual could prepare tax returns and claims for refund without 
meeting any qualifications or competency standards. A tax return 
preparer also used to be able to exercise the privilege of limited 
practice before the IRS pursuant to the rules in former Sec.  
10.7(c)(1)(viii) of Circular 230 and Revenue Procedure 81-38 (1981-2 CB 
592). See Sec.  601.601(d)(2)(ii)(b).
    In June 2009, the IRS launched a review of tax return preparers 
with the intent to propose a comprehensive set of recommendations to 
ensure uniform and high ethical standards of conduct for all tax return 
preparers and to increase taxpayer compliance. As part of this effort, 
the IRS received input from a large and diverse community through 
numerous channels, including public forums, solicitation of written 
comments, and meetings with advisory groups.
    The IRS made findings and recommendations in Publication 4832, 
``Return Preparer Review'' (the Report), which was published on January 
4, 2010. The Report recommends increased oversight of the tax return 
preparer industry through the issuance of regulations.
    To implement recommendations made in the Report, the IRS issued 
final

[[Page 32287]]

regulations under section 6109 of the Code (TD 9501) published in the 
Federal Register (75 FR 60309) on September 30, 2010. The final 
regulations under section 6109 provide that, for returns or claims for 
refund filed after December 31, 2010, the identifying number of a tax 
return preparer is the individual's preparer tax identification number 
(PTIN) or such other number prescribed by the IRS in forms, 
instructions, or other appropriate guidance. The regulations also 
provide that the IRS is authorized to require through other guidance 
(as well as in forms and instructions) that tax return preparers apply 
for a PTIN or other prescribed identifying number, the regular renewal 
of PTINs or other prescribed identifying number, and the payment of 
user fees. The IRS also issued final regulations (TD 9503) establishing 
a user fee to apply for or renew a PTIN published in the Federal 
Register (75 FR 60316) on September 30, 2010.
    On August 23, 2010, the Treasury Department and the IRS published 
in the Federal Register (75 FR 51713) a notice of proposed rulemaking 
(REG-138637-07) proposing amendments to Circular 230 based upon certain 
recommendations made in the Report. The proposed regulations provided 
that registered tax return preparers are practitioners under Circular 
230 and described the process for becoming a registered tax return 
preparer, as well as the scope of a registered tax return preparer's 
practice before the IRS. Amendments were also proposed to Sec.  10.30 
regarding solicitation, Sec.  10.36 regarding procedures to ensure 
compliance, and Sec.  10.51 regarding incompetence and disreputable 
conduct. A public hearing was held on the proposed regulations on 
October 8, 2010. Written public comments responding to the proposed 
regulations were received. After consideration of the public comments, 
the proposed regulations are adopted as revised by this Treasury 
decision.

Plain Language Summary of the Requirements for Becoming a Registered 
Tax Return Preparer or Continuing Education Provider

Am I affected by this regulation?

    If you are an attorney or certified public accountant, then the 
amendments to Sec. Sec.  10.3, 10.4, 10.5, 10.7 and 10.9 of Circular 
230 (rules regarding registered tax return preparers) do not affect 
you. If you are not an attorney or certified public accountant and you 
prepare, or assist in preparing, all or substantially all of a tax 
return or claim for refund for compensation, then you may be affected 
by this regulation.
    Section 10.2(a)(8) of the final regulations clarifies that the 
definition of ``tax return preparer'' in Circular 230 is the same as 
the meaning in section 7701(a)(36) of the Code and 26 CFR 301.7701-15. 
If you only furnish typing, reproduction, or other mechanical 
assistance with respect to a tax return or a claim for refund, you are 
not a tax return preparer under Circular 230.

How am I affected by this regulation and how does this regulation work 
with other recently issued IRS guidance?

    The final regulations, in part, provide details about: (1) The 
application process to become a registered tax preparer, (2) the 
renewal process to remain a registered tax return preparer, and (3) 
other rules that govern practice before the IRS that affect all 
practitioners.

Application Process

    Generally, you must do the following to apply to become a 
registered tax return preparer: (1) Pass a one-time competency exam, 
(2) pass a suitability check, and (3) obtain a PTIN (and pay the amount 
provided in the PTIN User Fee regulations).
    To allow tax return preparers a transition period to pass the 
competency examination and, because the competency examination will not 
be available until after these final regulations are published, Notice 
2011-6 (2011-3 IRB 315), which was published on December 30, 2010, 
provides the following guidance to tax return preparers who obtain a 
PTIN (in accordance with the PTIN regulations) and pay the applicable 
user fee (set forth in the PTIN User Fee regulations) before the 
competency examination is offered:
    Individuals who obtain a provisional PTIN before the competency 
examination is offered may prepare for compensation any tax return or 
claim for refund until December 31, 2013, as long as the individual 
renews their PTIN, passes a suitability check (when available), and 
pays the applicable user fee. After the examination is offered, only 
attorneys, certified public accountants, enrolled agents, and 
registered tax return preparers, or individuals defined in section 
1.02(a) or (b) of Notice 2011-6 may obtain a PTIN.
    The tax returns and claims for refund covered by the competency 
examination initially offered will be limited to individual tax returns 
(Form 1040 series tax returns and accompanying schedules). As provided 
in Notice 2011-6, individuals may certify that they do not prepare 
individual tax returns and, as a result, will not be required to pass 
this initial competency examination or become a registered tax return 
preparer at this time.
    The process for becoming a registered tax return preparer is 
comparable to the existing process for enrolled agents. Enrolled agents 
must pass the Special Enrollment Examination and complete continuing 
education requirements. These regulations, however, do not change 
enrolled agents' status as practitioners under Circular 230.

Renewal Process

    You must complete continuing education to maintain your status as a 
registered tax return preparer. A registered tax return preparer must 
annually renew their PTIN and pay a user fee every year. Generally, 
registered tax return preparers must complete a minimum of 15 credits 
of continuing education annually. This regulation specifies what 
constitutes continuing education. Registered tax return preparers must 
retain records of continuing education courses for four years.
    If you prepare or assist in preparing all or substantially all of a 
tax return for compensation but do not sign the tax return, you are 
exempt from the competency examination and continuing education 
requirements if the requirements of section 1.02(a) of Notice 2011-6 
are met. You must, however, renew your PTIN, pay the applicable PTIN 
user fee, and certify that the requirements of Notice 2011-6 are met.

Continuing Education Providers

    You are subject to requirements in the final regulations. The final 
regulations provide requirements applicable to continuing education 
providers who provide continuing education programs to registered tax 
return preparers and enrolled agents. Continuing education providers 
must obtain and renew continuing education provider numbers and 
continuing education provider program numbers and pay any applicable 
fees.

Summary of Comments and Explanation of Revisions

    The IRS received more than 50 written comments in response to the 
notice of proposed rulemaking. All of the comments were considered and 
are available for public inspection. Most of the comments that 
addressed the proposed regulations are summarized in this preamble. 
Some comments addressed other regulations or notices of proposed 
rulemaking and are not discussed in this preamble.

[[Page 32288]]

    The scope of these rules is limited to practice before the IRS. 
These regulations do not change the existing authority of attorneys, 
certified public accountants, and enrolled agents to practice before 
the IRS under Circular 230 and do not alter or supplant ethical 
standards that might otherwise be applicable to these practitioners.

IRS Offices Administering and Enforcing Circular 230

    To fully implement the return preparer initiative, the IRS 
announced that a new return preparer office was created to administer 
PTIN applications, competency testing, and continuing education. The 
IRS decided that an office dedicated solely to these matters will allow 
the IRS to best serve tax return preparers and taxpayers by providing 
efficiency and expertise in this area.
    Concurrently, the Office of Professional Responsibility will 
continue to enforce the Circular 230 provisions relating to 
practitioner conduct and discipline. The Office of Professional 
Responsibility will continue to carry out its mission to interpret and 
apply the standards of practice for tax professionals in a fair and 
equitable manner. As discussed in the Report, a strong enforcement 
regime is a key component to increased oversight of the tax return 
preparer industry. Commentators on the proposed regulations also 
suggested that the return preparer initiative must be met with 
appropriate enforcement measures. The IRS recognizes that the Office of 
Professional Responsibility is central to the IRS' goal of maintaining 
high standards of ethical conduct for all practitioners and that the 
Office must operate independently from IRS functions enforcing Title 26 
requirements.
    The final regulations accommodate the internal structure by 
generally removing references to the Office of Professional 
Responsibility. The final regulations allow the flexibility to adjust 
responsibility appropriately between the offices as the return preparer 
initiative is implemented. The Commissioner may delegate necessary 
authorities to appropriate offices.

Definitions--Practice Before the Internal Revenue Service, Tax Return 
Preparer

    The final regulations adopt the proposed amendments to Sec.  
10.2(a)(4), which clarify that either preparing a document or filing a 
document may constitute practice before the IRS. The final regulations 
also adopt the proposed amendments to Sec.  10.2(a)(8), which clarify 
that the definition of ``tax return preparer'' in Circular 230 is the 
same as the meaning in section 7701(a)(36) of the Code and 26 CFR 
301.7701-15.

Who May Practice

    The final regulations adopt the proposed amendments to Sec.  
10.3(f), which establish a new ``registered tax return preparer'' 
designation. A registered tax return preparer is any individual so 
designated under Sec.  10.4(c) who is not currently under suspension or 
disbarment from practice before the IRS. An individual who is a 
registered tax return preparer pursuant to this part is a practitioner 
authorized to practice before the IRS, subject to the limitations 
identified in these regulations. Some commentators stated that the term 
registered tax return preparer would confuse the public because it 
implies a high level of professional capability. As stated in the 
Report, the goal of the return preparer initiative is increased 
oversight of the tax return preparer industry and to institute 
standards for minimum competence. For those individuals who have passed 
a competency examination and have met continuing education 
requirements, the Treasury Department and the IRS conclude that the 
term ``registered'' is appropriate.
    Some commentators requested that the IRS not include registered tax 
return preparers as individuals who may practice under proposed Sec.  
10.3. Representation is defined as ``[a]cts performed on behalf of a 
taxpayer by a representative before the Internal Revenue Service.'' See 
26 CFR 601.501(b)(13) (Conference and Practice Requirements). As 
discussed earlier in this preamble, practice before the IRS includes 
preparing or filing tax returns and other documents with the IRS. Thus, 
preparation of a tax return is practice before the IRS. Because 
registered tax return preparers are individuals who prepare all or 
substantially all of a tax return or claim for refund on behalf of a 
taxpayer for compensation, they practice before the IRS and must be 
included in Sec.  10.3 of the final regulations.
    The Treasury Department and the IRS received comments requesting 
clarification with respect to which forms registered tax return 
preparers are permitted to prepare. The IRS will prescribe by forms, 
instructions, or other appropriate guidance the tax returns and claims 
for refund registered tax return preparers are permitted to prepare 
after successfully completing the competency examination. Forms, 
instructions, or other appropriate guidance may also provide rules with 
respect to forms that may be prepared without completion of the 
competency examination. Notice 2011-6 permits individuals who prepare 
tax returns not covered by the competency examination to obtain a PTIN 
if certain requirements are met.
    Registered tax return preparers also may represent taxpayers before 
revenue agents, customer service representatives, or similar officers 
and employees of the IRS (including the Taxpayer Advocate Service) 
during an examination if the registered tax return preparer signed the 
tax return or claim for refund for the taxable year or period under 
examination. Consistent with the limited practice rights previously 
available to unenrolled return preparers under former Sec.  
10.7(c)(1)(viii), registered tax return preparers are not permitted to 
represent taxpayers, regardless of the circumstances requiring 
representation, before appeals officers, revenue officers, Counsel, or 
similar officers or employees of the IRS or the Treasury Department. A 
registered tax return preparer's authorization to practice under this 
part also does not include the authority to provide tax advice to a 
client or another person except as necessary to prepare a tax return, 
claim for refund, or other document intended to be submitted to the 
IRS.
    Some commentators inquired as to whether the federally authorized 
tax practitioner privilege under section 7525 applies to communications 
between a taxpayer and a registered tax return preparer. The Treasury 
Department and the IRS have concluded that the federally authorized tax 
practitioner privilege generally does not apply to communications 
between a taxpayer and a registered tax return preparer because the 
advice a registered tax return preparer provides ordinarily is intended 
to be reflected on a tax return and is not intended to be confidential 
or privileged.
    The conduct of a registered tax return preparer in connection with 
the preparation of the return, claim for refund, or other document, as 
well as any representation of the client during an examination, will be 
subject to the standards of conduct in Circular 230. Inquiries into 
possible misconduct and disciplinary proceedings relating to registered 
tax return preparer misconduct will be conducted under the provisions 
in Circular 230.
    Numerous members of the tax return preparation industry submitted 
comments requesting that certain individuals be exempted from the 
requirements in the proposed regulations. Commentators suggested that 
tax return preparers who are

[[Page 32289]]

supervised by certain practitioners currently authorized to practice 
under Circular 230 should not be required to become registered tax 
return preparers if the supervising practitioner signs the tax return 
prepared in part by the supervised tax return preparer. Commentators 
reasoned that certain practitioners who sign tax returns are subject 
to, in addition to Circular 230, professional standards and oversight 
by state licensing authorities and other professional organizations 
that place responsibility for the tax return on the signing 
practitioner.
    In Notice 2011-6, the Treasury Department and the IRS provided, 
pursuant to Sec.  1.6019-2(h), that individuals who are not attorneys, 
certified public accountants, enrolled agents, enrolled retirement plan 
agents, enrolled actuaries, or registered tax return preparers will be 
eligible to obtain a PTIN and, thus, prepare, or assist in preparing, 
all or substantially all of a tax return or claim for refund for 
compensation in certain discrete circumstances. Section 1.02(a) of the 
notice permits certain individuals supervised by an attorney, certified 
public accountant, enrolled agent, enrolled retirement plan agent, or 
enrolled actuary who signs the return or claim for refund prepared by 
the individual to obtain a PTIN. These individuals also are required to 
certify in their application to receive a PTIN that they are supervised 
by an attorney, certified public accountant, enrolled agent, enrolled 
retirement plan agent, or enrolled actuary who signs the tax return or 
claim for refund and provide a supervising individual's PTIN or other 
number if prescribed by the IRS. These individuals may not sign any tax 
return they prepare or assist in preparing for compensation. If at any 
point, the individual is no longer supervised by the signing attorney, 
certified public accountant, enrolled agent, enrolled retirement plan 
agent, or enrolled actuary, the individual must notify the IRS if 
prescribed in forms, instructions, or other appropriate guidance and 
will no longer be permitted to prepare or assist in preparing all or 
substantially all of a tax return or claim for refund for compensation 
under this exception. Because individuals meeting these requirements, 
as fully set forth in Sec.  1.02(a) of Notice 2011-6, are permitted to 
obtain a PTIN, they are not required to become registered tax return 
preparers to obtain a PTIN.

Eligibility To Become an Enrolled Agent or Enrolled Retirement Plan 
Agent

    The final regulations provide that an enrolled agent or enrolled 
retirement plan agent must be eighteen years old and obtain a PTIN to 
be eligible to practice before the IRS as an enrolled agent or enrolled 
retirement plan agent.
    Section 10.4(d) of the final regulations also provides that a 
former employee who, by virtue of past service and technical experience 
in the IRS, may be granted enrollment as an enrolled agent or enrolled 
retirement plan agent if certain criteria are satisfied. Some 
commentators on the proposed regulations suggested that former IRS 
employees should not be granted enrollment because the IRS is not 
exempting, or ``grandfathering,'' experienced unenrolled practitioners 
from the testing and continuing education requirements. This 
recommendation is not adopted because the IRS may easily check a former 
employee's IRS employment record to ensure the individual has the past 
service and technical experience for the scope of enrollment sought by 
the former employee.

Eligibility To Become a Registered Tax Return Preparer

    The final regulations require that an individual must be eighteen 
years old, possess a current or otherwise valid PTIN or other 
prescribed identifying number, and pass a minimum competency 
examination to become a registered tax return preparer. Many 
commentators supported the IRS' effort to increase the overall 
competency of tax return preparers by implementing reasonable 
standards. The minimum age requirement included in the final 
regulations will assist the Treasury Department and the IRS in 
efficient tax administration by ensuring that registered tax return 
preparers have a minimum level of experience, knowledge, judgment, and 
maturity. Other categories of Circular 230 practitioners are generally 
subject to state requirements that result in the individual possessing 
a minimum level of experience, knowledge, judgment, and maturity.
    The competency examination will be administered by, or administered 
under the oversight of, the IRS, similar to the special enrollment 
examinations for enrolled agents and enrolled retirement plan agents. 
Tax return preparers will be subject to suitability checks to determine 
whether the tax return preparer has engaged in disreputable conduct, 
which, at the time the application is filed with the IRS, could result 
in suspension or disbarment under Circular 230. An individual who has 
engaged in disreputable conduct is not eligible to become a registered 
tax return preparer.
    Commentators requested that the IRS delay implementation of the 
testing requirement. The Treasury Department and the IRS did not adopt 
any delay in implementation of the testing requirement because it is 
currently anticipated that the examination to become a registered tax 
return preparer will not be available until after the effective date of 
these regulations. Notice 2011-6 provides guidance establishing 
transition rules explaining the steps individuals must take to prepare 
all or substantially all of a tax return or claim for refund while 
awaiting full implementation of the examination process. The IRS will 
provide administrative information about the competency examination to 
tax return preparers via appropriate channels, including the Tax 
Professionals page of the IRS website, http://www.irs.gov/taxpros.
    Some commentators also requested that the Treasury Department and 
the IRS delay implementation of the continuing education requirements. 
In response to these concerns and to ensure the IRS has sufficient time 
to implement these requirements appropriately, the Treasury Department 
and the IRS announced that the implementation of the continuing 
education requirement will be postponed and that there will be no 
continuing education requirement at least during the first year of 
registration, which commenced on September 30, 2010. The IRS will 
provide administrative information about continuing education to tax 
return preparers via appropriate channels, including the Tax 
Professionals page of the IRS Web site, http://www.irs.gov/taxpros.

Procedures for Becoming or Renewing an Individual's Designation as a 
Registered Tax Return Preparer

    Section 10.5 of the final regulations sets forth the applicable 
procedures related to becoming a registered tax return preparer, which 
generally are consistent with the procedures currently utilized for 
enrolled agents and enrolled retirement plan agents. The regulations 
provide that individuals who want to become a registered tax return 
preparer or renew their designation as a registered tax return preparer 
must utilize forms and comply with the procedures established and 
published by the IRS. The final regulations permit the IRS to change 
the procedures to apply to become a registered tax return preparer.
    As a condition for consideration of an application, the IRS may 
conduct a Federal tax compliance check and

[[Page 32290]]

suitability check. The tax compliance check will be limited to an 
inquiry regarding whether the individual has filed all required 
individual or business tax returns (such as employment tax returns that 
might have been required to be filed by the applicant) and whether the 
individual has failed to pay, or make proper arrangements with the IRS 
for payment of, any Federal tax debts. The suitability check will be 
limited to an inquiry regarding whether the individual has engaged in 
any conduct that would justify suspension or disbarment of any 
practitioner under the provisions of this part, including whether the 
applicant has engaged in disreputable conduct.
    The IRS may not designate an individual as a registered tax return 
preparer only if the results of the tax compliance or suitability check 
are sufficient to establish that the individual engaged in conduct 
subject to sanctions under Circular 230 at the time the individual 
seeks to become a registered tax return preparer or the individual does 
not pass the required competency examination or meet other established 
standards. If the individual does not pass the competency examination 
or the tax compliance or suitability check, the individual will not be 
designated as a registered tax return preparer. Pursuant to Sec.  
10.5(f) of these regulations, an applicant denied status as a 
registered tax return preparer will be informed in writing as to the 
reason(s) for any denial of the application. The applicant may file a 
written protest within 30 days after receipt of the denial. The written 
protest must be filed as prescribed by the Internal Revenue Service in 
forms, guidance, or other appropriate guidance. An individual who is 
initially denied status as a registered tax return preparer for failure 
pass a tax compliance check may reapply after the initial denial if the 
individual becomes current with respect to the individual's tax 
liabilities.
    Once an individual is approved as a registered tax return preparer, 
the IRS will issue a registration card or certificate to each 
individual. The card or certificate will be in addition to any 
notification provided to an individual who obtains a PTIN. Registered 
tax return preparers must have both a valid registration card or 
certificate and a current and valid PTIN number to practice before the 
IRS.
    Section 10.6 of the final regulations sets forth the procedures for 
renewing an individual's designation as a registered tax return 
preparer. Registered tax return preparers must renew their designation 
as prescribed in forms, instructions, or other appropriate guidance. A 
condition of renewal is the completion of the requisite number of 
continuing education hours by registered tax return preparers. 
Registered tax return preparers must complete 15 hours of continuing 
education during each registration year, with a minimum of three hours 
of Federal tax law updates, two hours of tax-related ethics and 10 
hours of Federal tax law topics. The registration year is defined as 
each 12-month period that the registered tax return preparer is 
authorized to practice before the IRS.
    Registered tax return preparers must maintain records with respect 
to the completion of the continuing education credit hours and to self-
certify the completion of the continuing education credit at the time 
of renewal. These regulations require that a qualifying continuing 
education course enhance professional knowledge in Federal taxation or 
Federal tax related matters and be consistent with the Code and 
effective tax administration.
    Section 10.6(f)(2)(iii) of the proposed regulations provided that 
the maximum continuing education credit allowed for instruction and 
preparation is four hours annually. The proposed regulations also 
removed the ability to receive hours for authoring articles, books, or 
other publications that was formerly allowed with respect to enrolled 
agents and enrolled retirement plan agents. The Treasury Department and 
the IRS did receive comments objecting to the reduction of maximum 
credit and the removal of the ability to receive credit for authoring 
publications. The comments stated that the rules would result in a 
lower quality of education and lower diversity.
    In Sec.  10.6(f)(2)(iii) of the final regulations, the Treasury 
Department and the IRS modified the proposed rules regarding the 
maximum credit allowed for instruction and preparation to allow 
enrolled agents and enrolled retirement plan agents to earn six hours 
annually. The final regulations allow registered tax return preparers 
to earn four hours annually. The Treasury Department and the IRS do not 
agree with the comments concerning receiving credit for authoring 
publications because the learning involved with authoring a publication 
does necessarily not equate to the knowledge derived from a continuing 
education program that is current and developed by an individual 
qualified in the relevant subject matter. Therefore, the final 
regulations remove the ability to receive hours for authoring articles, 
books, or other publications that was formerly allowed with respect to 
enrolled agents and enrolled retirement plan agents.
    Sections 10.5(b) and 10.6(d)(7) of the final regulations provide 
that the IRS may charge a reasonable nonrefundable fee for each initial 
application and renewal of status as a registered tax return preparer 
submitted to the IRS. At the outset, the initial application fee refers 
to the initial PTIN user fee and the user fee applicable to any 
required competency examination. Similarly, a registered tax return 
preparer must renew a PTIN and pay the applicable user fee as 
prescribed by the IRS in forms, instructions, or other appropriate 
guidance. The IRS may in future regulations add or remove fees 
applicable to becoming a registered tax return preparer.
    The Treasury Department and the IRS received numerous comments 
requesting that certain non-signing tax return preparers be exempt from 
the testing and continuing education requirements. Commentators 
reasoned that the testing and continuing education requirements are not 
necessary for non-signing tax return preparers who are supervised 
because a supervising practitioner is responsible for the accuracy of 
the underlying return and must generally comply with continuing 
professional education requirements and ethical standards. Comments 
also suggested that fees for the competency examination and continuing 
education for paraprofessionals and those assisting in return 
preparation would not be justified when the signing tax return preparer 
ultimately reviews, and is responsible for, the accuracy of the tax 
return. Overall, these comments suggested that the costs of requiring 
testing and continuing education for tax return preparers who are 
supervised by attorneys, certified public accountants, enrolled agents, 
enrolled retirement plan agents, and enrolled actuaries outweighed the 
attendant benefits.
    The Treasury Department and the IRS addressed these concerns in 
Notice 2011-6, which, as previously stated in this preamble, allows 
individuals who are not attorneys, certified public accountants, 
enrolled agents, or registered tax return preparers to obtain a PTIN 
provided the individual is supervised by an attorney, certified public 
accountant, enrolled agent, enrolled retirement plan agent, or enrolled 
actuary who signs the tax return or claim for refund when the 
individual prepares all or substantially all of a tax return or claim 
for refund. Because individuals meeting these requirements, as fully 
set forth in Sec.  1.02(a) of Notice 2011-6, are permitted to obtain a 
PTIN, they are not required to become registered tax return

[[Page 32291]]

preparers and, therefore, are not required to pass the competency 
examination or meet the continuing education requirements.
    Some commentators requested that the Treasury Department and the 
IRS exempt student interns from the requirement to obtain a PTIN. These 
commentators suggested that the PTIN requirement would deter interest 
in tax accounting internships and make internship programs a money-
losing proposition. The PTIN requirement applies to anyone who prepares 
all or substantially all of a tax return for compensation. If an intern 
does not receive compensation, the intern is not required to obtain a 
PTIN under the Sec.  1.6109-2 regulations. If, however, an intern 
engages in tax return preparation activities that make the intern a tax 
return preparer for purposes of the Sec.  1.6109-2 regulations and the 
intern is compensated for these activities, the intern must obtain a 
PTIN.

Continuing Education Providers

    In Sec.  10.9 of the proposed regulations, the Treasury Department 
and the IRS proposed a new requirement that continuing education 
providers obtain approval of each program to be qualified as a 
continuing education program. The proposed regulations also required 
providers of continuing education courses to maintain records and 
educational material concerning continuing education programs and the 
individuals who attended them. Section 10.9(a)(6) of the proposed 
regulations indicated that the IRS may charge a reasonable 
nonrefundable fee for each application for qualification as a qualified 
continuing education program.
    The Treasury Department and the IRS received numerous comments 
requesting that the IRS reconsider the change in the continuing 
education approval process. Comments questioned why the IRS would 
require pre-approval of continuing education requirements when the 
number of individuals required to complete continuing education 
requirements is being significantly increased. Commentators suggested 
that the pre-approval process would be a substantial burden to 
continuing education providers and the IRS. In response to these 
comments, the Treasury Department and the IRS chose not to finalize the 
rules in proposed Sec.  10.9 regarding pre-approval of individual 
continuing education programs.
    Because the Treasury Department and the IRS are not finalizing the 
rules in proposed Sec.  10.9 with respect to pre-approval of individual 
continuing education programs, Sec.  10.9 of these final regulations 
adopts rules similar to the rules in former Sec.  10.6(g) applicable to 
qualified sponsors. Under Sec.  10.9 of the final regulations, 
continuing education providers must be qualified and must obtain a 
qualified continuing education provider number to be eligible to offer 
qualified continuing education. While continuing education providers 
initially will not be required to obtain the IRS' approval of each 
continuing education program offered, the regulations authorize the IRS 
to require such approval, at its discretion, in appropriate forms, 
instructions or other appropriate guidance. Under the final 
regulations, continuing education providers are required to obtain a 
continuing education program number for each qualified continuing 
education program offered. Although the IRS is not currently proposing 
charging providers a fee for obtaining a continuing education provider 
number or a continuing education program number, these regulations 
provide that providers must pay any user fee applicable to obtaining 
either number established in future regulations.
    Section 10.9 of these final regulations allows those listed in 
former Sec.  10.6(g) to be qualified continuing education providers. 
Commentators on the proposed regulations suggested that the Treasury 
Department and the IRS consider that some professional organizations 
have nationally recognized standards for approving continuing education 
programs that are comparable to the IRS standards in Circular 230. 
Specifically, the comments requested that continuing education 
providers approved by these organization's standards be exempted from 
the requirement to seek additional approval from the IRS with respect 
to each continuing education program.
    The Treasury Department and the IRS agree with the commentators 
that there is merit in recognizing continuing education providers that 
have been approved previously by professional organizations with 
standards comparable to Circular 230. Accordingly, Sec.  10.9 of these 
regulations includes as qualified continuing education providers those 
providers that are recognized and approved as providers of continuing 
education on subject matters within Sec.  10.6(f) of these regulations 
by a qualifying organization that has minimum education standards 
comparable to those set forth in Circular 230. The IRS intends to 
identify in forms, instructions, or other appropriate guidance the 
professional organizations whose approval will allow a continuing 
education provider to be qualified within Sec.  10.9.

Limited Practice Before the IRS, Return Preparation, and Application to 
Other Individuals

    Section 10.3(f) of these regulations permits registered tax return 
preparers to represent a taxpayer during an examination if the 
registered tax return preparer prepared the return for the taxable 
period under examination. Therefore, the final regulations remove the 
limited practice authorization in former Sec.  10.7(c)(1)(viii), which 
allowed an unenrolled tax return preparer to represent a taxpayer 
during an examination if that individual prepared the return for the 
taxable period under examination. Additionally, the final regulations 
remove former Sec.  10.8 regarding customhouse brokers from Circular 
230 and move the language in former Sec.  10.7(e) to new Sec.  10.8.
    Section 10.8(a) of the final regulations provides that any 
individual who for compensation prepares or assists with the 
preparation of all or substantially all of a tax return or claim for 
refund must have a PTIN. Except as otherwise prescribed in forms, 
instructions, or other appropriate guidance, an individual must be an 
attorney, certified public accountant, enrolled agent, or registered 
tax return preparer to obtain a preparer tax identification number. 
These rules are consistent with the final PTIN regulations under 
section 6109. An individual who is not an attorney, certified public 
accountant, enrolled agent, or registered tax return preparer who 
nevertheless prepares for compensation all or a substantial portion of 
a document (including tax returns and claims for refund) for submission 
to the IRS is engaged in practice before the IRS and is subject to the 
rules and standards of Circular 230.
    Section 10.8(b) of the final regulations provides that any 
individual, whether or not the individual is a practitioner, may assist 
with the preparation of a tax return or claim for refund (provided the 
individual prepares less than substantially all of the tax return or 
claim for refund). This revision is consistent with the inclusion of 
registered tax return preparers as practitioners authorized to practice 
before the IRS and the practice rights available to these 
practitioners.
    These regulations also establish a new Sec.  10.8(c) regarding 
other individuals. Any individual who prepares for compensation all or 
a substantial portion of a document pertaining to a taxpayer's tax 
liability for submission to the IRS is subject to the duties and 
restrictions relating to practice before the IRS and may be sanctioned, 
after notice and opportunity for a conference,

[[Page 32292]]

for any conduct that would justify a sanction under Sec.  10.50. An 
individual described in 26 CFR 301.7701-15(f) is not treated as having 
prepared all or a substantial portion of the document by reason of such 
assistance. For example, an individual who only furnishes typing, 
reproducing, or other mechanical assistance with respect to a document 
is not subject to the duties and restrictions relating to practice 
before the IRS.

Solicitation

    Section 10.30(a)(1) of these regulations provides that a 
practitioner may not, with respect to any IRS matter, in any way use or 
participate in the use of any form of public communication or private 
solicitation containing a false, fraudulent, coercive, misleading, or 
deceptive statement or claim. In describing their designation, 
registered tax return preparers may not utilize the term ``certified'' 
or imply an employer/employee relationship with the IRS.
    The proposed regulations provided that registered tax return 
preparers were permitted to use the term ``designated as a registered 
tax return preparer with the Internal Revenue Service'' when describing 
their designation. Some commentators expressed concern that the word 
``with'' may imply a closer relationship with the IRS than exists, such 
as an employer-employee relationship. These commentators suggested 
using the term ``by'' instead. Accordingly, the IRS revised the 
language in final Sec.  10.30(a)(1) to take into account this 
suggestion.

Standards With Respect to Tax Returns and Documents, Affidavits and 
Other Papers

    After careful consideration, the IRS and the Treasury Department 
continue to conclude that the professional standards in Sec.  10.34(a) 
generally should be consistent with the civil penalty standards in 
section 6694 for tax return preparers. As discussed in this preamble, 
the limited differences between the standards in Sec.  10.34 and 
section 6694 arise from the different purposes served by those 
provisions and the different manner in which the two standards will be 
administered.
    The standards with respect to tax returns in Sec.  10.34(a) in the 
final regulations provide broader guidelines that are more appropriate 
for professional ethics standards. Under Sec.  10.34(a)(1)(i) of the 
regulations, a practitioner may not willfully, recklessly, or through 
gross incompetence, sign a tax return or claim for refund that the 
practitioner knows or reasonably should know contains a position that: 
(A) Lacks a reasonable basis; (B) is an unreasonable position as 
described in section 6694(a)(2) (including the related regulations and 
other published guidance); or (C) is a willful attempt by the 
practitioner to understate the liability for tax or a reckless or 
intentional disregard of rules or regulations by the practitioner as 
described in section 6694(b)(2) (including the related regulations and 
other published guidance).
    Under Sec.  10.34(a)(1)(ii) of these regulations, a practitioner 
may not willfully, recklessly, or through gross incompetence, advise a 
client to take a position on a tax return or claim for refund, or 
prepare a portion of a tax return or claim for refund containing a 
position, that: (A) Lacks a reasonable basis; (B) is an unreasonable 
position as described in section 6694(a)(2) (including the related 
regulations and other published guidance); or (C) is a willful attempt 
by the practitioner to understate the liability for tax or a reckless 
or intentional disregard of rules or regulations by the practitioner as 
described in section 6694(b)(2) (including the related regulations and 
other published guidance).
    Commentators on proposed Sec.  10.34 requested that the IRS clarify 
whether Notice 2009-5 (2009-3 IRB 309) applies for purposes of 
determining whether the tax return preparer prepared a return or claim 
for refund with an unreasonable position under Sec.  10.34. An 
unreasonable position for purposes of Sec.  10.34 is an unreasonable 
position as described in section 6694(a)(2) and related published 
guidance. Thus, Notice 2009-5 applies to determine whether the tax 
return preparer took an unreasonable position to the extent that it 
applies to the tax return preparer for purposes of section 6694.
    Some commentators were concerned that a violation of section 6694 
would translate to a per se violation of Sec.  10.34. If the IRS, 
however, assesses a penalty against a practitioner under section 6694 
and also refers the practitioner for possible discipline under Circular 
230, an independent determination as to whether the practitioner 
engaged in willful, reckless, or grossly incompetent conduct subject to 
discipline under Sec.  10.34(a) will be made before any disciplinary 
proceedings are instituted or any sanctions are imposed. Thus, a 
practitioner liable for a penalty under section 6694 is not 
automatically subject to discipline under Sec.  10.34(a) of these 
regulations.
    Several commentators recommended that the final regulations adopt 
the reasonable basis standard as the appropriate return position 
standard under Sec.  10.34(a) rather than the civil penalty standards 
in section 6694(a) (the substantial authority and reasonable basis with 
adequate disclosure standards). These commentators similarly requested 
clarification providing that a practitioner is not subject to 
discipline under Sec.  10.34(a) if the practitioner fails to adequately 
disclose a position on a return or claim for refund for which there is 
a reasonable basis. These comments are not adopted in final Sec.  
10.34(a). Proposed Sec.  10.34(a)(1)(i)(A) and (a)(1)(ii)(A) 
established reasonable basis as the minimum threshold standard for 
practitioners because a practitioner acts unethically when the 
practitioner advises a taxpayer to take a position on a return or claim 
for refund that lacks a reasonable basis. The Treasury Department and 
the IRS continue to believe that a practitioner also acts unethically 
in violating the civil penalty standards under section 6694(a) 
(including when there is a reasonable basis for a position on a return 
or claim for refund but the practitioner does not adequately disclose 
the position within the meaning of Sec.  1.6694-2(d)(3)) through 
willful, reckless, or grossly incompetent conduct. Accordingly, final 
Sec.  10.34(a)(1)(i) and (a)(1)(ii) provide three independent standards 
of practitioner conduct and a practitioner who fails to satisfy any one 
of these three standards is subject to discipline under Sec.  10.34(a).

Procedures To Ensure Compliance

    Section 10.36(b) of these regulations provides that firm management 
with principal authority and responsibility for overseeing a firm's 
practice of preparing tax returns, claims for refunds and other 
documents filed with the IRS must take reasonable steps to ensure that 
the firm has adequate procedures in effect for purposes of complying 
with Circular 230. The Treasury Department and the IRS continue to 
believe that expansion of Sec.  10.36 to require firm procedures for 
tax return preparation practice, in addition to the pre-existing 
application to covered opinions, will help ensure compliance and 
encourage firms to self-regulate. Firm responsibility is a critical 
factor in ensuring high quality advice and representation for 
taxpayers.

Authority To Accept a Practitioner's Consent To Sanction

    Section 10.50 of the final regulations provides that the IRS has 
the authority to accept a practitioner's offer of consent to be 
sanctioned under Sec.  10.50 in lieu of instituting or continuing a 
proceeding under Sec.  10.60(a). Section 10.61(b)(2)

[[Page 32293]]

currently provides that the IRS may accept or decline such an offer 
from a practitioner. A provision similar to the provision added to 
these regulations was removed during a previous revision of Circular 
230. Due to the removal, some stakeholders have expressed concern over 
whether the IRS has the authority to accept an offer of consent to 
sanction. The provision added in the final regulations is merely 
intended to clarify any ambiguity with respect to the authority of the 
IRS to accept an offer of consent to sanction in lieu of instituting or 
continuing a proceeding.

Incompetence and Disreputable Conduct

    Section 10.51 of Circular 230 defines disreputable conduct for 
which a practitioner may be sanctioned. Section 6011(e)(3) of the Code, 
enacted by section 17 of the Worker, Homeownership, and Business 
Assistance Act of 2009, Public Law 111-92 (123 Stat. 2984, 2996) (Nov. 
6, 2009), requires certain specified tax return preparers to file 
individual income tax returns electronically. Because the Treasury 
Department and the IRS believe that the failure to comply with this 
requirement is disreputable conduct, these regulations are amended to 
add a new paragraph in Sec.  10.51 to address practitioners who fail to 
comply with this requirement. Under Sec.  10.51(a)(16), disreputable 
conduct includes willfully failing to file on magnetic or other 
electronic media a tax return prepared by the practitioner when the 
practitioner is required to do so by Federal tax laws (unless the 
failure is due to reasonable cause and not due to willful neglect). 
Some commentators stated that a failure to electronically file is only 
a procedural failure and suggested that it could only constitute 
disreputable conduct when coupled with an attempt to defraud the 
government. Commentators also suggested that a failure to 
electronically file should not constitute disreputable conduct because 
there are many valid reasons why a practitioner would not choose to 
electronically file tax returns.
    The Treasury Department and the IRS, however, conclude that it is 
appropriate to include as disreputable conduct a tax return preparer's 
willful failure to electronically file tax returns subject to the 
mandatory electronic filing requirement. The IRS cannot permit tax 
return preparers to intentionally disregard the internal revenue laws 
and continue to practice before the IRS. Section 6011(e)(3) only 
applies to certain tax return preparers who file a specified number of 
returns per year and these tax return preparers need to be aware of the 
new electronic filing requirement. The Treasury Department and the IRS 
have issued final regulations (TD 9518) published in the Federal 
Register (76 FR 17521) on March 30, 2011, that provide exclusions from 
the electronic filing requirement. The exclusions in the final 
regulations include undue hardship waivers and administrative 
exemptions. See Rev. Proc. 2011-25 for additional information on 
hardship waivers and Notice 2011-16 for additional information on 
administrative exemptions. Moreover, tax return preparers are only 
subject to sanction under Sec.  10.51(a)(16) of the final regulations 
for not electronically filing if such a failure is willful. 
Accordingly, Sec.  10.51(a)(16) is sufficiently narrowly tailored to 
only apply to these tax return preparers who willfully fail to comply 
with the electronic filing requirement.
    Under Sec.  10.51(a)(17) of the final regulations, disreputable 
conduct also includes willfully preparing all or substantially all of, 
or signing as a compensated tax return preparer, a tax return or claim 
for refund when the practitioner does not possess a current or 
otherwise valid PTIN or other prescribed identifying number. Section 
10.51(a)(18) of these regulations states that it is disreputable 
conduct for a practitioner to willfully represent a taxpayer before an 
officer or employee of the IRS unless the practitioner is authorized to 
do so pursuant to Circular 230. These changes are consistent with the 
other revisions in these regulations and under section 6109.

Proceedings Against Appraisers

    The regulations also contain amendments to Sec.  10.60(b) relating 
to institution of proceedings against appraisers to better reflect the 
modifications made by section 1219 of the Pension Protection Act of 
2006, Public Law 109-280 (120 Stat. 780), and the enactment of the 
section 6695A penalty. The IRS may reprimand or institute a proceeding 
for disqualification against an appraiser assessed a penalty under 
sections 6694, 6695A, or 6701, among any other relevant penalty 
provisions, as long as it is determined that the appraiser acted 
willfully, recklessly, or through gross incompetence with respect to 
the proscribed conduct.

Appeal of Decision of Administrative Law Judge

    These regulations amend Sec.  10.77 to provide additional, 
clarifying information regarding the procedure for filing an appeal of 
an Administrative Law Judge's decision with respect to a proceeding 
under subpart D of Circular 230.

Records

    Section 10.90 of these final regulations clarify that the roster 
requirements also pertain to registered tax return preparers and 
qualified continuing education programs.

Effective Date

    These final regulations generally apply 60 days after the date the 
regulations are published in the Federal Register.

Special Analyses

    Executive Order 12866, as supplemented by Executive Order 13563, 
provides that regulations must promote predictability and reduce 
uncertainty, and in developing regulations, agencies must take into 
account benefits and costs, both quantitative and qualitative. 
Specifically, agencies are directed, to the extent permitted by law, to 
propose or adopt regulations only upon a reasoned determination that 
its benefits justify its costs (recognizing that some benefits and 
costs are difficult to quantify); tailor its regulations to impose the 
least burden on society, consistent with obtaining regulatory 
objectives; and in choosing among alternative regulatory approaches, 
select those approaches that maximize net benefits. This rule has been 
designated a ``significant regulatory action'' under section 3(f) of 
Executive Order 12866, inasmuch as it may adversely affect in a 
material way the economy, a sector of the economy, productivity, 
competition, or jobs. Accordingly, the rule has been reviewed by the 
Office of Management and Budget. The Regulatory Assessment prepared for 
this regulation is provided in this preamble under the heading 
``Regulatory Assessment Under E.O. 12866, as Supplemented by E.O. 
13563.''
    It has been determined that a final regulatory flexibility analysis 
is required for this final regulation under 5 U.S.C. 604. This analysis 
is set forth later in this preamble under the heading ``Final 
Regulatory Flexibility Analysis.''
    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that may result in expenditure by State, local, and Tribal governments, 
in the aggregate, or by the private sector, of $100 million or more in 
any one year. If a budgetary impact statement is required, section 205 
of the Unfunded Mandates Act also requires an agency to

[[Page 32294]]

identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule. Please see the Regulatory Assessment for a 
discussion of the budgetary impact of this final rule.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking was submitted to Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business and no comments were received.

A. Regulatory Assessment Under E.O. 12866, as Supplemented by E.O 13563

1. Statement of the Need for the Regulatory Action
    Although the IRS has exercised its authority to regulate for 
attorneys, certified public accountants, and other specified tax 
professionals, regulations under Circular 230 currently do not apply to 
a critical group of tax professionals: Tax return preparers. As 
discussed in the Report, taxpayers' reliance on tax return preparers 
has grown steadily in recent decades. The number of taxpayers who 
prepared their own tax returns without assistance fell by more than 
two-thirds between 1993 and 2005. In fact, today, tax return preparers 
assist a majority of U.S. taxpayers in meeting their Federal tax filing 
obligations. In 2008 and 2009, for example, paid tax return preparers, 
including attorneys, certified public accountants, enrolled agents, and 
unenrolled tax return preparers, prepared almost 60 percent of all 
federal tax returns filed, including approximately 87 million Federal 
individual income tax returns. The IRS expects these numbers to 
increase in 2010 and the coming years.
    Tax return preparers are not only responsible for assisting 
taxpayers in filing complete, timely, and accurate returns, but also 
help educate taxpayers about the tax laws, and facilitate electronic 
filing. Tax return preparers provide advice to taxpayers, identify 
items or issues for which the law or guidance is unclear, and inform 
taxpayers of the benefits and risks of positions taken on a tax return, 
and the tax treatment or reporting of items and transactions. The IRS 
and the Treasury Department recognize that the majority of tax return 
preparers serve the interests of their clients and the tax system by 
preparing complete and accurate returns.
    The tax system is best served by tax return preparers who are 
ethical, provide good service, and are qualified. Recent government 
studies, including studies from the Government Accountability Office 
and the Treasury Inspector General for Tax Administration, see, for 
example, Government Accountability Office, Paid Tax Return Preparers: 
In a Limited Study, Chain Preparers Made Serious Errors, GAO-06-563T 
(Apr. 4, 2006); Treasury Inspector General for Tax Administration, Most 
Tax Returns Prepared by a Limited Sample of Unenrolled Preparers 
Contained Significant Errors, Rept.  2008-40-171 (Sept. 3, 
2008), illustrate the losses incurred by both taxpayers and the system 
of Federal tax administration when tax return preparers fail to 
properly prepare tax returns. Additionally, many of the more than 500 
public comments received by the IRS during the agency's review of the 
return preparer industry expressed concern for taxpayers, tax 
administration and the return preparer industry, all of whom are hurt 
when tax returns are not accurately prepared.
    An overwhelming number of commentators (98 percent of the persons 
who offered comments on oversight and enforcement) supported increased 
government oversight of tax return preparers, particularly for 
individuals who are not attorneys, certified public accountants or 
others currently authorized to practice before the IRS. These 
commentators argued that taxpayers, the IRS and tax administration 
generally would benefit from the registration of tax return preparers. 
Eighty-eight percent of the persons who expressed an opinion on 
registering paid tax return preparers favor registration. Ninety 
percent of the persons who commented on testing and education favor 
minimum education or testing requirements for paid tax return 
preparers. And 98 percent of the persons who commented on quality and 
ethics favor establishment of quality and ethics standards for paid tax 
return preparers.
    Because the IRS has not adopted a uniform set of regulations for 
tax return preparers, the amount of oversight of tax return 
professionals varies greatly depending on professional affiliations and 
the geographic area in which they practice. Most tax return preparers 
do not have to pass any government or professionally mandated 
competency requirement. Most tax return preparers are not required to 
participate in a specified program of continuing professional 
education. And the ethical rules found in Circular 230 currently are 
not applicable to all tax return preparers.
    As such, the IRS recognizes the need to apply a uniform set of 
rules to offer taxpayers some assurance that their tax returns are 
prepared completely and accurately. Increasing the completeness and 
accuracy of returns would necessarily lead to increased compliance with 
tax obligations by taxpayers.
2. Potentially Affected Tax Returns
    These regulations generally extend pre-existing regulations that 
apply to attorneys, certified public accountants and other specified 
tax professionals to tax return preparers, including currently 
unenrolled tax return preparers, who prepare all or substantially all 
of a tax return or claim for refund for compensation. The rules 
potentially apply to all returns prepared by tax return preparers 
regardless of the taxpayer. For example, the rules apply to self-
employed tax return preparers who prepare individual tax returns for 
persons who have only wage and interest income. The IRS is authorized 
to extend the application of the rule to corporate and large 
partnership returns, which are prepared predominately by tax return 
preparers employed by large accounting firms. These examples are 
nonexclusive and the application or potential application of these 
rules is not limited to only those tax return preparers covered by the 
examples.
    The current expansion of these regulations to currently unenrolled 
tax return preparers will impact individual taxpayers more than large 
corporate taxpayers.
3. An Assessment of Benefits Anticipated From the Regulatory Action
    The primary benefit anticipated from these regulations is that they 
will improve the accuracy, completeness, and timeliness of tax returns 
prepared by tax return preparers. As illustrated in the recent 
government studies, including the IRS' recent review of the tax return 
preparer industry, inaccurate tax returns are costly both to taxpayers 
and the government. Inaccurate returns may affect the finances of 
taxpayers, who might overpay their respective share of taxes or fail to 
take advantage of available tax benefits. Inaccurate tax returns may 
also affect the U.S. government because of overpayments, underpayments 
and increased costs of enforcement and collection.
    The regulations are expected to improve the accuracy, completeness, 
and timeliness of tax returns in a number of ways. First, requiring 
registered tax return preparers to demonstrate the necessary 
qualifications to provide a valuable service by successfully completing 
a government or professionally mandated competency examination and 
continued competence

[[Page 32295]]

by completing the specified continuing education credits annually will 
result in more competent and ethical tax return preparers who are well 
educated in the rules and subject matter. A more competent and ethical 
tax return preparer community will prevent costly errors, potentially 
saving taxpayers from unwanted problems and relieving the IRS from 
expending valuable examination and collection resources. Thus, 
regulations are critical to assisting the IRS curtail the activities of 
noncompliant and unethical tax return preparers.
    Second, these regulations, in association with new and separate 
regulations under section 6109 requiring all individuals who prepare 
all or substantially all of a tax return for compensation to obtain a 
PTIN, are expected to improve the accuracy, completeness and timeliness 
of tax returns because they will help the IRS identify tax return 
preparers and the tax returns and claims for refund that they prepare, 
which will aid the IRS' oversight of tax return preparers, and to 
administer requirements intended to ensure that tax return preparers 
are competent, trained, and conform to rules of practice. Individuals 
who prepare all or substantially all of a tax return or claim for 
refund will be required to obtain a PTIN prescribed by the IRS and 
furnish the PTIN when the tax return preparer signs (as the tax return 
preparer) a tax return or claim for refund. Given the important role 
that tax return preparers play in Federal tax administration, the IRS 
has a significant interest in being able to accurately identify tax 
return preparers and monitor the tax return preparation activities of 
these individuals. These regulations, in conjunction with the final 
PTIN regulations, will enable the IRS to more accurately identify tax 
return preparers and improve the IRS' ability to associate filed tax 
returns and refund claims with the responsible tax return preparer.
    Third, the regulations are expected to improve the accuracy of tax 
returns by providing that all registered tax return preparers are 
practicing before the IRS and, therefore, are practitioners subject to 
the ethical standards of conduct in Circular 230. This change will 
authorize the IRS to inquire into possible misconduct and institute 
disciplinary proceedings relating to registered tax return preparer 
misconduct under the provisions of Circular 230. A registered tax 
return preparer who is shown to be incompetent or disreputable, fails 
to comply with the provisions in Circular 230, or with intent to 
defraud, willfully and knowingly misleads or threatens a client or 
prospective client, is subject to censure, suspension, or disbarment 
from practice before the IRS, as well as a monetary penalty.
    The availability of these sanctions will act as a deterrent to 
registered tax return preparers engaging in misconduct because 
disreputable or incompetent registered tax return preparers who are 
suspended or disbarred from practice will no longer be able to prepare 
tax returns, claims for refund, and other documents submitted to the 
IRS. Competent and ethical tax return preparers who are well educated 
in the rules and subject matter of their field can prevent costly 
errors, potentially saving a taxpayer from unwanted problems later on 
and relieving the IRS from expending valuable examination and 
collection resources.
    The IRS and the Treasury Department expect that the largest 
marginal improvements in accuracy will be with regard to tax returns 
prepared by tax return preparers who previously were unregulated 
through the Circular 230 requirements. Unlike certified public 
accountants, attorneys, and enrolled agents, unenrolled tax return 
preparers generally are not subject to any form of testing, continuing 
professional education, or uniform ethical standards. The tax returns 
prepared by unenrolled tax return preparers may involve tax issues that 
are less complicated and smaller in amount than issues in tax returns 
prepared by other types of tax professionals. In addition, individual 
taxpayers may face a variety of complex tax issues, for which the 
advice of a qualified tax advisor will improve the accuracy on the 
return.
4. An Assessment of Costs Anticipated From the Regulatory Action
    There are various costs anticipated from this regulatory action.

------------------------------------------------------------------------
             Cost category                  Preliminary cost estimate
------------------------------------------------------------------------
COMPETENCY EXAMINATION:
                                         Costs to Registered Tax Return
                                          Preparers:
     Costs to registered tax        The costs associated with
     preparers: Costs associated with        competency examinations for
     taking a minimum competency             registered tax preparers
     examination (including costs of         are currently unknown. The
     examination, amount of time             competency examination has
     required to study for the exam,         not been developed and an
     and any associated travel).             examination vendor has not
                                             been selected. The cost of
                                             the examination and amount
                                             of time required to study
                                             for it, therefore, are
                                             unknown. The costs for any
                                             associated travel will
                                             depend on what locations
                                             the test is offered in and
                                             how close the applicant
                                             lives to those locations.
                                             While there is currently no
                                             vendor for the examination,
                                             it is expected that the
                                             vendor will offer the test
                                             in many locations across
                                             the United States and
                                             multiple locations outside
                                             the United States.
                                         Costs to Vendors:
     Costs to vendors: User fee     The vendor for the
     costs IRS will charge to recover        examination has not been
     the costs to third-party vendors        selected so these fees
     who administer the registered tax       cannot yet be determined.
     return preparer competency
     examination.
                                         Costs to Government:
     Costs to government: Costs     These costs are currently
     associated with creating,               unknown. The costs to the
     administrating, and reviewing           government will depend, in
     competency exams.                       part, on which functions
                                             will be performed by a
                                             vendor. Also, the vendor
                                             may recover the vendor's
                                             associated costs through a
                                             separate fee charged by the
                                             vendor.
------------------------------------------------------------------------
PTIN:
                                         Costs to Registered Tax Return
                                          Preparers and Certain Other
                                          Individuals Eligible to
                                          Receive a PTIN Under Notice
                                          2011-6:

[[Page 32296]]

 
     Costs to registered tax        The fees registered tax
     preparers: User fees for applying       preparers and certain other
     for a PTIN and renewing a PTIN.         individuals under Notice
                                             2011-6 will face for
                                             applying for a PTIN and
                                             renewing a PTIN is $64.25
                                             annually. Given that there
                                             are an estimated 800,000 to
                                             1,200,000 individuals who
                                             will apply for or renew a
                                             PTIN annually, we estimate
                                             that the aggregate annual
                                             PTIN registration costs
                                             will be from $51 million to
                                             $77 million.
                                         Costs to Vendors:
     Costs to vendors: User fee     The fee charged by the
     assessed by third-party vendor to       vendor is $14.25. The
     administer the PTIN application         $14.25 fee reflects costs
     and renewal process.                    incurred by the vendor in
                                             processing a PTIN
                                             application or renewal.
                                             Given that there are an
                                             estimated 800,000 to
                                             1,200,000 individuals who
                                             will apply for or renew a
                                             PTIN annually, we estimate
                                             that the aggregate annual
                                             PTIN registration costs
                                             will be from $11 million to
                                             $17 million.
                                         Costs to Government:
     Costs to government:           The $50 annual fee is
     Administration of PTIN                  expected to recover the
     registration program.                   $59,427,633 annual costs
                                             the government will face in
                                             its administration of the
                                             PTIN registration program.
                                             This fee includes: (1) The
                                             costs the government faces
                                             in administering
                                             registration cards or
                                             certificates for each
                                             registered tax preparer,
                                             (2) costs associated with
                                             prescribing by forms,
                                             instructions, or other
                                             guidance which forms and
                                             schedules registered tax
                                             preparers can sign for, and
                                             (3) tax compliance and
                                             suitability checks
                                             conducted by the
                                             government.
------------------------------------------------------------------------
RECORDKEEPING:
                                         Costs to Continuing Education
                                          Providers:
     Costs to continuing            $38,632,500 annual costs.
     education providers: Recordkeeping
     requirements on continuing
     education providers to maintain
     records and educational material
     concerning these programs and the
     individuals who attend them.
                                         Costs to Registered Tax Return
                                          Preparers:
     Costs to registered tax        $9,880,000 annual costs.
     preparers: Recordkeeping
     requirements on registered tax
     preparers to maintain records and
     educational materials regarding
     the completion of the required
     qualifying continuing education
     credits.
------------------------------------------------------------------------
CONTINUING EDUCATION:
                                         Costs to Registered Tax Return
                                          Preparers:
     Costs to registered tax        We do not have a cost
     preparers: Completing continuing        estimate available for
     education coursework requirement.       continuing education costs
                                             borne by the tax preparers.
                                             The cost of continuing
                                             education courses generally
                                             range from $20 to $300 per
                                             course.
                                         Costs to Continuing Education
                                          Providers:
     Costs to continuing            Continuing education
     education providers: Obtaining          providers are not currently
     required numbers from the IRS.          charged a fee for obtaining
                                             a provider number or
                                             program number.
------------------------------------------------------------------------
FINGERPRINTING:
                                         Costs to Registered Tax Return
                                          Preparers and Certain Other
                                          Individuals Eligible to
                                          Receive a PTIN Under Notice
                                          2011-6:
     Costs to registered tax        The fees that will be
     return preparers: Fingerprinting        imposed on registered tax
                                             return preparers and
                                             certain other individuals
                                             eligible to receive a PTIN
                                             under Notice 2011-6 for
                                             fingerprinting are not
                                             available because the
                                             vendor processing the
                                             fingerprinting check has
                                             not been selected.
------------------------------------------------------------------------

    Tax return preparers will incur costs associated with taking a 
minimum competency examination, including the cost of the examination, 
the amount of time required to study for the examination, and any 
associated travel depending on the proximity of tax return preparer to 
the test site location. Although it is anticipated that the vendor will 
offer the test at multiple locations in the United States and outside 
the United States, the vendor and the test locations have not been 
selected at this time. Future regulations will be proposed that address 
the costs to the government for creating, administering, and reviewing 
the examination and the user fee the IRS will charge to recover these 
costs. The third-party vendor who helps administer the registered tax 
return preparer competency examination also will charge a reasonable 
fee to take the registered tax return preparer examination and a 
reasonable fee to be fingerprinted.
    Additionally, preparers are subject to user fees for applying for a 
PTIN and renewing the PTIN. Final regulations establish a $50 fee to 
apply for a PTIN. A third party vendor administers the PTIN application 
and renewal process and charges a $14.25 fee that is independent of the 
user fee charged by the government.
    The PTIN user fee recovers the full cost to the government to 
administer the PTIN application and renewal program. 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. 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

[[Page 32297]]

Federal tax return or claim for refund. 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, the IRS currently charges a user fee on 
applicants seeking those special benefits.
    Tax return preparers will incur recordkeeping and other costs 
associated with taking continuing education classes and any associated 
travel. Section 10.6 of these final regulations requires a registered 
tax return preparer to maintain records and educational materials 
regarding the completion of the required qualifying continuing 
education credits. The IRS and the Treasury Department estimate that 
there are 650,000 practitioners who will be affected by these 
recordkeeping requirements and the estimated annual burden per 
practitioner will vary from 30 minutes to one hour, depending on 
individual circumstances, with an estimated average of 54 minutes. The 
total annual costs resulting from these recordkeeping requirements will 
be $9,880,000 for all affected practitioners.
    Continuing education providers will be subject to recordkeeping 
costs. Section 10.9 of these final regulations requires providers of 
qualifying continuing education programs to maintain records and 
educational material concerning these programs and the individuals who 
attend them. Approximately 500 continuing education providers are 
currently approved to provide continuing education programs for the 
approximately 50,000 enrolled agents, enrolled actuaries and enrolled 
retirement plan agents who must complete continuing education 
currently, but the IRS and the Treasury Department estimate that there 
are 2,250 continuing education providers who will be affected by these 
recordkeeping requirements and the estimated annual burden per 
continuing education provider will vary from 5 hours to 5,000 hours, 
depending on individual circumstances, with an estimated average of 500 
hours. The estimated total annual costs resulting from these 
requirements will be $38,632,500 for all affected continuing education 
providers.
    Currently, the cost to the tax return preparer of any particular 
continuing education course can vary greatly from free to hundreds of 
dollars. Many tax return preparation firms either provide continuing 
education courses at the firm to their employees for no charge or 
sponsor the cost of external courses for their employees. Other tax 
return preparers, however, will have to personally pay the cost of each 
continuing education course, which generally ranges anywhere from $20 
to $300 per course depending on whether the continuing education 
provider offers the course in person, online, or over the phone. Tax 
return preparers also may incur additional costs if they travel to 
attend continuing education programs. These costs may include the time 
to travel to the program, transportation, lodging and incidentals.
    Entities may be directly affected by the competency examination, 
PTIN and continuing education costs if they choose to pay any or all of 
the user fees or expenses for their employees. Some individuals and 
entities also may lose sales and profits while preparers are studying 
and sitting for the examination or taking the continuing education 
courses. Finally, individual tax return preparers and entities that 
employ individuals who prepare tax returns may need to close or change 
their business model if all, or a majority, of their employees cannot 
satisfy the necessary qualifications and competency requirements. The 
IRS and the Treasury Department believe that only a small percentage of 
tax return preparers will need to close or change their business model 
based upon these rules.
5. An Assessment of Costs and Benefits of Potential Alternatives
    The IRS and the Treasury Department considered various alternatives 
in determining the best ways to implement proposed changes to the 
regulation of tax return preparers. In order to place the costs and 
benefits of the final rule in context, E.O. 12866 requires a comparison 
between the final rule, a baseline of what the world would look like 
without the final rule, and reasonable alternatives to the proposed 
rule.
i. Baseline Scenario
    Under a baseline scenario, the current ethical standards in 
Circular 230 would continue to apply only to attorneys, certified 
public accountants, enrolled agents, and other practitioners who 
prepare tax returns and claims for refund, but not to unenrolled tax 
return preparers. Also, any unenrolled tax return preparer under this 
baseline scenario would be able to prepare and sign tax returns and 
claims for refund without passing an examination to establish 
competence or satisfying continuing education requirements.
    Remaining under the current rules regarding tax return preparers 
would eliminate the benefits of the rule described in section A3 of 
this preamble. For example, under the baseline, OPR would not be 
authorized to institute disciplinary proceedings seeking sanctions 
against unenrolled tax return preparers.
    Continuing to authorize any individual to prepare tax returns and 
claims for refund for compensation without passing an examination or 
taking continuing education courses also would eliminate any costs 
associated with the rule described in section A4 of this preamble. Tax 
return preparers, however, would still potentially be subject to user 
fees for obtaining a PTIN and renewing the PTIN if other Treasury 
Department and IRS regulations specifically prescribed those fees.
ii. Alternative One
    The first alternative that was considered is to require all tax 
return preparers to comply with the ethical standards in Circular 230, 
but not to require any tax return preparer to pass an examination and 
complete continuing education courses. Under this alternative, the 
provisions of the rule clarifying that tax return preparers are subject 
to the ethical rules in Circular 230 would remain intact, but all of 
the other changes would not be adopted.
    The benefits resulting from this alternative would likely be less 
than the benefits resulting from these regulations because tax return 
preparers would not need to meet a minimum competency level and keep 
educated and up-to-date on Federal tax issues. The most significant 
drawback to this alternative is the potential loss of these benefits 
and the benefits that result from monitoring the return preparation 
activities of tax return preparers generally. Under this alternative, 
however, tax return preparers would not incur the majority of costs 
that exist under the regulations.
iii. Alternative Two
    A second alternative is to require tax return preparers who are not 
currently authorized to practice before the IRS to apply for such 
authorization with the IRS, satisfy annual continuing education 
requirements, and meet certain ethical standards, but not to pass a 
minimum competency examination. This alternative is identical to the 
regulations other than requiring certain preparers to successfully pass 
an examination administered by, or under the oversight of, the IRS.
    The benefits resulting from this alternative are more comparable to 
the benefits in the regulations than under alternative one. 
Nevertheless, the lack of an examination would not be as

[[Page 32298]]

effective in ensuring that tax return preparers are qualified to obtain 
professional credentials and practice before the IRS. Tax return 
preparers under this alternative would incur all of the same costs that 
are in the regulations other than the costs associated with taking the 
examination.
iv. Alternative Three
    A third alternative is to ``grandfather in'' unenrolled tax return 
preparers who have accurately and competently prepared tax returns for 
a certain amount of years. This alternative is the same as the rules in 
the regulations other than authorizing some unenrolled return preparers 
who have a specified amount of prior experience preparing tax returns 
and claims for refund to continue to prepare and sign returns without 
passing a minimum competency examination.
    The benefits resulting from this alternative would likely be less 
than the benefits resulting from these regulations because the IRS and 
the Treasury Department believe a minimum level of competency needs to 
be assured through examination. Additionally, this alternative is not 
as likely to promote the same taxpayer confidence in the tax return 
preparation community as the regulations, which may, in turn, influence 
taxpayers when choosing a tax return preparer. Tax return preparers 
under this alternative would incur all of the same costs that are in 
the regulations except certain unenrolled preparers would avoid the 
costs associated with taking the examination.
v. Alternative Four
    A fourth alternative is to require all tax return preparers, 
regardless of whether the tax return preparer is supervised, to 
complete the competency examination and continuing education 
requirements. This alternative is identical to the proposed 
regulations, which proposed requiring all unenrolled tax return 
preparers to meet the examination and education requirements.
    Numerous commentators suggested that the costs of requiring testing 
and continuing education for tax return preparers who are supervised by 
attorneys, certified public accountants and enrolled agents outweighed 
the attendant benefits. After fully considering these comments, the IRS 
decided that the best alternative was not requiring testing and 
continuing education for tax return preparers who are employed by law 
firms, certified public accounting firms and certain other recognized 
firms and are supervised by attorneys, certified public accountants, 
enrolled agents, enrolled retirement plan agents and enrolled actuaries 
who sign the returns that these individuals prepare.

B. Final Regulatory Flexibility Analysis

    When an agency promulgates a final regulation that follows a 
required notice of proposed rulemaking, the Regulatory Flexibility Act 
(5 U.S.C. chapter 6) (RFA) 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. Section 605 of 
the RFA provides an exception to this requirement if the agency 
certifies that the 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 final regulations will impact 
a substantial number of small entities and the economic impact will be 
significant. As a result, a regulatory flexibility analysis is 
required.
1. Statement of the Need for and Objectives of The Proposed Rule
    Tax return preparers are critical to ensuring compliance with the 
Federal tax laws and are an important component in the IRS' 
administration of those laws. More than eighty percent of U.S. 
taxpayers use a tax return preparer or consumer tax return preparation 
software to help prepare and file tax returns. Most tax return 
preparers are currently not subject to the ethical rules governing 
practice before the IRS and do not have to pass any competency 
requirement established by the government or a professional 
organization. After completing a comprehensive six-month review of tax 
return preparers, which included receiving input through public forums, 
solicitation of written comments, and meetings with advisory groups, 
the IRS concluded that there is a need for increased oversight of the 
tax return preparer industry.
    The principal objective of the regulations is to increase oversight 
of tax return preparers and to provide guidance to tax return preparers 
about the new requirements imposed on them under Circular 230. These 
regulations implement higher standards for the tax return preparer 
community with the goal of significantly enhancing protections and 
service for taxpayers, increasing confidence in the tax system, and 
resulting in greater long-term compliance with the tax laws.
    Specifically, the regulations clarify that a registered tax return 
preparer is a practitioner practicing before the IRS and thereby is 
subject to the ethical rules in Circular 230. The regulations require a 
registered tax return preparer to demonstrate the necessary 
qualifications and competency to advise and assist other persons in the 
preparation of all or substantially all of a tax return or claim for 
refund.
2. 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 to 
the Rule as a Result of the Comments
    The IRS did not receive specific comments from the public 
responding to the initial regulatory flexibility analysis in these 
final regulations. The IRS did receive comments from the public on the 
proposed amendments to 31 CFR part 10. A summary of the comments is set 
forth elsewhere in this preamble, along with the Treasury Department's 
and the IRS' assessment of the issues raised in the comments and 
descriptions of any revisions resulting from the comments.
3. Description and Estimate of the Number of Small Entities Subject to 
the Rule
    The regulations affect individuals currently working as paid tax 
return preparers, individuals who want to become designated as a 
registered tax return preparer under the new oversight rules in 
Circular 230, and those small entities that are owned by or employ paid 
preparers. 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 an unenrolled individual owning a small business or on a 
small business that otherwise employs unenrolled paid return preparers.
    The appropriate North American Industry Classification System 
(NAICS) codes for tax return preparers relate to tax preparation 
services (NAICS code 541213) and other accounting services (NAICS code 
541219). Entities identified under these codes are considered small 
under the Small Business Administration size standards (13 CFR 121.201) 
if their annual revenue is less than $7 million or $8.5 million, 
respectively. The IRS estimates that approximately seventy to eighty 
percent of the individuals subject to these

[[Page 32299]]

regulations are paid preparers operating as or employed by small 
entities.
4. Description of the Projected Reporting, Recordkeeping and Related 
Requirements of the Rule, Including an Estimate of the Classes of Small 
Entities That Will Be Subject to the Requirements and the Type of 
Professional Skills Necessary for Preparation of the Report or Record
    The IRS estimates that there are approximately 600,000 to 700,000 
unenrolled tax return preparers who are currently not attorneys, 
certified public accountants, or enrolled agents and who will seek 
status as a registered tax return preparer. Under the regulations, tax 
return preparers who become registered tax return preparers are subject 
to a recordkeeping requirement within the meaning of the Paperwork 
Reduction Act because they are required to maintain records and 
educational materials regarding their satisfaction of the qualifying 
continuing education requirements. These recordkeeping requirements do 
not require any specific professional skills other than general 
recordkeeping skills already needed to own and operate a small business 
or to competently act as a tax return preparer. It is estimated that 
practitioners will annually spend approximately 30 minutes to one hour 
in maintaining the required records, depending on individual 
circumstances.
    The estimated 2,250 providers of qualifying continuing education 
programs will be required to maintain records and educational material 
concerning these programs and the persons who attended them. These 
continuing education providers will annually spend approximately five 
minutes per attendee per program maintaining the required records.
    As previously discussed in section A4 of this preamble, the rule 
contains a number of other compliance requirements not subject to the 
Paperwork Reduction Act. These include the costs tax return preparers 
incur to take a competency examination, costs for continuing education 
classes, and other incidental costs and user fees. Small entities may 
be directly affected by these costs if they choose to pay any or all of 
these fees for their employees. In some cases, small entities may lose 
sales and profits while their employees prepare for and take the 
examination or participate in continuing education courses. Finally, 
some small entities that employ individuals who prepare tax returns may 
need to alter their business model if a significant number of their 
employees cannot satisfy the necessary qualifications and competency 
requirements. The IRS and the Treasury Department believe that only a 
small percentage of small entities, if any, may need to cease doing 
business or radically change their business model due to these rules.
5. 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 have considered alternatives to 
the final regulations at multiple points. These final regulations are, 
in large measure, an outgrowth of, and in part carry out, the Report, 
which extensively reviewed different approaches to improving how the 
IRS oversees and interacts with tax return preparers. As part of the 
Report, the IRS received a large volume of comments on the oversight 
and enforcement of tax return preparers from all interested parties, 
including tax professional groups representing large and small 
entities, Federal and state organizations, IRS advisory groups, 
software vendors, individual return preparers, and the public. The 
input received from this large and diverse community overwhelmingly 
expressed support for the requirements proposed in the Report.
    In concert with this tremendous public support for increased IRS 
oversight of tax return preparers, the IRS and the Treasury Department 
considered various alternatives in determining the best ways to 
implement proposed changes to the regulation of paid preparers. These 
alternatives included:
    (1) Requiring all tax return preparers to comply with the ethical 
standards in Circular 230 or a code of ethics similar to Circular 230, 
but not requiring any tax return preparers to demonstrate their 
qualifications and competency;
    (2) Requiring tax return preparers who are not currently authorized 
to practice before the IRS to apply for authorization with the IRS, 
satisfy annual continuing education requirements, and meet certain 
ethical standards, but not to pass a minimum competency examination;
    (3) Requiring all tax return preparers who are not currently 
authorized to practice before the IRS to pass a minimum competency 
examination and meet other requirements, but ``grandfather in'' tax 
return preparers who have accurately and competently prepared tax 
returns for a certain number of years; and
    (4) Requiring all unenrolled tax return preparers to complete 
testing and continuing education requirements.
    The proposed regulations proposed that all unenrolled tax return 
preparers must complete testing and continuing education requirements. 
Many commentators on the proposed regulations expressed support for 
efforts to increase the oversight of tax return preparers, particularly 
for those who are not attorneys, certified public accountants, or other 
individuals previously authorized to practice before the IRS. As 
discussed in this preamble, many commentators requested, however, that 
the IRS exempt individuals who prepare tax returns under the 
supervision of Circular 230 practitioners from the requirements of 
these regulations. These commentators were concerned that unnecessary 
time and cost would be incurred with respect to the testing and 
continuing education requirements for individuals who do not sign tax 
returns but prepare them under the supervision of a practitioner 
ultimately responsible for the tax return. In response to these 
comments, the IRS published Notice 2011-6, generally allowing 
individuals to obtain PTINs if the individuals are employed by law 
firms, certified public accounting firms and certain other recognized 
firms and who are supervised by attorneys, certified public 
accountants, enrolled agents, enrolled retirement plan agents and 
enrolled actuaries who sign the returns that these individuals prepare. 
This step taken by the IRS will minimize the economic impact of these 
regulations on many small entities in which attorneys, certified public 
accountants, enrolled agents, enrolled retirement plan agents, or 
enrolled actuaries supervise and sign tax returns prepared individuals 
who are not attorneys, certified public accountants, or enrolled 
agents.
    The IRS also received comments objecting to the rule in the 
proposed regulations requiring continuing education providers to obtain 
continuing education program approval from the IRS for each continuing 
education program offered. In response to these comments the IRS, the 
IRS eliminated such a requirement. This step taken by the IRS will 
minimize the economic impact of these regulations on some small 
entities that offer continuing education programs. These regulations do 
require continuing education providers to obtain a continuing education 
provider number and a continuing education provider program

[[Page 32300]]

number. Although the IRS is not currently proposing charging providers 
a fee to obtain a continuing education provider number or a continuing 
education provider program number, these regulations provide that the 
payment of any applicable user fee established in future regulations is 
required to obtain either number.
    The Treasury Department and the IRS are not aware of any additional 
steps that the IRS could take to minimize the economic impact on small 
entities that would 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 requirements that are not also applicable to larger 
entities covered by the regulations. After considering the alternatives 
and the input provided through the public comment process, the IRS and 
the Treasury Department concluded that the provisions of the final 
regulations are necessary for sound tax administration and are the best 
way to increase oversight of all paid preparers. The testing 
requirements in the rules will ensure that tax return preparers pass a 
minimum competency examination to obtain their professional 
credentials, while the continuing education requirements will help 
ensure that tax return preparers remain current on Federal tax law and 
continue to expand their tax knowledge. The extension of the rules in 
Circular 230 to registered tax return preparers will require all 
practitioners to meet certain ethical standards and allow the IRS to 
suspend or otherwise discipline tax return preparers who engage in 
unethical or disreputable conduct. Accordingly, the implementation of 
the qualification and competency standards in these rules is expected 
to increase taxpayer compliance, ensure uniformity, and allow taxpayers 
to be confident that the tax return preparers to whom they turn for 
assistance are knowledgeable, skilled and ethical.

Drafting Information

    The principal author of these regulations is Matthew D. Lucey of 
the Office of the Associate Chief Counsel (Procedure and 
Administration).

List of Subjects in 31 CFR Part 10

    Accountants, Administrative practice and procedure, Lawyers, 
Reporting and recordkeeping requirements, Taxes.

Adoption of Amendments to the Regulations

    Accordingly, 31 CFR part 10 is amended to read as follows:

PART 10--PRACTICE BEFORE THE INTERNAL REVENUE SERVICE

0
Paragraph 1. The authority citation for 31 CFR part 10 is revised to 
read as follows:

    Authority:  Sec. 3, 23 Stat. 258, secs. 2-12, 60 Stat. 237 et 
seq.; 5 U.S.C. 301, 500, 551-559; 31 U.S.C. 321; 31 U.S.C. 330; 
Reorg. Plan No. 26 of 1950, 15 FR 4935, 64 Stat. 1280, 3 CFR, 1949-
1953 Comp., p. 1017.


0
Par. 2. Section 10.0 is revised to read as follows:


Sec.  10.0  Scope of part.

    (a) This part contains rules governing the recognition of 
attorneys, certified public accountants, enrolled agents, enrolled 
retirement plan agents, registered tax return preparers, and other 
persons representing taxpayers before the Internal Revenue Service. 
Subpart A of this part sets forth rules relating to the authority to 
practice before the Internal Revenue Service; subpart B of this part 
prescribes the duties and restrictions relating to such practice; 
subpart C of this part prescribes the sanctions for violating the 
regulations; subpart D of this part contains the rules applicable to 
disciplinary proceedings; and subpart E of this part contains general 
provisions relating to the availability of official records.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 3. Section 10.1 is revised to read as follows:


Sec.  10.1  Offices.

    (a) Establishment of office(s). The Commissioner shall establish 
the Office of Professional Responsibility and any other office(s) 
within the Internal Revenue Service necessary to administer and enforce 
this part. The Commissioner shall appoint the Director of the Office of 
Professional Responsibility and any other Internal Revenue official(s) 
to manage and direct any office(s) established to administer or enforce 
this part. Offices established under this part include, but are not 
limited to:
    (1) The Office of Professional Responsibility, which shall 
generally have responsibility for matters related to practitioner 
conduct and discipline, including disciplinary proceedings and 
sanctions; and
    (2) An office with responsibility for matters related to authority 
to practice before the Internal Revenue Service, including acting on 
applications for enrollment to practice before the Internal Revenue 
Service and administering competency testing and continuing education.
    (b) Officers and employees within any office established under this 
part may perform acts necessary or appropriate to carry out the 
responsibilities of their office(s) under this part or as otherwise 
prescribed by the Commissioner.
    (c) Acting. The Commissioner will designate an officer or employee 
of the Internal Revenue Service to perform the duties of an individual 
appointed under paragraph (a) of this section in the absence of that 
officer or employee or during a vacancy in that office.
    (d) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 4. Section 10.2 is amended by revising paragraphs (a)(4) and 
(a)(5), adding paragraph (a)(8), and revising paragraph (b) to read as 
follows:


Sec.  10.2  Definitions.

    (a) * * *
    (4) Practice before the Internal Revenue Service comprehends all 
matters connected with a presentation to the Internal Revenue Service 
or any of its officers or employees relating to a taxpayer's rights, 
privileges, or liabilities under laws or regulations administered by 
the Internal Revenue Service. Such presentations include, but are not 
limited to, preparing documents; filing documents; corresponding and 
communicating with the Internal Revenue Service; rendering written 
advice with respect to any entity, transaction, plan or arrangement, or 
other plan or arrangement having a potential for tax avoidance or 
evasion; and representing a client at conferences, hearings, and 
meetings.
    (5) Practitioner means any individual described in paragraphs (a), 
(b), (c), (d), (e), or (f) of Sec.  10.3.
* * * * *
    (8) Tax return preparer means any individual within the meaning of 
section 7701(a)(36) and 26 CFR 301.7701-15.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 5. Section 10.3 is amended by:
0
1. Revising paragraphs (d)(3) and (e)(3);
0
2. Redesignating paragraphs (f), (g), (h), and (i) as paragraphs (g), 
(h), (i), and (j) respectively;
0
3. Adding new paragraph (f); and
0
4. Revising newly designated paragraph (j).

[[Page 32301]]

    The revisions and additions read as follows:


Sec.  10.3  Who may practice.

* * * * *
    (d) * * *
    (3) An individual who practices before the Internal Revenue Service 
pursuant to paragraph (d)(1) of this section is subject to the 
provisions of this part in the same manner as attorneys, certified 
public accountants, enrolled agents, enrolled retirement plan agents, 
and registered tax return preparers.
    (e) * * *
    (3) An individual who practices before the Internal Revenue Service 
pursuant to paragraph (e)(1) of this section is subject to the 
provisions of this part in the same manner as attorneys, certified 
public accountants, enrolled agents, enrolled actuaries, and registered 
tax return preparers.
    (f) Registered tax return preparers. (1) Any individual who is 
designated as a registered tax return preparer pursuant to Sec.  
10.4(c) of this part who is not currently under suspension or 
disbarment from practice before the Internal Revenue Service may 
practice before the Internal Revenue Service.
    (2) Practice as a registered tax return preparer is limited to 
preparing and signing tax returns and claims for refund, and other 
documents for submission to the Internal Revenue Service. A registered 
tax return preparer may prepare all or substantially all of a tax 
return or claim for refund of tax. The Internal Revenue Service will 
prescribe by forms, instructions, or other appropriate guidance the tax 
returns and claims for refund that a registered tax return preparer may 
prepare and sign.
    (3) A registered tax return preparer may represent taxpayers before 
revenue agents, customer service representatives, or similar officers 
and employees of the Internal Revenue Service (including the Taxpayer 
Advocate Service) during an examination if the registered tax return 
preparer signed the tax return or claim for refund for the taxable year 
or period under examination. Unless otherwise prescribed by regulation 
or notice, this right does not permit such individual to represent the 
taxpayer, regardless of the circumstances requiring representation, 
before appeals officers, revenue officers, Counsel or similar officers 
or employees of the Internal Revenue Service or the Treasury 
Department. A registered tax return preparer's authorization to 
practice under this part also does not include the authority to provide 
tax advice to a client or another person except as necessary to prepare 
a tax return, claim for refund, or other document intended to be 
submitted to the Internal Revenue Service.
    (4) An individual who practices before the Internal Revenue Service 
pursuant to paragraph (f)(1) of this section is subject to the 
provisions of this part in the same manner as attorneys, certified 
public accountants, enrolled agents, enrolled retirement plan agents, 
and enrolled actuaries.
* * * * *
    (j) Effective/applicability date. This section is generally 
applicable beginning August 2, 2011.

0
Par. 6. Section 10.4 is revised to read as follows:


Sec.  10.4  Eligibility to become an enrolled agent, enrolled 
retirement plan agent, or registered tax return preparer.

    (a) Enrollment as an enrolled agent upon examination. The 
Commissioner, or delegate, will grant enrollment as an enrolled agent 
to an applicant eighteen years of age or older who demonstrates special 
competence in tax matters by written examination administered by, or 
administered under the oversight of, the Internal Revenue Service, who 
possesses a current or otherwise valid preparer tax identification 
number or other prescribed identifying number, and who has not engaged 
in any conduct that would justify the suspension or disbarment of any 
practitioner under the provisions of this part.
    (b) Enrollment as a retirement plan agent upon examination. The 
Commissioner, or delegate, will grant enrollment as an enrolled 
retirement plan agent to an applicant eighteen years of age or older 
who demonstrates special competence in qualified retirement plan 
matters by written examination administered by, or administered under 
the oversight of, the Internal Revenue Service, who possesses a current 
or otherwise valid preparer tax identification number or other 
prescribed identifying number, and who has not engaged in any conduct 
that would justify the suspension or disbarment of any practitioner 
under the provisions of this part.
    (c) Designation as a registered tax return preparer. The 
Commissioner, or delegate, may designate an individual eighteen years 
of age or older as a registered tax return preparer provided an 
applicant demonstrates competence in Federal tax return preparation 
matters by written examination administered by, or administered under 
the oversight of, the Internal Revenue Service, or otherwise meets the 
requisite standards prescribed by the Internal Revenue Service, 
possesses a current or otherwise valid preparer tax identification 
number or other prescribed identifying number, and has not engaged in 
any conduct that would justify the suspension or disbarment of any 
practitioner under the provisions of this part.
    (d) Enrollment of former Internal Revenue Service employees. The 
Commissioner, or delegate, may grant enrollment as an enrolled agent or 
enrolled retirement plan agent to an applicant who, by virtue of past 
service and technical experience in the Internal Revenue Service, has 
qualified for such enrollment and who has not engaged in any conduct 
that would justify the suspension or disbarment of any practitioner 
under the provisions of this part, under the following circumstances:
    (1) The former employee applies for enrollment on an Internal 
Revenue Service form and supplies the information requested on the form 
and such other information regarding the experience and training of the 
applicant as may be relevant.
    (2) The appropriate office of the Internal Revenue Service provides 
a detailed report of the nature and rating of the applicant's work 
while employed by the Internal Revenue Service and a recommendation 
whether such employment qualifies the applicant technically or 
otherwise for the desired authorization.
    (3) Enrollment as an enrolled agent based on an applicant's former 
employment with the Internal Revenue Service may be of unlimited scope 
or it may be limited to permit the presentation of matters only of the 
particular specialty or only before the particular unit or division of 
the Internal Revenue Service for which the applicant's former 
employment has qualified the applicant. Enrollment as an enrolled 
retirement plan agent based on an applicant's former employment with 
the Internal Revenue Service will be limited to permit the presentation 
of matters only with respect to qualified retirement plan matters.
    (4) Application for enrollment as an enrolled agent or enrolled 
retirement plan agent based on an applicant's former employment with 
the Internal Revenue Service must be made within three years from the 
date of separation from such employment.
    (5) An applicant for enrollment as an enrolled agent who is 
requesting such enrollment based on former employment with the Internal 
Revenue Service must have had a minimum of five years continuous 
employment with the Internal Revenue Service during which the applicant 
must have been

[[Page 32302]]

regularly engaged in applying and interpreting the provisions of the 
Internal Revenue Code and the regulations relating to income, estate, 
gift, employment, or excise taxes.
    (6) An applicant for enrollment as an enrolled retirement plan 
agent who is requesting such enrollment based on former employment with 
the Internal Revenue Service must have had a minimum of five years 
continuous employment with the Internal Revenue Service during which 
the applicant must have been regularly engaged in applying and 
interpreting the provisions of the Internal Revenue Code and the 
regulations relating to qualified retirement plan matters.
    (7) For the purposes of paragraphs (d)(5) and (6) of this section, 
an aggregate of 10 or more years of employment in positions involving 
the application and interpretation of the provisions of the Internal 
Revenue Code, at least three of which occurred within the five years 
preceding the date of application, is the equivalent of five years 
continuous employment.
    (e) Natural persons. Enrollment or authorization to practice may be 
granted only to natural persons.
    (f) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 7. Section 10.5 is revised to read as follows:


Sec.  10.5  Application to become an enrolled agent, enrolled 
retirement plan agent, or registered tax return preparer.

    (a) Form; address. An applicant to become an enrolled agent, 
enrolled retirement plan agent, or registered tax return preparer must 
apply as required by forms or procedures established and published by 
the Internal Revenue Service, including proper execution of required 
forms under oath or affirmation. The address on the application will be 
the address under which a successful applicant is enrolled or 
registered and is the address to which all correspondence concerning 
enrollment or registration will be sent.
    (b) Fee. A reasonable nonrefundable fee may be charged for each 
application to become an enrolled agent, enrolled retirement plan 
agent, or registered tax return preparer. See 26 CFR part 300.
    (c) Additional information; examination. The Internal Revenue 
Service may require the applicant, as a condition to consideration of 
an application, to file additional information and to submit to any 
written or oral examination under oath or otherwise. Upon the 
applicant's written request, the Internal Revenue Service will afford 
the applicant the opportunity to be heard with respect to the 
application.
    (d) Compliance and suitability checks. (1) As a condition to 
consideration of an application, the Internal Revenue Service may 
conduct a Federal tax compliance check and suitability check. The tax 
compliance check will be limited to an inquiry regarding whether an 
applicant has filed all required individual or business tax returns and 
whether the applicant has failed to pay, or make proper arrangements 
with the Internal Revenue Service for payment of, any Federal tax 
debts. The suitability check will be limited to an inquiry regarding 
whether an applicant has engaged in any conduct that would justify 
suspension or disbarment of any practitioner under the provisions of 
this part on the date the application is submitted, including whether 
the applicant has engaged in disreputable conduct as defined in Sec.  
10.51. The application will be denied only if the results of the 
compliance or suitability check are sufficient to establish that the 
practitioner engaged in conduct subject to sanctions under Sec. Sec.  
10.51 and 10.52.
    (2) If the applicant does not pass the tax compliance or 
suitability check, the applicant will not be issued an enrollment or 
registration card or certificate pursuant to Sec.  10.6(b) of this 
part. An applicant who is initially denied enrollment or registration 
for failure to pass a tax compliance check may reapply after the 
initial denial if the applicant becomes current with respect to the 
applicant's tax liabilities.
    (e) Temporary recognition. On receipt of a properly executed 
application, the Commissioner, or delegate, may grant the applicant 
temporary recognition to practice pending a determination as to whether 
status as an enrolled agent, enrolled retirement plan agent, or 
registered tax return preparer should be granted. Temporary recognition 
will be granted only in unusual circumstances and it will not be 
granted, in any circumstance, if the application is not regular on its 
face, if the information stated in the application, if true, is not 
sufficient to warrant granting the application to practice, or the 
Commissioner, or delegate, has information indicating that the 
statements in the application are untrue or that the applicant would 
not otherwise qualify to become an enrolled agent, enrolled retirement 
plan agent, or registered tax return preparer. Issuance of temporary 
recognition does not constitute either a designation or a finding of 
eligibility as an enrolled agent, enrolled retirement plan agent, or 
registered tax return preparer, and the temporary recognition may be 
withdrawn at any time.
    (f) Protest of application denial. The applicant will be informed 
in writing as to the reason(s) for any denial of an application. The 
applicant may, within 30 days after receipt of the notice of denial of 
the application, file a written protest of the denial as prescribed by 
the Internal Revenue Service in forms, guidance, or other appropriate 
guidance. A protest under this section is not governed by subpart D of 
this part.
    (g) Effective/applicability date. This section is applicable to 
applications received August 2, 2011.

0
Par. 8. Section 10.6 is revised to read as follows:


Sec.  10.6  Term and renewal of status as an enrolled agent, enrolled 
retirement plan agent, or registered tax return preparer.

    (a) Term. Each individual authorized to practice before the 
Internal Revenue Service as an enrolled agent, enrolled retirement plan 
agent, or registered tax return preparer will be accorded active 
enrollment or registration status subject to renewal of enrollment or 
registration as provided in this part.
    (b) Enrollment or registration card or certificate. The Internal 
Revenue Service will issue an enrollment or registration card or 
certificate to each individual whose application to practice before the 
Internal Revenue Service is approved. Each card or certificate will be 
valid for the period stated on the card or certificate. An enrolled 
agent, enrolled retirement plan agent, or registered tax return 
preparer may not practice before the Internal Revenue Service if the 
card or certificate is not current or otherwise valid. The card or 
certificate is in addition to any notification that may be provided to 
each individual who obtains a preparer tax identification number.
    (c) Change of address. An enrolled agent, enrolled retirement plan 
agent, or registered tax return preparer must send notification of any 
change of address to the address specified by the Internal Revenue 
Service within 60 days of the change of address. This notification must 
include the enrolled agent's, enrolled retirement plan agent's, or 
registered tax return preparer's name, prior address, new address, tax 
identification number(s) (including preparer tax identification 
number), and the date the change of address is effective. Unless this 
notification is sent, the address for purposes of any correspondence 
from the appropriate Internal Revenue Service office responsible for 
administering this part shall be the address reflected on the 
practitioner's most recent application

[[Page 32303]]

for enrollment or registration, or application for renewal of 
enrollment or registration. A practitioner's change of address 
notification under this part will not constitute a change of the 
practitioner's last known address for purposes of section 6212 of the 
Internal Revenue Code and regulations thereunder.
    (d) Renewal--(1) In general. Enrolled agents, enrolled retirement 
plan agents, and registered tax return preparers must renew their 
status with the Internal Revenue Service to maintain eligibility to 
practice before the Internal Revenue Service. Failure to receive 
notification from the Internal Revenue Service of the renewal 
requirement will not be justification for the individual's failure to 
satisfy this requirement.
    (2) Renewal period for enrolled agents. (i) All enrolled agents 
must renew their preparer tax identification number as prescribed by 
forms, instructions, or other appropriate guidance.
    (ii) Enrolled agents who have a Social Security number or tax 
identification number that ends with the numbers 0, 1, 2, or 3, except 
for those individuals who received their initial enrollment after 
November 1, 2003, must apply for renewal between November 1, 2003, and 
January 31, 2004. The renewal will be effective April 1, 2004.
    (iii) Enrolled agents who have a social security number or tax 
identification number that ends with the numbers 4, 5, or 6, except for 
those individuals who received their initial enrollment after November 
1, 2004, must apply for renewal between November 1, 2004, and January 
31, 2005. The renewal will be effective April 1, 2005.
    (iv) Enrolled agents who have a social security number or tax 
identification number that ends with the numbers 7, 8, or 9, except for 
those individuals who received their initial enrollment after November 
1, 2005, must apply for renewal between November 1, 2005, and January 
31, 2006. The renewal will be effective April 1, 2006.
    (v) Thereafter, applications for renewal as an enrolled agent will 
be required between November 1 and January 31 of every subsequent third 
year as specified in paragraph (d)(2)(i), (d)(2)(ii), or (d)(2)(iii) of 
this section according to the last number of the individual's Social 
Security number or tax identification number. Those individuals who 
receive initial enrollment as an enrolled agent after November 1 and 
before April 2 of the applicable renewal period will not be required to 
renew their enrollment before the first full renewal period following 
the receipt of their initial enrollment.
    (3) Renewal period for enrolled retirement plan agents. (i) All 
enrolled retirement plan agents must renew their preparer tax 
identification number as prescribed by the Internal Revenue Service in 
forms, instructions, or other appropriate guidance.
    (ii) Enrolled retirement plan agents will be required to renew 
their status as enrolled retirement plan agents between April 1 and 
June 30 of every third year subsequent to their initial enrollment.
    (4) Renewal period for registered tax return preparers. Registered 
tax return preparers must renew their preparer tax identification 
number and their status as a registered tax return preparer as 
prescribed by the Internal Revenue Service in forms, instructions, or 
other appropriate guidance.
    (5) Notification of renewal. After review and approval, the 
Internal Revenue Service will notify the individual of the renewal and 
will issue the individual a card or certificate evidencing current 
status as an enrolled agent, enrolled retirement plan agent, or 
registered tax return preparer.
    (6) Fee. A reasonable nonrefundable fee may be charged for each 
application for renewal filed. See 26 CFR part 300.
    (7) Forms. Forms required for renewal may be obtained by sending a 
written request to the address specified by the Internal Revenue 
Service or from such other source as the Internal Revenue Service will 
publish in the Internal Revenue Bulletin (see 26 CFR 
601.601(d)(2)(ii)(b)) and on the Internal Revenue Service webpage 
(http://www.irs.gov).
    (e) Condition for renewal: continuing education. In order to 
qualify for renewal as an enrolled agent, enrolled retirement plan 
agent, or registered tax return preparer, an individual must certify, 
in the manner prescribed by the Internal Revenue Service, that the 
individual has satisfied the requisite number of continuing education 
hours.
    (1) Definitions. For purposes of this section--
    (i) Enrollment year means January 1 to December 31 of each year of 
an enrollment cycle.
    (ii) Enrollment cycle means the three successive enrollment years 
preceding the effective date of renewal.
    (iii) Registration year means each 12-month period the registered 
tax return preparer is authorized to practice before the Internal 
Revenue Service.
    (iv) The effective date of renewal is the first day of the fourth 
month following the close of the period for renewal described in 
paragraph (d) of this section.
    (2) For renewed enrollment as an enrolled agent or enrolled 
retirement plan agent--(i) Requirements for enrollment cycle. A minimum 
of 72 hours of continuing education credit, including six hours of 
ethics or professional conduct, must be completed during each 
enrollment cycle.
    (ii) Requirements for enrollment year. A minimum of 16 hours of 
continuing education credit, including two hours of ethics or 
professional conduct, must be completed during each enrollment year of 
an enrollment cycle.
    (iii) Enrollment during enrollment cycle--(A) In general. Subject 
to paragraph (e)(2)(iii)(B) of this section, an individual who receives 
initial enrollment during an enrollment cycle must complete two hours 
of qualifying continuing education credit for each month enrolled 
during the enrollment cycle. Enrollment for any part of a month is 
considered enrollment for the entire month.
    (B) Ethics. An individual who receives initial enrollment during an 
enrollment cycle must complete two hours of ethics or professional 
conduct for each enrollment year during the enrollment cycle. 
Enrollment for any part of an enrollment year is considered enrollment 
for the entire year.
    (3) Requirements for renewal as a registered tax return preparer. A 
minimum of 15 hours of continuing education credit, including two hours 
of ethics or professional conduct, three hours of Federal tax law 
updates, and 10 hours of Federal tax law topics, must be completed 
during each registration year.
    (f) Qualifying continuing education--(1) General--(i) Enrolled 
agents. To qualify for continuing education credit for an enrolled 
agent, a course of learning must--
    (A) Be a qualifying continuing education program designed to 
enhance professional knowledge in Federal taxation or Federal tax 
related matters (programs comprised of current subject matter in 
Federal taxation or Federal tax related matters, including accounting, 
tax return preparation software, taxation, or ethics); and
    (B) Be a qualifying continuing education program consistent with 
the Internal Revenue Code and effective tax administration.
    (ii) Enrolled retirement plan agents. To qualify for continuing 
education credit for an enrolled retirement plan agent, a course of 
learning must--
    (A) Be a qualifying continuing education program designed to 
enhance professional knowledge in qualified retirement plan matters; 
and

[[Page 32304]]

    (B) Be a qualifying continuing education program consistent with 
the Internal Revenue Code and effective tax administration.
    (iii) Registered tax return preparers. To qualify for continuing 
education credit for a registered tax return preparer, a course of 
learning must--
    (A) Be a qualifying continuing education program designed to 
enhance professional knowledge in Federal taxation or Federal tax 
related matters (programs comprised of current subject matter in 
Federal taxation or Federal tax related matters, including accounting, 
tax return preparation software, taxation, or ethics); and
    (B) Be a qualifying continuing education program consistent with 
the Internal Revenue Code and effective tax administration.
    (2) Qualifying programs--(i) Formal programs. A formal program 
qualifies as a continuing education program if it--
    (A) Requires attendance and provides each attendee with a 
certificate of attendance;
    (B) Is conducted by a qualified instructor, discussion leader, or 
speaker (in other words, a person whose background, training, 
education, and experience is appropriate for instructing or leading a 
discussion on the subject matter of the particular program);
    (C) Provides or requires a written outline, textbook, or suitable 
electronic educational materials; and
    (D) Satisfies the requirements established for a qualified 
continuing education program pursuant to Sec.  10.9.
    (ii) Correspondence or individual study programs (including taped 
programs). Qualifying continuing education programs include 
correspondence or individual study programs that are conducted by 
continuing education providers and completed on an individual basis by 
the enrolled individual. The allowable credit hours for such programs 
will be measured on a basis comparable to the measurement of a seminar 
or course for credit in an accredited educational institution. Such 
programs qualify as continuing education programs only if they--
    (A) Require registration of the participants by the continuing 
education provider;
    (B) Provide a means for measuring successful completion by the 
participants (for example, a written examination), including the 
issuance of a certificate of completion by the continuing education 
provider;
    (C) Provide a written outline, textbook, or suitable electronic 
educational materials; and
    (D) Satisfy the requirements established for a qualified continuing 
education program pursuant to Sec.  10.9.
    (iii) Serving as an instructor, discussion leader or speaker. (A) 
One hour of continuing education credit will be awarded for each 
contact hour completed as an instructor, discussion leader, or speaker 
at an educational program that meets the continuing education 
requirements of paragraph (f) of this section.
    (B) A maximum of two hours of continuing education credit will be 
awarded for actual subject preparation time for each contact hour 
completed as an instructor, discussion leader, or speaker at such 
programs. It is the responsibility of the individual claiming such 
credit to maintain records to verify preparation time.
    (C) The maximum continuing education credit for instruction and 
preparation may not exceed four hours annually for registered tax 
return preparers and six hours annually for enrolled agents and 
enrolled retirement plan agents.
    (D) An instructor, discussion leader, or speaker who makes more 
than one presentation on the same subject matter during an enrollment 
cycle or registration year will receive continuing education credit for 
only one such presentation for the enrollment cycle or registration 
year.
    (3) Periodic examination. Enrolled Agents and Enrolled Retirement 
Plan Agents may establish eligibility for renewal of enrollment for any 
enrollment cycle by--
    (i) Achieving a passing score on each part of the Special 
Enrollment Examination administered under this part during the three 
year period prior to renewal; and
    (ii) Completing a minimum of 16 hours of qualifying continuing 
education during the last year of an enrollment cycle.
    (g) Measurement of continuing education coursework. (1) All 
continuing education programs will be measured in terms of contact 
hours. The shortest recognized program will be one contact hour.
    (2) A contact hour is 50 minutes of continuous participation in a 
program. Credit is granted only for a full contact hour, which is 50 
minutes or multiples thereof. For example, a program lasting more than 
50 minutes but less than 100 minutes will count as only one contact 
hour.
    (3) Individual segments at continuous conferences, conventions and 
the like will be considered one total program. For example, two 90-
minute segments (180 minutes) at a continuous conference will count as 
three contact hours.
    (4) For university or college courses, each semester hour credit 
will equal 15 contact hours and a quarter hour credit will equal 10 
contact hours.
    (h) Recordkeeping requirements. (1) Each individual applying for 
renewal must retain for a period of four years following the date of 
renewal the information required with regard to qualifying continuing 
education credit hours. Such information includes--
    (i) The name of the sponsoring organization;
    (ii) The location of the program;
    (iii) The title of the program, qualified program number, and 
description of its content;
    (iv) Written outlines, course syllibi, textbook, and/or electronic 
materials provided or required for the course;
    (v) The dates attended;
    (vi) The credit hours claimed;
    (vii) The name(s) of the instructor(s), discussion leader(s), or 
speaker(s), if appropriate; and
    (viii) The certificate of completion and/or signed statement of the 
hours of attendance obtained from the continuing education provider.
    (2) To receive continuing education credit for service completed as 
an instructor, discussion leader, or speaker, the following information 
must be maintained for a period of four years following the date of 
renewal--
    (i) The name of the sponsoring organization;
    (ii) The location of the program;
    (iii) The title of the program and copy of its content;
    (iv) The dates of the program; and
    (v) The credit hours claimed.
    (i) Waivers. (1) Waiver from the continuing education requirements 
for a given period may be granted for the following reasons--
    (i) Health, which prevented compliance with the continuing 
education requirements;
    (ii) Extended active military duty;
    (iii) Absence from the United States for an extended period of time 
due to employment or other reasons, provided the individual does not 
practice before the Internal Revenue Service during such absence; and
    (iv) Other compelling reasons, which will be considered on a case-
by-case basis.
    (2) A request for waiver must be accompanied by appropriate 
documentation. The individual is required to furnish any additional 
documentation or explanation deemed necessary. Examples of appropriate 
documentation could be a medical certificate or military orders.

[[Page 32305]]

    (3) A request for waiver must be filed no later than the last day 
of the renewal application period.
    (4) If a request for waiver is not approved, the individual will be 
placed in inactive status. The individual will be notified that the 
waiver was not approved and that the individual has been placed on a 
roster of inactive enrolled agents, enrolled retirement plan agents, or 
registered tax return preparers.
    (5) If the request for waiver is not approved, the individual may 
file a protest as prescribed by the Internal Revenue Service in forms, 
instructions, or other appropriate guidance. A protest filed under this 
section is not governed by subpart D of this part.
    (6) If a request for waiver is approved, the individual will be 
notified and issued a card or certificate evidencing renewal.
    (7) Those who are granted waivers are required to file timely 
applications for renewal of enrollment or registration.
    (j) Failure to comply. (1) Compliance by an individual with the 
requirements of this part is determined by the Internal Revenue 
Service. The Internal Revenue Service will provide notice to any 
individual who fails to meet the continuing education and fee 
requirements of eligibility for renewal. The notice will state the 
basis for the determination of noncompliance and will provide the 
individual an opportunity to furnish the requested information in 
writing relating to the matter within 60 days of the date of the 
notice. Such information will be considered in making a final 
determination as to eligibility for renewal. The individual must be 
informed of the reason(s) for any denial of a renewal. The individual 
may, within 30 days after receipt of the notice of denial of renewal, 
file a written protest of the denial as prescribed by the Internal 
Revenue Service in forms, instructions, or other appropriate guidance. 
A protest under this section is not governed by subpart D of this part.
    (2) The continuing education records of an enrolled agent, enrolled 
retirement plan agent, or registered tax return preparer may be 
reviewed to determine compliance with the requirements and standards 
for renewal as provided in paragraph (f) of this section. As part of 
this review, the enrolled agent, enrolled retirement plan agent or 
registered tax return preparer may be required to provide the Internal 
Revenue Service with copies of any continuing education records 
required to be maintained under this part. If the enrolled agent, 
enrolled retirement plan agent or registered tax return preparer fails 
to comply with this requirement, any continuing education hours claimed 
may be disallowed.
    (3) An individual who has not filed a timely application for 
renewal, who has not made a timely response to the notice of 
noncompliance with the renewal requirements, or who has not satisfied 
the requirements of eligibility for renewal will be placed on a roster 
of inactive enrolled individuals or inactive registered individuals. 
During this time, the individual will be ineligible to practice before 
the Internal Revenue Service.
    (4) Individuals placed in inactive status and individuals 
ineligible to practice before the Internal Revenue Service may not 
state or imply that they are eligible to practice before the Internal 
Revenue Service, or use the terms enrolled agent, enrolled retirement 
plan agent, or registered tax return preparer, the designations ``EA'' 
or ``ERPA'' or other form of reference to eligibility to practice 
before the Internal Revenue Service.
    (5) An individual placed in inactive status may be reinstated to an 
active status by filing an application for renewal and providing 
evidence of the completion of all required continuing education hours 
for the enrollment cycle or registration year. Continuing education 
credit under this paragraph (j)(5) may not be used to satisfy the 
requirements of the enrollment cycle or registration year in which the 
individual has been placed back on the active roster.
    (6) An individual placed in inactive status must file an 
application for renewal and satisfy the requirements for renewal as set 
forth in this section within three years of being placed in inactive 
status. Otherwise, the name of such individual will be removed from the 
inactive status roster and the individual's status as an enrolled 
agent, enrolled retirement plan agent, or registered tax return 
preparer will terminate. Future eligibility for active status must then 
be reestablished by the individual as provided in this section.
    (7) Inactive status is not available to an individual who is the 
subject of a pending disciplinary matter before the Internal Revenue 
Service.
    (k) Inactive retirement status. An individual who no longer 
practices before the Internal Revenue Service may request to be placed 
in an inactive retirement status at any time and such individual will 
be placed in an inactive retirement status. The individual will be 
ineligible to practice before the Internal Revenue Service. An 
individual who is placed in an inactive retirement status may be 
reinstated to an active status by filing an application for renewal and 
providing evidence of the completion of the required continuing 
education hours for the enrollment cycle or registration year. Inactive 
retirement status is not available to an individual who is ineligible 
to practice before the Internal Revenue Service or an individual who is 
the subject of a pending disciplinary matter under this part.
    (l) Renewal while under suspension or disbarment. An individual who 
is ineligible to practice before the Internal Revenue Service by virtue 
of disciplinary action under this part is required to conform to the 
requirements for renewal of enrollment or registration before the 
individual's eligibility is restored.
    (m) Enrolled actuaries. The enrollment and renewal of enrollment of 
actuaries authorized to practice under paragraph (d) of Sec.  10.3 are 
governed by the regulations of the Joint Board for the Enrollment of 
Actuaries at 20 CFR 901.1 through 901.72.
    (n) Effective/applicability date. This section is applicable to 
enrollment or registration effective beginning August 2, 2011.

0
Par. 9. Section 10.7 is amended by:
0
1. Revising the section heading.
0
2. Removing paragraph (c)(1)(viii).
0
3. Revising paragraph (c)(2), and (d).
0
4. Removing paragraph (e).
0
5. Redesignating paragraphs (f) and (g) as paragraphs (e) and (f) and 
revising them.
    The revisions read as follows:


Sec.  10.7  Representing oneself; participating in rulemaking; limited 
practice; and special appearances.

* * * * *
    (c) * * *
    (2) Limitations. (i) An individual who is under suspension or 
disbarment from practice before the Internal Revenue Service may not 
engage in limited practice before the Internal Revenue Service under 
paragraph (c)(1) of this section.
    (ii) The Commissioner, or delegate, may, after notice and 
opportunity for a conference, deny eligibility to engage in limited 
practice before the Internal Revenue Service under paragraph (c)(1) of 
this section to any individual who has engaged in conduct that would 
justify a sanction under Sec.  10.50.
    (iii) An individual who represents a taxpayer under the authority 
ofparagraph (c)(1) of this section is subject, to the extent of his or 
her authority, to such rules of general applicability regarding 
standards of conduct and other matters as prescribed by the Internal 
Revenue Service.
    (d) Special appearances. The Commissioner, or delegate, may, 
subject

[[Page 32306]]

to conditions deemed appropriate, authorize an individual who is not 
otherwise eligible to practice before the Internal Revenue Service to 
represent another person in a particular matter.
    (e) Fiduciaries. For purposes of this part, a fiduciary (for 
example, a trustee, receiver, guardian, personal representative, 
administrator, or executor) is considered to be the taxpayer and not a 
representative of the taxpayer.
    (f) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 10. Section 10.8 is revised to read as follows:


Sec.  10.8  Return preparation and application of rules to other 
individuals.

    (a) Preparing all or substantially all of a tax return. Any 
individual who for compensation prepares or assists with the 
preparation of all or substantially all of a tax return or claim for 
refund must have a preparer tax identification number. Except as 
otherwise prescribed in forms, instructions, or other appropriate 
guidance, an individual must be an attorney, certified public 
accountant, enrolled agent, or registered tax return preparer to obtain 
a preparer tax identification number. Any individual who for 
compensation prepares or assists with the preparation of all or 
substantially all of a tax return or claim for refund is subject to the 
duties and restrictions relating to practice in subpart B, as well as 
subject to the sanctions for violation of the regulations in subpart C.
    (b) Preparing a tax return and furnishing information. Any 
individual may for compensation prepare or assist with the preparation 
of a tax return or claim for refund (provided the individual prepares 
less than substantially all of the tax return or claim for refund), 
appear as a witness for the taxpayer before the Internal Revenue 
Service, or furnish information at the request of the Internal Revenue 
Service or any of its officers or employees.
    (c) Application of rules to other individuals. Any individual who 
for compensation prepares, or assists in the preparation of, all or a 
substantial portion of a document pertaining to any taxpayer's tax 
liability for submission to the Internal Revenue Service is subject to 
the duties and restrictions relating to practice in subpart B, as well 
as subject to the sanctions for violation of the regulations in subpart 
C. Unless otherwise a practitioner, however, an individual may not for 
compensation prepare, or assist in the preparation of, all or 
substantially all of a tax return or claim for refund, or sign tax 
returns and claims for refund. For purposes of this paragraph, an 
individual described in 26 CFR 301.7701-15(f) is not treated as having 
prepared all or a substantial portion of the document by reason of such 
assistance.
    (d) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 11. Section 10.9 is added to subpart A to read as follows:


Sec.  10.9  Continuing education providers and continuing education 
programs.

    (a) Continuing education providers--(1) In general. Continuing 
education providers are those responsible for presenting continuing 
education programs. A continuing education provider must--
    (i) Be an accredited educational institution;
    (ii) Be recognized for continuing education purposes by the 
licensing body of any State, territory, or possession of the United 
States, including a Commonwealth, or the District of Columbia;
    (iii) Be recognized and approved by a qualifying organization as a 
provider of continuing education on subject matters within Sec.  
10.6(f) of this part. The Internal Revenue Service may, at its 
discretion, identify a professional organization, society or business 
entity that maintains minimum education standards comparable to those 
set forth in this part as a qualifying organization for purposes of 
this part in appropriate forms, instructions, and other appropriate 
guidance; or
    (iv) Be recognized by the Internal Revenue Service as a 
professional organization, society, or business whose programs include 
offering continuing professional education opportunities in subject 
matters within Sec.  10.6(f) of this part. The Internal Revenue 
Service, at its discretion, may require such professional 
organizations, societies, or businesses to file an agreement and/or 
obtain Internal Revenue Service approval of each program as a qualified 
continuing education program in appropriate forms, instructions or 
other appropriate guidance.
    (2) Continuing education provider numbers--(i) In general. A 
continuing education provider is required to obtain a continuing 
education provider number and pay any applicable user fee.
    (ii) Renewal. A continuing education provider maintains its status 
as a continuing education provider during the continuing education 
provider cycle by renewing its continuing education provider number as 
prescribed by forms, instructions or other appropriate guidance and 
paying any applicable user fee.
    (3) Requirements for qualified continuing education programs. A 
continuing education provider must ensure the qualified continuing 
education program complies with all the following requirements--
    (i) Programs must be developed by individual(s) qualified in the 
subject matter;
    (ii) Program subject matter must be current;
    (iii) Instructors, discussion leaders, and speakers must be 
qualified with respect to program content;
    (iv) Programs must include some means for evaluation of the 
technical content and presentation to be evaluated;
    (v) Certificates of completion bearing a current qualified 
continuing education program number issued by the Internal Revenue 
Service must be provided to the participants who successfully complete 
the program; and
    (vi) Records must be maintained by the continuing education 
provider to verify the participants who attended and completed the 
program for a period of four years following completion of the program. 
In the case of continuous conferences, conventions, and the like, 
records must be maintained to verify completion of the program and 
attendance by each participant at each segment of the program.
    (4) Program numbers--(i) In general. Every continuing education 
provider is required to obtain a continuing education provider program 
number and pay any applicable user fee for each program offered. 
Program numbers shall be obtained as prescribed by forms, instructions 
or other appropriate guidance. Although, at the discretion of the 
Internal Revenue Service, a continuing education provider may be 
required to demonstrate that the program is designed to enhance 
professional knowledge in Federal taxation or Federal tax related 
matters (programs comprised of current subject matter in Federal 
taxation or Federal tax related matters, including accounting, tax 
return preparation software, taxation, or ethics) and complies with the 
requirements in paragraph (a)(2)of this section before a program number 
is issued.
    (ii) Update programs. Update programs may use the same number as 
the program subject to update. An update program is a program that 
instructs on a change of existing law occurring within one year of the 
update program offering. The qualifying education program subject to 
update must have been offered within the two

[[Page 32307]]

year time period prior to the change in existing law.
    (iii) Change in existing law. A change in existing law means the 
effective date of the statute or regulation, or date of entry of 
judicial decision, that is the subject of the update.
    (b) Failure to comply. Compliance by a continuing education 
provider with the requirements of this part is determined by the 
Internal Revenue Service. A continuing education provider who fails to 
meet the requirements of this part will be notified by the Internal 
Revenue Service. The notice will state the basis for the determination 
of noncompliance and will provide the continuing education provider an 
opportunity to furnish the requested information in writing relating to 
the matter within 60 days of the date of the notice. The continuing 
education provider may, within 30 days after receipt of the notice of 
denial, file a written protest as prescribed by the Internal Revenue 
Service in forms, instructions, or other appropriate guidance. A 
protest under this section is not governed by subpart D of this part.
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 12. Section 10.20 is amended by
0
1. Redesignating paragraphs (b) and (c) as (a)(3) and (b).
0
2. Revising newly designated paragraphs (a)(3) and (b).
0
3. Adding paragraph (c).
    The revisions and additions read as follows:


Sec.  10.20  Information to be furnished.

    (a) * * *
    (3) When a proper and lawful request is made by a duly authorized 
officer or employee of the Internal Revenue Service, concerning an 
inquiry into an alleged violation of the regulations in this part, a 
practitioner must provide any information the practitioner has 
concerning the alleged violation and testify regarding this information 
in any proceeding instituted under this part, unless the practitioner 
believes in good faith and on reasonable grounds that the information 
is privileged.
    (b) Interference with a proper and lawful request for records or 
information. A practitioner may not interfere, or attempt to interfere, 
with any proper and lawful effort by the Internal Revenue Service, its 
officers or employees, to obtain any record or information unless the 
practitioner believes in good faith and on reasonable grounds that the 
record or information is privileged.
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 13. Section 10.25 is amended by revising paragraphs (c)(2) and (e) 
to read as follows:


Sec.  10.25  Practice by former government employees, their partners 
and their associates.

* * * * *
    (c) * * *
    (2) When isolation of a former Government employee is required 
under paragraph (c)(1) of this section, a statement affirming the fact 
of such isolation must be executed under oath by the former Government 
employee and by another member of the firm acting on behalf of the 
firm. The statement must clearly identify the firm, the former 
Government employee, and the particular matter(s) requiring isolation. 
The statement must be retained by the firm and, upon request, provided 
to the office(s) of the Internal Revenue Service administering or 
enforcing this part.
* * * * *
    (e) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 14. Section 10.30 is amended by revising paragraphs (a)(1) and (e) 
to read as follows:


Sec.  10.30  Solicitation.

    (a) Advertising and solicitation restrictions. (1) A practitioner 
may not, with respect to any Internal Revenue Service matter, in any 
way use or participate in the use of any form of public communication 
or private solicitation containing a false, fraudulent, or coercive 
statement or claim; or a misleading or deceptive statement or claim. 
Enrolled agents, enrolled retirement plan agents, or registered tax 
return preparers, in describing their professional designation, may not 
utilize the term ``certified'' or imply an employer/employee 
relationship with the Internal Revenue Service. Examples of acceptable 
descriptions for enrolled agents are ``enrolled to represent taxpayers 
before the Internal Revenue Service,'' ``enrolled to practice before 
the Internal Revenue Service,'' and ``admitted to practice before the 
Internal Revenue Service.'' Similarly, examples of acceptable 
descriptions for enrolled retirement plan agents are ``enrolled to 
represent taxpayers before the Internal Revenue Service as a retirement 
plan agent'' and ``enrolled to practice before the Internal Revenue 
Service as a retirement plan agent.'' An example of an acceptable 
description for registered tax return preparers is ``designated as a 
registered tax return preparer by the Internal Revenue Service.''
* * * * *
    (e) Effective/applicability date. This section is applicable 
beginning August 2, 2011.
* * * * *

0
Par. 15. Section 10.34 is amended by:
0
1. Adding paragraph (a).
0
2. Redesignating paragraph (f) as paragraph (e).
0
3. Revising newly designated paragraph (e).
    The revision and addition read as follows:


Sec.  10.34  Standards with respect to tax returns and documents, 
affidavits and other papers.

    (a) Tax returns. (1) A practitioner may not willfully, recklessly, 
or through gross incompetence--
    (i) Sign a tax return or claim for refund that the practitioner 
knows or reasonably should know contains a position that--
    (A) Lacks a reasonable basis;
    (B) Is an unreasonable position as described in section 6694(a)(2) 
of the Internal Revenue code (Code) (including the related regulations 
and other published guidance); or
    (C) Is a willful attempted by the practitioner to understate the 
liability for tax or a reckless or intentional disregard of rules or 
regulations by the practitioner as described in section 6694(b)(2) of 
the Code (including the related regulations and other published 
guidance).
    (ii) Advise a client to take a position on a tax return or claim 
for refund, or prepare a portion off a tax return or claim for refund 
containing a position, that--
    (A) Lacks a reasonable basis;
    (B) Is an unreasonable position as described in section 6694(a)(2) 
of theCode (including the related regulations and other published 
guidance); or
    (C) Is a willful attempt by the practitioner to understate the 
liability for tax or a reckless or intentional disregard of rules or 
regulations by the practitioner as described in section 6694(b)(2) of 
the Code (including the related regulations and other published 
guidance).
    (2) A pattern of conduct is a factor that will be taken into 
account in determining whether a practitioner acted willfully, 
recklessly, or through gross incompetence.
* * * * *
    (e) Effective/applicability date. Paragraph (a) of this section is

[[Page 32308]]

applicable for returns or claims for refund filed, or advice provided, 
beginning August 2, 2011. Paragraphs (b) through (d) of this section 
are applicable to tax returns, documents, affidavits, and other papers 
filed on or after September 26, 2007.

0
Par. 16. Section 10.36 is amended by:
0
1. Redesignating paragraph (b) as paragraph (c).
0
2. Adding new paragraph (b).
0
3. Revising newly designated paragraph (c).
    The addition and revisions read as follows:


Sec.  10.36  Procedures to ensure compliance.

* * * * *
    (b) Requirements for tax returns and other documents. Any 
practitioner who has (or practitioners who have or share) principal 
authority and responsibility for overseeing a firm's practice of 
preparing tax returns, claims for refunds, or other documents for 
submission to the Internal Revenue Service must take reasonable steps 
to ensure that the firm has adequate procedures in effect for all 
members, associates, and employees for purposes of complying with 
Circular 230. Any practitioner who has (or practitioners who have or 
share) this principal authority will be subject to discipline for 
failing to comply with the requirements of this paragraph if--
    (1) The practitioner through willfulness, recklessness, or gross 
incompetence does not take reasonable steps to ensure that the firm has 
adequate procedures to comply with Circular 230, and one or more 
individuals who are members of, associated with, or employed by, the 
firm are, or have, engaged in a pattern or practice, in connection with 
their practice with the firm, of failing to comply with Circular 230; 
or
    (2) The practitioner knows or should know that one or more 
individuals who are members of, associated with, or employed by, the 
firm are, or have, engaged in a pattern or practice, in connection with 
their practice with the firm, that does not comply with Circular 230, 
and the practitioner, through willfulness, recklessness, or gross 
incompetence fails to take prompt action to correct the noncompliance.
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 17. Section 10.38 is revised to read as follows:


Sec.  10.38  Establishment of advisory committees.

    (a) Advisory committees. To promote and maintain the public's 
confidence in tax advisors, the Internal Revenue Service is authorized 
to establish one or more advisory committees composed of at least six 
individuals authorized to practice before the Internal Revenue Service. 
Membership of an advisory committee must be balanced among those who 
practice as attorneys, accountants, enrolled agents, enrolled 
actuaries, enrolled retirement plan agents, and registered tax return 
preparers. Under procedures prescribed by the Internal Revenue Service, 
an advisory committee may review and make general recommendations 
regarding the practices, procedures, and policies of the offices 
described in Sec.  10.1.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 18. Section 10.50 is amended by
0
1. Revising paragraph (b)(1).
0
2. Removing paragraphs (d) and (e) as paragraphs (e) and (f).
0
3. Adding new paragraph (d).
0
4. Revising newly redesignated paragraph (f).
    The revisions and addition read as follows:


Sec.  10.50  Sanctions.

* * * * *
    (b) * * *
    (1) If any appraiser is disqualified pursuant to this subpart C, 
the appraiser is barred from presenting evidence or testimony in any 
administrative proceeding before the Department of Treasury or the 
Internal Revenue Service, unless and until authorized to do so by the 
Internal Revenue Service pursuant to Sec.  10.81, regardless of whether 
the evidence or testimony would pertain to an appraisal made prior to 
or after the effective date of disqualification.
* * * * *
    (d) Authority to accept a practitioner's consent to sanction. The 
Internal Revenue Service may accept a practitioner's offer of consent 
to be sanctioned under Sec.  10.50 in lieu of instituting or continuing 
a proceeding under Sec.  10.60(a).
* * * * *
    (f) Effective/applicability date. This section is applicable to 
conduct occurring on or after August 2, 2011, except that paragraphs 
(a), (b)(2), and (e) apply to conduct occurring on or after September 
26, 2007, and paragraph (c) applies to prohibited conduct that occurs 
after October 22, 2004.

0
Par. 19. Section 10.51 is amended by adding paragraphs (a)(16), (17), 
and (18) and revising paragraph (b) to read as follows:


Sec.  10.51  Incompetence and disreputable conduct.

    (a) * * *
    (16) Willfully failing to file on magnetic or other electronic 
media a tax return prepared by the practitioner when the practitioner 
is required to do so by the Federal tax laws unless the failure is due 
to reasonable cause and not due to willful neglect.
    (17) Willfully preparing all or substantially all of, or signing, a 
tax return or claim for refund when the practitioner does not possess a 
current or otherwise valid preparer tax identification number or other 
prescribed identifying number.
    (18) Willfully representing a taxpayer before an officer or 
employee of the Internal Revenue Service unless the practitioner is 
authorized to do so pursuant to this part.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 20. Section 10.53 is revised to read as follows:


Sec.  10.53  Receipt of information concerning practitioner.

    (a) Officer or employee of the Internal Revenue Service. If an 
officer or employee of the Internal Revenue Service has reason to 
believe a practitioner has violated any provision of this part, the 
officer or employee will promptly make a written report of the 
suspected violation. The report will explain the facts and reasons upon 
which the officer's or employee's belief rests and must be submitted to 
the office(s) of the Internal Revenue Service responsible for 
administering or enforcing this part.
    (b) Other persons. Any person other than an officer or employee of 
the Internal Revenue Service having information of a violation of any 
provision of this part may make an oral or written report of the 
alleged violation to the office(s) of the Internal Revenue Service 
responsible for administering or enforcing this part or any officer or 
employee of the Internal Revenue Service. If the report is made to an 
officer or employee of the Internal Revenue Service, the officer or 
employee will make a written report of the suspected violation and 
submit the report to the office(s) of the Internal Revenue Service 
responsible for administering or enforcing this part.
    (c) Destruction of report. No report made under paragraph (a) or 
(b) of this section shall be maintained unless retention of the report 
is permissible under the applicable records control schedule as 
approved by the National Archives and Records Administration

[[Page 32309]]

and designated in the Internal Revenue Manual. Reports must be 
destroyed as soon as permissible under the applicable records control 
schedule.
    (d) Effect on proceedings under subpart D. The destruction of any 
report will not bar any proceeding under subpart D of this part, but 
will preclude the use of a copy of the report in a proceeding under 
subpart D of this part.
    (e) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 21. Section 10.60 is amended by revising paragraphs (a), (b), and 
(d) to read as follows:


Sec.  10.60  Institution of proceeding.

    (a) Whenever it is determined that a practitioner (or employer, 
firm or other entity, if applicable) violated any provision of the laws 
governing practice before the Internal Revenue Service or the 
regulations in this part, the practitioner may be reprimanded in 
accordance with Sec.  10.62, or subject to a proceeding for sanctions 
described in Sec.  10.50.
    (b) Whenever a penalty has been assessed against an appraiser under 
the Internal Revenue Code and an appropriate officer or employee in an 
office established to enforce this part determines that the appraiser 
acted willfully, recklessly, or through gross incompetence with respect 
to the proscribed conduct, the appraiser may be reprimanded in 
accordance with Sec.  10.62 or subject to a proceeding for 
disqualification. A proceeding for disqualification of an appraiser is 
instituted by the filing of a complaint, the contents of which are more 
fully described in Sec.  10.62.
* * * * *
    (d) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 22. Section 10.61 is amended by revising paragraphs (a), (b)(2), 
and (c) to read as follows:


Sec.  10.61  Conferences.

    (a) In general. The Commissioner, or delegate, may confer with a 
practitioner, employer, firm or other entity, or an appraiser 
concerning allegations of misconduct irrespective of whether a 
proceeding has been instituted. If the conference results in a 
stipulation in connection with an ongoing proceeding in which the 
practitioner, employer, firm or other entity, or appraiser is the 
respondent, the stipulation may be entered in the record by either 
party to the proceeding.
    (b) * * *
    (2) Discretion; acceptance or declination. The Commissioner, or 
delegate, may accept or decline the offer described in paragraph (b)(1) 
of this section. When the decision is to decline the offer, the written 
notice of declination may state that the offer described in paragraph 
(b)(1) of this section would be accepted if it contained different 
terms. The Commissioner, or delegate, has the discretion to accept or 
reject a revised offer submitted in response to the declination or may 
counteroffer and act upon any accepted counteroffer.
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 23. Section 10.62 is revised to read as follows:


Sec.  10.62  Contents of complaint.

    (a) Charges. A complaint must name the respondent, provide a clear 
and concise description of the facts and law that constitute the basis 
for the proceeding, and be signed by an authorized representative of 
the Internal Revenue Service under Sec.  10.69(a)(1). A complaint is 
sufficient if it fairly informs the respondent of the charges brought 
so that the respondent is able to prepare a defense.
    (b) Specification of sanction. The complaint must specify the 
sanction sought against the practitioner or appraiser. If the sanction 
sought is a suspension, the duration of the suspension sought must be 
specified.
    (c) Demand for answer. The respondent must be notified in the 
complaint or in a separate paper attached to the complaint of the time 
for answering the complaint, which may not be less than 30 days from 
the date of service of the complaint, the name and address of the 
Administrative Law Judge with whom the answer must be filed, the name 
and address of the person representing the Internal Revenue Service to 
whom a copy of the answer must be served, and that a decision by 
default may be rendered against the respondent in the event an answer 
is not filed as required.
    (d) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 24. Section 10.63 is amended by revising paragraphs (c) and (f) to 
read as follows:


Sec.  10.63  Service of complaint; service of other papers; service of 
evidence in support of complaint; filing of papers.

* * * * *
    (c) Service of papers on the Internal Revenue Service. Whenever a 
paper is required or permitted to be served on the Internal Revenue 
Service in connection with a proceeding under this part, the paper will 
be served on the Internal Revenue Service's authorized representative 
under Sec.  10.69(a)(1) at the address designated in the complaint, or 
at an address provided in a notice of appearance. If no address is 
designated in the complaint or provided in a notice of appearance, 
service will be made on the office(s) established to enforce this part 
under the authority of Sec.  10.1, Internal Revenue Service, 1111 
Constitution Avenue, NW., Washington, DC 20224.
* * * * *
    (f) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 25. Section 10.64 is amended by revising paragraph (a) and adding 
paragraph (f) to read as follows:


Sec.  10.64  Answer; default.

    (a) Filing. The respondent's answer must be filed with the 
Administrative Law Judge, and served on the Internal Revenue Service, 
within the time specified in the complaint unless, on request or 
application of the respondent, the time is extended by the 
Administrative Law Judge.
* * * * *
    (f) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 26. Section 10.65 is amended by revising paragraphs (a) and (c) to 
read:


Sec.  10.65  Supplemental charges.

    (a) In general. Supplemental charges may be filed against the 
respondent by amending the complaint with the permission of the 
Administrative Law Judge if, for example--
    (1) It appears that the respondent, in the answer, falsely and in 
bad faith, denies a material allegation of fact in the complaint or 
states that the respondent has insufficient knowledge to form a belief, 
when the respondent possesses such information; or
    (2) It appears that the respondent has knowingly introduced false 
testimony during the proceedings against the respondent.
* * * * *
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 27. Section 10.66 is revised to read as follows:


Sec.  10.66  Reply to answer.

    (a) The Internal Revenue Service may file a reply to the 
respondent's answer, but unless otherwise ordered by the Administrative 
Law Judge, no reply to the respondent's answer is required. If a reply 
is not filed, new matter in the answer is deemed denied.

[[Page 32310]]

    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 28. Section 10.69 is revised to read as follows:


Sec.  10.69  Representation; ex parte communication.

    (a) Representation. The Internal Revenue Service may be represented 
in proceedings under this part by an attorney or other employee of the 
Internal Revenue Service. An attorney or an employee of the Internal 
Revenue Service representing the Internal Revenue Service in a 
proceeding under this part may sign the complaint or any document 
required to be filed in the proceeding on behalf of the Internal 
Revenue Service.
    (b) Ex parte communication. The Internal Revenue Service, the 
respondent, and any representatives of either party, may not attempt to 
initiate or participate in ex parte discussions concerning a proceeding 
or potential proceeding with the Administrative Law Judge (or any 
person who is likely to advise the Administrative Law Judge on a ruling 
or decision) in the proceeding before or during the pendency of the 
proceeding. Any memorandum, letter or other communication concerning 
the merits of the proceeding, addressed to the Administrative Law 
Judge, by or on behalf of any party shall be regarded as an argument in 
the proceeding and shall be served on the other party.
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 29. Section 10.72 is amended by revising paragraphs (a)(3)(iv)(A), 
(d)(1), and (g) to read as follows:


Sec.  10.72  Hearings.

    (a) * * *
    (3) * * *
    (iv) * * *
    (A) The Internal Revenue Service withdraws the complaint;
* * * * *
    (d) Publicity--(1) In general. All reports and decisions of the 
Secretary of the Treasury, or delegate, including any reports and 
decisions of the Administrative Law Judge, under this subpart D are, 
subject to the protective measures in paragraph (d)(4) of this section, 
public and open to inspection within 30 days after the agency's 
decision becomes final.
* * * * *
    (g) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 30. Section 10.76 is amended by revising paragraphs (c), and (e) 
to read as follows:


Sec.  10.76  Decision of Administrative Law Judge.

* * * * *
    (c) Copy of decision. The Administrative Law Judge will provide the 
decision to the Internal Revenue Service's authorized representative, 
and a copy of the decision to the respondent or the respondent's 
authorized representative.
* * * * *
    (e) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 31. Section 10.77 is revised to read as follows:


Sec.  10.77  Appeal of decision of Administrative Law Judge.

    (a) Appeal. Any party to the proceeding under this subpart D may 
appeal the decision of the Administrative Law Judge by filing a notice 
of appeal with the Secretary of the Treasury, or delegate deciding 
appeals. The notice of appeal must include a brief that states 
exceptions to the decision of Administrative Law Judge and supporting 
reasons for such exceptions.
    (b) Time and place for filing of appeal. The notice of appeal and 
brief must be filed, in duplicate, with the Secretary of the Treasury, 
or delegate deciding appeals, at an address for appeals that is 
identified to the parties with the decision of the Administrative Law 
Judge. The notice of appeal and brief must be filed within 30 days of 
the date that the decision of the Administrative Law Judge is served on 
the parties. The appealing party must serve a copy of the notice of 
appeal and the brief to any non-appealing party or, if the party is 
represented, the non-appealing party's representative.
    (c) Response. Within 30 days of receiving the copy of the 
appellant's brief, the other party may file a response brief with the 
Secretary of the Treasury, or delegate deciding appeals, using the 
address identified for appeals. A copy of the response brief must be 
served at the same time on the opposing party or, if the party is 
represented, the opposing party's representative.
    (d) No other briefs, responses or motions as of right. Other than 
the appeal brief and response brief, the parties are not permitted to 
file any other briefs, responses or motions, except on a grant of leave 
to do so after a motion demonstrating sufficient cause, or unless 
otherwise ordered by the Secretary of the Treasury, or delegate 
deciding appeals.
    (e) Additional time for briefs and responses. Notwithstanding the 
time for filing briefs and responses provided in paragraphs (b) and (c) 
of this section, the Secretary of the Treasury, or delegate deciding 
appeals, may, for good cause, authorize additional time for filing 
briefs and responses upon a motion of a party or upon the initiative of 
the Secretary of the Treasury, or delegate deciding appeals.
    (f) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 32. Section 10.78 is amended by revising paragraphs (c) and (d) to 
read as follows:


Sec.  10.78  Decision on review.

* * * * *
    (c) Copy of decision on review. The Secretary of the Treasury, or 
delegate, will provide copies of the agency decision to the authorized 
representative of the Internal Revenue Service and the respondent or 
the respondent's authorized representative.
    (d) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 33. Section 10.79 is revised to read as follows:


Sec.  10.79  Effect of disbarment, suspension, or censure.

    (a) Disbarment. When the final decision in a case is against the 
respondent (or the respondent has offered his or her consent and such 
consent has been accepted by the Internal Revenue Service) and such 
decision is for disbarment, the respondent will not be permitted to 
practice before the Internal Revenue Service unless and until 
authorized to do so by the Internal Revenue Service pursuant to Sec.  
10.81.
    (b) Suspension. When the final decision in a case is against the 
respondent (or the respondent has offered his or her consent and such 
consent has been accepted by the Internal Revenue Service) and such 
decision is for suspension, the respondent will not be permitted to 
practice before the Internal Revenue Service during the period of 
suspension. For periods after the suspension, the practitioner's future 
representations may be subject to conditions as authorized by paragraph 
(d) of this section.
    (c) Censure. When the final decision in the case is against the 
respondent (or the Internal Revenue Service has accepted the 
respondent's offer to consent, if such offer was made) and such 
decision is for censure, the respondent will be permitted to practice 
before the Internal Revenue Service, but the respondent's future 
representations may be subject to conditions as

[[Page 32311]]

authorized by paragraph (d) of this section.
    (d) Conditions. After being subject to the sanction of either 
suspension or censure, the future representations of a practitioner so 
sanctioned shall be subject to specified conditions designed to promote 
high standards of conduct. These conditions can be imposed for a 
reasonable period in light of the gravity of the practitioner's 
violations. For example, where a practitioner is censured because the 
practitioner failed to advise the practitioner's clients about a 
potential conflict of interest or failed to obtain the clients' written 
consents, the practitioner may be required to provide the Internal 
Revenue Service with a copy of all consents obtained by the 
practitioner for an appropriate period following censure, whether or 
not such consents are specifically requested.
    (e) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 34. Section 10.80 is revised to read as follows:


Sec.  10.80  Notice of disbarment, suspension, censure, or 
disqualification.

    (a) In general. On the issuance of a final order censuring, 
suspending, or disbarring a practitioner or a final order disqualifying 
an appraiser, notification of the censure, suspension, disbarment or 
disqualification will be given to appropriate officers and employees of 
the Internal Revenue Service and interested departments and agencies of 
the Federal government. The Internal Revenue Service may determine the 
manner of giving notice to the proper authorities of the State by which 
the censured, suspended, or disbarred person was licensed to practice.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 35. Section 10.81 is revised to read as follows:


Sec.  10.81  Petition for reinstatement.

    (a) In general. A disbarred practitioner or a disqualified 
appraiser may petition for reinstatement before the Internal Revenue 
Service after the expiration of 5 years following such disbarment or 
disqualification. Reinstatement will not be granted unless the Internal 
Revenue Service is satisfied that the petitioner is not likely to 
conduct himself, thereafter, contrary to the regulations in this part, 
and that granting such reinstatement would not be contrary to the 
public interest.
    (b) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 36. Section 10.82 is amended by revising paragraphs (a), (c) 
introductory text, (c)(3), (d), (e), (f), (g), and (h) to read as 
follows:


Sec.  10.82  Expedited suspension.

    (a) When applicable. Whenever the Commissioner, or delegate, 
determines that a practitioner is described in paragraph (b) of this 
section, proceedings may be instituted under this section to suspend 
the practitioner from practice before the Internal Revenue Service.
* * * * *
    (c) Instituting a proceeding. A proceeding under this section will 
be instituted by a complaint that names the respondent, is signed by an 
authorized representative of the Internal Revenue Service under Sec.  
10.69(a)(1), and is filed and served according to the rules set forth 
in paragraph (a) of Sec.  10.63. The complaint must give a plain and 
concise description of the allegations that constitute the basis for 
the proceeding. The complaint must notify the respondent--
* * * * *
    (3) That the respondent may request a conference to address the 
merits of the complaint and that any such request must be made in the 
answer; and
* * * * *
    (d) Answer. The answer to a complaint described in this section 
must be filed no later than 30 calendar days following the date the 
complaint is served, unless the time for filing is extended. The answer 
must be filed in accordance with the rules set forth in Sec.  10.64, 
except as otherwise provided in this section. A respondent is entitled 
to a conference only if the conference is requested in a timely filed 
answer. If a request for a conference is not made in the answer or the 
answer is not timely filed, the respondent will be deemed to have 
waived the right to a conference and may be suspended at any time 
following the date on which the answer was due.
    (e) Conference. An authorized representative of the Internal 
Revenue Service will preside at a conference described in this section. 
The conference will be held at a place and time selected by the 
Internal Revenue Service, but no sooner than 14 calendar days after the 
date by which the answer must be filed with the Internal Revenue 
Service, unless the respondent agrees to an earlier date. An authorized 
representative may represent the respondent at the conference. 
Following the conference, upon a finding that the respondent is 
described in paragraph (b) of this section, or upon the respondent's 
failure to appear at the conference either personally or through an 
authorized representative, the respondent may be immediately suspended 
from practice before the Internal Revenue Service.
    (f) Duration of suspension. A suspension under this section will 
commence on the date that written notice of the suspension is issued. 
The suspension will remain effective until the earlier of the 
following:
    (1) The Internal Revenue Service lifts the suspension after 
determining that the practitioner is no longer described in paragraph 
(b) of this section or for any other reason; or
    (2) The suspension is lifted by an Administrative Law Judge or the 
Secretary of the Treasury in a proceeding referred to in paragraph (g) 
of this section and instituted under Sec.  10.60.
    (g) Proceeding instituted under Sec.  10.60. If the Internal 
Revenue Service suspended a practitioner under this section, the 
practitioner may ask the Internal Revenue Service to issue a complaint 
under Sec.  10.60. The request must be made in writing within 2 years 
from the date on which the practitioner's suspension commences. The 
Internal Revenue Service must issue a complaint requested under this 
paragraph within 30 calendar days of receiving the request.
    (h) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

0
Par. 37. Section 10.90 is amended by:
0
1. Revising paragraph (a).
0
2. Redesignating the second paragraph (b) as paragraph (c).
0
3. Revising newly designated paragraph (c).
    The revisions read as follows:


Sec.  10.90  Records.

    (a) Roster. The Internal Revenue Service will maintain and make 
available for public inspection in the time and manner prescribed by 
the Secretary, or delegate, the following rosters--
    (1) Individuals (and employers, firms, or other entities, if 
applicable) censured, suspended, or disbarred from practice before the 
Internal Revenue Service or upon whom a monetary penalty was imposed.
    (2) Enrolled agents, including individuals--
    (i) Granted active enrollment to practice;
    (ii) Whose enrollment has been placed in inactive status for 
failure to meet the requirements for renewal of enrollment;
    (iii) Whose enrollment has been placed in inactive retirement 
status; and
    (iv) Whose offer of consent to resign from enrollment has been 
accepted by

[[Page 32312]]

the Internal Revenue Service under Sec.  10.61.
    (3) Enrolled retirement plan agents, including individuals--
    (i) Granted active enrollment to practice;
    (ii) Whose enrollment has been placed in inactive status for 
failure to meet the requirements for renewal of enrollment;
    (iii) Whose enrollment has been placed in inactive retirement 
status; and
    (iv) Whose offer of consent to resign from enrollment has been 
accepted under Sec.  10.61.
    (4) Registered tax return preparers, including individuals--
    (i) Authorized to prepare all or substantially all of a tax return 
or claim for refund;
    (ii) Who have been placed in inactive status for failure to meet 
the requirements for renewal;
    (iii) Who have been placed in inactive retirement status; and
    (iv) Whose offer of consent to resign from their status as a 
registered tax return preparer has been accepted by the Internal 
Revenue Service under Sec.  10.61.
    (5) Disqualified appraisers.
    (6) Qualified continuing education providers, including providers--
    (i) Who have obtain a qualifying continuing education provider 
number
    (ii) Whose qualifying continuing education number has been revoked 
for failure to comply with the requirements of this part.
* * * * *
    (c) Effective/applicability date. This section is applicable 
beginning August 2, 2011.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: May 20, 2011.

George Madison,
General Counsel, Office of the Secretary.
[FR Doc. 2011-13666 Filed 5-31-11; 11:15 am]
BILLING CODE 4830-01-P