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



[[Page 59329]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[REG-116284-11]
RIN 1545-BK24


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

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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

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

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

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

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

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

[[Page 59330]]

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

User Fee To Take the Registered Tax Return Preparer Competency 
Examination

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

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

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

[[Page 59331]]

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

Authority

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

Proposed Effective/Applicability Date

    The Administrative Procedure Act provides that substantive rules 
generally will not be effective until thirty days after the final 
regulations are published in the Federal Register (5 U.S.C. 553(d)). 
Final regulations may be effective prior to thirty days after 
publication if the publishing agency finds that there is good cause for 
an earlier effective date.
    This regulation is part of the IRS's continued effort to implement 
the recommendations in the ``Return Preparer Review.'' The recently 
published amendments to Circular 230 established registered tax return 
preparers as practitioners under Circular 230 and required that 
individuals must pass a competency examination, among other 
requirements, to become a registered tax return preparer. Before the 
competency examination can be offered, the competency examination user 
fee must be in place. As part of the recent amendments to the section 
6109 regulations, the IRS established a requirement to pass a 
suitability check prior to obtaining a PTIN. To fully implement the 
suitability check, the regulations establishing a user fee to be 
fingerprinted must be finalized so the IRS can begin fingerprinting 
required applicants. Further, the competency examination and the 
fingerprinting user fees must be finalized significantly before the 
2012 filing season to enable the IRS to have these aspects of the new

[[Page 59332]]

regulatory program in place for the 2012 filing season.
    Thus, the Treasury Department and the IRS find that there is good 
cause for these regulations to be effective upon the publication of a 
Treasury decision adopting these rules as final regulations in the 
Federal Register.

Special Analyses

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

Initial Regulatory Flexibility Analysis

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

[[Page 59333]]

by individuals who are denied the ability to participate in their 
respective program because the individuals failed the suitability 
check. Individuals who participate in the PTIN program receive the 
special benefit of being able to prepare all or substantially all of a 
tax return or claim for refund for compensation. Individuals who 
participate in the acceptance agent program receive the special benefit 
of being able to facilitate and expedite the issuance of ITINs and EINs 
by verifying the applicant's identity and status as an alien; 
certifying acceptance agents receive the additional benefit of being 
able to certify an ITIN applicant's identity and status as an alien. 
Persons who participate in the authorized e-file provider program 
receive the special benefit of being able to electronically file tax 
and information returns.
    The legal basis for establishing a user fee is contained in section 
9701 of title 31.
A Description of and, Where Feasible, an Estimate of the Number of 
Small Entities to Which the Proposed Rule Will Apply
    The proposed regulations affect all individuals who want to become 
registered tax return preparers under the new oversight rules in 
Circular 230. Only individuals, not businesses, can practice before the 
IRS or become a registered tax return preparer. Thus, the economic 
impact of these regulations on any small entity generally will be a 
result of applicants owning a small business or a small entity 
employing applicants. The NAICS code that relates to tax preparation 
services (NAICS code 541213) is the appropriate code for the registered 
tax return preparer program. Entities identified as tax preparation 
services are considered small under the Small Business Administration 
size standards (13 CFR 121.201) if their annual revenue is less than $7 
million. The IRS estimates that approximately 350,000 individuals will 
become registered tax return preparers. The IRS estimates that 
approximately 70 to 80 percent of the individuals who apply to become 
registered tax return preparers are operating as or employed by small 
entities.
    The proposed regulations affect certain individuals who have or 
want to obtain a PTIN. Only individuals, not businesses, can obtain a 
PTIN. Thus, the economic impact of these regulations on any small 
entity generally will be a result of an individual tax return preparer 
who is required to obtain a PTIN owning a small business or a small 
business otherwise employing an individual tax return preparer who is 
required to apply for or renew a PTIN to prepare all or substantially 
all of a tax return or claim for refund. The appropriate NAICS codes 
for applicants or participants in the PTIN program who will have to be 
fingerprinted relates to tax preparation services (NAICS code 541213). 
The IRS estimates that approximately 450,000 individuals who receive a 
PTIN will be required to pay the fingerprinting user fee. Entities 
identified as tax preparation services and offices of lawyers are 
considered small under the Small Business Administration size standards 
if their annual revenue is less than $7 million. The IRS estimates that 
approximately 70 to 80 percent of the individuals required to be 
fingerprinted are operating as or employed by small entities.
    The proposed regulations also affect individuals who are or want to 
become an acceptance agent. Only an individual can become an acceptance 
agent; thus, the regulations will economically impact any small entity 
that is owned by or employs an acceptance agent. The NAICS code that 
relates to tax preparation services (NAICS code 541213) is the 
appropriate code for the acceptance agent program. Entities identified 
as tax preparation services are considered small under the Small 
Business Administration size standards if their annual revenue is less 
than $7 million. The IRS estimates that 3,500 individuals who are not 
required to obtain a PTIN will be fingerprinted as part of the 
acceptance agent program. The IRS estimates that 80 to 90 percent of 
acceptance agents are operating as or employed by small entities.
    Finally, the proposed regulations will affect any person that is an 
authorized e-file provider or applies to become an authorized e-file 
provider. Small businesses can be authorized e-file providers. The 
NAICS code that relates to authorized e-file providers is data 
processing, hosting, and related services (NAICS code 518210). Entities 
identified as data processing, hosting, and related services are 
considered small under the Small Business Administration size standards 
if their annual revenue is less than $25 million. The IRS projects that 
6,500 persons who are not required to obtain a PTIN will be 
fingerprinted as part of the authorized e-file provider program. The 
IRS estimates that 99 percent of authorized e-file providers are 
operating as small businesses.
    A description of the projected reporting, recordkeeping, and other 
compliance requirements of the proposed rule, including an estimate of 
the classes of small entities that will be subject to the requirement 
and the type of professional skills necessary for preparation of the 
report or record.
    No reporting or recordkeeping requirements are projected to be 
associated with this proposed regulation.
An Identification, to the Extent Practicable, of All Relevant Federal 
Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule
    The IRS is not aware of any federal rules that duplicate, overlap, 
or conflict with the proposed rule.
A Description of Any Significant Alternatives to the Proposed Rule, 
Which Accomplish the Stated Objectives of Applicable Statutes and Which 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities
    The IOAA authorizes the charging of user fees for agency services, 
subject to policies designated by the President. The OMB Circular 
implements presidential policies regarding user fees and encourages 
user fees when a government agency provides a special benefit to a 
member of the public. As Congress has not appropriated funds to the 
registered tax return preparer, PTIN, acceptance agent, or authorized 
e-file provider programs, there are no viable alternatives to the 
imposition of user fees.
    While the IRS previously did not charge a user fee to recover its 
costs in conjunction with the fingerprinting of applicants to the 
acceptance agent and authorized e-file programs, the number of 
applicants in these programs was small enough that the cost of 
collecting a user fee to fingerprint applicants in these programs would 
represent an unduly large portion of the user fee. The addition of the 
PTIN applicants as a group of individuals who also are required to be 
fingerprinted increased the number of persons required to be 
fingerprinted to approximately 460,000. Because the population of 
individuals to be fingerprinted substantially increased, the cost of 
collecting a user fee for fingerprinting acceptance agents and 
authorized e-file providers is no longer an unduly large portion of the 
user fee.

Comments and Public Hearing

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

[[Page 59334]]

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

Drafting Information

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

List of Subjects in 26 CFR Part 300

    Reporting and recordkeeping requirements, User fees.

Proposed Amendments to the Regulations

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

Part 300--USER FEES

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

    Authority:  31 U.S.C. 9701.

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


Sec.  300.0  User fees; in general.

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


Sec.  300.12  [Redesignated as Sec.  300.13]

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


Sec.  300.12  Registered tax return preparer competency examination 
fee.

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


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

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

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