[Federal Register Volume 84, Number 92 (Monday, May 13, 2019)]
[Rules and Regulations]
[Pages 20801-20804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09732]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 9858]
RIN 1545-BO38


User Fees Relating to Enrolled Agents and Enrolled Retirement 
Plan Agents

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulation.

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SUMMARY: This document contains final regulations that amend 
regulations relating to imposing user fees for enrolled agents and 
enrolled retirement plan agents. The final regulations remove the 
initial enrollment user fee for enrolled retirement plan agents because 
the IRS no longer offers initial enrollment as an enrolled retirement 
plan agent. The final regulations also increase the amount of the 
renewal user fee for enrolled retirement plan agents from $30 to $67. 
In addition, the final regulations increase the amount of both the 
enrollment and renewal user fee for enrolled agents from $30 to $67. 
The final regulations affect individuals who are, or apply to become, 
enrolled agents and individuals who are enrolled retirement plan 
agents. The Independent Offices Appropriations Act of 1952 authorizes 
charging user fees.

DATES: 
    Effective date: This regulation is effective June 12, 2019.
    Applicability date: For the dates of applicability, see Sec. Sec.  
300.5(d), 300.6(d), and 300.10(d).

FOR FURTHER INFORMATION CONTACT: Mark Shurtliff at (202) 317-6845 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    This document contains amendments to 26 CFR part 300 regarding user 
fees.

A. User Fee Authority and Enrolled Agent and Enrolled Retirement Plan 
Agent User Fees

    The Independent Offices Appropriations Act of 1952 (IOAA) (31 
U.S.C. 9701) authorizes each agency to promulgate regulations 
establishing a charge for services the agency provides (user fees). 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. Under the IOAA, user fee 
regulations are subject to policies prescribed by the President. Those 
policies are currently set forth in the Office of Management and Budget 
(OMB) Circular A-25, 58 FR 38142 (July 15, 1993).
    Under OMB Circular A-25, Federal agencies that provide services 
that confer special benefits on identifiable recipients beyond those 
accruing to the general public are to establish user fees that recover 
the full cost of providing the special benefit. An agency that seeks to 
impose a user fee for government-provided services must calculate the 
full cost of providing those services, review user fees biennially, and 
update them as necessary. Section 330(a)(1) of title 31 of the United 
States Code authorizes the Secretary of the Treasury to regulate the 
practice of representatives before the Department of the Treasury 
(Treasury Department). Pursuant to section 330 of title 31, the 
Secretary has published regulations governing practice before the IRS 
in 31 CFR part 10 and reprinted the regulations as Treasury Department 
Circular No. 230 (Circular 230). Section 10.3 of Circular 230 defines 
who may practice before the IRS and includes individuals who have been 
granted enrollment to practice as enrolled agents and enrolled 
retirement plan agents. Section 10.4 of Circular 230 authorizes the IRS 
to grant enrollment as an enrolled agent or enrolled retirement plan 
agent to individuals who demonstrate special competence in tax matters 
by passing a written examination administered by, or under

[[Page 20802]]

the oversight of, the IRS and who have not engaged in any conduct that 
would justify suspension or disbarment under Circular 230. Section 10.4 
also authorizes the IRS to grant enrollment as an enrolled agent or an 
enrolled retirement plan agent to a qualifying former IRS employee by 
virtue of past IRS service and technical experience if the former 
employee has not engaged in any conduct that would justify suspension 
or disbarment under the provisions of Circular 230 and meets certain 
other requirements. The ability to practice before the IRS is a special 
benefit that is conferred on enrolled agents and enrolled retirement 
plan agents that does not accrue to the general public.
    Once eligible for enrollment as an enrolled agent, whether by 
examination or former employment with the IRS, an individual must file 
an application for enrollment with the IRS and pay a $30 nonrefundable 
user fee. To maintain active enrollment and eligibility to practice 
before the IRS, an individual who has been enrolled as an enrolled 
agent or enrolled retirement plan agent must file an application to 
renew enrollment every three years and pay a $30 nonrefundable user 
fee. 31 CFR 10.6(d).
    As required by the IOAA and OMB Circular A-25, the IRS Return 
Preparer Office (RPO) completed its 2017 biennial review of the 
enrollment and renewal user fees associated with enrolled agents and 
enrolled retirement plan agents. As discussed in section B of this 
preamble, during its review the RPO took into account the increase in 
labor, benefits, and overhead costs incurred in connection with 
providing services to individuals who enroll or renew enrollment as 
enrolled agents and enrolled retirement plan agents since the user fee 
was last changed in 2011. In addition, RPO determined that costs 
associated with Federal tax-compliance checks and suitability checks on 
enrolled individuals should be recovered as part of the user fee for 
administering the enrollment and renewal programs. The 2017 biennial 
review also took into account new costs associated with administering 
the program for enrolled agents and enrolled retirement plan agents, 
including the costs of operating a dedicated toll-free helpline in the 
RPO for enrollment and renewal matters.

B. Calculation of the User Fee

    The IRS follows generally accepted accounting principles (GAAP) in 
calculating the full cost of administering the program for enrollment 
or renewal. GAAP is established by the Financial Accounting Standards 
Board (FASB). Recognition of costs is based on Statement of Federal 
Financial Accounting Standards (SFFAS) No. 4: Managerial Cost 
Accounting Concepts and Standards for the Federal Government, issued by 
the Federal Accounting Standard Advisory Board (FASAB). The FASAB 
Handbook of Federal Accounting Standards and Other Pronouncements, as 
Amended, is available at https://files.fasab.gov/pdffiles/2018_fasab_handbook.pdf.
1. Cost Center Allocation
    The IRS determines the cost of its services and activities using a 
cost-accounting system that tracks costs to organizational units. The 
lowest organizational unit in the IRS's cost-accounting system is a 
cost center. Cost centers are usually separate offices that are 
distinguished by subject-matter area of responsibility or geographic 
region. Costs of operating a cost center are recorded in the IRS's 
cost-accounting system. Costs of user fees include direct costs, such 
as labor, and indirect costs. Indirect costs are not easily traceable 
and are allocated using a method or by applying an overhead rate.
2. Determining the per Unit Cost
    To establish the per-unit cost, the total cost of providing the 
service is divided by the volume of services provided.
3. Cost Estimation of Direct Labor
    Not all cost centers are fully devoted to one service for which the 
IRS charges user fees. Some cost centers work on a number of different 
services across the IRS. In these cases, the IRS uses various cost-
measurement techniques to estimate the cost incurred in those cost 
centers attributable to the program. These techniques include using 
various timekeeping systems to measure the time required to accomplish 
activities, or using information provided by subject-matter experts on 
the time devoted to a program. Once the IRS has estimated the average 
time required to accomplish an activity, it multiplies that time 
estimate by the relevant organizational unit's average labor and 
benefits cost per unit of time to determine the labor and benefits cost 
incurred to provide the service. To determine the full cost, IRS then 
adds overhead as discussed below.
4. Overhead
    Overhead is an indirect cost of operating an organization that 
cannot be immediately associated with an activity that the organization 
performs. Overhead includes costs of resources that are jointly or 
commonly consumed by one or more organizational unit's activities but 
are not specifically identifiable to a single activity.
    These costs can include:
     General management and administrative services of 
sustaining and supporting organizations.
     Facilities management and ground maintenance services 
(security, rent, utilities, and building maintenance).
     Procurement and contracting services.
     Financial management and accounting services.
     Information technology services.
     Services to acquire and operate property, plants and 
equipment.
     Publication, reproduction, and graphics and video 
services.
     Research, analytical, and statistical services.
     Human resources/personnel services.
     Library and legal services.
    To calculate the overhead allocable to a service, the IRS 
multiplies a Corporate Overhead rate by the labor and benefits costs 
determined as discussed previously. The IRS calculates the Corporate 
Overhead rate annually based on cost elements underlying the Statement 
of Net Cost included in the IRS Annual Financial Statements, which are 
audited by the Government Accountability Office. The Corporate Overhead 
rate is the ratio of the sum of the IRS's indirect labor and benefits 
costs from the supporting and sustaining organizational units--those 
that do not interact directly with taxpayers--and all non-labor costs 
to the IRS's labor and benefits costs of its organizational units that 
interact directly with taxpayers.
    The Corporate Overhead rate of 68.00 percent for costs reviewed 
during FY 2017 was calculated based on FY 2016 costs (which are assumed 
to be fixed and reoccurring) as follows:

 
 
 
Indirect Labor and Benefits Costs...................      $1,681,373,747
Non-Labor Costs.....................................    + $2,879,907,032
                                                     -------------------
  Total Indirect Costs..............................      $4,561,280,779
Direct Labor and Benefits Costs.....................    / $6,708,063,559
                                                     -------------------
Corporate Overhead Rate.............................              68.00%
                                                     ===================
 

5. Calculation of the per Unit Cost of the User Fee
    The IRS used projections for fiscal years 2018 through 2020 to 
determine the direct costs associated with enrolled agent enrollment 
and renewal and enrolled retirement plan agent renewal. Direct costs 
are incurred by the RPO and include labor costs for enrollment and

[[Page 20803]]

renewal submission processing; tax compliance and background checks; 
continuing education and testing-related activities; and 
communications, which include the new toll-free helpline.
    The labor and benefits for the work performed related to 
administering the program for enrolled agent enrollment and renewal and 
enrolled retirement plan agent renewal is projected to be $2,708,603 in 
total over fiscal years 2018 through 2020. The labor and benefits costs 
include the cost to perform background checks and tax compliance 
checks, which are services that were not included in the previous $30 
user fee. The number of enrollment and renewal applications is based on 
the FY2016 numbers adjusted by the anticipated increase in enrollment. 
Adding Corporate Overhead expenses to the total labor and benefits 
results in total costs of $4,550,453 as shown below:

 
 
 
Labor and Benefits.........................................   $2,708,603
Corporate Overhead (68%)...................................   $1,841,850
                                                            ------------
Labor, Benefits, and Overhead..............................   $4,550,453
 

    Dividing this total cost by the projected population of initial 
enrollment and renewal applications for fiscal years 2018 through 2020 
results in a cost per application of $67 as shown below:

 
 
 
Labor, Benefits and Overhead...............................   $4,550,453
Number of Applications.....................................     / 68,343
                                                            ------------
Cost per Application.......................................          $67
                                                            ============
 

    Taking into account the full amount of these costs, the RPO 
determined that the full cost of administering the program for enrolled 
agents and enrolled retirement plan agents has increased from $30 to 
$67 per application for enrollment or renewal. The user fee complies 
with the directive in OMB Circular A-25 to recover the full cost of 
providing a service that confers special benefits on identifiable 
recipients beyond those accruing to the general public.

C. Notice of Proposed Rulemaking and Final Regulations

    On November 19, 2018, a notice of proposed rulemaking (REG-122898-
17) proposing to amend the regulations relating to imposing user fees 
for enrolled agents and retirement plan agents was published in the 
Federal Register (83 FR 58202). The document proposed removing the 
initial enrollment user fee for enrolled retirement plan agents because 
the IRS no longer offers initial enrollment as an enrolled retirement 
plan agent.
    The document also proposed increasing the amount of the renewal 
user fee for enrolled retirement plan agents from $30 to $67. In 
addition, the document proposed increasing the amount of both the 
enrollment and renewal user fees for enrolled agents from $30 to $67. 
The notice of proposed rulemaking contains a detailed explanation 
regarding the amendments to these regulations.
    Two comments responding to the notice of proposed rulemaking were 
received. A public hearing on the notice of proposed rulemaking was 
scheduled for January 24, 2019. As stated in the notice of proposed 
rulemaking, requests to speak and outlines of topics to be discussed at 
the hearing were required to be submitted by January 18, 2019. On 
January 22, 2019, the public hearing was cancelled due to a lapse in 
appropriations (IR-2019-05). Because no requests to speak at the 
hearing had been received, the hearing was not rescheduled. After 
consideration of the comments, this Treasury Decision adopts the 
regulations proposed by the notice of proposed rulemaking without 
change.

Summary of Comments

    Two comments were submitted on the notice of proposed rulemaking. 
The comments are available at www.regulations.gov or upon request.
    One of the comments agreed with the proposed user fee regulations 
because the commenter's status as an enrolled agent allows him to earn 
income by representing taxpayers before the IRS. The comment stated 
that the commenter supported the increase, so long as the user fees 
comply with the relevant authorities. As discussed in the background 
section of this preamble, the IOAA authorizes each agency to promulgate 
regulations that impose user fees for services the agency provides to 
identifiable recipients. User fee regulations under the IOAA are 
subject to policies prescribed by the President, which are set forth in 
OMB Circular A-25. As described in the background section of this 
preamble, the Treasury Department and IRS complied with the 
requirements of the IOAA and OMB Circular A-25 in promulgating these 
regulations. The notice of proposed rulemaking and the background 
section of this preamble provide a detailed analysis of how the RPO 
determined the full cost of providing services to enrolled agents and 
enrolled retirement plan agents (83 FR 58202). Accordingly, the user 
fee complies with the relevant authorities.
    The other comment generally disagreed with enrollment and renewal 
user fees associated with enrolled agents and enrolled retirement plan 
agents. The comment stated that the Federal government should bear the 
full cost of administering programs related to tax professionals. This 
comment was not accepted because it is contrary to the policies 
prescribed by the President as set forth in OMB Circular A-25. 
Accordingly, the proposed regulations are adopted without change.

Special Analyses

    Executive Orders 13563 and 12866 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility.
    OIRA has determined that this regulation is significant and subject 
to review under section 6(b) of Executive Order 12866.
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that this regulation will not have a significant 
economic impact on a substantial number of small entities. The user fee 
primarily affects individuals who are enrolled agents, apply to become 
enrolled agents, or are enrolled retirement plan agents. Only 
individuals, not businesses, can be enrolled agents or enrolled 
retirement plan agents. Thus, any economic impact of the user fee on 
small entities generally will occur only when an enrolled agent or 
enrolled retirement plan agent owns a small business or when a small 
business employs enrolled agents or enrolled retirement plan agents and 
reimburses them for their renewal fees. The Treasury Department and IRS 
estimate that approximately 22,781 individuals will apply annually for 
enrollment as an enrolled agent, renewal as an enrolled agent, or 
renewal as an enrolled retirement plan agent. Due to the relatively 
small number of small businesses that employ enrolled agents or 
enrolled retirement plan agents, a substantial number of small entities 
are not likely to be affected. Further, the economic impact on any 
small entities affected would be limited to paying the $37 difference 
in cost between the $67 user fee and the previous $30 user fee for each 
enrolled agent or enrolled retirement plan agent that a small entity 
employs and reimburses, or otherwise pays for, the

[[Page 20804]]

cost of the user fee. The total economic impact of this regulation is 
thus approximately $842,897 annually, which is the product of the 
approximately 22,781 individuals and the $37 increase in the fee which 
is not a significant economic impact. Accordingly, it is certified that 
the rule will not have a significant economic impact on a substantial 
number of small entities.
    It is not anticipated that the increase in user fee that is paid 
every three years and averages to $12.33 per year will negatively 
affect enrollment, which has historically remained steady as user fee 
amounts have changed. Pursuant to section 7805(f), the notice of 
proposed rulemaking was submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on its impact on small 
business (83 FR 58202). No comments on the notice of proposed 
rulemaking were received from the Chief Counsel for Advocacy of the 
Small Business Administration.

Drafting Information

    The principal author of these regulations is Mark Shurtliff of the 
Office of the Associate Chief Counsel (Procedure and Administration). 
Other personnel from the Treasury Department and the IRS participated 
in their development.

List of Subjects in 26 CFR Part 300

    Reporting and recordkeeping requirements, User fees.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 300 is amended as follows:

PART 300--USER FEES

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

    Authority: 31 U.S.C. 9701.


Sec.  300.0  [Amended]

0
Par. 2. Section 300.0 is amended by removing paragraph (b)(10) and 
redesignating paragraphs (b)(11) through (13) as paragraphs (b)(10) 
through (12).

0
Par. 3. Section 300.5 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec.  300.5  Enrollment of enrolled agent fee.

* * * * *
    (b) Fee. The fee for initially enrolling as an enrolled agent with 
the IRS is $67.
* * * * *
    (d) Applicability date. This section applies beginning June 12, 
2019.

0
Par. 4. Section 300.6 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec.  300.6  Renewal of enrollment of enrolled agent fee.

* * * * *
    (b) Fee. The fee for renewal of enrollment as an enrolled agent 
with the IRS is $67.
* * * * *
    (d) Applicability date. This section applies beginning June 12, 
2019.


Sec.  300.10  [Removed]

0
Par. 5. Section 300.10 is removed.


Sec.  300.11  [Redesignated as Sec.  300.10 and Amended]

0
Par. 6. Redesignate Sec.  300.11 as Sec.  300.10 and amend newly 
redesignated Sec.  300.10 by revising paragraphs (b) and (d) to read as 
follows:


Sec.  300.10  Renewal of enrollment of enrolled retirement plan agent 
fee.

* * * * *
    (b) Fee. The fee for renewal of enrollment as an enrolled 
retirement plan agent with the IRS is $67.
* * * * *
    (d) Applicability date. This section applies beginning June 12, 
2019.


Sec. Sec.  300.12 and 300.13  [Redesignated as Sec. Sec.  300.11 and 
300.12]

0
Par. 7. Redesignate Sec. Sec.  300.12 and 300.13 as Sec. Sec.  300.11 
and 300.12.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.

    Approved: April 19, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2019-09732 Filed 5-10-19; 8:45 am]
BILLING CODE 4830-01-P