us-irs-revenue-rulings-irb-2011-27-pdf•Internal Revenue Bulletin 2011-27 (PDF rendition): IRS Revenue Rulings
Internal Revenue Bulletin 2011-27 (PDF rendition): IRS Revenue Rulings
us-irs-revenue-rulings-irb-2011-27-pdfInternal Revenue Bulletin 2011-27 (PDF rendition): IRS Revenue RulingsGuidance
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Bulletin No. 201 1-27 July 5, 2011 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX Rev. Rul. 2011–14, page 31. Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate.For pur- poses of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for July 2011. Notice 2011–47, page 34. This notice provides for the suspension of certain requirements under section 42 of the Code for low-income housing credit projects in Missouri in order to provide emergency housing re- lief needed as a result of the devastation caused by severe storms, tornadoes, and flooding in that state beginning on April 19, 2011. Notice 2011–50, page 35. Credit for carbon dioxide sequestration; 2011 section 45Q inflation adjustment factor.This notice publishes the inflation adjustment factor for the credit for carbon dioxide (CO 2 ) sequestration under section 45Q of the Code for cal- endar year 2011. The amount of credit must be adjusted for inflation for taxable years beginning in a calendar year after 2009. Notice 2011–51, page 36. This notice extends interim guidance provided in Notice 2010–79, 2010– 49 I.R.B. 809, on the modification of section 833 treatment of certain health organizations. EXEMPT ORGANIZATIONS Announcement 2011–37, page 37. This announcement advises tax-exempt organizations that op- erate one or more hospital facilities that Part V, Section B of Schedule H,Hospitals, of the 2010 Form 990,Return of Or- ganization Exempt From Income Tax, is optional for the 2010 tax year. ADMINISTRATIVE T.D. 9527, page 1. Final regulations in 31 CFR Part 10 provide that registered tax return preparers are practitioners under Circular 230, and that an individual is required to pass a minimum competency ex- amination to become a registered tax return preparer. The fi- nal regulations also address registered tax return preparers’ continuing education requirements and incorporate the amend- ments to regulations section 10.34(a) relating to standards with respect to tax returns. Finding Lists begin on page ii. The IRS Mission Provide Americ a’s taxpayers top-quality service by helping them understa nd and meet their tax responsibilities and en- force the law wi th integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, mod- ify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indi- cated. Procedures relating solely to matters of internal man- agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—19 86 Code. This part i ncludes rulings and decisions based on provisions of the Intern al Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Leg- islation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secre- tary (Enforcement). Part IV .—Items of General Interest. This par t includes notices of proposed rulemakings, disbar- ment an d suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The c ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402. July 5, 20112011–27 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 42.—L ow-Income Housing Credi t The adjusted a pplicable federal short-term, mid- term, and long -term rates are set forth for the month of July 2011. S ee Rev. Rul. 2011-14, page 31. Section 280G.—Golden Parachute Payments Federal short-term, mid-term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 330.—31 USC—Practice Before the Department 31 CFR 10.0: Scope of part. T.D. 9527 DEPARTMENT OF THE TREASURY Internal Revenue Service 31 CFR Part 10 Regulations Governing Practice Before the Internal Revenue Service AGENCY: Office of the Secretary, Trea- sury. ACTION: Final regulations. SUMMARY: This document contains final regulations governing practice before the Internal Revenue Service (IRS). The regu- lations affect individuals who practice be- fore the IRS and providers of continuing education programs. The regulations mod- ify the general standards of practice before the IRS and the standards with respect to tax returns. DATES :Effective Date:These regulations are ef fective on August 2, 2011. Appli cability Date:For dates of appli- cabil ity, see §§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), 10.3 0(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 con- tained 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 §§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 lat- est 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 Sect ion 330 of title 31 of the United Stat es Code authorizes the Secretary of the T reasury (the Secretary) to regulate the prac tice of representatives before the Trea- sury Department. The Secretary is autho- riz ed, after notice and an opportunity for a pro ceeding, to censure, suspend, or disbar fro m practice before the Treasury Depart- men t those representatives who are incom- pet ent, disreputable, or who violate regu- la tions prescribed under section 330 of ti- tl e 31. The Secretary also is authorized to im pose a monetary penalty against these in dividuals and the individuals’ firms or other entitie s that employ them. Addi- tionally, the Secretary may seek an injunc- tion against t hese individuals under section 7408 of the In ternal Revenue Code (Code). The Secretary has published regulations governing th e practice of representatives before the IR Sin31CFRpart10and reprinted th e regulations as Treasury De- partment Cir cular No. 230 (Circular 230). These regul ations authorize the IRS to act upon applic ations for enrollment to prac- tice before the IRS; to make inquiries with respect to m atters under Circular 230; to institute proceedings to impose a monetary penalty or to censure, suspend, or disbar a practitio ner from practice before the IRS; to institu te proceedings to disqualify ap- praisers; and to perform other duties nec- essary to carry out these functions. Circular 230 has been amended periodic ally.The regulations were amended m ost recently on Septem- ber 26, 20 07 (T.D. 9359, 2007–2 C.B. 931 [ 72 FR 54540]), to modify various p rovisions relating to the general standar ds of practice. For example, the 2007 regulations established an enrolle d retirement plan agent designation, modifie d the conflict of interest rules, limite d the use of contingent fees by prac titioners, and required public disclo sure of OPR disciplinary decisions after t he decisions become final. Those f inal regulations, however, did not fin alize the standards with respect to tax ret urns under §10.34(a) and the def- initi ons under §10.34(e) because of the amend ments to section 6694(a) of the Code m ade by the Small Business and Work O pportunity Tax Act of 2007, Public Law 11 0–28, 121 Stat. 190. Rather, the IRS a nd the Treasury Department reserved §10. 34(a) and (e) in those final regulations and a lso simultaneously issued a notice of prop osed rulemaking (REG–138637–07, 2007 –2 C.B. 977) in theFederal Register (72 F R 54621) proposing to conform the pro fessional standards under §10.34 of Cir cular 230 with the civil penalty stan- dar ds under section 6694(a) as amended by t he 2007 Act. On O ctober 3, 2008, the Tax Ex- ten ders and Alternative Minimum Tax Rel ief Act of 2008, Div. C. of Public 2011–27 I.R.B.1July 5, 2011 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 De- partment published final regulations (T.D. 9436, 2009–3 I.R.B. 268) in theFederal 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 §10.34(a). These final regulations also provide new rules governing the oversight of tax return preparers. Previously, an individ- ual tax return preparer generally was not subject to the provisions in Circular 230 unless the tax return preparer was an attor- ney, certified public accountant, enrolled agent, or other type of practitioner identi- fied 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 §10.7(c)(1)(viii) of Circular 230 and Rev- enue Procedure 81–38, 1981–2 C.B. 592. See §601.601(d)(2)(ii)(b). In June 2009, the IRS launched a re- view of tax return preparers with the in- tent to propose a comprehensive set of recommendations to ensure uniform and high ethical standards of conduct for all tax return preparers and to increase tax- payer compliance. As part of this effort, the IRS received input from a large and di- verse community through numerous chan- nels, including public forums, solicitation of written comments, and meetings with advisory groups. The IRS made findings and recommen- dations in Publication 4832, “Return Pre- parer Review” (the Report), which was published on January 4, 2010. The Re- port 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 reg- ulations under section 6109 of the Code (T.D. 9501, 2010–46 I.R.B. 651) published in theFederal Register(75 FR 60309) on September 30, 2010. The final reg- ulations under section 6109 provide that, for returns or claims for refund filed after December 31, 2010, the identifying num- ber of a tax return preparer is the indi- vidual’s preparer tax identification number (PTIN) or such other number prescribed by the IRS in forms, instructions, or other ap- propriate guidance.The regulations also provide that the IRS is authorized to re- quire through other guidance (as well as in forms and instructions) that tax return preparers apply for a PTIN or other pre- scribed identifying number, the regular re- newal of PTINs or other prescribed iden- tifying number, and the payment of user fees. The IRS also issued final regulations (T.D. 9503, 2010–47 I.R.B. 706) establish- ing a user fee to apply for or renew a PTIN published in theFederal Register(75 FR 60316) on September 30, 2010. On August 23, 2010, the Treasury De- partment and the IRS published in theFed- eral Register(75 FR 51713) a notice of proposed rulemaking (REG–138637–07, 2010–44 I.R.B. 581) proposing amend- ments to Circular 230 based upon certain recommendations made in the Report. The proposed regulations provided that registered tax return preparers are practi- tioners 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 prac- tice before the IRS. Amendments were also proposed to §10.30 regarding solic- itation, §10.36 regarding procedures to ensure compliance, and §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 pro- posed 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 pub- lic accountant, then the amendments to §§10.3, 10.4, 10.5, 10.7 and 10.9 of Circu- lar 230 (rules regarding registered tax re- turn preparers) do not affect you. If you are not an attorney orcertified public accoun- tant and you prepare, or assist in prepar- ing, 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 regula- tions clarifies that the definition of “tax re- turn 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 pro- vided in the PTIN User Fee regulations). To allow tax return preparers a transi- tion period to pass the competency exam- ination and, because the competency ex- amination will not be available until after these final regulations are published, No- tice 2011–6, 2011–3 I.R.B. 315, which was published on December 30, 2010, provides the following guidance to tax return pre- parers who obtain a PTIN (in accordance with the PTIN regulations) and pay the ap- plicable user fee (set forth in the PTIN User Fee regulations) before the compe- tency 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 De- cember 31, 2013, as long as the individ- ual renews their PTIN, passes a suitability check (when available), and pays the ap- plicable user fee. After the examination is offered, only attorneys, certified public ac- countants, enrolled agents, and registered July 5, 201122011–27 I.R.B. 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 indi- vidual tax returns (Form 1040 series tax returns and accompanying schedules). As provided in Notice 2011–6, individuals may certify that they do not prepare indi- vidual 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. En- rolled agents must pass the Special Enroll- ment Examination and complete continu- ing education requirements. These regu- lations, however, do not change enrolled agents’ status as practitioners under Circu- lar 230. Renewal Process You must complete continuing educa- tion 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 com- plete a minimum of 15 credits of contin- uing education annually. This regulation specifies what constitutes continuing ed- ucation. Registered tax return preparers must retain records of continuing educa- tion 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 re- turn, you are exempt from the competency examination and continuing education re- quirements if the requirements of section 1.02(a) of Notice 2011–6 are met. You must, however, renew your PTIN, pay the applicable PTIN userfee, 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 con- tinuing education providers who provide continuing education programs to regis- tered tax return preparers and enrolled agents. Continuing education providers must obtain and renew continuing edu- cation 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 writ- ten comments in response to the notice of proposed rulemaking. All of the com- ments were considered and are available for public inspection. Most of the com- ments that addressed the proposed regu- lations are summarized in this preamble. Some comments addressed other regula- tions or notices of proposed rulemaking and are not discussed in this preamble. The scope of these rules is limited to practice before the IRS. These regulations do not change the existing authority of at- torneys, certified public accountants, and enrolled agents to practice before the IRS under Circular 230 and do not alter or sup- plant ethical standards that might other- wise 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 re- turn preparer office was created to admin- ister PTIN applications, competency test- ing, 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 Profes- sional Responsibility will continue to enforce the Circular 230 provisions relat- ing to practitioner conduct and discipline. The Office of Professional Responsibil- ity 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. Commen- tators 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 op- erate 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 al- low the flexibility to adjust responsibility appropriately between the offices as the return preparer initiative is implemented. The Commissioner may delegate neces- sary authorities to appropriate offices. Definitions — Practice Before the Internal Revenue Service, Tax Return Preparer The final regulations adopt the pro- posed amendments to §10.2(a)(4), which clarify that either preparing a document or filing a document may constitute prac- tice before the IRS. The final regulations also adopt the proposed amendments to §10.2(a)(8), which clarify that the defini- tion of “tax return preparer” in Circular 230 is the same as the meaning in sec- tion 7701(a)(36) of the Code and 26 CFR 301.7701–15. Who May Practice The final regulations adopt the pro- posed amendments to §10.3(f), which establish a new “registered tax return pre- parer” designation. A registered tax return preparer is any individual so designated under §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 con- fuse the public because it implies a high level of professional capability. As stated in the Report, the goal of the return pre- parer initiative is increased oversight of the tax return preparer industry and to institute standards for minimum compe- tence. For those individuals who have passed a competency examination and have met continuing education require- ments, the Treasury Department and the IRS conclude that the term “registered” is appropriate. 2011–27 I.R.B.3July 5, 2011 Some commentators requested that the IRS not include registered tax return pre- parers as individuals who may practice un- der proposed §10.3. Representation is de- fined 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, prepara- tion of a tax return is practice before the IRS. Because registered tax return prepar- ers are individuals who prepare all or sub- stantially all of a tax return or claim for re- fund on behalf of a taxpayer for compensa- tion, they practice before the IRS and must be included in §10.3 of the final regula- tions. The Treasury Department and the IRS received comments requesting clarifica- tion with respect to which forms registered tax return preparers are permitted to pre- pare. The IRS will prescribe by forms, instructions, or other appropriate guidance the tax returns and claims for refund regis- tered tax return preparers are permitted to prepare after successfully completing the competency examination. Forms,instruc- tions, 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 reg- istered tax return preparer signed the tax return or claim for refund for the taxable year or period under examination. Con- sistent with the limited practice rights previously available to unenrolled return preparers under former §10.7(c)(1)(viii), registered tax return preparers are not per- mitted to represent taxpayers, regardless of the circumstances requiring represen- tation, before appeals officers, revenue officers, Counsel, or similar officers or employees of the IRS or the Treasury Department. A registered tax return pre- parer’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 docu- ment intended to be submitted to the IRS. Some commentators inquired as to whether the federally authorized tax prac- titioner privilege under section 7525 applies to communications between a taxpayer and a registered tax return pre- parer. The Treasury Department and the IRS have concluded that the feder- ally authorized tax practitioner privilege generally does not apply to communica- tions 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 confi- dential or privileged. The conduct of a registered tax return preparer in connection with the prepara- tion 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 Cir- cular 230. Inquiries into possible miscon- duct and disciplinary proceedings relating to registered tax return preparer miscon- duct will be conducted under the provi- sions 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 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 rea- soned 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 De- partment and the IRS provided, pursuant to §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 ob- tain a PTIN and, thus, prepare, or assist in preparing, all or substantially all of a tax return or claim for refund for compen- sation in certain discrete circumstances. Section 1.02(a) of the notice permits cer- tain 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 ob- tain 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 in- dividuals may not sign any tax return they prepare or assist in preparing for compen- sation. 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 re- turn or claim for refund for compensation under this exception. Because individuals meeting these requirements, as fully set forth in §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 ob- tainaPTINtobeeligibletopracticebefore the IRS as an enrolled agent or enrolled re- tirement plan agent. Section 10.4(d) of the final regulations also provides that a former employee who, by virtue of past service and technical ex- perience in the IRS, may be granted en- rollment as an enrolled agent or enrolled retirement plan agent if certain criteria are satisfied. Some commentators on the pro- posed regulations suggested that former IRS employees should not be granted en- rollment because the IRS is not exempt- ing, or “grandfathering,” experienced un- July 5, 201142011–27 I.R.B. enrolled practitioners from the testing and continuing education requirements. This recommendation is not adopted because the IRS may easily check a former em- ployee’s IRS employment record to en- sure the individual has the past service and technical experience for the scope of en- rollment sought by the former employee. Eligibility to Become a Registered Tax Return Preparer The final regulations require that an in- dividual must be eighteen years old, pos- sess 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 regula- tions will assist the Treasury Department and the IRS in efficient tax administra- tion by ensuring that registered tax return preparers have a minimum level of ex- perience, knowledge, judgment, and ma- turity. 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 spe- cial enrollment examinations for enrolled agents and enrolled retirement plan agents. Tax return preparers will be subject to suit- ability checks to determine whether the taxreturnpreparerhasengagedindisrep- utable conduct, which, at the time the ap- plication is filed with the IRS, could result in suspension or disbarment under Circu- lar 230. An individual who has engaged in disreputable conduct is not eligible to be- come a registered tax return preparer. Commentators requested that the IRS delay implementation of the testing re- quirement. The Treasury Department and the IRS did not adopt any delay in im- plementation 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 regula- tions. 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 implementa- tion 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 re- quirements appropriately, the Treasury Department and the IRS announced that the implementation of the continuing edu- cation requirement will be postponed and that there will be no continuing educa- tion requirement at least during the first year of registration, which commenced on September 30, 2010. The IRS will provide administrative information about contin- uing education to tax return preparers via appropriate channels, including the Tax Professionals page of the IRS website, 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 re- turn preparer or renew their designation as a registered tax return preparer must uti- lize 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 regis- tered tax return preparer. As a condition for consideration of an application, the IRSmay conduct a Fed- eral tax compliance check and suitability check. The tax compliance check will be limited to an inquiry regarding whether the individual has filed all required individ- ual or business tax returns (such as em- ployment 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 in- quiry regarding whether the individual has engaged in any conduct that would justify suspension or disbarment of any practi- tioner under the provisions of this part, in- cluding whether the applicant has engaged in disreputable conduct. The IRS may not designate an individ- ual as a registered tax return preparer only if the results of the tax compliance or suit- ability 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 exami- nation or meet other established standards. If the individual does not pass the compe- tency examination or the tax compliance or suitability check, the individual will not be designated as a registered tax return pre- parer. Pursuant to §10.5(f) of these regula- tions, an applicant denied status as a regis- tered 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 filedasprescribedbytheInternalRevenue Service in forms, guidance, or other appro- priate guidance. An individual who is ini- tially denied status as a registered tax re- turn preparer for failure pass a tax compli- ance check may reapply after the initial de- nial if the individual becomes current with respect to the individual’s tax liabilities. Once an individual is approved as a reg- istered tax return preparer, the IRS will is- sue 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. Regis- tered 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 renewtheir designation as prescribed in forms, instructions, or other appropriate guidance. A condition of re- newal is the completion of the requisite number of continuing education hours by registered tax return preparers. Registered 2011–27 I.R.B.5July 5, 2011 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 practicebeforetheIRS. Registered tax return preparers must maintain records with respect to the com- pletion 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 pub- lications that was formerly allowed with respect to enrolled agents and enrolled retirement plan agents. The Treasury Department and the IRS did receive com- ments objecting to the reduction of maxi- mum credit and the removal of the ability to receive credit for authoring publica- tions. The comments stated that the rules would result in a lower quality of educa- tion and lower diversity. In §10.6(f)(2)(iii) of the final regu- lations, the Treasury Department and the IRS modified the proposed rules re- garding the maximum credit allowed for instruction and preparation to allow en- rolled agents and enrolled retirement plan agents to earn six hours annually. The final regulations allow registered tax re- turn preparers to earn four hour annually. The Treasury Department and the IRS do not agree with the comments concerning receiving credit for authoring publica- tions 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 en- rolled 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 sta- tus as a registered tax return preparer sub- mitted 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. Simi- larly, a registered tax return preparer must renew a PTIN and pay the applicable user fee as prescribed by the IRS in forms, in- structions, or other appropriate guidance. The IRS may in future regulations add or remove fees applicable to becoming a reg- istered tax return preparer. The Treasury Department and the IRS received numerous comments requesting that certain non-signing tax return prepar- ers be exempt from the testing and contin- uing education requirements. Commenta- tors reasoned that the testing and contin- uing education requirements are not nec- essary for non-signing tax return prepar- ers who are supervised because a supervis- ing practitioner is responsible for the ac- curacy of the underlying return and must generally comply with continuing profes- sional 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 re- turn. Overall, these comments suggested that the costs of requiring testing and con- tinuing education for tax return preparers who are supervised by attorneys, certified public accountants, enrolled agents, en- rolled retirement plan agents, and enrolled actuaries outweighed the attendant bene- fits. 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 §1.02(a) of Notice 2011–6, are permitted to obtain a PTIN, they are not required to become registered tax return 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 sug- gested 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 sub- stantially all of a tax return for compensa- tion. If an intern doesnot receive compen- sation, the intern is not required to obtain a PTIN under the §1.6109–2 regulations. If, however, an intern engages in tax re- turn preparation activities that make the in- tern a tax return preparer for purposes of the §1.6109–2 regulations and the intern is compensated for these activities, the intern must obtain a PTIN. Continuing Education Providers In §10.9 of the proposed regulations, the Treasury Department and the IRS pro- posed a new requirement that continuing education providers obtain approval of each program to be qualified as a contin- uing education program. The proposed regulations also required providers of continuing education courses to maintain records and educational material con- cerning continuing education programs and the individuals who attended them. Section 10.9(a)(6) of the proposed regu- lations 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 ed- ucation requirements when the number of individuals required to complete con- tinuing education requirement is being significantly increased. Commentators July 5, 201162011–27 I.R.B. suggested that the pre-approval process would be a substantial burden to contin- uing education providers and the IRS. In response to these comments, the Treasury Department and the IRS chose not to final- ize the rules in proposed §10.9 regarding pre-approval of individual continuing ed- ucation programs. Because the Treasury Department and the IRS are not finalizing the rules in pro- posed §10.9 with respect to pre-approval of individual continuing education pro- grams, §10.9 of these final regulations adopts rules similar to the rules in former §10.6(g) applicable to qualified sponsors. Under §10.9 of the final regulations, con- tinuing education providers must be quali- fied and must obtain a qualified continuing education provider number to be eligible to offer qualified continuing education. While continuing education providers ini- tially will not be required to obtain the IRS’ approval of each continuing edu- cation program offered, the regulations authorize the IRS to require such approval, at its discretion, in appropriate forms, in- structions 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 educa- tion 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 §10.6(g) to be qualified continuing education providers. Commentators on the proposed regula- tions suggested that the Treasury De- partment and the IRS consider that some professional organizations have nationally recognized standards for approving con- tinuing education programs that are com- parable to the IRS standards in Circular 230. Specifically, thecomments requested that continuing education providers ap- proved by these organization’s standards be exempted from the requirement to seek additional approval from the IRS with respect to each continuing education pro- gram. The Treasury Department and the IRS agree with the commentators that there is merit in recognizing continuing education providers that have been approved previ- ously by professional organizations with standards comparable to Circular 230. Ac- cordingly, §10.9 of these regulations in- cludes as qualified continuing education providers those providers that are recog- nized and approved as providers of contin- uing education on subject matters within §10.6(f) of these regulations by a quali- fying organization that has minimum ed- ucation standards comparable to those set forth in Circular 230. The IRS intends to identify in forms, instructions, or other ap- propriate guidance the professional orga- nizations whose approval will allow a con- tinuing education provider to be qualified within §10.9. Limited Practice Before the IRS, Return Preparation, and Application to Other Individuals Section 10.3(f) of these regulations per- mits registered tax return preparers to rep- resent a taxpayer during an examination if the registered tax return preparer prepared the return for the taxable period under ex- amination. Therefore, the final regulations remove the limited practice authorization in former §10.7(c)(1)(viii), which allowed an unenrolled tax return preparer to repre- sent a taxpayer during an examination if that individual prepared the return for the taxable period under examination. Addi- tionally, the final regulations remove for- mer §10.8 regarding customhouse brokers from Circular 230 and move the language in former §10.7(e) to new §10.8. Section 10.8(a) of the final regula- tions provides that any individual who for compensation prepares or assists with the preparation of all or substantially all of a taxreturnorclaimforrefundmusthavea PTIN. Except as otherwise prescribed in forms, instructions, or other appropriate guidance, an individual must be an attor- ney, certified public accountant, enrolled agent, or registered tax return preparer to obtain a preparer tax identification num- ber. These rules are consistent with the final PTIN regulations under section 6109. An individual who is not an attorney, cer- tified public accountant, enrolled agent, or registered tax return preparer who never- theless prepares for compensation all or a substantial portion of a document (in- cluding 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 as- sist 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 revi- sion is consistent with the inclusion of reg- istered tax return preparers as practitioners authorized to practice before the IRS and the practice rights available to these prac- titioners. These regulations also establish a new §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 du- ties and restrictions relating to practice be- fore the IRS and may be sanctioned, af- ter notice and opportunity for a confer- ence, for any conduct that would justify a sanction under §10.50. An individual de- scribed in 26 CFR 301.7701–15(f) is not treated as having prepared all or a substan- tial portion of the document by reason of such assistance. For example, an individ- ual who only furnishes typing, reproduc- ing, or other mechanical assistance with re- spect 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 regula- tions 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, fraudu- lent, coercive, misleading, or deceptive statement or claim. In describing their designation, registered tax return prepar- ers 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 per- mitted to use the term “designated as a registered tax return preparer with the In- ternal Revenue Service” when describing their designation. Some commentators ex- pressed concern that the word “with” may imply a closer relationship with the IRS 2011–27 I.R.B.7July 5, 2011 than exists, such as an employer-employee relationship. These commentators sug- gested using the term “by” instead. Ac- cordingly, the IRS revised the language in final §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 con- clude that the professional standards in §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 §10.34 and sec- tion 6694 arise from the different purposes served by those provisions and the differ- ent manner in which the two standards will be administered. The standards with respect to tax re- turns in §10.34(a) in the final regulations provide broader guidelines that are more appropriate for professional ethics stan- dards. Under §10.34(a)(1)(i) of the reg- ulations, 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 in- tentional disregard of rules or regulations by the practitioner as described in section 6694(b)(2) (including the related regula- tions and other published guidance). Under §10.34(a)(1)(ii) of these regu- lations, a practitioner may not willfully, recklessly, or through gross incompetence, advise a client to take a position on a tax re- turn or claim for refund, or prepare a por- tion of a tax return or claim for refund con- taining a position, that: (A) lacks a reason- able basis; (B) is an unreasonable position as described in section 6694(a)(2) (includ- ing the related regulations and other pub- lished guidance); or (C) is a willful attempt by the practitioner to understate the liabil- ity for tax or a reckless or intentional dis- regard of rules or regulations by the prac- titioner as described in section 6694(b)(2) (including the related regulations and other published guidance). Commentators on proposed §10.34 re- quested that the IRS clarify whether Notice 2009–5, 2009–3 I.R.B. 309, applies for purposes of determining whether the tax return preparer prepared a return or claim for refund with an unreasonable position under §10.34. An unreasonable position for purposes of §10.34 is an unreasonable position as described in section 6694(a)(2) and related published guidance. Thus, No- tice 2009–5 applies to determine whether the tax return preparer took an unreason- able position to the extent that it applies to the tax return preparer for purposes of sec- tion 6694. Some commentators were concerned that a violation of section 6694 would translate to aper seviolation of §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 inde- pendent determination as to whether the practitioner engaged in willful, reckless, or grossly incompetent conduct subject to discipline under §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 §10.34(a) of these regulations. Several commentators recommended that the final regulations adopt the rea- sonable basis standard as the appropriate return position standard under §10.34(a) rather than the civil penalty standards in section 6694(a) (the substantial authority and reasonable basis with adequate dis- closure standards). These commentators similarly requested clarification providing that a practitioner is not subject to disci- pline under §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 §10.34(a). Proposed §10.34(a)(1)(i)(A) and (a)(1)(ii)(A) estab- lished reasonable basis as the minimum threshold standard for practitioners be- cause a practitioneracts 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 De- partment 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 §1.6694–2(d)(3)) through willful, reckless, or grossly in- competent conduct. Accordingly, final §10.34(a)(1)(i) and (a)(1)(ii) provide three independent standards of practitioner con- duct and a practitioner who fails to satisfy any one of these three standards is subject to discipline under §10.34(a). Procedures to Ensure Compliance Section 10.36(b) of these regulations provides that firm management with prin- cipal authority and responsibility for over- seeing a firm’s practice of preparing tax re- turns, claims for refunds and other docu- ments filed with the IRS must take reason- able steps to ensure that the firm has ade- quate procedures in effect for purposes of complying with Circular 230. The Trea- sury Department and the IRS continue to believe that expansion of §10.36 to require firm procedures for tax return preparation practice, in addition to the pre-existing ap- plication to covered opinions, will help en- sure compliance and encourage firms to self-regulate. Firm responsibility is a crit- ical factor in ensuringhigh 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 §10.50 in lieu of in- stituting or continuing a proceeding under §10.60(a). Section 10.61(b)(2) currently provides that the IRS may accept or de- cline 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 ex- pressed concern over whether the IRS has the authority to accept an offer of consent to sanction. The provision added in the fi- nal regulations is merely intended to clar- ify any ambiguity with respect to the au- thority of the IRS to accept an offer of con- sent to sanction in lieu of instituting or con- tinuing a proceeding. July 5, 201182011–27 I.R.B. Incompetence and Disreputable Conduct Section 10.51 of Circular 230 de- fines 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, Pub- lic 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 §10.51 to address practitioners who fail to comply with this requirement. Under §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 fileis 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 file 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 elec- tronically file tax returns subject to the mandatory electronic filing requirement. The IRS cannot permit tax return prepar- ers 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 require- ment. The Treasury Department and the IRS have issued final regulations (T.D. 9518, 2011–17 I.R.B. 710, published in theFederal 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 ad- ministrative exemptions.SeeRev. Proc. 2011–25 for additional information on hardship waivers and Notice 2011–16 for additional information on administrative exemptions. Moreover, tax return pre- parers are only subject to sanction under §10.51(a)(16) of the final regulations for not electronically filing if such a failure is willful. Accordingly, §10.51(a)(16) is suf- ficiently narrowly tailored to only apply to these tax return preparers who willfully fail to comply with the electronic filing requirement. Under §10.51(a)(17) of the final regu- lations, 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 prac- titioner 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 re- visions in these regulations and under section 6109. Proceedings Against Appraisers The regulations also contain amend- ments to §10.60(b) relating to institution of proceedings against appraisers to better reflect the modifications made by sec- tion 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 disqualifi- cation 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§10.77topro- vide additional, clarifying information re- garding the procedure for filing an appeal of an Administrative Law Judge’s decision with respect to a proceeding under subpart DofCircular230. Records Section 10.90 of these final regulations clarify that the roster requirements also pertain to registered tax return preparers and qualified continuing education pro- grams. Effective Date These final regulations generally apply 60 days after the date the regulations are published in theFederal Register. Special Analyses Executive Order 12866, as supple- mented by Executive Order 13563, pro- vides that regulations must promote pre- dictability 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 permit- ted 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 ac- tion” 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 “Regu- latory Assessment Under E.O. 12866, as Supplemented by E.O. 13563.” It has been determined that a final reg- ulatory flexibility analysis is required for this final regulation under 5 U.S.C. 604. This analysis is set forth later in this pre- amble under the heading “Final Regula- tory Flexibility Analysis.” Section 202 of the Unfunded Man- dates Reform Act of 1995 (’’Unfunded Mandates Act’’), Public Law 104–4 (March 22, 1995), requires that an agency 2011–27 I.R.B.9July 5, 2011 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 toidentify 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 Inter- nal Revenue Code, the notice of proposed rulemaking was submitted to Chief Coun- sel 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 au- thority to regulate forattorneys, 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 pre- parers. As discussed in the Report, tax- payers’ 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 meet- ing their Federal tax filing obligations. In 2008 and 2009, for example, paid tax re- turn preparers, including attorneys, certi- fied public accountants, enrolled agents, and unenrolled tax return preparers, pre- pared almost 60 percent of all federal tax returns filed, including approximately 87 million federal individual income tax re- turns. The IRS expects these numbers to increase in 2010 and the coming years. Tax return preparers are not only re- sponsible for assisting taxpayers in filing complete, timely, andaccurate returns, but also help educate taxpayers about the tax laws, and facilitate electronic filing. Tax return preparers provide advice to taxpay- ers, identify items or issues for which the law or guidance is unclear, and inform tax- payers of the benefits and risks of positions takenonataxreturn,andthetaxtreatment or reporting of items and transactions. The IRS and the Treasury Department recog- nize that the majority of tax return prepar- ers 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 whoare ethical, provide good service, and arequalified. Recent government studies, including studies from the Government Accountability Of- fice 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 Administra- tion,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 ex- pressed concern for taxpayers, tax admin- istration and the return preparer industry, all of whom are hurt when tax returns are not accurately prepared. An overwhelming number of commen- tators (98 percent of the persons who of- fered comments on oversight and enforce- ment) supported increased government oversight of tax return preparers, particu- larly for individuals who are not attorneys, certified public accountants or others cur- rently authorized to practice before the IRS. These commentators argued that tax- payers, the IRS and tax administration generally would benefit from the registra- tion of tax return preparers. Eighty-eight percent of the persons who expressed an opinion on registering paid tax return pre- parers 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 depend- ing on professional affiliations and the geographic area in which they practice. Mosttaxreturnpreparersdonothaveto pass any government or professionally mandated competency requirement. Most tax return preparers are not required to participate in a specified program of con- tinuing professional education. And the ethical rules found in Circular 230 cur- rently are not applicable to all tax return preparers. As such, the IRS recognizes the need to apply a uniform set of rules to offer tax- payers some assurance that their tax re- turns are prepared completely and accu- rately. Increasing the completeness and ac- curacy of returns would necessarily lead to increased compliancewith tax obligations by taxpayers. 2.Potentially affected tax returns These regulations generally extend pre-existing regulations that apply to at- torneys, certified public accountants and other specified tax professionals to tax return preparers, including currently unen- rolled 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 appli- cation of the rule to corporate and large partnership returns, which are prepared predominately by tax return preparers em- ployed by large accounting firms. These examples are nonexclusive and the ap- plication or potential application of these rules is not limited to only those tax return preparers covered by the examples. The current expansion of these regu- lations to currently unenrolled tax return preparers will impact individual taxpayers more than large corporate taxpayers. July 5, 2011102011–27 I.R.B. 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 pre- parers. As illustrated in the recent gov- ernment studies, including the IRS’ recent review of the tax return preparer indus- try, inaccurate tax returns are costly both to taxpayers and the government. Inaccu- rate returns may affect the finances of tax- payers, who might overpay their respec- tive share of taxes or fail to take advan- tage of available tax benefits. Inaccurate tax returns may also affect the U.S. gov- ernment because of overpayments, under- payments and increased costs of enforce- ment and collection. The regulations are expected to im- prove the accuracy, completeness, and timeliness of tax returns in a number of ways. First, requiringregistered 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 by completing the specified continuing education credits annually will result in more competent and ethical tax return pre- parers 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 valu- able examination and collection resources. Thus, regulations are critical to assisting the IRS curtail the activities of noncom- pliant and unethical tax return preparers. Second, these regulations, in associ- ation with new and separate regulations under section 6109 requiring all individ- uals who prepare all or substantially all of a tax return for compensation to ob- tain 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. Individ- uals 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 administra- tion, the IRS has a significant interest in being able to accurately identify tax re- turn 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 pre- parer. Third, the regulations are expected to improve the accuracy oftax returns by pro- viding that all registered tax return pre- parers 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 miscon- duct 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 Cir- cular 230, or with intent to defraud, will- fully 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 mon- etary 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 dis- barred 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 sub- ject matter of their field can prevent costly errors, potentially saving a taxpayer from unwanted problems later on and relieving the IRS from expending valuable examina- tion and collection resources. The IRS and the Treasury Department expect that the largest marginal improve- ments in accuracy will be with regard to tax returns prepared by tax return preparers who previously were unregulated through the Circular 230 requirements. Unlike cer- tified public accountants, attorneys, and enrolled agents, unenrolled tax return pre- parers generally are not subject to any form of testing, continuing professional educa- tion, or uniform ethical standards. The tax returns prepared by unenrolled tax re- turn 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, in- dividual 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. 2011–27 I.R.B.11July 5, 2011 Cost CategoryPreliminary Cost Estimate COMPETENCY EXAMINATION •Costs to regist ered tax preparers: costs associated with tak- ing a minimum co mpetency examination (including costs of examination, a mount of time required to study for the exam, and any associa ted travel) Costs to Registered Tax Return Preparers The costs associated with competency examinations for registered tax preparers are currently unknown. The competency examination has not been developed and an 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: user fee costs IRS will charge to recover the costs to third-party vendors who administer the registered tax return preparer competency examination Costs to Vendors The vendor for the examination has not been selected so these fees cannot yet be determined. •Costs to government: costs associated with creating, admin- istrating, and reviewing competency exams Costs to Government These costs are currently unknown. The costs to the government will depend, in 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 preparers: user fees for applying for a PTIN and renewing a PTIN Costs to Registered Tax Return Preparers and Certain Other Individuals Eligible to Receive a PTIN under Notice 2011–6 The fees registered tax preparers and certain other 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: user fee assessed by third-party vendor to administer the PTIN application and renewal process Costs to Vendors The fee charged by the vendor is $14.25. The $14.25 fee reflects costs 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. July 5, 2011122011–27 I.R.B. •Costs to govern ment: administration of PTIN registration program Costs to Government The $50 annual fee is expected to recover the $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: recordkeeping re- quirements on continuing education providers to maintain records and educational material concerning these programs and the individuals who attend them. Costs to Continuing Education Providers $38,632,500 annual costs •Costs to registered tax preparers: recordkeeping require- ments on registered tax preparers to maintain records and educational materials regarding the completion of the re- quired qualifying continuing education credits. Costs to Registered Tax Return Preparers $9,880,000 annual costs CONTINUING EDUCATION •Costs to registered tax preparers: completing continuing ed- ucation coursework requirement Costs to Registered Tax Return Preparers We do not have a cost estimate available for 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: obtaining required numbers from the IRS Costs to C ontinuing Education Providers Continuin g education providers are not currently charged a fee for obtai ning a provider number or program number. FINGERPRINTING •Coststoregisteredtaxreturnpreparers: fingerprinting Costs to Registered Tax Return Preparers and Certain Other Individuals Eligible to Receive a PTIN under Notice 2011–6 The fees that will be imposed on registered tax return preparers and certain other individualseligible 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 com- petency 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 mul- tiple 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 gov- ernment 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 pre- parer competency examination also will charge a reasonable fee to take the regis- tered tax return preparer examination and a reasonable fee to be fingerprinted. 2011–27 I.R.B.13July 5, 2011 Additionally, preparers are subject to user fees for applying for a PTIN and re- newing the PTIN. Final regulations estab- lish a $50 fee to apply for a PTIN. A third party vendor administers the PTIN appli- cation 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 ad- ministration 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 federal tax return or claim for refund. This analysis is consis- tent 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 appli- cants seeking those special benefits. Tax return preparers will incur record- keeping 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 con- tinuing education credits. The IRS and the Treasury Department estimate that there are 650,000 practitioners who will be affected by these recordkeeping require- ments and the estimated annual burden per practitioner will vary from 30 minutes to one hour, depending on individual circum- stances, with an estimated average of 54 minutes. The total annual costs resulting from these recordkeeping requirements will be $9,880,000 for all affected practi- tioners. Continuing education providers will be subject to recordkeeping costs. Section 10.9 of these final regulations requires providers of qualifying continuing edu- cation programs to maintain records and educational material concerning these programs and the individuals who attend them. Approximately 500 continuing ed- ucation 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 educa- tion 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 con- tinuing education providers. Currently, the cost to the tax return preparer of any particular continuing ed- ucation course can vary greatly from free to hundreds of dollars. Many tax return preparation firms either provide continu- ing education courses at the firm to their employees for no charge or sponsor the cost of external courses for their employ- ees. 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 in- cur 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 con- tinuing 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 prof- its while preparers arestudying and sitting for the examination or taking the continu- ing education courses. Finally, individual tax return preparers and entities that em- ploy individuals who prepare tax returns may need to close or change their business model if all, or a majority, of their employ- ees cannot satisfy the necessary qualifica- tions 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 Depart- ment 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 con- text, E.O. 12866 requires a comparison between the final rule, a baseline of what the world would look like without the fi- nal 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, cer- tified public accountants, enrolled agents, and other practitioners who prepare tax re- turns and claims for refund, but not to un- enrolled tax return preparers. Also, any unenrolled tax return preparer under this baseline scenario would be able to prepare andsigntaxreturnsand claims for refund without passing an examination to estab- lish competence or satisfying continuing education requirements. Remaining under the current rules re- garding tax return preparers would elimi- nate the benefits of the rule described in section A3 of this preamble. For example, under the baseline, OPR would not be au- thorized to institute disciplinary proceed- ings 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 ex- amination or taking continuing education courses also would eliminate any costs as- sociated 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 re- newing the PTIN if other Treasury Depart- ment and IRS regulations specifically pre- scribed those fees. ii.Alternative one The first alternative that was considered is to require all tax return preparers to com- ply with the ethical standards in Circular 230, but not to require any tax return pre- parer to pass an examination and complete continuing education courses. Under this July 5, 2011142011–27 I.R.B. alternative, the provisions of the rule clar- ifying 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 alter- native would likely be less than the ben- efits resulting from these regulations be- cause 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 thebenefits that result from monitoring the return preparation ac- tivities 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 re- turn preparers who are not currently autho- rized 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 examina- tion. This alternative is identical to the reg- ulations other than requiring certain pre- parers to successfully pass an examination administered by, or under the oversight of, the IRS. The benefits resulting from this alter- native are more comparable to the bene- fits in the regulations than under alterna- tive one. Nevertheless, the lack of an ex- amination would not be as effective in en- suring that tax return preparers are quali- fied to obtain professional credentials and practice before the IRS. Tax return prepar- ers 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 expe- rience preparing tax returns and claims for refund to continue to prepare and sign returns without passing a minimum com- petency examination. The benefits resulting from this alter- native would likely be less than the ben- efits resulting from these regulations be- cause the IRS and the Treasury Depart- ment believe a minimum level of compe- tency needs to be assured through exam- ination. Additionally, this alternative is not as likely to promote the same taxpayer confidence in the taxreturn preparation community as the regulations, which may, in turn, influence taxpayers when choosing a tax return preparer. Tax return prepar- ers 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 reg- ulations, which proposed requiring all un- enrolled tax return preparers to meet the examination and education requirements. Numerous commentators suggested that the costs of requiring testing and con- tinuing 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, en- rolled 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 reg- ulatory flexibility analysis.” A final reg- ulatory flexibility analysis must, pursuant to 5 U.S.C. 604(a), contain the five ele- ments listed in this final regulatory flex- ibility analysis. Section 605 of the RFA provides an exceptionto this requirement if the agency certifies that the rulemaking will not have a significant economic im- pact on a substantial number of small en- tities. 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 en- suring 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. taxpay- ers 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 be- fore the IRS and do not have to pass any competency requirement established by the government or a professional organi- zation. After completing a comprehensive six-month review of tax return preparers, which included receiving input through public forums, solicitation of written com- ments, 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 regula- tions is to increase oversight of tax re- turn preparers and to provide guidance to tax return preparers about the new require- ments imposed on them under Circular 230. These regulations implement higher standards for the tax return preparer com- munity with the goal of significantly en- hancing protections and service for tax- payers, 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 2011–27 I.R.B.15July 5, 2011 registered tax return preparer to demon- strate the necessary qualifications and competency to advise and assist other persons in the preparation of all or sub- stantially 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 theruleasaresultofthecomments The IRS did not receive specific com- ments from the public responding to the initial regulatory flexibility analysis in these final regulations. The IRS did re- ceive 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 com- ments 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 cur- rently working as paid tax return prepar- ers, individuals who want to become desig- nated as a registered tax return preparer un- der the new oversight rules in Circular 230, and those small entities that are owned by or employ paid preparers. Only individ- uals, 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 gen- erally will be a result of an unenrolled in- dividual owning a small business or on a small business that otherwise employs un- enrolled paid return preparers. The appropriate North American In- dustry 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 esti- mates that approximately seventy to eighty percent of the individuals subject to these 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 approx- imately 600,000 to 700,000 unenrolled taxreturnpreparerswhoarecurrentlynot attorneys, certified public accountants, or enrolled agents and who will seek status as a registered tax return preparer. Under the regulations, taxreturn preparers who become registered tax return preparers are subject to a recordkeeping requirement within the meaning of the Paperwork Re- duction Act because they are required to maintain records and educational materials regarding their satisfaction of the quali- fying 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 practi- tioners will annually spend approximately 30 minutes to one hour in maintaining the required records, depending on individual circumstances. The estimated 2,250 providers of qual- ifying continuing education programs will be required to maintain records and educa- tional material concerning these programs and the persons who attended them. These continuing education providers will annu- ally spend approximately five minutes per attendee per program maintaining the re- quired 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 ex- amination, costs for continuing education classes, and other incidental costs and user fees. Small entities may be directly af- fected 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 individ- uals who prepare tax returns may need to alter their business model if a signif- icant 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 out- growth of, and in part carry out, the Report, which extensively reviewed different ap- proaches to improving how the IRS over- sees and interacts with tax return prepar- ers. As part of the Report, the IRS received a large volume of comments on the over- sight and enforcement of tax return pre- parers from all interested parties, including tax professional groups representing large and small entities, Federal and state orga- nizations, IRS advisory groups, software vendors, individual return preparers, and the public. The input received from this large and diverse community overwhelm- ingly expressed support for the require- ments proposed in the Report. In concert with this tremendous pub- lic support for increased IRS oversight of tax return preparers, the IRS and the Trea- sury Department considered various alter- natives in determining the best ways to im- plement proposed changes to the regula- tion of paid preparers. These alternatives included: (1) Requiring all tax return preparers to comply with the ethical standards in Cir- cular 230 or a code of ethics similar to Circular 230, but not requiring any tax re- July 5, 2011162011–27 I.R.B. turn preparers to demonstrate their qualifi- cations and competency; (2) Requiring tax return preparers who are not currently authorized to practice be- fore the IRS to apply forauthorization with the IRS, satisfy annual continuing educa- tion requirements, and meet certain ethical standards, but not to pass a minimum com- petency examination; (3) Requiring all tax return preparers who are not currently authorized to prac- tice before the IRS to pass a minimum competency examination and meet other requirements, but “grandfather in” tax re- turn preparers who have accurately and competently prepared tax returns for a cer- tain number of years; and (4) Requiring all unenrolled tax return preparers to complete testing and continu- ing 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 ac- countants, or other individuals previously authorized to practice before the IRS. As discussed in this preamble, many com- mentators 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 commenta- tors 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 indi- viduals to obtain PTINs if the individuals are employed by law firms, certified pub- lic 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 ob- jecting to the rule in the proposed reg- ulations 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 contin- uing education programs. These regu- lations do require continuing education providers to obtain a continuing education provider number and a continuing educa- tion provider program number. Although the IRS is not currently proposing charg- ing providers a fee to obtain a continuing education provider number or a continu- ing 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 eco- nomic 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. Fur- ther, 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 com- ment 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 pre- parers. The testing requirements in the rules will ensure that tax return prepar- ers pass a minimum competency exami- nation to obtain their professional creden- tials, while the continuing education re- quirements will help ensure that tax re- turn preparers remain current on Federal tax law and continue to expand their tax knowledge. The extension of the rules inCircular230toregisteredtaxreturn 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 un- ethical or disreputable conduct. Accord- ingly, the implementation of the qualifi- cation and competency standards in these rules is expected to increase taxpayer com- pliance, ensure uniformity, and allow tax- payers 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 regula- tions is Matthew D. Lucey of the Office of the Associate Chief Counsel (Procedure and Administration). ***** 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 Paragraph 1. The authority citation for 31 CFR part 10 is revised to read as fol- lows: 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. Par. 2. Section 10.0 is revised to read as follows: §10.0 Scope of part. (a) This part contains rules governing the recognition of attorneys, certified pub- lic accountants, enrolled agents, enrolled retirement plan agents, registered tax re- turn preparers, and other persons repre- senting taxpayers before the Internal Rev- enue Service. Subpart A of this part sets forth rules relating to the authority to prac- tice 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 sanc- tions for violating the regulations; subpart D of this part contains the rules applicable to disciplinary proceedings; and subpart E 2011–27 I.R.B.17July 5, 2011 of this part contains general provisions re- lating to the availability of official records. (b)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 3. Section 10.1 is revised to read as follows: §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 Ser- vice necessary to administer and enforce this part. The Commissioner shall appoint the Director of the Office of Professional Responsibility and any other Internal Rev- enue official(s) to manage and direct any office(s) established to administer or en- force this part. Offices established under this part include, but are not limited to: (1) The Office of Professional Re- sponsibility, which shall generally have responsibility for matters related to prac- titioner conduct and discipline, including disciplinary proceedings and sanctions; and (2) An office with responsibility for matters related to authority to practice be- fore the Internal Revenue Service, includ- ing 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 per- form 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 des- ignate an officer or employee of the In- ternal Revenue Service to perform the du- ties of an individualappointed under para- graph (a) of this section in the absence of that officer or employee or during a va- cancy in that office. (d)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 4. Section 10.2 is amended by re- vising paragraphs (a)(4) and (a)(5), adding paragraph (a)(8), and revising paragraph (b) to read as follows: §10.2 Definitions. (a) * * * (4)Practice before the Internal Rev- enue Servicecomprehends all matters con- nected with a presentation to the Inter- nal Revenue Service or any of its offi- cers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Inter- nal Revenue Service. Such presentations include, but are not limited to, preparing documents; filing documents; correspond- ing and communicating with the Internal Revenue Service; rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrange- ment having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings. (5)Practitionermeans any individual described in paragraphs (a), (b), (c), (d), (e), or (f) of §10.3. ***** (8)Tax return preparermeans any in- dividual 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. Par. 5. Section 10.3 is amended by: 1. Revising paragraphs (d)(3) and (e)(3); 2.Redesignating paragraphs (f), (g), (h), and (i) as paragraphs (g), (h), (i), and (j) respectively; 3.Adding new paragraph (f); and 4.Revising newly designated paragraph (j). The revisions and additions read as fol- lows: §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 ac- countants, enrolled agents, enrolled retire- ment 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 ac- countants, enrolled agents, enrolled actu- aries, and registered tax return preparers. (f)Registered tax return preparers.(1) Any individual who is designated as a registered tax return preparer pursuant to §10.4(c) of this part who is not currently under suspension or disbarment from prac- tice 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 sign- ing tax returns and claims for refund, and other documents for submission to the In- ternal Revenue Service. A registered tax return preparer may prepare all or substan- tially 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 re- turn preparer may prepare and sign. (3) A registered tax return preparer may represent taxpayers before revenue agents, customer service representatives, or sim- ilar officers and employees of the Inter- nal Revenue Service (including the Tax- payer Advocate Service) during an exami- nation if the registered tax return preparer signed the tax return or claim for refund for the taxable year or period under examina- tion. Unless otherwise prescribed by reg- ulation or notice, this right does not per- mit such individual to represent the tax- payer, regardless of the circumstances re- quiring representation, before appeals of- ficers, revenue officers, Counsel or sim- ilar officers or employees of the Internal Revenue Service or the Treasury Depart- ment. A registered tax return preparer’s authorization to practice under this part also does not include the authority to pro- vide tax advice to a client or another person except as necessary to prepare a tax return, claim for refund, or other document in- tended to be submitted to the Internal Rev- enue 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 man- ner as attorneys, certified public accoun- tants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries. ***** (j)Effective/applicability date.This section is generally applicable beginning August 2, 2011. July 5, 2011182011–27 I.R.B. Par. 6. Section 10.4 is revised to read as follows: §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 anapplicant 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 en- gaged in any conduct that would justify the suspension or disbarment of any prac- titioner under the provisions of this part. (b)Enrollment as a retirement plan agent upon examination. The Commis- sioner, 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 en- gaged in any conduct that would justify the suspension or disbarment of any prac- titioner 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 reg- istered 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 sus- pension or disbarment of any practitioner under the provisions of this part. (d)Enrollment of former Internal Rev- enue Service employees. The Commis- sioner, 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 sus- pension 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 Ser- vice form and supplies the information re- quested on the form and such other infor- mation regarding the experience and train- ing of the applicant as may be relevant. (2) The appropriate office of the Inter- nal Revenue Service provides a detailed report of the nature and rating of the ap- plicant’s work while employed by the In- ternal Revenue Service and a recommen- dation whether such employment qualifies the applicant technically or otherwise for the desired authorization. (3) Enrollment as an enrolled agent basedonanapplicant’sformeremploy- ment with the Internal Revenue Service may be of unlimited scope or it may be limited to permit the presentation of mat- ters 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 en- rolled agent or enrolled retirement plan agent based on an applicant’s former em- ployment with the Internal Revenue Ser- vice must be made within three years from the date of separation from such employ- ment. (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 con- tinuous employment with the Internal Revenue Service during which the appli- cant must have been regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the reg- ulations relating to income, estate, gift, employment, or excise taxes. (6) An applicant for enrollment as an enrolled retirement plan agent who is re- questing such enrollment based on former employment with the Internal Revenue Servicemusthavehadaminimumoffive 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 in- terpretation of the provisions of the Inter- nal 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 au- thorization to practice may be granted only to natural persons. (f)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 7. Section 10.5 is revised to read as follows: §10.5 Application to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer. (a)Form; address. An applicant to be- come an enrolled agent, enrolled retire- ment plan agent, or registered tax return preparer must apply as required by forms or procedures established and published by the Internal RevenueService, including proper execution of required forms under oath or affirmation. The address on the ap- plication will be the address under which a successful applicant is enrolled or regis- tered and is the address to which all corre- spondence concerning enrollment or regis- tration will be sent. (b)Fee. A reasonable nonrefundable fee may be charged for each application to become an enrolled agent, enrolled retire- ment plan agent, or registered tax return preparer. See 26 CFR part 300. (c)Additional information; examina- tion. The Internal Revenue Service may require the applicant, as a condition to con- sideration of an application, to file addi- 2011–27 I.R.B.19July 5, 2011 tional 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 suitabilitycheck. The tax com- pliance check will be limited to an inquiry regarding whether anapplicant has filed all required individual or business tax re- turns 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 regard- ing 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 ap- plication is submitted, including whether the applicant has engaged in disreputable conduct as defined in §10.51. The appli- cation 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 §§10.51 and 10.52. (2) If the applicant does not pass the tax compliance or suitability check, the appli- cant will not be issued an enrollment or registration card or certificate pursuant to §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 temporaryrecognition to prac- tice pending a determination as to whether status as an enrolled agent, enrolled retire- ment 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 suf- ficient to warrant granting the application to practice, or the Commissioner, or del- egate, has information indicating that the statements in the application are untrue or that the applicant would not otherwise qualify to become an enrolled agent, en- rolled 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 applica- tion. The applicant may, within 30 days after receipt of the notice of denial of the application, file a written protest of the de- nial as prescribed by the Internal Revenue Service in forms, guidance, or other appro- priate guidance. A protest under this sec- tion is not governed by subpart D of this part. (g)Effective/applicability date.This section is applicable to applications re- ceived August 2, 2011. Par. 8. Section 10.6 is revised to read as follows: §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 Ser- vice as an enrolled agent, enrolled retire- ment plan agent, or registered tax return preparer will be accorded active enroll- ment or registration status subject to re- newal of enrollment or registration as pro- videdinthispart. (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 Inter- nal 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 Rev- enue 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 Rev- enue 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 pre- parer’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 for enrollment or registration, or application for renewal of enrollment or registration. A practitioner’s change of address notifi- cation under this part will not constitute a change of the practitioner’s last known address for purposes of section 6212 of the Internal RevenueCode 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 Rev- enue Service to maintain eligibility to practice before the Internal Revenue Ser- vice. Failure to receive notification from the Internal Revenue Service of the re- newal 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 pre- scribed by forms, instructions, or other ap- propriate guidance. (ii) Enrolled agents who have a so- cial security number ortax identification number that ends with the numbers 0, 1, 2, or 3, except for those individuals who received their initial enrollment af- ter 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 so- cial security number or tax identifica- tion number that ends with the numbers 4, 5, or 6, except for those individuals who received their initial enrollment af- ter November 1, 2004, must apply for renewal between November 1, 2004, and July 5, 2011202011–27 I.R.B. January 31, 2005. The renewal will be effective April 1, 2005. (iv) Enrolled agents who have a so- cial security numberor tax identifica- tion number that ends with the numbers 7, 8, or 9, except for those individuals who received their initial enrollment af- ter 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 be- tween November 1 and January 31 of ev- ery 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 indi- viduals who receive initial enrollment as an enrolled agent after November 1 and be- fore April 2 of the applicable renewal pe- riod will not be required to renew their en- rollment before the first full renewal pe- riod following the receipt of their initial enrollment. (3)Renewal period for enrolled retire- ment plan agents. (i) All enrolled retire- ment plan agents must renew their preparer tax identification number as prescribed by the Internal Revenue Service in forms, in- structions, 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 re- turn preparers. Registered tax return pre- parers must renew their preparer tax iden- tification number and their status as a reg- istered tax return preparer as prescribed by the Internal Revenue Service in forms, in- structions, or other appropriate guidance. (5)Notification of renewal.Afterre- view and approval, the Internal Revenue Service will notify the individual of the re- newal 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 Ser- vice will publish in the Internal Revenue Bulletin (see 26 CFR 601.601(d)(2)(ii)(b)) and on the Internal Revenue Service web- page (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 pre- parer, an individual must certify, in the manner prescribed by the Internal Revenue Service, that the individual has satisfied the requisite numberof continuing educa- tion hours. (1)Definitions. For purposes of this section— (i)Enrollment yearmeans January 1 to December 31 of each year of an enrollment cycle. (ii)Enrollment cyclemeans the three successive enrollment years preceding the effective date of renewal. (iii)Registration yearmeans each 12-month period the registered tax return preparer is authorized to practice before the Internal Revenue Service. (iv) Theeffective date of renewalis 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 en- rolled agent or enrolled retirement plan agent—(i)Requirements for enrollment cycle. A minimum of 72 hours of contin- uing education credit, including six hours of ethics or professional conduct, must be completed during eachenrollment 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 eachenrollment year of an enrollment cycle. (iii)Enrollment during enrollment cy- cle—(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 enroll- ment cycle. Enrollment for any part of a month is considered enrollment for the en- tire month. (B) Ethics. An individual who receives initial enrollment during an enrollment cy- cle must complete two hours of ethics or professional conduct for each enrollment year during the enrollment cycle. Enroll- ment for any part of an enrollment year is considered enrollment for the entire year. (3)Requirements for renewal as a reg- istered tax return preparer.Aminimumof 15 hours of continuing education credit, in- cluding two hours of ethics or professional conduct, three hours of Federal tax law up- dates, and 10 hours of Federal tax law top- ics, must be completed during each regis- tration year. (f)Qualifying continuing educa- tion—(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 edu- cation program designed to enhance pro- fessional 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 educa- tion program consistent with the Internal Revenue Code and effective tax adminis- tration. (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 educa- tion program designed to enhance profes- sional knowledge in qualified retirement plan matters; and (B) Be a qualifying continuing educa- tion program consistent with the Internal Revenue Code and effective tax adminis- tration. (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 edu- cation program designed to enhance pro- fessional 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 educa- tion program consistent with the Internal Revenue Code and effective tax adminis- tration. 2011–27 I.R.B.21July 5, 2011 (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 atten- dance; (B) Is conducted by a qualified instruc- tor, discussion leader, or speaker (in other words, a person whose background, train- ing, education, and experience is appropri- ate for instructing or leading a discussion on the subject matter of the particular pro- gram); (C) Provides or requires a written out- line, textbook, or suitable electronic edu- cational materials; and (D) Satisfies the requirements estab- lished for a qualified continuing education program pursuant to §10.9. (ii)Correspondence or individual study programs (including taped programs). Qualifying continuingeducation programs include correspondence or individual study programs that are conducted by con- tinuing education providers and completed on an individual basis by the enrolled in- dividual. The allowable credit hours for such programs will be measured on a basis comparable to the measurement of a sem- inar or course for credit in an accredited educational institution. Such programs qualify as continuingeducation programs only if they— (A) Require registration of the par- ticipants by the continuing education provider; (B) Provide a means for measuring suc- cessful completion by the participants (for example, a written examination), includ- ing the issuance of a certificate of comple- tion by the continuing education provider; (C) Provide a written outline, textbook, or suitable electronic educational materi- als; and (D) Satisfy the requirements estab- lished for a qualified continuing education program pursuant to §10.9. (iii)Serving as an instructor, discussion leader or speaker. (A) One hour of contin- uing education credit will be awarded for each contact hour completed as an instruc- tor, discussion leader, or speaker at an edu- cational program that meets the continuing education requirements of paragraph (f) of this section. (B) A maximum of two hours of con- tinuing education credit will be awarded for actual subject preparation time for each contact hour completed as an instructor, discussion leader, or speaker at such pro- grams. It is the responsibility of the in- dividual claiming such credit to maintain records to verify preparation time. (C) The maximum continuing educa- tion 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 pre- sentation on the same subject matter dur- ing an enrollment cycle or registration year will receive continuing education credit for only one such presentation for the en- rollment cycle or registration year. (3)Periodic examination. Enrolled Agents and Enrolled Retirement Plan Agents may establish eligibility for re- newal of enrollment for any enrollment cycle by— (i) Achieving a passing score on each part of the Special Enrollment Examina- tion 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 educa- tion coursework. (1) All continuing edu- cation 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 con- tinuous 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 ex- ample, two 90-minute segments (180 min- utes) 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 follow- ing the date of renewal the information re- quired with regard to qualifying continu- ing education credit hours. Such informa- tion includes— (i) The name of the sponsoring organi- zation; (ii) The location of the program; (iii) The title of the program, quali- fied program number, and description of its content; (iv) Written outlines, course syllibi, textbook, and/or electronic materials pro- vided 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 ap- propriate; 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 in- structor, 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 organi- zation; (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 con- tinuing education requirements for a given period may be granted for the following reasons— (i) Health, which prevented compliance with the continuing education require- ments; (ii) Extended active military duty; (iii) Absence from the United States for an extended period of time due to employ- ment or other reasons, provided the indi- vidual 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)Arequestforwaivermustbeac- companied by appropriate documentation. The individual is required to furnish any additional documentation or explanation deemed necessary. Examples of appropri- ate documentation could be a medical cer- tificate or military orders. (3) A request for waiver must be filed no later than the last day of the renewal application period. July 5, 2011222011–27 I.R.B. (4) If a request for waiver is not ap- proved, the individual will be placed in in- active status. The individual will be noti- fied 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 re- turn preparers. (5) If the request for waiver is not ap- proved, 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 re- newal of enrollment or registration. (j)Failure to comply. (1) Compliance by an individual with the requirements of this part is determined by the Internal Rev- enue Service. The Internal Revenue Ser- vice will provide notice to any individ- ual who fails to meet the continuing edu- cation and fee requirements of eligibility for renewal. The notice will state the ba- sis for the determination of noncompliance and will provide the individual an oppor- tunity to furnish the requested information in writing relating to the matter within 60 days of the date of the notice. Such in- formation will be considered in making a final determination as to eligibility for re- newal. 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 pre- scribed 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 sec- tion. As part of this review, the enrolled agent, enrolled retirement plan agent or registered tax return preparer may be re- quired to provide the Internal Revenue Ser- vice with copies of any continuing educa- tion records required to be maintained un- der this part. If the enrolled agent, enrolled retirement plan agent or registered tax re- turn preparer fails to comply with this re- quirement, 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 require- ments, or who has not satisfied the re- quirements of eligibility for renewal will be placed on a roster of inactive enrolled individuals or inactive registered individ- uals. During this time, the individual will be ineligible to practice before the Internal Revenue Service. (4) Individuals placed in inactive sta- tus 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 Ser- vice, or use the terms enrolled agent, en- rolled 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 sta- tus may be reinstated to an active status by filing an application for renewal and pro- viding evidence of the completion of all re- quired continuing education hours for the enrollment cycle or registration year. Con- tinuing education credit under this para- graph (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 sta- tus 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. Oth- erwise, 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 termi- nate. Future eligibility for active status must then be reestablished by the individ- ual as provided in this section. (7) Inactive status is not available to an individual who is the subject of a pend- ing disciplinary matter before the Internal Revenue Service. (k)Inactive retirement status. An indi- vidual 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 in- dividual will be ineligible to practice be- fore the Internal Revenue Service. An in- dividual who is placed in an inactive re- tirement status may be reinstated to an ac- tive status by filing an application for re- newal and providing evidence of the com- pletion of the required continuing educa- tion hours for the enrollment cycle or reg- istration year. Inactive retirement status is not available to an individual who is inel- igible to practice before the Internal Rev- enue 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 ineli- gible to practice before the Internal Rev- enue Service by virtue of disciplinary ac- tion under this part is required to conform to the requirements for renewal of enroll- ment or registration before the individual’s eligibility is restored. (m)Enrolled actuaries.Theenrollment and renewal of enrollment of actuaries au- thorized to practice under paragraph (d) of §10.3 are governed by the regulations of the Joint Board for the Enrollment of Ac- tuaries at 20 CFR 901.1 through 901.72. (n)Effective/applicability date.This section is applicable to enrollment or regis- tration effective beginning August 2, 2011. Par. 9. Section 10.7 is amended by: 1. Revising the section heading. 2. Removing paragraph (c)(1)(viii). 3. Revising paragraph (c)(2), and (d). 4. Removing paragraph (e) 5. Redesignating paragraphs (f) and (g) as paragraphs (e) and (f) and revising them. The revisions read as follows: §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 Ser- vice 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 Rev- enue Service under paragraph (c)(1) of this 2011–27 I.R.B.23July 5, 2011 section to any individual who has engaged in conduct that would justify a sanction under §10.50. (iii) An individual who represents a taxpayer under the authority of paragraph (c)(1) of this section is subject, to the ex- tent 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 Commis- sioner, or delegate, may, subject to condi- tions deemed appropriate, authorize an in- dividual who is not otherwise eligible to practice before the Internal Revenue Ser- vice to represent another person in a par- ticular matter. (e)Fiduciaries. For purposes of this part, a fiduciary (for example, a trustee, re- ceiver, 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. Par. 10. Section 10.8 is revised to read as follows: §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. Ex- cept as otherwise prescribed in forms, in- structions, or other appropriate guidance, an individual must be anattorney, certified public accountant, enrolled agent, or reg- istered tax return preparer to obtain a pre- parer tax identification number. Any indi- vidual who for compensation prepares or assists with the preparation of all or sub- stantially all of a tax return or claim for re- fund 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 furnish- ing information. Any individual may for compensation prepare or assist with the preparation of a tax returnorclaimforre- fund (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 re- quest of the Internal Revenue Service or any of its officers or employees. (c)Application of rules to other individ- uals. Any individual who for compensa- tion prepares, or assists in the preparation of, all or a substantial portion of a doc- ument 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 sub- part B, as well as subject to the sanctions for violation of the regulations in subpart C. Unless otherwise a practitioner, how- ever, an individual may not for compen- sation 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. Par. 11. Section 10.9 is added to sub- part A to read as follows: §10.9 Continuing education providers and continuing education programs. (a)Continuingeducation providers—(1)In general. Continuing education providersare those responsible for presenting continuing education pro- grams. A continuing education provider must— (i) Be an accredited educational institu- tion; (ii) Be recognized for continuing educa- tion 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 §10.6(f) of this part. The Inter- nal Revenue Service may, at its discretion, identify a professional organization, soci- ety or business entity that maintains min- imum education standards comparable to those set forth in this part as a qualifying organization for purposes of this part in ap- propriate forms, instructions, and other ap- propriate guidance; or (iv) Be recognized by the Internal Rev- enue Service as a professional organiza- tion, society, or business whose programs include offering continuing professional education opportunities in subject matters within §10.6(f) of this part. The Inter- nal Revenue Service, at its discretion, may require such professional organiza- tions, 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 continu- ing education provider during the contin- uing education provider cycle by renew- ing its continuing education provider num- ber as prescribed by forms, instructions or other appropriate guidance and paying any applicable user fee. (3)Requirements for qualified contin- uing education programs. A continuing education provider must ensure the qual- ified continuing education program com- plies with all the following requirements— (i) Programs must be developed by in- dividual(s) qualified in the subject matter; (ii) Program subject matter must be cur- rent; (iii) Instructors, discussion leaders, and speakers must be qualified with respect to program content; (iv) Programs must include some means for evaluation of thetechnical 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 providertoverifythe participants who attended and completed the program for a period of four years fol- lowing completion of the program. In the case of continuous conferences, conven- tions, and the like, records must be main- tained to verify completion of the program July 5, 2011242011–27 I.R.B. 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 of- fered. Program numbers shall be obtained as prescribed by forms, instructions or other appropriate guidance. Although, at the discretion of the Internal Revenue Service, a continuingeducation provider may be required to demonstrate that the program is designed to enhance profes- sional 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.Updatepro- grams 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 offer- ing. The qualifying education program subject to update must have been offered within the two 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 continu- ing education provider who fails to meet the requirements of this part will be noti- fied by the Internal Revenue Service. The notice will state the basis for the determi- nation of noncompliance and will provide the continuing education provider an op- portunity to furnish the requested informa- tion in writing relating to the matter within 60 days of the date of the notice. The con- tinuing 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, instruc- tions, 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. Par. 12. Section 10.20 is amended by 1. Redesignating paragraphs (b) and (c) as (a)(3) and (b). 2.Revising newly designated paragraphs (a)(3) and (b). 3.Adding paragraph (c). The revisions and additions read as fol- lows: §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 vi- olation of the regulations in this part, a practitioner must provide any information the practitioner has concerning the alleged violation and testify regarding this infor- mation 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 law- fulrequestforrecordsorinformation.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 be- lieves 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. Par. 13. Section 10.25 is amended by revising paragraphs (c)(2) and (e) to read as follows: §10.25 Practice by former government employees, their partners and their associates. ***** (c) * * * (2) When isolation of a former Gov- ernment employee is required under para- graph (c)(1) of this section, a statement af- firming the fact of such isolation must be executed under oath by the former Gov- ernment 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 iso- lation. 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. Par. 14. Section 10.30 is amended by revising paragraphs (a)(1) and (e) to read as follows: §10.30 Solici tation. (a)Advertising and solicitation restric- tions. (1) A practitioner may not, with re- spect to any Internal Revenue Service mat- ter, 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 retire- ment plan agents, or registered tax return preparers, in describing their professional designation, may not utilize the term “cer- tified” or imply an employer/employee re- lationship with the Internal Revenue Ser- vice. Examples of acceptable descriptions for enrolled agents are “enrolled to rep- resent taxpayers before the Internal Rev- enue Service,” “enrolled to practice before the Internal Revenue Service,” and “admit- ted to practice before the Internal Revenue Service.” Similarly, examples of accept- able descriptions for enrolled retirement plan agents are “enrolled to represent tax- payers before the Internal Revenue Service as a retirement plan agent” and “enrolled to practice before the Internal Revenue Ser- vice as a retirement plan agent.” An exam- ple of an acceptable description for regis- tered tax return preparers is “designated as a registered tax return preparer by the In- ternal Revenue Service.” ***** (e)Effective/applicability date.This section is applicable beginning August 2, 2011. ***** Par. 15. Section 10.34 is amended by: 1. Adding paragraph (a). 2.Redesignating paragraph (f) as para- graph (e). 3.Revising newly designated paragraph (e). 2011–27 I.R.B.25July 5, 2011 The revision and addition read as fol- lows: §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)Signataxreturnorclaimforrefund 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 In- ternal Revenue Code (Code) (including the related regulations and other published guidance); or (C) Is a willful attempt by the practi- tioner 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 (includ- ing the related regulations and other pub- lished guidance). (ii) 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 de- scribed in section 6694(a)(2) of the Code (including the related regulations and other published guidance); or (C) Is a willful attempt by the practi- tioner 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 (includ- ing the related regulations and other pub- lished guidance). (2) A pattern of conduct is a factor that will be taken into account in determin- ing whether a practitioner acted willfully, recklessly, or through gross incompetence. ***** (e)Effective/applicability date. Para- graph (a) of this section is applicable for returns or claims for refund filed, or advice provided, beginning August 2, 2011. Para- graphs (b) through (d) of this section are applicable to tax returns, documents, affi- davits, and other papers filed on or after September 26, 2007. Par. 16. Section 10.36 is amended by: 1. Redesignating paragraph (b) as para- graph (c). 2.Adding new paragraph (b). 3.Revising newly designated paragraph (c). The addition and revisions read as fol- lows: §10.36 Procedures toensure 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, as- sociates, and employees for purposes of complying with Circular 230. Any practi- tioner 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 willful- ness, recklessness, or gross incompetence does not take reasonable steps to ensure that the firm has adequate procedures to comply with Circular230, and one or more individuals who are members of, associ- ated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm,offailingtocomplywithCircular 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 pat- tern or practice, in connection with their practice with the firm, that does not com- ply 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. Par. 17. Section 10.38 is revised to read as follows: §10.38 Establishment of advisory com- mittees. (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 ad- visory committees composed of at least six individuals authorized to practice be- fore the Internal Revenue Service. Mem- bership of an advisory committee must be balanced among those who practice as at- torneys, accountants,enrolled agents, en- rolled actuaries, enrolled retirement plan agents, and registered tax return preparers. Under procedures prescribed by the Inter- nal Revenue Service, an advisory commit- tee may review and make general recom- mendations regarding the practices, proce- dures, and policies of the offices described in §10.1. (b)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 18. Section 10.50 is amended by 1. Revising paragraph (b)(1). 2.Redesignating paragraphs (d) and (e) as paragraphs (e) and (f). 3.Adding new paragraph (d). 4.Revising newly redesignated para- graph (f). The revisions and addition read as fol- lows: §10.50 Sanctions. ***** (b) * * * (1) If any appraiser is disqualified pur- suant to this subpart C, the appraiser is barred from presenting evidence or testi- mony in any administrative proceeding be- fore the Department of Treasury or the In- ternal Revenue Service, unless and until authorized to do so by the Internal Rev- enue Service pursuant to §10.81, regard- less of whether the evidence or testimony would pertain to an appraisal made prior to or after the effective date of disqualifi- cation. ***** (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 §10.50 in lieu of instituting or continuing a proceed- ing under §10.60(a). ***** (f)Effective/applicability date.This section is applicableto conduct occurring on or after August 2, 2011, except that paragraphs (a), (b)(2), and (e) apply to con- duct occurring on or after September 26, 2007, and paragraph (c) applies to prohib- July 5, 2011262011–27 I.R.B. ited conduct that occurs after October 22, 2004. Par. 19. Section 10.51 is amended by adding paragraphs (a)(16), (17), and (18) and revising paragraph (b) to read as fol- lows: §10.51 Incompetence and disreputable conduct. (a) * * * (16) Willfully failing to file on mag- netic or other electronic media a tax return prepared by the practitioner when the prac- titionerisrequiredtodosobytheFederal tax laws unless the failure is due to reason- able cause and not due to willful neglect. (17) Willfully preparing all or substan- tially all of, or signing, a tax return or claim for refund when the practitioner does not possess a current or otherwise valid pre- parer tax identification number or other prescribed identifying number. (18) Willfully representing a taxpayer before an officer or employee of the In- ternal Revenue Service unless the practi- tioner is authorized to do so pursuant to this part. (b)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 20. Section 10.53 is revised to read as follows: §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 em- ployee 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 In- ternal Revenue Service responsible for ad- ministering 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 al- leged violation to the office(s) of the In- ternal Revenue Service responsible for ad- ministering or enforcing this part or any of- ficer or employee of the Internal Revenue Service. If the report is made to an offi- cer 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 sec- tion shall be maintained unless retention of the report is permissible under the applica- ble records control schedule as approved by the National Archives and Records Ad- ministration and designated in the Inter- nal Revenue Manual. Reports must be de- stroyed 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. Par. 21. Section 10.60 is amended by revising paragraphs (a), (b), and (d) to read as follows: §10.60 Institution of proceeding. (a) Whenever it is determined that a practitioner (or employer, firm or other en- tity, if applicable) violated any provision of the laws governing practice before the In- ternal Revenue Service or the regulations in this part, the practitioner may be repri- manded in accordance with §10.62, or sub- ject to a proceeding for sanctions described in §10.50. (b) Whenever a penalty has been as- sessed against an appraiser under the Internal Revenue Code and an appropriate officer or employee in an office estab- lished 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 §10.62 or subject to a proceeding for disqualification. A proceeding for dis- qualification of an appraiser is instituted by the filing of a complaint, the contents of which are more fully described in §10.62. ***** (d)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 22. Section 10.61 is amended by revising paragraphs (a), (b)(2), and (c) to read as follows: §10.61 Conferences. (a)In general. The Commissioner, or delegate, may confer with a practitioner, employer, firm or other entity, or an ap- praiser concerning allegations of miscon- duct irrespective of whether a proceeding has been instituted. If the conference re- sultsinastipulationinconnectionwithan ongoing proceeding in which the practi- tioner, 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 declina- tion. 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 writ- ten 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 del- egate, has the discretion to accept or re- ject 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. Par.23.Section10.62isrevisedtoread as follows: §10.62 Contents of complaint. (a)Charges. A complaint must name the respondent, provide a clear and con- cise 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 §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.Thecom- plaint must specify the sanction sought against the practitioner or appraiser. If the sanction sought is a suspension, the dura- tion of the suspension sought must be spec- ified. 2011–27 I.R.B.27July 5, 2011 (c)Demand for answer. The respon- dent 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 per- son representing the Internal Revenue Ser- vice 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. Par. 24. Section 10.63 is amended by revising paragraphs (c) and (f) to read as follows: §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 re- quiredorpermittedtobeservedontheIn- ternal Revenue Service in connection with a proceeding under this part, the paper will be served on the Internal Revenue Service’s authorized representative under §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 en- force this part under the authority of §10.1, Internal Revenue Service, 1111 Constitu- tion Avenue, NW, Washington, DC 20224. ***** (f)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 25. Section 10.64 is amended by revising paragraph (a) and adding para- graph (f) to read as follows: §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. Par. 26. Section 10.65 is amended by revising paragraphs (a) and (c) to read: §10.65 Supplemental charges. (a)In general. Supplemental charges may be filed against the respondent by amending the complaint with the permis- sion 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 insuffi- cient knowledge to form a belief, when the respondent possesses such information; or (2) It appears that the respondent has knowingly introduced false testimony dur- ing the proceedings against the respondent. ***** (c)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 27. Section 10.66 is revised to read as follows: §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 Adminis- trative Law Judge, no reply to the respon- dent’s answer is required. If a reply is not filed, new matter in the answer is deemed denied. (b)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 28. Section 10.69 is revised to read as follows: §10.69 Representation; ex parte communication. (a)Representation. The Internal Rev- enue Service may be represented in pro- ceedings 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 Rev- enue Service. (b)Ex parte communication.TheInter- nal Revenue Service, the respondent, and any representatives of either party, may not attempt to initiate or participate inex partediscussions concerning a proceeding or potential proceeding with the Admin- istrative Law Judge (or any person who is likely to advise the Administrative Law Judge on a ruling or decision) in the pro- ceeding before or during the pendency of the proceeding. Any memorandum, let- ter 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 argu- ment in the proceeding and shall be served on the other party. (c)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 29. Section 10.72 is amended by revising paragraphs (a)(3)(iv)(A), (d)(1), and (g) to read as follows: §10.72 Hearings. (a) * * * (3) * * * (iv)*** (A) The Internal Revenue Service with- draws the complaint; ***** (d)Publicity—(1)In general.Allre- ports and decisions of the Secretary of the Treasury, or delegate, including any re- ports and decisions of the Administrative Law Judge, under this subpart D are, sub- ject to the protective measures in para- graph (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. Par. 30. Section 10.76 is amended by revising paragraphs (c), and (e) to read as follows: §10.76 Decision of Administrative Law Judge. ***** July 5, 2011282011–27 I.R.B. (c)Copy of decision.TheAdministra- tive 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 au- thorized representative. ***** (e)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 31. Section 10.77 is revised to read as follows: §10.77 Appeal of decision of Administrative Law Judge. (a)Appeal. Any party to the proceeding under this subpart D may appeal the deci- sion of the Administrative Law Judge by filing a notice of appeal with the Secretary of the Treasury, or delegate deciding ap- peals. The notice of appeal must include a brief that states exceptions to the decision of Administrative Law Judge and support- ing 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 Admin- istrative Law Judge. The notice of appeal andbriefmustbefiledwithin30daysof the date that the decision of the Adminis- trative 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 rep- resented, the non-appealing party’s repre- sentative. (c)Response. Within 30 days of receiv- ing 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 iden- tified for appeals. A copy of the response brief must be served at the same time on the opposing party or, if the party is rep- resented, the opposing party’s representa- tive. (d)No other briefs, responses or mo- tions 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 de- ciding appeals. (e)Additional time for briefs and re- sponses. Notwithstanding the time for fil- ing briefs and responses provided in para- graphs (b) and (c) of this section, the Sec- retary of the Treasury, or delegate deciding appeals, may, for good cause, authorize ad- ditional time for filing briefs and responses upon a motion of a party or upon the ini- tiative of the Secretary of the Treasury, or delegate deciding appeals. (f)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 32. Section 10.78 is amended by revising paragraphs (c) and (d) to read as follows: §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 Inter- nal Revenue Service and the respondent or the respondent’s authorized representative. (d)Effective/applicability date.This section is applicable beginning August 2, 2011. Par. 33. Section 10.79 is revised to read as follows: §10.79 Effect of disbarment, suspension, or censure. (a)Disbarment. When the final deci- sion in a case is against the respondent (or the respondent has offered his or her con- sent 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 Rev- enue Service pursuant to §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 deci- sion is for suspension, the respondent will not be permitted to practice before the In- ternal Revenue Service during the period of suspension. For periods after the sus- pension, the practitioner’s future represen- tations may be subject to conditions as au- thorized 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 cen- sure, the respondent will be permitted to practice before the Internal Revenue Ser- vice, but the respondent’s future represen- tations may be subject to conditions as au- thorized by paragraph (d) of this section. (d)Conditions. After being subject to the sanction of either suspension or cen- sure, the future representations of a prac- titioner so sanctioned shall be subject to specified conditions designed to promote high standards of conduct. These condi- tions can be imposed for a reasonable pe- riod in light of the gravity of the practi- tioner’s violations. For example, where a practitioner is censured because the prac- titioner failed to advise the practitioner’s clients about a potential conflict of interest or failed to obtain the clients’ written con- sents, the practitioner may be required to provide the Internal Revenue Service with a copy of all consents obtained by the prac- titioner 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. Par.34.Section10.80isrevisedtoread as follows: §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 Rev- enue Service may determine the manner of giving notice to the proper authorities of the State by which the censured, sus- pended, or disbarred person was licensed to practice. (b)Effective/applicability date.This section is applicable beginning August 2, 2011. Par.35.Section10.81isrevisedtoread as follows: 2011–27 I.R.B.29July 5, 2011 §10.81 Petition for reinstatement. (a)In general. A disbarred practitioner or a disqualified appraiser may petition for reinstatement before the Internal Rev- enue Service after the expiration of 5 years following such disbarment or disqualifica- tion. Reinstatement will not be granted un- less the Internal Revenue Service is sat- isfied 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. 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: §10.82 Expedited suspension. (a)When applicable. Whenever the Commissioner, or delegate, determines that a practitioner is described in para- graph (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.Apro- ceeding under this section will be insti- tuted by a complaint that names the re- spondent, is signed by an authorized rep- resentative of the Internal Revenue Service under §10.69(a)(1), and is filed and served according to the rules set forth in para- graph (a) of §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 §10.64, except as otherwise provided in this section. A respondent is entitled to a conference only if the con- ference is requested in a timely filed an- swer. 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 follow- ing the date on which the answer was due. (e)Conference. An authorized repre- sentative 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 Inter- nal Revenue Service, but no sooner than 14 calendar days after the date by which the answer must be filed with the Internal Rev- enue Service, unless the respondent agrees to an earlier date. An authorized repre- sentative may represent the respondent at the conference. Following the conference, upon a finding that the respondent is de- scribed 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 respon- dent may be immediately suspended from practice before the Internal Revenue Ser- vice. (f)Duration of suspension. A suspen- sion under this section will commence on the date that written notice of the suspen- sion 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 para- graph (b) of this section or for any other reason; or (2) The suspension is lifted by an Ad- ministrative Law Judge or the Secretary of the Treasury in a proceeding referred to in paragraph (g) of this section and instituted under §10.60. (g)Proceeding instituted under §10.60. If the Internal Revenue Service suspended a practitioner under this section, the prac- titioner may ask the Internal Revenue Service to issue a complaint under §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. Par. 37. Section 10.90 is amended by: 1. Revising paragraph (a). 2.Redesignating the second paragraph (b) as paragraph (c). 3.Revising newly designated paragraph (c). The revisions read as follows: §10.90 Records (a)Roster. The Internal Revenue Ser- vice 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 be- fore the Internal Revenue Service or upon whom a monetary penalty was imposed. (2) Enrolled agents, including individu- als— (i) Granted active enrollment to prac- tice; (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 the Internal Revenue Service under §10.61. (3) Enrolled retirement plan agents, in- cluding individuals— (i) Granted active enrollment to prac- tice; (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 §10.61. (4) Registered tax return preparers, in- cluding individuals— (i) Authorized to prepare all or substan- tially 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 July 5, 2011302011–27 I.R.B. preparer has been accepted by the Internal Revenue Service under §10.61. (5) Disqualified appraisers. (6) Qualified continuing education providers, including providers— (i) Who have obtain a qualifying con- tinuing education provider number (ii) Whose qualifying continuing edu- cation number has been revoked for fail- ure to comply with the requirements of this part. ***** (c)Effective/applicability date.This section is applicable beginning August 2, 2011. Steven T. Mill er, Deputy Commis sioner for Services and E nforcement. Approved May 20, 2011. George Madison, General Counsel, Office of the Secretary. (Filed by the Office of the Federal Register on May 31, 2011, 8:45 a.m., and published in the issue of the Federal Register for June 3, 2011, 76 F.R. 32286) Section 382.—Limitation on Net Operating Loss Carrryforwards and Certain Built-In Losses Following Ownership Change The adjusted applicable federal long-term rate is set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 412.—Minimum Funding Standards The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 467.—Certain Payment sfortheUseof Property or Services The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 482.—Allocation of Income and Deductions Among Taxpayers Federal short-term, mid-term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 483.—Interest on Certain Deferred Payments The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 642.—Special Rules for Credits and Deductions Federal short-term, mid-term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 807.—Rules for Certain Reserves The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 846.—Discounted Unpaid Losses Defined The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 1274.—Determi- nation of Issue Price in the Case of Certain Debt Instru- ments Issued for Property (Also Sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.) Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate.For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for July 2011. Rev. Rul. 2011–14 This revenue ruling provides various prescribed rates for federal income tax pur- poses for July 2011 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted appli- cable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-in- come housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new build- ings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Finally, Table 6 contains the blended annual rate for 2011 for purposes of section 7872. 2011–27 I.R.B.31July 5, 2011 REV. RUL. 2011–14 TABLE 1 Applicable Federal Rates (AFR) for July 2011 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term AFR.37%.37%.37%.37% 110% AFR.41%.41%.41%.41% 120% AFR.44%.44%.44%.44% 130% AFR.48%.48%.48%.48% Mid-term AFR2.00%1.99%1.99%1.98% 110% AFR2.20%2.19%2.18%2.18% 120% AFR2.40%2.39%2.38%2.38% 130% AFR2.61% 2.59%2.58%2.58% 150% AFR 3.01%2.99%2.98%2.97% 175% AFR3.51% 3.48%3.46%3.46% Long-term AFR3.86%3.82%3.80%3.79% 110% AFR4.24%4.20%4.18%4.16% 120% AFR4.63% 4.58%4.55%4.54% 130% AFR 5.03% 4.97%4.94%4.92% REV. RUL. 2011–14 TABLE 2 Adjusted AFR for July 2011 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term adjusted AFR .53%.53%.53%.53% Mid-term adjusted AFR 1.57%1.56%1.56%1.55% Long-term adjusted AFR 3.86%3.82%3.80%3.79% REV. RUL. 2011–14 TABLE 3 Rates Under Section 382 for July 2011 Adjusted federal long-term rate for the current month3.86% Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.)4.30% REV. RUL. 2011–14 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for July 2011 Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. Appropriate percentage for the 70% present value low-income housing credit7.68% Appropriate percentage for the 30% present value low-income housing credit3.29% July 5, 2011322011–27 I.R.B. REV. RUL. 2011–14 TABLE 5 Rate Under Section 7520 for July 2011 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest2.4% REV. RUL. 2011–14 TABLE 6 Blended Annual Rate for 2011 Section 7872(e)(2) blended annual rate for 2011.40% Section 1288.—Treatment of Original Issue Discount on Tax-Exempt Obligations The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 7520.—Valuation Tables The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. Section 7872.—Treatment of Loans With Below-Market Interest Rates The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of July 2011. See Rev. Rul. 2011-14, page 31. 2011–27 I.R.B.33July 5, 2011 Part III. Administrative, Procedural, and Miscellaneous Relief from Certain Low-Income Housing Credit Requirements Due to Severe Storms, Tornadoes, and Flooding in Missouri Notice 2011–47 The Internal Revenue Service is sus- pending certain requirements under § 42 of the Internal Revenue Code for low-in- come housing credit projects in the United States to provide emergency housing relief needed as a result of the devastation caused by severe storms, tornadoes, and flooding in Missouri beginning on April 19, 2011. This relief is being granted pursuant to the Service’s authority under § 42(n) and § 1.42–13(a) of the Income Tax Regula- tions. BACKGROUND On May 9, 2011, the President de- clared a major disaster for the State of Missouri. This declaration was made un- der the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121et seq. Subsequently, the Federal Emergency Management Agency (FEMA) designated jurisdictions for Individual Assistance. The State of Missouri has requested that the Service allow owners of low-income housingcredit projects to provide temporary housing in vacant units to individuals who resided in jurisdictions designated for Individual Assistance in Missouri and who have been displaced because their residences were destroyed or damaged as a result of the devastation caused by the severe storms, tornadoes, and flooding. Based upon this request and because of the widespread damage to housing caused by the severe storms, tornadoes, and flooding, the Service has determined that the Missouri Housing Development Commission (Commission) may provide approval to project owners to provide temporary emergency housing for displaced individuals in accordance with this notice. I. SUSPENSION OF INCOME LIMITATIONS The Service has determined that it is appropriate to temporarily suspend certain income limitation requirements under § 42 for certain qualified low-income projects. The suspension will apply to low-income housing projects approved by the Commis- sion, in which vacant units are rented to displaced individuals. The Commission will determine the appropriate period of temporary housing for each project, not to extend beyond June 30, 2012 (temporary housing period). II. STATUS OF UNITS A. Units in the first year of the credit period A displaced individual temporarily occupying a unit during the first year of the credit period under § 42(f)(1) will be deemed a qualified low-income tenant for purposes of determining the project’s qualified basis under § 42(c)(1), and for meeting the project’s 20-50 test or 40-60 test as elected by the project owner under § 42(g)(1). After the end of the temporary housing period established by the Commission (not to extend beyond June 30, 2012), a displaced individual will no longer be deemed a qualified low-income tenant. B. Vacant units after the first year of the credit period During the temporary housing period established by the Commission, the status of a vacant unit (that is, market-rate or low- income for purposes of § 42 or never pre- viously occupied) afterthe first year of the credit period that becomes temporarily oc- cupied by a displaced individual remains the same as the unit’s status before the displaced individual moves in. Displaced individuals temporarily occupying vacant units will not be treated as low-income tenants under § 42(i)(3)(A)(ii). However, even if it houses a displaced individual, a low-income or market rate unit that was vacant before the effective date of this no- tice will continue to be treated as a va- cant low-income or market rate unit. Sim- ilarly, a unit that was never previously oc- cupied before the effective date of this no- tice will continue to be treated as a unit that has never been previously occupied even if it houses a displaced individual. Thus, the fact that a vacant unit becomes occupied by a displaced individual will not affect the building’s applicable frac- tion under § 42(c)(1)(B) for purposes of determining the building’s qualified basis, nor will it affect the 20–50 test or 40–60 test of § 42(g)(1). If the income of oc- cupants in low-income units exceeds 140 percent of the applicable income limita- tion, the temporary occupancy of a unit by a displaced individual will not cause ap- plication of the available unit rule under § 42(g)(2)(D)(ii). In addition, the project owner is not required during the temporary housing period to make attempts to rent to low-income individuals the low-income units that house displaced individuals. III. SUSPENSION OF NON-TRANSIENT REQUIREMENTS The non-transient use requirement of § 42(i)(3)(B)(i) shall not apply to any unit providing temporary housing to a displaced individual during the temporary housing period determined by the Com- mission in accordance with section I of this notice. IV. OTHER REQUIREMENTS All other rules and requirements of § 42 will continue to apply during the temporary housing period established by the Commission. After the end of the temporary housing period, the ap- plicable income limitations contained in § 42(g)(1), the available unit rule un- der § 42(g)(2)(D)(ii), the nontransient requirement of § 42(i)(3)(B)(i), and the requirement to make reasonable attempts to rent vacant units to low-income individ- uals shall resume. If a project owner offers to rent a unit to a displaced individual after the end of the temporary housing period, the displaced individual must be certified under the requirements of § 42(i)(3)(A)(ii) and § 1.42–5(b) and (c) to be a qualified low-income tenant. To qualify for the re- lief in this notice, the project owner must additionally meet all of the following re- quirements: July 5, 2011342011–27 I.R.B. (1) Major Disaster Area The displaced individual must have resided in a Missouri jurisdiction desig- nated for Individual Assistance by FEMA as a result of the severe storms, tornadoes, and flooding in Missouri beginning on April 19, 2011. (2) Approval of the Missouri Housing Development Commission The project owner must obtain approval from the Commission for the relief de- scribed in this notice. The Commission will determine the appropriate period of temporary housing for each project, not to extend beyond June 30, 2012. (3) Certificationsand Recordkeeping To comply with the requirements of § 1.42–5, project owners are required to maintain and certify certain information concerning each displaced individual tem- porarily housed in the project, specifically: name, address of damaged residence, social security number, and a statement signed under penalties of perjury by the displaced individual that, because of dam- age to the individual’s residence in a Mis- souri jurisdiction designated for Individual Assistance by FEMA as a result of the severe storms, tornadoes, and flooding be- ginning on April 19, 2011, the individual requires temporary housing. The owner must notify the Commission that vacant units are available for rent to displaced individuals. The owner must also certify the date the displaced individual began temporary oc- cupancy and the date the project will dis- continue providing temporary housing as established by the Commission. The certi- fications and recordkeeping for displaced individuals must be maintained as part of the annual compliance monitoring process with the Commission. (4) Rent Restrictions Rents for the low-income units that house displaced individuals must not ex- ceed the existing rent-restricted rates for the low-income units established under § 42(g)(2). (5) Protection of Existing Tenants Existing tenants inoccupied low-in- come units cannot be evicted or have their tenancy terminated as a result of efforts to provide temporary housing for displaced individuals. EFFECTIVE DATE This notice is effective May 9, 2011 (the date of the President’s major disaster dec- larations as a result of the severe storms, tornadoes, and flooding in Missouri begin- ning on April 19, 2011). PAPERWORK REDUCTION ACT The collection of information contained in this notice has been reviewed and ap- proved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–2210. An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. The collection of information in this no- tice is in the section titled “OTHER RE- QUIREMENTS” under “(3) Certifications and Recordkeeping.” This information is required to enable the Service to verify whether individuals are displaced as a re- sult of the devastation caused by severe storms, tornadoes, and flooding in Mis- souri beginning on April 19, 2011, and thus warrant temporary housing in vacant low-income housing units. The collection of information is required to obtain a bene- fit. The likely respondents are individuals and businesses. The estimated total annual recordkeep- ing burden is 125 hours. The estimated annual burden per recordkeeper is approximately 15 minutes. The estimated number of recordkeepers is 500. Books or records relating to a collection of information must be retained as long as their contents may become material to the administration of the internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. DRAFTING INFORMATION The principal author of this notice is David Selig of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information re- garding this notice, contact Mr. Selig at (202) 622–3040 (not a toll-free call). Credit for Carbon Dioxide Sequestration 2011 Section 45Q Inflation Adjustment Factor Notice 2011–50 SECTION 1. PURPOSE This notice publishes the inflation ad- justment factor for the credit for carbon dioxide (CO 2 ) sequestration under § 45Q of the Internal Revenue Code (§ 45Q credit) for calendar year 2011. The infla- tion adjustment factor is used to determine the amount of the credit allowable under § 45Q. The calendar year 2011 infla- tion-adjusted creditapplies to the amount of qualified CO 2 captured by a taxpayer at a qualified facility and disposed of in secure geological storage. SECTION 2. BACKGROUND Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified CO 2 that is cap- tured by the taxpayer at a qualified facil- ity, disposed of by the taxpayer in secure geological storage, and not used by the taxpayer as a tertiary injectant. Section 45Q(a)(2) allows a credit of $10 per metric ton of qualified CO 2 that is captured by the taxpayer at a qualified facility, used by the taxpayer as a tertiary injectant in a quali- fied enhanced oil or natural gas recovery project (EOR project), and disposed of by the taxpayer in secure geological storage. Section 45Q(b)(1) defines the term “qualified carbon dioxide” as CO 2 cap- tured from an industrial source that would otherwise be released into the atmosphere as industrial emission of greenhouse gas (GHG), and that is measured at the source of capture and verified at the point of dis- posal or injection. Qualified CO 2 includes 2011–27 I.R.B.35July 5, 2011 the initial deposit of captured CO 2 used as a tertiary injectant but does not include CO 2 that is re-captured, recycled, or oth- erwise re-injected as part of the enhanced oil and natural gas recovery process. Section 45Q(c) defines the term “qual- ified facility” as an industrial facility that is owned by the taxpayer, where carbon capture equipment is placed in service, and where at least 500,000 metric tons of CO 2 is captured during the taxable year. Section 45Q(d)(2) provides that the Secretary, in consultation with the Admin- istrator of the Environmental Protection Agency (EPA), the Secretary of Energy, and the Secretary of the Interior, shall establish regulationsfor determining ade- quate security measures for the geological storage of CO 2 under paragraph (1)(B) or (2)(C) of subsection (a) such that the CO 2 does not escape into the atmosphere. See section 5 of Notice 2009–83, 2009–44 I.R.B. 588, for procedures regarding se- cure geological storage. Section 45Q(d)(5) allows the § 45Q credit to the person that captures and physically or contractually ensures the disposal of or the use as a tertiary injectant of the qualified CO 2, except to the extent provided in regulations prescribed by the Secretary. Under § 45Q(d)(7), for taxable years beginning in a calendar year after 2009, the dollar amount contained in § 45Q(a) must be adjusted for inflation by multiply- ing such dollar amount by the inflation ad- justment factor for such calendar year de- termined under § 43(b)(3)(B), determined by substituting “2008” for “1990.” Section 43(b)(3)(B) defines “inflation adjustment factor” as, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the de- nominator of which is the GNP implicit price deflator for 1990. For purposes of § 45Q(d)(7), with respect to 2011 calen- dar year, the inflation adjustment factor is a fraction the numerator of which is the GNP implicit price deflator for 2010 (110.654) and the denominator of which is the GNP implicit price deflator for 2008 (108.626). Section 45Q(e) provides that the § 45Q credit will apply with respect to qualified CO 2 before the end of the calendar year in which the Secretary, in consultation with the EPA, certifies that 75,000,000 metric tons of qualified CO 2 have been taken into account in accordance with § 45Q(a). SECTION 3. INFLATION ADJUSTMENT FACTOR The inflation adjustment factor for cal- endar year 2011 is 1.0187. The 45Q credit for calendar year 2011 is $20.37 per met- ric ton of qualified CO 2 under § 45Q(a)(1) and $10.19 per metric ton of qualified CO 2 under § 45Q(a)(2). SECTION 4. DRAFTING INFORMATION The principal author of this notice is Jennifer C. Bernardini of the Office of Associate Chief Counsel (Passthroughs & Special Industries).For further information regarding this notice, contact Jennifer C. Bernardini at (202) 622–3110 (not a toll-free call). Extension of Interim Guidance on Modification of Section 833 Treatment of Certain Health Organizations Notice 2011–51 PURPOSE This notice extends the interim guidance provided in Notice 2010–79, 2010–49 I.R.B. 809, as clarified and modi- fied by Notice 2011–4, 2011–2 I.R.B. 282, and Rev. Proc. 2011–14, 2011–4 I.R.B. 330, on the interpretation and application of § 833(c)(5) of the Internal Revenue Code (Code). BACKGROUND Section 9016 of the Patient Protections and Affordable Care Act, Pub. L. No. 111–148, 124 Stat. 119 (2010), (Afford- able Care Act) added § 833(c)(5) to the Code, effective for taxable years begin- ning after December 31, 2009. Section 833(c)(5) provides that § 833 does not ap- ply to an otherwise-eligible organization unless the organization’s medical loss ratio (MLR) during the taxable year is not less than 85 percent. For this purpose, an or- ganization’s MLR is equal to the fraction of the organization’s total premium rev- enue that is expended on reimbursement for clinical services provided to enrollees under its policies during the taxable year (as reported under § 2718 of the Public Health Service Act). In 2010, the Department of Health and Human Services issued interim final regu- lations implementing § 2718 of the Public Health Service Act, 75 Fed. Reg. 74864 (December 1, 2010) (to be codified at 45 C.F.R. pt. 158). Also in 2010, Treasury and the IRS is- sued Notice 2010–79, 2010–49 I.R.B. 809, providing transitional relief and interim guidance on the computation of a tax- payer’s MLR for purposes of § 833(c)(5), the consequences of nonapplication of § 833 by reason of § 833(c)(5), and changes in accounting method. The relief appliedtothefirsttaxable year beginning after December 31, 2009. EXTENSION OF INTERIM GUIDANCE To provide affected taxpayers with suf- ficient time to adapt to the reporting re- quirements under § 2718 of the Public Health Service Act that bear on data used to compute the MLR under § 833(c)(5) and to make any administrative or other adjust- ments that may be necessary in light of the possible nonapplication of § 833 to such taxpayers, the interim guidance provided in Notice 2010–79 is extended to any tax- able year beginning in 2010 and the first taxable year beginning after December 31, 2010. CONTACT INFORMATION The principal author of this notice is Rebecca L. Baxter of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this notice, contact Rebecca L. Baxter at (202) 622–7117 (not a toll-free call). July 5, 2011362011–27 I.R.B. Part IV. Items o fGeneralInterest Portion of For m 990 Schedule HOptionalfor Tax-Exempt Hospitals for Tax Year 2010 Announcemen t 2011–37 This announc ement advises tax-ex- empt organiz ations that operate one or more hospita l facilities (“hospital orga- nizations”) that Part V, Section B (“Part V.B”)ofSch edule H,Hospitals,ofthe 2010 Form 99 0,Return of Organization Exempt From Income Tax, is optional for the 2010 tax year. Hospital organizations that are re quired to file the 2010 Form 990 are not required to complete Part V.B, but they ar e required to complete all other sections o f the 2010 Schedule H, including Sections A and C of Part V. In addition, a hospita l organization must attach its most rece nt audited financial statements to its 201 0 Form 990 if its tax year be- gan after March 23, 2010, regardless of whether it completes Part V.B.SeeI.R.C. § 6033(b )(15)(B); Instructions for Form 990, Par t IV, line 20b. The Inte rnal Revenue Service (IRS) has decided to make the entire Part V.B op- tional f or the 2010 tax year to give the hospita l community more time to familiar- ize itself wit h the types of information the IRS will be col lecting related to compli- ance with sect ion 9007 of the Patient Pro- tection and Af fordable Care Act (“Afford- able Care Act” ), Pub. L. No. 111–148, 124 Stat. 119 (March 23, 2010) and to address any a mbiguities arising from the extensive re visions of the form and in- structions. Part V.B includes questions related to t he additional requirements en- acted by Sec tion 9007 of the Affordable Care Act, su ch as questions regarding a hospital fa cility’s community health needs assessmen t (Lines 1 through 7, optional for tax years b eginning on or before March 23, 2012), fin ancial assistance policy (Lines 8 through 13 ), billing and collections (Lines 14 through 18) and charges for medical care (lin es 19 through 21). The IRS contin- ues to inv ite comments on how to improve the clari ty and reduce the burden of report- ing the in formation related to these addi- tional r equirements on the Form 990 and Schedul e H. (For details on how to submit comment s regarding the Form 990, see In- structi ons for 2010 Form 990, p. 46.) No penal ties under section 6652(c) (1)(A)(ii) of the Internal Revenue Code (Co de)willbeassessedforfailureto includ e information required to be shown on a Form 990 be cause any line or lines of Part V.B is lef t incomplete. If an affected hospital orga nization receives a section 6652(c)(1)(A )(ii) penalty notice from the IRS solely for not completing any line or lines of Part V.B for the tax year 2010, the hospital organization should call the telephone nu mber on the penalty notice to request th at the IRS abate the penalty. Section 665 2(c)(1)(A)(ii) penalties still applytothe failure to complete the other sections of theScheduleHortheForm 990. This announ cement does not affect the effective d ates of section 501(r) or any other prov ision added to the Code by sec- tion 9007 o f the Affordable Care Act. Announcem ent 2011–20, which directs hospital o rganizations not to file the 2010 Form 990 be fore July 1, 2011, and grants hospital o rganizations with return due dates pri or to August 15, 2011, an auto- matic thr ee-month extension of time to fileaFor m 990 for 2010, is still in effect. For furth er information regard- ing this a nnouncement, please contact Steve Cla rke at (202) 283–9474 (not a toll-fr ee number). 2011–27 I.R.B.37July 5, 2011 Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is be- ingextendedtoapplytoavariationofthe fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodi- fied,below). Clarifiedis used in those instances where the language in a prior ruling is be- ing made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare withamplifiedandclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published ruling is not correct and the correct position is beingstatedinanewruling. Supersededdescribes a situation where the new ruling does nothing more than re- state the substance and situation of a previ- ously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same po- sition published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single rul- ing a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new rul- ing does more than restate the substance of a prior ruling, a combination of terms is used. For example,modifiedandsu- persededdescribes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously pub- lished ruling is first modified and then, as modified, is superseded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original rul- ing has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the ad- ditions, and supersedes all prior rulings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The fol lowing abbreviations in current use and for merly used will appear in material publis hedintheBulletin. A—Individual. Acq.—A cquiescence. B—Individual. BE—Beneficiary. BK—Bank . B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cu mulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Coo perative. Ct.D.—Court Decision. CY—County. D—Decede nt. DC—Dummy Corporation. DE—Donee. Del. Order —Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Emp loyer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduc iary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Fo reign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Fed eral Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grante e. GP—General Partner. GR—Grantor. IC—Insura nce Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—No nacquiescence. O—Organization. P—Parent Corporation. PHC—Persona l Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Pa rtnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Re al Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsi diary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Trans feree. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpay er. TR—Trust. TT—Trustee. U.S.C.—Uni ted States Code. X—Corporation. Y—Corporation. Z—Corporat ion. July 5, 2011i2011–27 I.R.B. Numerical Finding List 1 Bulletin 2011–27 Announcements: 2011-37, 2011-27 I.R.B.37 Notices: 2011-47, 2011-27 I.R.B.34 2011-50, 2011-27 I.R.B.35 2011-51, 2011-27 I.R.B.36 Revenue Rulings: 2011-14, 2011-27 I.R.B.31 Treasury Decisions: 9527, 2011-27 I.R.B.1 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011. 2011–27 I.R.B.iiJuly 5, 2011 Finding List of Current Actions on Previously Published Items 1 Bulletin 2011–27 1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011. July 5, 2011iii2011–27 I.R.B. INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin- tendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select More Topics. Then select Internal Revenue Bulletins. INTERNAL REVENUE BULLETINS ON CD-ROM Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders) or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197–9000. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Internal Revenue Service W ashington,DC20224 Official Business Penalty for Private Use, $300
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