Internal Revenue Bulletin 2011-27 (PDF rendition): IRS Revenue Rulings

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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
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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.
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