Reg-134235-08 (nprm)

Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Proposed Rules

emcdonald on DSK2BSOYB1PROD with PROPOSALS

Register on November 17, 2009 [74 FR
59108].
DATES: Interested persons desiring to
participate in this hearing must provide
written notice of desired participation
as set out below, on or before April 26,
2010.
The hearing will commence on May 4,
2010 at 10 a.m. at 600 Army Navy Drive,
Arlington, VA 22202.
ADDRESSES: To ensure proper handling
of notification, please reference ‘‘Docket
No. DEA–333’’ on all correspondence.
Written notification sent via regular or
express mail should be sent to Hearing
Clerk, Office of the Administrative Law
Judge, Drug Enforcement
Administration, 8701 Morrissette Drive,
Springfield, VA 22152.
FOR FURTHER INFORMATION CONTACT:
Hearing Clerk, Office of the
Administrative Law Judge, Drug
Enforcement Administration, 8701
Morrissette Drive, Springfield, VA
22152, Telephone (202) 307–8188.
SUPPLEMENTARY INFORMATION:
Background
On November 17, 2009, the Drug
Enforcement Administration (DEA)
published a Notice of Proposed
Rulemaking (NPRM) in the Federal
Register (74 FR 59108) to place the
substance carisoprodol into schedule IV
of the Controlled Substances Act (CSA)
(21 U.S.C. 801, et seq.). The NPRM
stated that, if this scheduling action
were finalized, carisoprodol would be
subject to the regulatory controls and
criminal sanctions of schedule IV, as are
applicable to the manufacture,
distribution, dispensing, importation,
and exportation of carisoprodol and
products containing carisoprodol.
The NPRM invited interested parties
to submit comments, objections, and
requests for hearing on or before
December 17, 2009. The DEA received
18 comments in response to the NPRM.
Seventeen commenters strongly
supported the control of carisoprodol.
These commenters included health care
providers, an organization representing
pharmaceutical manufacturers and
distributors, State regulatory agencies
and State Departments of Health
officials, law enforcement entities and
one pain management association.
According to these commenters,
carisoprodol products are being
diverted, abused, misused, and sold on
the street and from Internet sites
without legitimate prescriptions.
Commenters indicated carisoprodol is
being abused with other controlled
drugs such as opioids. There are
incidences of pain patients addicted to
carisoprodol.

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While 17 comments were supportive
of control, one commenter requested a
hearing on the issue. This commenter
stated that it believes ‘‘that the NPRM
and the associated documentation do
not provide substantial evidence to
support the proposed scheduling of
carisoprodol.’’ Additionally, the
petitioner stated that ‘‘the proposal gives
inadequate weight to the negative
impact on patient care of scheduling
carisoprodol.’’ In requesting a hearing,
the commenter stated its intention to
present factual information concerning
the relative potential for abuse of
carisoprodol, and expert opinion
concerning the significance and
reliability of data cited in the NPRM and
associated materials.
All comments received in response to
the NPRM are part of the administrative
record and will be considered by DEA
in determining whether to finalize the
rule placing carisoprodol into schedule
IV.
Hearing Notification
In response to this request, DEA is
convening a hearing on the NPRM.
Accordingly, notice is hereby given that
a hearing in connection with this
proposed scheduling action will
commence on May 4, 2010, at 10 a.m.
at the Drug Enforcement
Administration, 600 Army Navy Drive,
Arlington, VA 22202 and will continue
until all interested persons, as that term
is defined in 21 CFR 1300.01(b)(19),
desiring to participate, who have given
notice of such desire as prescribed
below, have been heard. The hearing
will be conducted pursuant to the
provisions of 5 U.S.C. 556 and 557, and
21 CFR 1308.41–1308.45, and 1316.41–
1316.68.
Every interested person desiring to
participate in the hearing shall file a
written notice of intention to
participate, in duplicate, with the
Hearing Clerk, Office of the
Administrative Law Judge, Drug
Enforcement Administration, 8701
Morrissette Drive, Springfield, VA
22152, on or before April 26, 2010. Each
notice of intention to participate must
be in the form prescribed in 21 CFR
1316.48. The commenter who requested
the hearing is hereby directed to file
with the Administrative Law Judge a
notice of its continued intention to
participate in the hearing and to state
with particularity its interest in the
proceeding.
Dated: March 21, 2010.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 2010–6763 Filed 3–25–10; 8:45 am]

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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–134235–08]
RIN 1545–BI28

Furnishing Identifying Number of Tax
Return Preparer
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations under section
6109 of the Internal Revenue Code
(Code) that provide guidance to tax
return preparers on furnishing an
identifying number on tax returns and
claims for refund of tax that they
prepare. These proposed regulations
provide guidance on the identifying
number of a tax return preparer for tax
returns and claims for refund filed
before and after the proposed effective
date. The proposed regulations describe
how the IRS will define the identifying
number of tax return preparers.
Additional provisions of the proposed
regulations provide that tax return
preparers must apply for and regularly
renew their preparer identifying number
as the IRS may prescribe in forms,
instructions, or other guidance. This
document also invites comments from
the public regarding these proposed
regulations.
DATES: Written or electronic comments
and requests for a public hearing must
be received by April 26, 2010.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–134235–08), Room
5205, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to CC:PA:LPD:PR (REG–134235–
08), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC 20224, or sent
electronically via the Federal
eRulemaking Portal at http://
www.regulations.gov (IRS–REG–
134235–08).
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Stuart Murray at (202) 622–4940 (not a
toll-free number); concerning
submissions of comments and requests
for a hearing, Richard Hurst at
richard.a.hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:

BILLING CODE 4410–09–P

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Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Proposed Rules

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Paperwork Reduction Act
The collection of information
contained in this notice of proposed
rulemaking has been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the
collection of information should be sent
to the Office of Management and
Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by April
26, 2010.
Comments are specifically requested
concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the IRS,
including whether the information will
have practical utility;
The accuracy of the estimated burden
associated with the proposed collection
of information (see below);
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the proposed collections of information
may be minimized, including through
the application of automated collection
techniques or other forms of information
technology; and
Estimates of capital or start-up costs
of operation, maintenance, and
purchase of service to provide
information.
The collection of information in these
proposed regulations is in § 1.6109–2(d)
and (e). This information is required in
order for the IRS to issue identifying
numbers to tax return preparers who are
eligible to receive them. Tax return
preparers will need to apply for an
identifying number as prescribed in
forms, instructions, or other guidance.
The use of a prescribed identifying
number by tax return preparers on tax
returns and claims for refund of tax will
enable the IRS to accurately identify tax
return preparers, to match tax return
preparers to tax returns and claims for
refund that they prepare, and to
generally administer the internal
revenue laws. The collection of
information is mandatory. The likely
respondents are tax return preparers and
employers of tax return preparers.
Estimated total annual reporting
burden: 300,000 hours.
Estimated average annual burden
hours (or fraction of an hour) per

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respondent: varies from 10 to 20
minutes, with an estimated average of
15 minutes.
Estimated number of respondents: 1.2
million.
Estimated annual frequency of
responses: once every three years.
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 control number
assigned by the Office of Management
and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document contains proposed
amendments to regulations under
section 6109 of the Code relating to
furnishing a tax return preparer’s
identifying number on tax returns and
claims for refund of tax. Section 6109
was added to the Code in 1961 (Pub. L.
87–397, 75 Stat. 828) and authorizes the
Secretary to prescribe regulations for the
inclusion of identifying numbers on a
return, statement, or other document
required to be filed with the IRS. In
addition, section 6109(c) authorizes the
Secretary ‘‘to require such information
as may be necessary to assign an
identifying number to any person.’’
Section 6109(a)(4) as originally enacted
by section 1203(d) of the Tax Reform
Act of 1976 (Pub. L. 94–455, 90 Stat.
1520) required return preparers to
furnish on income tax returns and
claims for refund of income tax an
identifying number, as prescribed, to
identify the preparer, the preparer’s
employer, or both. Section
8246(a)(2)(D)(i) of the Small Business
and Work Opportunity Tax Act of 2007
(Pub. L. 110–28, 121 Stat. 112),
amended section 6109(a)(4) to allow the
IRS to prescribe that tax return
preparers furnish identifying numbers
on any tax returns or claims for refund
they prepare. As currently prescribed in
regulations, the identifying number of a
tax return preparer who is an individual
is the preparer’s Social Security number
(SSN) or alternative number as
prescribed by the IRS. The proposed
regulations provide that the identifying
number of a tax return preparer is
exclusively the number prescribed by
the IRS. The proposed regulations will
implement some of the
recommendations made in Publication
4832, Return Preparer Review (Rev. 12–

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2009), published at the end of last year
(the Report). The IRS and the Treasury
Department believe that the
implementation of the Report’s
recommendations, including the
recommendations implemented by these
regulations, will increase tax
compliance and allow taxpayers to be
confident that the tax return preparers
to whom they turn for assistance are
knowledgeable, skilled, and ethical.
1. Identifying Numbers Generally
Because an identifying number is
unique to the person to whom assigned,
the IRS is able to use the number to
correctly identify the taxpayer or the tax
return preparer. The use of identifying
numbers allows the IRS to accurately
and timely process returns and issue
refunds, centralize information, post
information to the correct taxpayer’s
account, and effectively administer the
rules relating to tax return preparers.
2. Requiring Identifying Numbers From
Tax Return Preparers
Tax return preparers generally must
provide an identifying number on the
tax returns they prepare and sign.
Specifically, under § 1.6695–1(b), a
signing tax return preparer, as defined
under § 301.7701–15(b)(1), must sign a
return of tax or claim for refund after it
is completed and before it is presented
to the taxpayer for signature. A signing
tax return preparer under § 301.7701–
15(b)(1) is a tax return preparer who has
primary responsibility for the overall
substantive accuracy of the preparation
of a return of tax or claim for refund.
Under § 1.6109–2(a)(1), a tax return
preparer who must sign a tax return or
tax refund claim must also include an
identifying number with the preparer’s
signature. A return of tax includes an
information return described in
§ 301.7701–15(b)(4). If a signing tax
return preparer has an employment
arrangement or association with another
person, then that other person’s
employer identification number (EIN)
must also be included on the tax return
or refund claim.
The identifying number of a signing
tax return preparer, and the identifying
number of any person with whom the
preparer has an employment
arrangement or association, must be
included on electronically filed tax
returns, as well as paper returns.
Further, because of recent statutory
changes, tax return preparers who
prepare and file individual income tax
returns (Form Series 1040) for their
clients will soon be required to
electronically file the returns, unless the
tax return preparer reasonably expects
to file only 10 or fewer individual

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Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Proposed Rules
income tax returns for the calendar year.
See Section 17 of the Worker,
Homeownership, and Business
Assistance Act of 2009, Public Law 111–
92, 123 Stat. 2984, 2997 (adding Code
section 6011(e)(3)).
Tax return preparers who are required
but fail to include their identifying
number on a tax return or refund claim,
or fail to include the identifying number
of any person with whom they have an
employment arrangement or association,
are subject to a penalty under section
6695(c). A tax return preparer is not
liable for the penalty if the failure to
include an identifying number is due to
reasonable cause and not due to willful
neglect.

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3. Preparer Tax Identification Numbers
Section 6109(a) initially provided that
the identifying number of a tax return
preparer was the individual’s SSN.
Section 3710(a) of the IRS Restructuring
and Reform Act of 1998 (Pub. L. 105–
206, 112 Stat. 685) (RRA ’98), allowed
the IRS to prescribe an identifying
number for tax return preparers other
than the preparer’s SSN. In response to
section 3710(a) of RRA ’98, the IRS
developed and began to issue preparer
tax identification numbers (PTINs). Tax
return preparers currently may apply
online for a PTIN using the e-services
PTIN process on the IRS Web site at
http://www.irs.gov or by filing Form W–
7P, ‘‘Application for Preparer Tax
Identification Number.’’ Applying
online is faster, and return preparers are
encouraged to apply online. In the
future, the IRS will prescribe the
method to apply for a PTIN consistent
with these proposed regulations.
Currently, under § 1.6109–2(a)(2), a tax
return preparer may use as an
identifying number on a tax return or
claim for refund either the preparer’s
SSN or an ‘‘alternative number’’
prescribed by the IRS, including a PTIN.
But an EIN, an Electronic Filing
Identification Number (EFIN) (which is
an identification number assigned to
IRS e-file providers), or an Electronic
Transmitter Identification Number
(ETIN) (which is an identification
number assigned to IRS e-file providers
who electronically transmit tax returns
to the IRS) is not a valid preparer
identifying number.
4. Regulation of Tax Return Preparers
In June 2009, the IRS initiated a
comprehensive review of tax return
preparers, and in December 2009 the
IRS published the Report describing its
findings from that review. The Report
recommended, in part, that tax return
preparers be required to obtain and use
a PTIN as the exclusive preparer

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identifying number and undergo a taxcompliance check. As discussed below,
the proposed regulations implement
those recommendations.
Under current law, any individual
may prepare a tax return or claim for
refund. The Report recommended that
the IRS establish new eligibility
standards that an individual must meet
in order to prepare tax returns—
including testing, continuing education,
and tax compliance checks. The Report
contemplates that only attorneys,
certified public accountants, enrolled
agents, as well as tax return preparers
who pass a minimum competency exam
and meet other requirements (referred to
as ‘‘registered tax return preparers’’) will
be eligible to prepare and sign tax
returns and claims for refund. These
proposed regulations do not establish
the requirements to become a registered
tax return preparer, which primarily
will be set forth in future guidance
under Treasury Department Circular No.
230, 31 CFR part 10. After a transition
period, however, it is intended that only
individuals who satisfy the eligibility
standards may obtain and use a PTIN as
a tax return preparer.
Explanation of Provisions
1. Requiring the Use of PTINs
The proposed regulations provide that
for tax returns or refund claims filed
after December 31, 2010, the identifying
number that a tax return preparer must
include with the preparer’s signature on
tax returns and refund claims is that
prescribed by the IRS in forms,
instructions, or other guidance. Tax
return preparers will not be able to use
an SSN as a preparer identifying
number unless specifically prescribed
by the IRS in forms, instructions, or
other guidance. Instead, to the extent
provided in forms and instructions, a
tax return preparer will be required to
use a PTIN as the identifying number
unless the IRS prescribes in the future
a replacement to the PTIN. Forms and
instructions will be revised accordingly.
The use of PTINs as the identifying
number for tax return preparers will
improve tax administration and tax
compliance, benefit taxpayers and tax
return preparers, and help maintain the
confidentiality of SSNs.
For tax returns or claims for refund
filed before January 1, 2011, the
identifying number of a tax return
preparer will remain the preparer’s SSN
or PTIN. In the case of tax returns for
taxable periods ending before January 1,
2011, and made on the appropriate
forms prescribed for the taxable periods,
but which are filed on or after January
1, 2011, tax return preparers must

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furnish on the returns the identifying
number prescribed on the forms to be
filed and in associated instructions.
For tax return preparation businesses
and other persons having an
employment arrangement or association
with a tax return preparer, the
business’s or employer’s EIN continues
to be the identifying number that must
be included on tax returns and refund
claims along with the tax return
preparer’s signature and preparer
identifying number. An individual tax
return preparer, however, may not use
an EIN as a preparer identifying number
on a return, even if the preparer has an
EIN (for example, as a sole proprietor).
Tax return preparers who use their SSN,
or an EIN, EFIN, or ETIN, instead of a
valid PTIN, on tax returns or claims for
refund filed after the effective date may
be subject to the penalty under section
6695(c) unless the failure to include a
valid PTIN is due to reasonable cause
and not due to willful neglect.
2. Eligibility To Receive a PTIN
The proposed regulations provide that
all tax return preparers must apply for
a PTIN or other prescribed identifying
number at the time and in the manner
as may be prescribed by the IRS in
forms, instructions, or other appropriate
guidance. The proposed regulations also
authorize the IRS to prescribe a user fee
in connection with applying for, and
renewing, a PTIN (or successor number
similar to a PTIN). Except as provided
in any transitional period, beginning
after December 31, 2010, to obtain a
PTIN, an individual must be an
attorney, certified public accountant,
enrolled agent, or registered tax return
preparer under future guidance to be
provided in Circular 230.
Only for purposes of applying for and
renewing a PTIN or other prescribed
preparer identifying number, the term
tax return preparer means any
individual who is compensated for
preparing, or assisting in the
preparation of, all or substantially all, of
a tax return or claim for refund of tax.
A tax return preparer does not include
an individual who is not otherwise a tax
return preparer as that term is defined
in § 301.7701–15(b)(2), or who is an
individual described in § 301.7701–
15(f). The proposed regulations provide
several examples illustrating who is a
tax return preparer required to apply for
a PTIN.
As part of the process of applying for
a PTIN, a tax return preparer may be
subject to both an initial tax-compliance
check and subsequent periodic checks,
which could include a review of a
preparer’s history of compliance with
personal and business tax filing and

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payment obligations. The taxcompliance check is intended to
establish whether a tax return preparer
has timely filed required personal and
business tax returns and has paid taxes
that are due or made other acceptable
arrangements with the IRS, such as an
approved installment agreement under
section 6159. If a tax return preparer
disregards any applicable requirements
to obtain a prescribed identifying
number and thereafter omits, when
required to include, a valid identifying
number on a tax return or claim for
refund filed after the effective date, the
preparer may be liable for the section
6695(c) penalty, unless the failure to
include a valid identifying number was
due to reasonable cause and not due to
willful neglect.
The information a tax return preparer
provides when the preparer initially
applies for a PTIN or other prescribed
identifying number will often become
outdated or otherwise inaccurate. The
IRS may require tax return preparers to
regularly renew their identifying
numbers and otherwise maintain
updated information with the IRS. If a
tax return preparer who is required to
include an identifying number on a tax
return or claim for refund filed after the
effective date uses an expired
identifying number, the tax return
preparer may be liable for the section
6695(c) penalty, unless the use of the
expired number was due to reasonable
cause and not due to willful neglect.
The proposed regulations provide that
if necessary for effective tax
administration, the IRS may prescribe
exceptions to any of the requirements,
such as for an interim period while
procedures are being implemented. For
example, the IRS and the Treasury
Department recognize that the
procedures for becoming a registered tax
return preparer may not be fully
implemented when these regulations
become effective. It is anticipated that
transitional interim guidance will be
provided to allow individuals who
intend to become registered tax return
preparers to obtain an interim PTIN or
other interim identifying number that
may be used as a preparer identifying
number on tax returns and refund
claims until the procedures are fully
implemented. After the interim period,
however, to obtain a PTIN, an
individual will need to be an attorney,
certified public accountant, enrolled
agent, or registered tax return preparer
authorized to practice before the IRS
under Circular 230.

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Proposed Effective/Applicability Date
These regulations are effective after
the date that final regulations are
published in the Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations.
It has been determined that an initial
regulatory flexibility analysis under 5
U.S.C. 603 is required for this notice of
proposed rulemaking. The analysis is
set forth below under the heading,
‘‘Initial Regulatory Flexibility Analysis.’’
Pursuant to section 7805(f) of the
Code, this notice of proposed
rulemaking has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
Initial Regulatory Flexibility Analysis
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) requires the agency
to ‘‘prepare and make available for
public comment an initial regulatory
flexibility analysis’’ that ‘‘describe[s] the
impact of the proposed rule on small
entities.’’ 5 U.S.C. 603(a). Section 605 of
the Act provides an exception to this
requirement if the agency certifies that
the proposed rulemaking will not have
a significant economic impact on a
substantial number of small entities. A
small entity is defined as a small
business, small nonprofit organization,
or small governmental jurisdiction. 5
U.S.C. 601(3)–(6). The IRS and the
Treasury Department conclude that the
proposed regulations, if promulgated
(together with other contemplated
guidance provided for in these
regulations), will impact a substantial
number of small entities and the
economic impact will be significant. As
a result, an initial regulatory flexibility
analysis is required.
Description of the reasons why the
agency action is being considered.
Taxpayers’ reliance on paid tax return
preparers has grown steadily in recent
decades. Today, paid tax return
preparers assist a majority of U.S.
taxpayers in meeting their income tax
filing obligations. Beyond preparing tax
returns, tax return preparers also help
educate taxpayers about the tax laws,
and facilitate electronic filing. Tax
return preparers provide advice to
taxpayers, identify items or issues for

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which the law or guidance is unclear,
and inform taxpayers of the benefits and
risks of positions taken on a tax return,
and the tax treatment or reporting of
items and transactions. Competent tax
return preparers who are well educated
in the rules and subject matter of their
field can prevent costly errors,
potentially saving a taxpayer from
unwanted problems later on and
relieving the IRS from expending
valuable examination and collection
resources.
Given the important role that tax
return preparers play in Federal tax
administration, the IRS has a significant
interest in being able to accurately
identify tax return preparers and
monitor their tax return preparation
activities. The proposed regulations are
intended to advance tax administration
by requiring all individuals who are
paid to prepare all or substantially all of
a tax return or claim for refund of tax
to obtain a preparer identifying number
prescribed by the IRS. Pursuant to the
proposed regulations, the IRS will
require individuals who sign tax returns
or claims for refund to report the
preparer’s identifying number on a tax
return or claim for refund when the
return or refund claim is signed. The
proposed regulations also provide that
the IRS may require tax return preparers
to apply for, and regularly renew, their
identifying numbers. Under the
proposed regulations, the IRS may
prescribe a user fee payable when
applying for a number and for renewal.
Further, the IRS and the Treasury
Department conclude that taxpayers, tax
return preparers, and overall tax
administration will be best served
through increased oversight of the tax
return preparer industry. Mandating a
single prescribed identifying number for
all tax return preparers and assigning a
prescribed number to registered tax
return preparers is critical to effective
oversight.
Statement of the objectives of, and the
legal basis for, the proposed rule.
The principal objective of the
proposed regulations is to enable the
IRS to more accurately identify tax
return preparers and the tax returns and
refund claims associated with each tax
return preparer. The proposed
regulations do this by providing that the
IRS may prescribe the use of identifying
numbers for tax return preparers and the
qualifications or other requirements
necessary to obtain a valid number. The
legal basis for these provisions is section
6109 of the Code, which authorizes the
Secretary to prescribe the ‘‘identifying
number for securing proper
identification of’’ a tax return preparer
and ‘‘to require such information as may

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Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Proposed Rules
be necessary to assign an identifying
number to any person.’’
Description and estimate (where
feasible) of the number of small entities
subject to the proposed rule.
The proposed regulations apply to
individuals who prepare tax returns and
claims for refund of tax. The estimated
number of paid tax return preparers is
as high as 1.2 million, which means the
proposed regulations are likely to
impact a large number of individuals.
Most paid tax return preparers are
employed by firms. A substantial
number of paid tax return preparers are
employed at small tax return
preparation firms or are self-employed
tax return preparers. Any economic
impact of these regulations on small
entities generally will be on selfemployed tax return preparers who
prepare and sign tax returns or on small
businesses that employ one or more
individuals who sign tax returns.
The appropriate NAICS codes for tax
return preparers are those for tax return
preparation services (NAICS code
541213) and other accounting services
(NAICS code 541219). Entities
identified under either of these two
codes are considered small under the
Small Business Administration’s size
standards (13 CFR 121.201), if their
annual revenue is less than $7 million
or $8.5 million, respectively. The IRS
estimates that approximately 70 to 80
percent of the individuals subject to
these proposed regulations are tax
return preparers operating as or
employed by small entities.
Description of the projected reporting,
recordkeeping, and related requirements
of the proposed 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 proposed regulations do not
directly impose any reporting,
recordkeeping, or similar requirements
on any small entities. Rather, the
proposed regulations provide that the
IRS may prescribe in forms,
instructions, or other guidance
(including regulations) requirements for
identifying numbers for tax return
preparers, regular renewal of identifying
numbers, and payment of a user fee
when applying for or renewing an
identifying number. In addition, other
guidance may require certain tax return
preparers to complete competency
testing, complete continuing education
courses, and adhere to established rules
of practice governing attorneys, certified
public accountants, enrolled agents,
enrolled actuaries, and enrolled
retirement plan agents.

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Applying for an identifying number
and subsequent renewal will require
reporting of certain information, but are
not expected to require recordkeeping.
These activities also will not require the
purchase or use of any special business
equipment or software. To the extent it
will be necessary to apply for a PTIN (or
similar identifying number that replaces
a PTIN) online at http://www.irs.gov,
most if not all tax return preparation
businesses have computers and Internet
access. The IRS estimates that applying
for a PTIN will take 10 to 20 minutes
per individual, with an average of 15
minutes per individual.
Under other guidance that the IRS
may issue, tax return preparers who
apply to be registered tax return
preparers and who regularly renew their
status may be subject to recordkeeping
requirements because they may be
required to maintain specified records,
such as documentation and educational
materials relating to completion of
continuing education courses. These
requirements do not involve any
specific professional skills other than
general recordkeeping abilities already
needed to own and operate a small
business or to competently act as a tax
return preparer. It is estimated that tax
return preparers will annually spend
approximately 30 minutes to 1 hour in
maintaining records relating to the
continuing education requirements,
depending on individual circumstances.
A separate regulation addressing
reasonable user fees will be proposed in
the near future. Tax return preparers
may be required to pay a user fee when
first applying for a PTIN and at every
renewal. Small entities may be affected
by these costs if the entities choose to
pay some or all of these fees for their
employees.
Under regulations to be issued in the
future, tax return preparers may also
incur costs for commercial continuing
education courses and minimum
competency examinations, plus
incidental costs, such as for travel and
accommodations in order to maintain
their status as registered tax return
preparers under Circular 230. Course
prices can vary greatly, from free to
hundreds of dollars. Many small tax
return preparation firms may choose, as
with the user fee, to bear these costs for
their employees. In some cases, small
entities may lose sales and profits while
their employed tax return preparers
attend training or educational classes or
are studying and sitting for
examinations. Some small entities that
employ tax return preparers may even
need to alter their business operations if
a significant number of their employees
cannot satisfy the necessary registration

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and competency requirements. The IRS
and the Treasury Department conclude,
however, that only a small percentage of
small entities, if any, may need to cease
doing business or radically change their
business model due to the proposed
regulations.
Although each of the reporting and
recordkeeping requirements and the
costs identified above (in connection
with the proposed regulations and the
other anticipated guidance necessary to
implement the Return Preparer Review)
is not expected to singly result in a
significant economic impact, taken
together it is anticipated that they may
have a significant economic impact on
a substantial number of small entities.
Identification, to the extent
practicable, of all relevant Federal rules
that may duplicate, overlap, or conflict
with the proposed rule.
The proposed regulations do not
duplicate, overlap, or conflict with any
Federal statutes or other rules.
Description of any significant
alternatives to the proposed rule that
accomplish the stated objectives of
applicable statutes and minimize any
significant economic impact on small
entities.
The IRS and the Treasury Department
have determined that there are no viable
alternatives to the proposed regulations
that would enable the IRS to accurately
identify tax return preparers, other than
through the use of a prescribed
identifying number, as provided in the
proposed regulations.
More broadly, the IRS received a large
volume of comments as part of the
Return Preparer Review on the issue of
increased oversight of tax return
preparers generally and on the Report’s
proposed recommendations, including
requiring tax return preparers to use a
uniform prescribed identifying number.
The comments were received from all
categories of interested stakeholders,
including tax professional groups
representing large and small entities,
IRS advisory groups, tax return
preparers, and the public. The input
received from this large and diverse
community overwhelmingly expressed
support for the proposed requirements.
As to the proposed requirements
recommended in the Report, the IRS
and the Treasury Department
considered various alternatives in
determining the best ways to effectuate
proposed changes with respect to tax
return preparers, including:
(1) Requiring all paid tax return
preparers to comply with the ethical
standards in Circular 230 or an ethics
code similar to Circular 230, but not
requiring any paid preparers to

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Federal Register / Vol. 75, No. 58 / Friday, March 26, 2010 / Proposed Rules

demonstrate their qualification and
competency;
(2) Requiring tax return preparers who
are not currently authorized to practice
before the IRS to register with the IRS,
complete annual continuing education
requirements, and meet certain ethical
standards, but not to pass a minimum
competency examination;
(3) Requiring all paid tax return
preparers to pass a minimum
competency examination and meet
other registration requirements; and
(4) Requiring all paid tax return
preparers who are not currently
authorized to practice before the IRS to
pass a minimum competency
examination and meet other registration
requirements, but ‘‘grandfather in’’ tax
return preparers who have accurately
and competently prepared tax returns
for a certain period of years.
After consideration of these and other
alternatives and the responses received
in the public comment process, the IRS
and the Treasury Department conclude
that the provisions of the proposed
regulations will most effectively
promote sound tax administration. The
provisions in the proposed regulations
for a single prescribed identifying
number for tax return preparers will
enable the IRS to accurately identify tax
return preparers, match preparers with
the tax returns and claims for refund
they prepare, and better administer the
tax laws with respect to tax return
preparers and their clients. The
provisions, in combination with
anticipated guidance described above,
also will ensure that qualified,
competent, and ethical tax return
preparers will be assigned prescribed
preparer identifying numbers. The
testing requirements that may be set
forth in other guidance will establish a
benchmark of minimum competency
necessary for tax return preparers to
obtain their professional credentials,
while the continuing education
requirements are intended to ensure that
tax return preparers remain current on
the Federal tax laws and continue to
develop their tax knowledge. The
extension in other, prospective guidance
of the rules in Circular 230 to any paid
tax return preparer will require all
practitioners to meet certain ethical
standards and allow the IRS to suspend
or otherwise appropriately discipline
tax return preparers who engage in
unethical or disreputable conduct.
Accordingly, the implementation of
qualification and competency standards
is expected to increase tax compliance
and allow taxpayers to be confident that
the tax return preparers to whom they
turn for assistance are knowledgeable,
skilled, and ethical.

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Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
written comments (a signed original and
eight (8) copies) or electronic comments
that are submitted timely to the IRS. The
IRS and the Treasury Department
request comments on the clarity of the
proposed rules and how they can be
made easier to understand. All
comments that are submitted by the
public will be available for public
inspection and copying. A public
hearing will be scheduled if requested
in writing by any person who timely
submits comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be
published in the Federal Register.
Drafting Information
The principal author of these
proposed regulations is Stuart Murray of
the Office of the Associate Chief
Counsel, Procedure and Administration.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6109–2 also issued under 26
U.S.C. 6109(a) * * *

Par. 2. Section 1.6109–2 is amended
by revising the section heading, revising
paragraphs (a)(2) and (d), and adding
paragraphs (e), (f), (g), (h), and (i) to read
as follows:
§ 1.6109–2 Tax return preparers furnishing
identifying numbers for returns or claims
for refund and related requirements.

(a) * * *
(2)(i) For tax returns or claims for
refund filed on or before December 31,
2010, the identifying number of an
individual tax return preparer is that
individual’s social security number or
such alternative number as may be
prescribed by the Internal Revenue
Service in forms, instructions, or other
appropriate guidance.
(ii) For tax returns or claims for
refund filed after December 31, 2010,
the identifying number of a tax return
preparer is the individual’s preparer tax
identification number or such other

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number prescribed by the Internal
Revenue Service in forms, instructions,
or other appropriate guidance.
*
*
*
*
*
(d) Beginning after December 31,
2010, all tax return preparers must have
a preparer tax identification number or
other prescribed identifying number
that was applied for and received at the
time and in the manner, including the
payment of a user fee, as may be
prescribed by the Internal Revenue
Service in forms, instructions, or other
appropriate guidance. Except as
provided in paragraph (h) of this
section, beginning after December 31,
2010, to obtain a preparer tax
identification number or other
prescribed identifying number, a tax
return preparer must be an attorney,
certified public accountant, enrolled
agent, or registered tax return preparer
authorized to practice before the
Internal Revenue Service under 31
U.S.C. 330 and the regulations
thereunder.
(e) The Internal Revenue Service may
designate an expiration date for any
preparer tax identification number or
other prescribed identifying number and
may further prescribe the time and
manner for renewing a preparer tax
identification number or other
prescribed identifying number,
including the payment of a user fee, as
set forth in forms, instructions, or other
appropriate guidance. The Internal
Revenue Service may provide that any
identifying number issued by the
Internal Revenue Service prior to the
effective date of this regulation will
expire on December 31, 2010, unless
properly renewed as set forth in forms,
instructions, or other appropriate
guidance, including these regulations.
(f) As may be prescribed in forms,
instructions, or other appropriate
guidance, the IRS may conduct a tax
compliance check on a tax return
preparer who applies for or renews a
preparer tax identification number or
other prescribed identifying number.
(g) Only for purposes of paragraphs
(d), (e), and (f) of this section, the term
tax return preparer means any
individual who is compensated for
preparing, or assisting in the
preparation of, all or substantially all of
a tax return or claim for refund of tax.
Factors to consider in determining
whether an individual is a tax return
preparer under this paragraph (g)
include, but are not limited to, the
complexity of the work performed by
the individual relative to the overall
complexity of the tax return or claim for
refund of tax; the amount of the items
of income, deductions, or losses

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emcdonald on DSK2BSOYB1PROD with PROPOSALS

attributable to the work performed by
the individual relative to the total
amount of income, deductions, or losses
required to be correctly reported on the
tax return or claim for refund of tax; and
the amount of tax or credit attributable
to the work performed by the individual
relative to the total tax liability required
to be correctly reported on the tax return
or claim for refund of tax. A tax return
preparer does not include an individual
who is not otherwise a tax return
preparer as that term is defined in
§ 301.7701–15(b)(2), or who is an
individual described in § 301.7701–
15(f). The provisions of this paragraph
(g) are illustrated by the following
examples:
Example 1. Employee A, an individual
employed by Tax Return Preparer B, assists
Tax Return Preparer B in answering
telephone calls, making copies, inputting
client tax information gathered by B into the
data fields of tax preparation software on a
computer, and using the computer to file
electronic returns of tax prepared by B.
Although Employee A must exercise
judgment regarding which data fields in the
tax preparation software to use, A does not
exercise any discretion or independent
judgment as to the clients’ underlying tax
positions. Employee A, therefore, merely
provides clerical assistance or incidental
services and is not a tax return preparer
required to apply for a PTIN or other
identifying number as the Internal Revenue
Service may prescribe in forms, instructions,
or other appropriate guidance.
Example 2. The facts are the same as in
Example 1, except that Employee A also
interviews B’s clients and obtains from them
information needed for the preparation of tax
returns. Employee A determines the amount
and character of entries on the returns and
whether the information provided is
sufficient for purposes of preparing the
returns. For at least some of B’s clients, A
obtains information and makes
determinations that constitute all or
substantially all of the tax return. Employee
A is a tax return preparer required to apply
for a PTIN or other identifying number as the
Internal Revenue Service may prescribe in
forms, instructions, or other appropriate
guidance. Employee A is a tax return
preparer even if Employee A relies on tax
preparation software to prepare the return.
Example 3. C is an employee of a firm that
prepares tax returns and claims for refund of
tax for compensation. C is responsible for
preparing a Form 1040, ‘‘U.S. Individual
Income Tax Return,’’ for a client. C obtains
the information necessary for completing the
return during a meeting with the client, and
makes determinations with respect to the
proper application of the tax laws to the
information in order to determine the client’s
tax liability. C completes the tax return and
sends the completed return to employee D,
who reviews the return for accuracy before
signing it. Both C and D are tax return
preparers required to apply for a PTIN or
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Revenue Service may prescribe in forms,
instructions, or other appropriate guidance.
Example 4. E is an employee at a firm
which prepares tax returns and claims for
refund of tax for compensation. The firm is
engaged by a corporation to prepare its
Federal income tax return on Form 1120,
‘‘U.S. Corporation Income Tax Return.’’
Among the documentation that the
corporation provides to E in connection with
the preparation of the tax return is
documentation relating to the corporation’s
potential eligibility to claim a recently
enacted tax credit for the taxable year. In
preparing the return, and specifically for
purposes of the new tax credit, E (with the
corporation’s consent) obtains advice from F,
a subject matter expert on this and similar
credits. F advises E as to the corporation’s
entitlement to the credit and provides his
calculation of the amount of the credit. Based
on this advice from F, E prepares the
corporation’s Form 1120 claiming the tax
credit in the amount recommended by F. The
additional credit is one of many tax credits
and deductions claimed on the tax return,
and determining the credit amount does not
constitute preparation of all or substantially
all of the corporation’s tax return under this
paragraph (g). F will not be considered to
have prepared all or substantially all of the
corporation’s tax return, and F is not a tax
return preparer required to apply for a PTIN
or other identifying number as the Internal
Revenue Service may prescribe in forms,
instructions, or other appropriate guidance.
The analysis is the same whether or not the
tax credit is a substantial portion of the
return under § 301.7701–15 of this chapter,
and whether or not F is in the same firm with
E. E is a tax return preparer required to apply
for a PTIN or other identifying number as the
Internal Revenue Service may prescribe in
forms, instructions, or other appropriate
guidance.

(h) The Internal Revenue Service,
through forms, instructions, or other
appropriate guidance, may prescribe
exceptions to the requirements of this
section, including the requirement that
an individual be authorized to practice
before the Internal Revenue Service
before receiving a preparer tax
identification number or other
prescribed identifying number, as
necessary in the interest of effective tax
administration.
(i) Effective/applicability date.
Paragraph (a)(2) of this section is
effective for returns and claims for
refund filed after the date that final
regulations are published in the Federal
Register. Paragraphs (d) through (h) of
this section are effective after the date
that final regulations are published in
the Federal Register.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2010–6867 Filed 3–24–10; 11:15 am]
BILLING CODE 4830–01–P

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ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R09–OAR–2009–0958; FRL–9131–3]

Revisions to the California State
Implementation Plan
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
SUMMARY: EPA is proposing to approve
revisions to the San Joaquin Valley
Unified Air Pollution Control District
(SJVUAPCD) portion of the California
State Implementation Plan (SIP). These
revisions concern volatile organic
compound (VOC) emissions from
refinery vacuum producing systems and
process unit turnaround. We are
approving local rules that regulate these
emission sources under the Clean Air
Act as amended in 1990 (CAA or the
Act). We are taking comments on this
proposal and plan to follow with a final
action.
DATES: Any comments must arrive by
April 26, 2010.
ADDRESSES: Submit comments,
identified by docket number [EPA–R09–
OAR–2009–0958], by one of the
following methods:
1. Federal eRulemaking Portal:
http://www.regulations.gov. Follow the
on-line instructions.
2. E-mail: steckel.andrew@epa.gov.
3. Mail or deliver: Andrew Steckel
(Air–4), U.S. Environmental Protection
Agency Region IX, 75 Hawthorne Street,
San Francisco, CA 94105–3901.
Instructions: All comments will be
included in the public docket without
change and may be made available
online at http://www.regulations.gov,
including any personal information
provided, unless the comment includes
Confidential Business Information (CBI)
or other information whose disclosure is
restricted by statute. Information that
you consider CBI or otherwise protected
should be clearly identified as such and
should not be submitted through
http://www.regulations.gov or e-mail.
Http://www.regulations.gov is an
‘‘anonymous access’’ system, and EPA
will not know your identity or contact
information unless you provide it in the
body of your comment. If you send email directly to EPA, your e-mail
address will be automatically captured
and included as part of the public
comment. If EPA cannot read your
comment due to technical difficulties
and cannot contact you for clarification,
EPA may not be able to consider your
comment.

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