Disclosure of Tax Return Information for Purposes of Quality or Peer Reviews

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Treasury Decisions
Copyright 2007 LexisNexis Group, All Rights Reserved
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 301 and 602
56 FR 66995
Disclosure of Tax Return Information for Purposes of Quality or Peer Reviews; Due to Incapacity or Death of Tax
Return Preparer
T.D. 8383
DATE: December 27, 1991
ACTION: Final regulations.
SUMMARY: This document contains final regulations § 301.7216-2(o) prescribing the circumstances under which tax
return information may be disclosed for purposes of conducting quality or peer reviews. These regulations are necessary
to provide tax return preparers with the guidance needed to comply with changes to the applicable law made by the
Omnibus Budget Reconciliation Act of 1989. This document also contains final regulations § 301.7216-2(p) regarding
disclosures necessitated by a tax return preparer's incapacity or death.
DATES:
EFFECTIVE DATE: These regulations are effective on December 28, 1990.Display Classification Information Display
Classification Information Display Classification Information Display Classification Information Display Classification
Information Display Classification Information Display Classification Information
ADDRESSES:
FOR FURTHER INFORMATION CONTACT: David L. Meyer, Office of the Assistant Chief Counsel (Income Tax
and Accounting), Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224 (Attention:
CC:CORP:T:R), or by telephone at 202-566-5985 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these regulations has been reviewed and approved by the Office of
Management and Budget in accordance with the Paperwork Reduction Act of 1980, (44 U.S.C. 3504(h)), under control
number 1545-1209. The estimated annual burden per recordkeeper varies from 15 minutes to 2 hours, depending on
individual circumstances, with an estimated average of 1 hour.

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T.D. 8383

These estimates are an approximation of the average time expected to be necessary for a collection of information.
They are based on such information as is available to the Internal Revenue Service. Individual recordkeepers may
require greater or less time, depending on their particular circumstances.
Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be
directed to the Internal Revenue Service, Attn: IRS Reports Clearance Officer T:FP, Washington, DC 20224, with
copies to the Office of Management and Budget, Attention: Desk Officer for the Department of Treasury, Office of
Information and Regulatory Affairs, Washington, DC 20503.
Background
These regulations were published in temporary and proposed form in the Federal Register on December 28, 1990
(55 FR 53295, 55 FR 53313). This document adds rules under section 7216(b)(3) of the Internal Revenue Code of 1986
to the Regulations on Procedure and Administration (26 CFR part 301). A number of comments were received in
response to the notice of proposed rulemaking. A public hearing was held on June 3, 1991. After consideration of the
public comments received, the regulations are adopted as revised by this Treasury decision.
Explanation of Provisions
The explanation contained in the preamble to the temporary regulations applies equally to the final regulations
except as described below.
The temporary regulations define a quality or peer review as a review that is undertaken to evaluate, monitor, and
improve the quality and accuracy of a tax return preparer's tax preparation services. Some commentators suggested that
the definition is too broad and might defeat the statutory purpose of maintaining the confidentiality of tax return
information. Other commentators suggested that this definition is too restrictive. They noted that some preparers must
undergo a review of their auditing and accounting services to satisfy government concerns. While these reviews are
only incidentally related to tax return preparation, tax return information sometimes must be disclosed to properly
complete the review. The commentators are concerned that the definition in the temporary regulations will not allow
these reviews to be accomplished.
The final regulations slightly expand the definition of a quality or peer review to include accounting and auditing
services. It is believed that concerns about unauthorized disclosures or uses of tax return information are adequately
addressed by the safeguards contained in the regulations together with the criminal and civil penalties of sections
7216(a) and 6713 of the Code. The safeguards contained in the regulations include: (a) Limiting the scope of reviews to
address only tax return preparation, accounting, and auditing services; (b) requiring that any taxpayer identifying
information be excised from any final evaluative reports that may be accessible to anyone other than the reviewer or the
preparer being reviewed; (c) treating any person who obtains tax return information in the course of a review as a tax
return preparer for purposes of sections 7216(a) and 6713(a) of the Code; and (d) limiting those who may conduct
reviews to persons who are subject to the provisions of Treasury Department Circular 230 ("Circular 230").
Persons permitted to conduct quality or peer reviews under the temporary regulations (i.e. persons subject to
Circular 230) are attorneys, certified public accountants, enrolled agents, and enrolled actuaries who are not under
suspension or disbarment from practice before the Service. Some commentators suggested that the classes of persons
permitted to conduct a quality or peer review be expanded to include non-certified, licensed public accountants
("LPAs") who are neither enrolled agents, nor otherwise eligible to practice before the Service. Unenrolled LPAs are
not subject to the provisions of Circular 230. The Service believes that permitting only persons subject to Circular 230
to conduct a quality or peer review helps to prevent unauthorized disclosures of tax return information. Accordingly, the
final regulations do not adopt this suggestion.
Finally, some commentators suggested that the temporary regulations should be revised to permit franchisees to
disclose tax return information to their franchisor for purposes that are unrelated to a quality or peer review. Along

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similar lines, one commentator suggested that a franchisor's employees who are not eligible to practice before the
Service should nonetheless be permitted to conduct quality or peer reviews. Neither suggestion was adopted. The first
suggestion raised concerns that were not within the scope of these regulations. The second suggestion would not further
the statutory purpose of maintaining the confidentiality of tax return information.
Special Analyses
These rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is
not required. Although this Treasury decision was preceded by a notice of proposed rulemaking that solicited public
comments, the notice was not required by 5 U.S.C. 553 since the regulations proposed in that notice and adopted by this
Treasury decision are interpretive. Therefore, a final Regulatory Impact Analysis is not required by the Regulatory
Flexibility Act (5 U.S.C. chapter 6). Pursuant to section 7805(f) of the Internal Revenue Code, a copy of the temporary
and proposed regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on small business.
Drafting Information
The principal author of these regulations is David L. Meyer, Office of Assistant Chief Counsel, Income Tax and
Accounting, Internal Revenue Service. However, personnel from other offices of the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 301
Administrative practice and procedure, Alimony, Bankruptcy, Child support, Continental shelf, Courts, Crime,
Disclosure of information, Employment taxes, Estate taxes, Excise taxes, Filing requirements, Gift tax, Income taxes,
Investigations, Law enforcement, Oil pollution, Penalties, Pensions, Reporting and recordkeeping requirements,
Statistics, Taxes.
26 CFR Part 602
Reporting and recordkeeping requirements.
Amendments to the Regulations
For the reasons set forth in the preamble, 26 CFR parts 301 and 602 are amended as follows.
PART 301 -- PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority for part 301 is amended by adding the following citation to read:
Authority: Sec. 7805, I.R.C. 1954; 68A Stat. 917; 26 U.S.C. 7805 * * * Section 301.7216-2, paragraphs (o) and (p)
also issued under 26 U.S.C. 7216(b)(3).
Par. 2. The authority citation located at the end of § 301.7216-2 is removed and § 301.7216-2 is amended by adding
paragraphs (o) and (p) to read as follows:
§ 301.7216-2 Disclosure or use without formal consent of taxpayer.
*****
(o) Disclosure or use of information for quality or peer reviews. The provisions of section 7216(a) and §

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301.7216-1 do not apply to any disclosure of tax return information permitted by this paragraph (o) made after
December 28, 1990. Tax return information may be disclosed for the purpose of a quality or peer review to the extent
necessary to accomplish the review. A quality or peer review is a review that is undertaken to evaluate, monitor, and
improve the quality and accuracy of a tax return preparer's tax preparation, accounting, or auditing services. A quality or
peer review may be conducted only by attorneys, certified public accountants, enrolled agents, and enrolled actuaries
who are eligible to practice before the Internal Review Service. See Department of the Treasury Circular 230, 31 CFR
part 10. Disclosure of tax return information is also authorized to persons who provide administrative or support
services to an individual who is conducting a quality or peer review under this paragraph (o), but only to the extent
necessary for the reviewer to conduct the review. Tax return information gathered in conducting a review may be used
only for purposes of a review. No tax return information identifying a taxpayer may be disclosed in any evaluative
reports or recommendations that may be accessible to any person other than the reviewer or the preparer being
reviewed. The preparer being reviewed shall maintain a record of the review including the information reviewed and the
identity of the persons conducting the review. After completion of the review, no documents containing information that
may identify any taxpayer by name or identification number may be retained by a reviewer or by the reviewer's
administrative or support personnel. Any person (including administrative and support personnel) receiving tax return
information in connection with a quality or peer review is a tax return preparer for purposes of sections 7216(a) and
6713(a).
(p) Disclosure of tax return information due to a tax return preparer's incapacity or death. The provisions of
section 7216(a) and § 301.7216-1 do not apply to any disclosure of tax return information permitted by this paragraph
(p) made after December 28, 1990. In the event of incapacity or death of a tax return preparer, disclosure of tax return
information may be made for the purpose of assisting the tax return preparer or his legal representative (or the
representative of a deceased preparer's estate) in operating the business. Any person receiving tax return information
under the provisions of this paragraph (p) is a tax return preparer for purposes of sections 7216(a) and 6713(a).
Par. 3. Section 301.7216-2T is removed.
PART 602 -- OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 4. The authority for part 602 continues to read as follows:
Authority: (26 U.S.C. 7805).
Par. 5. The table of OMB Control Numbers in § 602.101 is amended by revising the entry in the table for "§
301.7216-2T" to read as follows:
"§ 301.7216-2(o) * * * 1545-1209".
Fred T. Goldberg, Jr.,
Commissioner of Internal Revenue.
Approved: December 5, 1991.
Kenneth W. Gideon,
Assistant Secretary of the Treasury.
[FR Doc. 91-30712 Filed 12-26-91; 8:45 am]
BILLING CODE 4830-01-M