Treasury

Department

Circular No. 230

(Rev. 7-2002)

Regulations Governing the

Practice of Attorneys,

Certified Public Accountants,

Enrolled Agents,

Enrolled Actuaries, and 

Appraisers before the

Internal Revenue Service

Department

of the

Treasury

Internal

Revenue

Service

Title 31 Code of Federal Regulations,

Subtitle A, Part 10, revised as of

July 26, 2002
List of Subjects in 31 CFR part 10

Accountants, Administrative practice and procedure, Lawyers, Reporting and

recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 31 CFR part 10 is amended as follows:

Paragraph 1. The table of contents reads as follows:

PART 10 -- PRACTICE BEFORE THE INTERNAL REVENUE SERVICE

Sec.

10.0 Scope of part.

Subpart A--Rules Governing Authority to Practice

10.1 Director of Practice.................................................................................................................4

10.2 Definitions..............................................................................................................................5

10.3 Who may practice...................................................................................................................6

10.4 Eligibility for enrollment........................................................................................................8

10.5 Application for enrollment....................................................................................................11

10.6 Enrollment.............................................................................................................................12

10.7 Representing oneself; participating in rulemaking; limited practice; special appearances;

and return preparation............................................................................................................25

10.8 Customhouse brokers............................................................................................................28

Subpart B--Duties and Restrictions Relating to Practice

 Before the Internal Revenue Service

10.20 Information to be furnished...................................................................................................29

10.21 Knowledge of client=s omission............................................................................................30

10.22 Diligence as to accuracy........................................................................................................30

10.23 Prompt disposition of pending matters..................................................................................31

10.24 Assistance from or to disbarred or suspended persons and former Internal Revenue

Service employees..................................................................................................................31

10.25 Practice by former Government employees, their partners and their associates...................32

10.26 Notaries..................................................................................................................................35

10.27 Fees........................................................................................................................................35

10.28 Return of client=s records.......................................................................................................36

10.29 Conflicting interests..............................................................................................................37

10.30 Solicitation............................................................................................................................38

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10.31 Negotiation of taxpayer checks.............................................................................................40

10.32 Practice of law.......................................................................................................................40

10.33 Tax shelter opinions..........................RESERVED.........See Addendum..............................71

10.34 Standards for advising with respect to tax return positions and for preparing or signing

returns....................................................................................................................................40

Subpart C--Sanctions for Violation of the Regulations

10.50 Sanctions...............................................................................................................................42

10.51 Incompetence and disreputable conduct................................................................................43

10.52 Violation of regulations........................................................................................................46

10.53 Receipt of information concerning practitioner....................................................................46

Subpart D--Rules Applicable to Disciplinary Proceedings

10.60 Institution of proceeding.......................................................................................................47

10.61 Conferences...........................................................................................................................48

10.62 Contents of complaint...........................................................................................................50

10.63 Service of complaint; service and filing of other papers.......................................................50

10.64 Answer; default.....................................................................................................................53

10.65 Supplemental charges...........................................................................................................54

10.66 Reply to answer.....................................................................................................................55

10.67 Proof; variance; amendment of pleadings.............................................................................55

10.68 Motions and requests............................................................................................................55

10.69 Representation; ex parte communication..............................................................................56

10.70 Administrative Law Judge.....................................................................................................57

10.71 Hearings.................................................................................................................................58

10.72 Evidence................................................................................................................................59

10.73 Depositions...........................................................................................................................60

10.74 Transcript..............................................................................................................................61

10.75 Proposed findings and conclusions.......................................................................................61

10.76 Decision of Administrative Law Judge.................................................................................62

10.77 Appeal of decision of Administrative Law Judge.................................................................63

10.78 Decision on appeal................................................................................................................63

10.79 Effect of disbarment, suspension, or censure........................................................................64

10.80 Notice of disbarment, suspension, censure, or disqualification............................................65

10.81 Petition for reinstatement......................................................................................................65

10.82 Expedited suspension upon criminal conviction or loss of license for cause.......................66

Subpart E--General Provisions

10.90 Records..................................................................................................................................69

10.91 Saving clause.........................................................................................................................69

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10.92 Special orders........................................................................................................................69

10.93 Effective date.........................................................................................................................70

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;

'10.0 Scope of part.

This part contains rules governing the recognition of attorneys, certified public

accountants, enrolled agents, and other persons representing taxpayers before the

Internal Revenue Service. Subpart A of this part sets forth rules relating to the authority

to practice 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

sanctions for violating the regulations; subpart D of this part contains the rules

applicable to disciplinary proceedings; and subpart E of this part contains general

provisions including provisions relating to the availability of official records. 

Par. 2. In part 10, subpart A is revised to read as follows:

Subpart A -- Rules Governing Authority to Practice

'10.1 Director of Practice.

(a) Establishment of office. The Office of Director of Practice is established in

the Office of the Secretary of the Treasury. The Director of Practice is appointed by the

Secretary of the Treasury, or his or her designate.

(b) Duties. The Director of Practice acts on applications for enrollment to practice

before the Internal Revenue Service; makes inquiries with respect to matters under his

or her jurisdiction; institutes and provides for the conduct of disciplinary proceedings

relating to attorneys, certified public accountants, enrolled agents, enrolled actuaries

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 Addendum.............................................................................................................................71
and appraisers; and performs other duties as are necessary or appropriate to carry out

his or her functions under this part or as are prescribed by the Secretary of the

Treasury, or his or her delegate.

(c) Acting Director of Practice. The Secretary of the Treasury, or his or her

delegate, will designate an officer or employee of the Treasury Department to act as

Director of Practice in the absence of the Director or a vacancy in that office.

'10.2 Definitions.

As used in this part, except where the text clearly provides otherwise:

(a) Attorney means any person who is a member in good standing of the bar of

the highest court of any State, territory, or possession of the United States, including a

Commonwealth, or the District of Columbia.

(b) Certified public accountant means any person who is duly qualified to

practice as a certified public accountant in any State, territory, or possession of the

United States, including a Commonwealth, or the District of Columbia.

(c) Commissioner refers to the Commissioner of Internal Revenue.

(d) Practice before the Internal Revenue Service comprehends all matters

connected with a presentation to the Internal Revenue Service or any of its officers or

employees relating to a taxpayer=s rights, privileges, or liabilities under laws or

regulations administered by the Internal Revenue Service. Such presentations include,

but are not limited to, preparing and filing documents, corresponding and

communicating with the Internal Revenue Service, and representing a client at

conferences, hearings, and meetings.

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(e) Practitioner means any individual described in paragraphs (a), (b), (c), or (d)

of ' 10.3.

(f) A tax return includes an amended tax return and a claim for refund.

(g) Service means the Internal Revenue Service.

'10.3 Who may practice.

(a) Attorneys. Any attorney who is not currently under suspension or disbarment

from practice before the Internal Revenue Service may practice before the Internal

Revenue Service by filing with the Internal Revenue Service a written declaration that

he or she is currently qualified as an attorney and is authorized to represent the party or

parties on whose behalf he or she acts.

(b) Certified public accountants. Any certified public accountant who is not

currently under suspension or disbarment from practice before the Internal Revenue

Service may practice before the Internal Revenue Service by filing with the Internal

Revenue Service a written declaration that he or she is currently qualified as a certified

public accountant and is authorized to represent the party or parties on whose behalf

he or she acts.

(c) Enrolled agents. Any individual enrolled as an agent pursuant to this part

who is not currently under suspension or disbarment from practice before the Internal

Revenue Service may practice before the Internal Revenue Service.

(d) Enrolled actuaries. (1) Any individual who is enrolled as an actuary by the

Joint Board for the Enrollment of Actuaries pursuant to 29 U.S.C. 1242 who is not

currently under suspension or disbarment from practice before the Internal Revenue

Service may practice before the Internal Revenue Service by filing with the Internal

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Revenue Service a written declaration stating that he or she is currently qualified as an

enrolled actuary and is authorized to represent the party or parties on whose behalf he

or she acts. 

(2) Practice as an enrolled actuary is limited to representation with respect to

issues involving the following statutory provisions in title 26 of the United States Code:

sections 401 (relating to qualification of employee plans), 403(a) (relating to whether an

annuity plan meets the requirements of section 404(a)(2)), 404 (relating to deductibility

of employer contributions), 405 (relating to qualification of bond purchase plans), 412

(relating to funding requirements for certain employee plans), 413 (relating to

application of qualification requirements to collectively bargained plans and to plans

maintained by more than one employer), 414 (relating to definitions and special rules

with respect to the employee plan area), 419 (relating to treatment of funded welfare

benefits), 419A (relating to qualified asset accounts), 420 (relating to transfers of

excess pension assets to retiree health accounts), 4971 (relating to excise taxes

payable as a result of an accumulated funding deficiency under section 412), 4972

(relating to tax on nondeductible contributions to qualified employer plans), 4976

(relating to taxes with respect to funded welfare benefit plans), 4980 (relating to tax on

reversion of qualified plan assets to employer), 6057 (relating to annual registration of

plans), 6058 (relating to information required in connection with certain plans of

deferred compensation), 6059 (relating to periodic report of actuary), 6652(e) (relating

to the failure to file annual registration and other notifications by pension plan), 6652(f)

(relating to the failure to file information required in connection with certain plans of

deferred compensation), 6692 (relating to the failure to file actuarial report), 7805(b)

7
(relating to the extent to which an Internal Revenue Service ruling or determination

letter coming under the statutory provisions listed here will be applied without

retroactive effect); and 29 U.S.C. 1083 (relating to the waiver of funding for nonqualified

plans).

(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 accountants and enrolled agents.

(e) Others. Any individual qualifying under paragraph (d) of '10.5 or '10.7 is

eligible to practice before the Internal Revenue Service to the extent provided in those

sections.

(f) Government officers and employees, and others. An individual, who is an

officer or employee of the executive, legislative, or judicial branch of the United States

Government; an officer or employee of the District of Columbia; a Member of Congress;

or a Resident Commissioner may not practice before the Internal Revenue Service if

such practice violates 18 U.S.C. 203 or 205.

(g) State officers and employees. No officer or employee of any State, or

subdivision of any State, whose duties require him or her to pass upon, investigate, or

deal with tax matters for such State or subdivision, may practice before the Internal

Revenue Service, if such employment may disclose facts or information applicable to

Federal tax matters.

'10.4 Eligibility for enrollment.

(a) Enrollment upon examination. The Director of Practice may grant enrollment

to an applicant who demonstrates special competence in tax matters by written

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examination administered by, or administered under the oversight of, the Director of

Practice and who has not engaged in any conduct that would justify the censure,

suspension, or disbarment of any practitioner under the provisions of this part.

(b) Enrollment of former Internal Revenue Service employees. The Director of

Practice may grant enrollment to an applicant who, by virtue of his or her 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 censure,

suspension, or disbarment of any practitioner under the provisions of this part, under

the following circumstances--

(1) The former employee applies for enrollment to the Director of Practice on a

form supplied by the Director of Practice and supplies the information requested on the

form and such other information regarding the experience and training of the applicant

as may be relevant.

(2) An appropriate office of the Internal Revenue Service, at the request of the

Director of Practice, will provide the Director of Practice with a detailed report of the

nature and rating of the applicant's work while employed by the Internal Revenue

Service and a recommendation whether such employment qualifies the applicant

technically or otherwise for the desired authorization.

(3) Enrollment based on an applicant=s former employment with the Internal

Revenue Service may be of unlimited scope or it may be limited to permit the

presentation of matters only of the particular class or only before the particular unit or

division of the Internal Revenue Service for which the applicant=s former employment

has qualified the applicant.

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(4) Application for enrollment based on an applicant=s former employment with

the Internal Revenue Service must be made within 3 years from the date of separation

from such employment.

(5) An applicant for enrollment who is requesting such enrollment based on his

or her former employment with the Internal Revenue Service must have had a minimum

of 5 years continuous employment with the Internal Revenue Service during which he

or she must have been regularly engaged in applying and interpreting the provisions of

the Internal Revenue Code and the regulations thereunder relating to income, estate,

gift, employment, or excise taxes.

(6) For the purposes of paragraph (b)(5) of this section, an aggregate of 10 or

more years of employment in positions involving the application and interpretation of

the provisions of the Internal Revenue Code, at least 3 of which occurred within the 5

years preceding the date of application, is the equivalent of 5 years continuous

employment.

(c) Natural persons. Enrollment to practice may be granted only to natural

persons.

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'10.5 Application for enrollment.

(a) Form; address. An applicant for enrollment must file an application on Form

23, AApplication for Enrollment to Practice Before the Internal Revenue Service,@

properly executed under oath or affirmation, with the Director of Practice. The address

of the applicant entered on Form 23 will be the address under which a successful

applicant is enrolled and is the address to which the Director of Practice will send

correspondence concerning enrollment. An enrolled agent must send notification of

any change to his or her enrollment address to the Director of Practice, Internal

Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224, or at such

other address specified by the Director of Practice. This notification must include the

enrolled agent=s name, old address, new address, social security number or tax

identification number, signature, and the date. 

(b) Fee. The application for enrollment must be accompanied by a check or

money order in the amount set forth on Form 23, payable to the Internal Revenue

Service, which amount constitutes a fee charged to each applicant for enrollment. This

fee will be retained by the United States whether or not the applicant is granted

enrollment.

(c) Additional information; examination. The Director of Practice, as a condition

to consideration of an application for enrollment, may require the applicant to file

additional information and to submit to any written or oral examination under oath or

otherwise. The Director of Practice will, on written request filed by an applicant, afford

such applicant the opportunity to be heard with respect to his or her application for

enrollment.

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(d) Temporary recognition. On receipt of a properly executed application, the

Director of Practice may grant the applicant temporary recognition to practice pending a

determination as to whether enrollment to practice 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 sufficient to warrant enrollment to practice, or if there is

any information before the Director of Practice indicating that the statements in the

application are untrue or that the applicant would not otherwise qualify for enrollment. 

Issuance of temporary recognition does not constitute enrollment to practice or a finding

of eligibility for enrollment, and the temporary recognition may be withdrawn at any time

by the Director of Practice.

 (e) Appeal from denial of application. The Director of Practice must inform the

applicant as to the reason(s) for any denial of an application for enrollment. The

applicant may, within 30 days after receipt of the notice of denial of enrollment, file a

written appeal of the denial of enrollment with the Secretary of the Treasury or his or

her delegate. A decision on the appeal will be rendered by the Secretary of the

Treasury, or his or her delegate, as soon as practicable. 

'10.6 Enrollment.

(a) Roster. The Director of Practice will maintain rosters of all individuals--

(1) Who have been granted active enrollment to practice before the Internal

Revenue Service;

(2) Whose enrollment has been placed in inactive status for failure to meet the

requirements for renewal of enrollment;

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(3) Whose enrollment has been placed in inactive retirement status;

(4) Who have been censured, suspended, or disbarred from practice before the

Internal Revenue Service;

(5) Whose offer of consent to resign from enrollment to practice before the

Internal Revenue Service has been accepted by the Director of Practice under '10.61;

and

(6) Whose application for enrollment has been denied.

(b) Enrollment card. The Director of Practice will issue an enrollment card

to each individual whose application for enrollment to practice before the Internal

Revenue Service is approved after July 26, 2002. Each enrollment card will be valid for

the period stated on the enrollment card. An individual is not eligible to practice before

the Internal Revenue Service if his or her enrollment card is not valid.

(c) Term of enrollment. Each individual enrolled to practice before the Internal

Revenue Service will be accorded active enrollment status subject to his or her renewal

of enrollment as provided in this part.

(d) Renewal of enrollment. To maintain active enrollment to practice before the

Internal Revenue Service, each individual enrolled is required to have his or her

enrollment renewed. Failure by an individual to receive notification from the Director of

Practice of the renewal requirement will not be justification for the failure to satisfy this

requirement.

(1) All individuals licensed to practice before the Internal Revenue Service who

have a social security number or tax identification number that ends with the numbers

0, 1, 2, or 3, except for those individuals who received their initial enrollment after

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November 1, 2003, must apply for renewal between November 1, 2003, and January

31, 2004. The renewal will be effective April 1, 2004.

(2) All individuals licensed to practice before the Internal Revenue Service who

have a social security number or tax identification number that ends with the numbers

4, 5, or 6, except for those individuals who received their initial enrollment after

November 1, 2004, must apply for renewal between November 1, 2004, and January

31, 2005. The renewal will be effective April 1, 2005.

(3) All individuals licensed to practice before the Internal Revenue Service who

have a social security number or tax identification number that ends with the numbers

7, 8, or 9, except for those individuals who received their initial enrollment after

November 1, 2005, must apply for renewal between November 1, 2005, and January

31, 2006. The renewal will be effective April 1, 2006.

(4) Thereafter, applications for renewal will be required between November 1

and January 31 of every subsequent third year as specified in paragraphs (d)(1),(2) or

(3) of this section according to the last number of the individual=s social security number

or tax identification number. Those individuals who receive initial enrollment after

November 1 and before April 2 of the applicable renewal period will not be required to

renew their enrollment before the first full renewal period following the receipt of their

initial enrollment. 

(5) The Director of Practice will notify the individual of his or her renewal of

enrollment and will issue the individual a card evidencing enrollment.

(6) A reasonable nonrefundable fee may be charged for each application for

renewal of enrollment filed with the Director of Practice.

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(7) Forms required for renewal may be obtained from the Director of Practice,

Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224.

(e) Condition for renewal: Continuing professional education. In order to qualify

for renewal of enrollment, an individual enrolled to practice before the Internal Revenue

Service must certify, on the application for renewal form prescribed by the Director of

Practice, that he or she has satisfied the following continuing professional education

requirements.

(1) For renewed enrollment effective after March 31, 2004. (i) A minimum of 16 

hours of continuing education credit must be completed during each calendar year in

the enrollment term.

(2) For renewed enrollment effective after April 1, 2007. (i) A minimum of 72

hours of continuing education credit must be completed during each three year period

described in paragraph (d)(4) of this section. Each such three year period is known as

an enrollment cycle.

(ii) A minimum of 16 hours of continuing education credit, including 2 hours of

ethics or professional conduct, must be completed in each year of an enrollment cycle.

(iii) An individual who receives initial enrollment during an enrollment cycle must

complete two (2) hours of qualifying continuing education credit for each month enrolled

during the enrollment cycle. Enrollment for any part of a month is considered

enrollment for the entire month.

(f) Qualifying continuing education--(1) General. To qualify for continuing

education credit, a course of learning mustB

(i) Be a qualifying program designed to enhance professional knowledge

15
in Federal taxation or Federal tax related matters, i.e., programs comprised of current

subject matter in Federal taxation or Federal tax related matters, including accounting,

tax preparation software and taxation or ethics; and

(ii) Be conducted by a qualifying sponsor.

(2) Qualifying programs--(i) Formal programs. A formal program qualifies as

continuing education programs if it--

(A) Requires attendance. Additionally, the program sponsor must provide each

attendee with a certificate of attendance; and

(B) Requires that the program be conducted by a qualified instructor, discussion

leader, or speaker, i.e., a person whose background, training, education and

experience is appropriate for instructing or leading a discussion on the subject matter of

the particular program; and

(C) Provides or requires a written outline, textbook, or suitable electronic

educational materials.

(ii) Correspondence or individual study programs (including taped programs). 

Qualifying continuing education programs include correspondence or individual study

programs that are conducted by qualifying sponsors and completed on an individual

basis by the enrolled individual. The allowable credit hours for such programs will be

measured on a basis comparable to the measurement of a seminar or course for credit

in an accredited educational institution. Such programs qualify as continuing education

programs if they--

(A) Require registration of the participants by the sponsor;

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(B) Provide a means for measuring completion by the participants (e.g., a written

examination), including the issuance of a certificate of completion by the sponsor; and

(C) Provide a written outline, textbook, or suitable electronic educational

materials.

(iii) Serving as an instructor, discussion leader or speaker. (A) One hour of

continuing education credit will be awarded for each contact hour completed as an

instructor, discussion leader, or speaker at an educational program that meets the

continuing education requirements of paragraph (f) of this section.

(B) Two hours of continuing education credit will be awarded for actual subject

preparation time for each contact hour completed as an instructor, discussion leader, or

speaker at such programs. It is the responsibility of the individual claiming such credit

to maintain records to verify preparation time.

(C) The maximum credit for instruction and preparation may not exceed 50

percent of the continuing education requirement for an enrollment cycle.

(D) An instructor, discussion leader, or speaker who makes more than one

presentation on the same subject matter during an enrollment cycle, will receive

continuing education credit for only one such presentation for the enrollment cycle.

(iv) Credit for published articles, books, etc. (A) Continuing education credit will

be awarded for publications on Federal taxation or Federal tax related matters,

including accounting, financial management, tax preparation software, and taxation,

provided the content of such publications is current and designed for the enhancement

of the professional knowledge of an individual enrolled to practice before the Internal

Revenue Service.

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(B) The credit allowed will be on the basis of one hour credit for each hour of

preparation time for the material. It is the responsibility of the person claiming the credit

to maintain records to verify preparation time.

(C) The maximum credit for publications may not exceed 25 percent of the

continuing education requirement of any enrollment cycle.

(3) Periodic examination. (i) Individuals may establish eligibility for renewal of

enrollment for any enrollment cycle by--

(A) Achieving a passing score on each part of the Special Enrollment

Examination administered under this part during the three year period prior to renewal;

and

(B) Completing a minimum of 16 hours of qualifying continuing education during

the last year of an enrollment cycle.

(ii) Courses designed to help an applicant prepare for the examination specified

in paragraph (a) of '10.4 are considered basic in nature and are not qualifying

continuing education.

(g) Sponsors. (1) Sponsors are those responsible for presenting programs.

(2) To qualify as a sponsor, a program presenter must--

(i) Be an accredited educational institution;

(ii) Be recognized for continuing education purposes by the licensing body of any

State, territory, or possession of the United States, including a Commonwealth, or the

District of Columbia.

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(iii) Be recognized by the Director of Practice as a professional organization or

society whose programs include offering continuing professional education

opportunities in subject matters within the scope of paragraph (f)(1)(i) of this section; or 

(iv) File a sponsor agreement with the Director of Practice and obtain approval of

the program as a qualified continuing education program.

(3) A qualifying sponsor must ensure the program complies with the following

requirements--

(i) Programs must be developed by individual(s) qualified in the subject matter;

(ii) Program subject matter must be current;

(iii) Instructors, discussion leaders, and speakers must be qualified with respect

to program content;

(iv) Programs must include some means for evaluation of technical content and

presentation;

(v) Certificates of completion must be provided to the participants who

successfully

complete the program; and

(vi) Records must be maintained by the sponsor to verify the participants who

attended and completed the program for a period of three years following completion of

the program. In the case of continuous conferences, conventions, and the like, records

must be maintained to verify completion of the program and attendance by each

participant at each segment of the program.

(4) Professional organizations or societies wishing to be considered as qualified

sponsors must request this status from the Director of Practice and furnish information

19
in support of the request together with any further information deemed necessary by the

Director of Practice.

(5) A professional organization or society recognized as a qualified sponsor by

the Director of Practice will retain its status for one enrollment cycle. The Director of

Practice will publish the names of such sponsors on a periodic basis.

(h) Measurement of continuing education coursework. (1) All continuing

education 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 continuous participation in a program. Credit

is granted only for a full contact hour, i.e., 50 minutes or multiples thereof. For

example, a program lasting more than 50 minutes but less than 100 minutes will count

as one contact hour.

(3) Individual segments at continuous conferences, conventions and the like will

be considered one total program. For example, two 90-minute segments (180 minutes)

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.

(i) Recordkeeping requirements. (1) Each individual applying for renewal must 

retain for a period of three years following the date of renewal of enrollment the

information required with regard to qualifying continuing professional education credit

hours. Such information includes--

(i) The name of the sponsoring organization;

(ii) The location of the program;

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(iii) The title of the program and description of its content;

(iv) Written outlines, course syllibi, textbook, and/or electronic materials provided

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

appropriate; and

(viii) The certificate of completion and/or signed statement of the hours of

attendance obtained from the sponsor.

(2) To receive continuing education credit for service completed as an 

instructor, discussion leader, or speaker, the following information must be maintained

for a period of three years following the date of renewal of enrollment--

(i) The name of the sponsoring organization;

(ii) The location of the program;

(iii) The title of the program and description of its content;

(iv) The dates of the program; and

(v) The credit hours claimed.

(3) To receive continuing education credit for publications, the following

information must be maintained for a period of three years following the date of renewal

of enrollment--

(i) The publisher;

(ii) The title of the publication;

(iii) A copy of the publication; 

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(iv) The date of publication; and

(v) Records that substantiate the hours worked on the publication.

(j) Waivers. (1) Waiver from the continuing education requirements for a given

period may be granted by the Director of Practice for the following reasons--

(i) Health, which prevented compliance with the continuing education

requirements;

(ii) Extended active military duty;

(iii) Absence from the United States for an extended period of time due to

employment or other reasons, provided the individual 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) A request for waiver must be accompanied by appropriate documentation. 

The individual is required to furnish any additional documentation or explanation

deemed necessary by the Director of Practice. Examples of appropriate documentation

could be a medical certificate or military orders.

(3) A request for waiver must be filed no later than the last day of the renewal

application period.

(4) If a request for waiver is not approved, the individual will be placed in inactive

status, so notified by the Director of Practice, and placed on a roster of inactive enrolled

individuals.

(5) If a request for waiver is approved, the individual will be notified and issued a

card evidencing renewal.

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(6) Those who are granted waivers are required to file timely applications for

renewal of enrollment.

(k) Failure to comply. (1) Compliance by an individual with the requirements of

this part is determined by the Director of Practice. An individual who fails to meet the

requirements of eligibility for renewal of enrollment will be notified by the Director of

Practice at his or her enrollment address by first class mail. The notice will state the

basis for the determination of noncompliance and will provide the individual an

opportunity to furnish information in writing relating to the matter within 60 days of the

date of the notice. Such information will be considered by the Director of Practice in

making a final determination as to eligibility for renewal of enrollment.

(2) The Director of Practice may require any individual, by notice sent by first

class mail to his or her enrollment address, to provide copies of any records required to

be maintained under this part. The Director of Practice may disallow any continuing

professional education hours claimed if the individual fails to comply with this

requirement.

(3) An individual who has not filed a timely application for renewal of enrollment,

who has not made a timely response to the notice of noncompliance with the renewal

requirements, or who has not satisfied the requirements of eligibility for renewal will be

placed on a roster of inactive enrolled individuals. During this time, the individual will be

ineligible to practice before the Internal Revenue Service.

(4) Individuals placed in inactive enrollment status and individuals ineligible to

practice before the Internal Revenue Service may not state or imply that they are

enrolled to practice before the Internal Revenue Service, or use the term enrolled

23
agent, the designation "E. A.," or other form of reference to eligibility to practice before

the Internal Revenue Service.

(5) An individual placed in an inactive status may be reinstated to an active

enrollment status by filing an application for renewal of enrollment and providing

evidence of the completion of all required continuing professional education hours for

the enrollment cycle. Continuing education credit under this paragraph (k)(5) may not

be used to satisfy the requirements of the enrollment cycle in which the individual has

been placed back on the active roster.

(6) An individual placed in an inactive status must file an application for renewal

of enrollment and satisfy the requirements for renewal as set forth in this section within

three years of being placed in an inactive status. The name of such individual

otherwise will be removed from the inactive enrollment roster and his or her enrollment

will terminate. Eligibility for enrollment must then be reestablished by the individual as

provided in this section.

(7) Inactive enrollment status is not available to an individual who is the subject

of a disciplinary matter in the Office of Director of Practice.

(l) Inactive retirement status. An individual who no longer practices before the

Internal Revenue Service may request being placed in an inactive status at any time

and such individual will be placed in an inactive retirement status. The individual will be

ineligible to practice before the Internal Revenue Service. Such individual must file a

timely application for renewal of enrollment at each applicable renewal or enrollment

period as provided in this section. An individual who is placed in an inactive retirement

status may be reinstated to an active enrollment status by filing an application for

24
renewal of enrollment and providing evidence of the completion of the required

continuing professional education hours for the enrollment cycle. Inactive retirement

status is not available to an individual who is subject of a disciplinary matter in the

Office of Director of 

Practice.

(m) Renewal while under suspension or disbarment. An individual who is

ineligible to practice before the Internal Revenue Service by virtue of disciplinary action

is required to be in conformance with the requirements for renewal of enrollment before

his or her eligibility is restored.

(n) Verification. The Director of Practice may review the continuing education

records of an enrolled individual and/or qualified sponsor in a manner deemed

appropriate to determine compliance with the requirements and standards for renewal

of enrollment as provided in paragraph (f) of this section.

(o) Enrolled Actuaries. The enrollment and the renewal of enrollment of

actuaries authorized to practice under paragraph (d) of '10.3 are governed by the

regulations of the Joint Board for the Enrollment of Actuaries at 20 CFR 901.1 through

901.71.

(Approved by the Office of Management and Budget under Control No. 1545-0946 and

1545-1726)

'10.7 Representing oneself; participating in rulemaking; limited practice; special

appearances; and return preparation.

(a) Representing oneself. Individuals may appear on their own behalf before the

Internal Revenue Service provided they present satisfactory identification.

25
(b) Participating in rulemaking. Individuals may participate in rulemaking as

provided by the Administrative Procedure Act. See 5 U.S.C. 553.

(c) Limited practice--(1) In general. Subject to the limitations in paragraph (c)(2)

of this section, an individual who is not a practitioner may represent a taxpayer before

the Internal Revenue Service in the circumstances described in this paragraph (c)(1),

even if the taxpayer is not present, provided the individual presents satisfactory

identification and proof of his or her authority to represent the taxpayer. The

circumstances described in this paragraph (c)(1) are as follows:

(i) An individual may represent a member of his or her immediate family.

(ii) A regular full-time employee of an individual employer may represent

the employer.

(iii) A general partner or a regular full-time employee of a partnership may

represent the partnership.

(iv) A bona fide officer or a regular full-time employee of a corporation (including

a parent, subsidiary, or other affiliated corporation), association, or organized group

may represent the corporation, association, or organized group.

(v) A regular full-time employee of a trust, receivership, guardianship, or estate

may represent the trust, receivership, guardianship, or estate. 

(vi) An officer or a regular employee of a governmental unit, agency, or authority

may represent the governmental unit, agency, or authority in the course of his or her

official duties.

26
(vii) An individual may represent any individual or entity, who is outside the

United States, before personnel of the Internal Revenue Service when such

representation takes place outside the United States.

(viii) An individual who prepares and signs a taxpayer's tax return as the

preparer, or who prepares a tax return but is not required (by the instructions to the tax

return or regulations) to sign the tax return, may represent the taxpayer before revenue

agents, customer service representatives or similar officers and employees of the

Internal Revenue Service during an examination of the taxable year or period covered

by that tax return, but, unless otherwise prescribed by regulation or notice, this right

does not permit such individual to represent the taxpayer, regardless of the

circumstances requiring representation, before appeals officers, revenue officers,

Counsel or similar officers or employees of the Internal Revenue Service or the

Department of Treasury.

(2) Limitations. (i) An individual who is under suspension or disbarment from

practice before the Internal Revenue Service may not engage in limited practice before

the Internal Revenue Service under paragraph (c)(1) of this section.

(ii) The Director, after notice and opportunity for a conference, may deny

eligibility to engage in limited practice before the Internal Revenue Service under

paragraph (c)(1) of this section to any individual who has engaged in conduct that

would justify censuring, suspending, or disbarring a practitioner from practice before the

Internal Revenue Service.

(iii) An individual who represents a taxpayer under the authority of paragraph

(c)(1) of this section is subject, to the extent of his or her authority, to such rules of

27
general applicability regarding standards of conduct and other matters as the Director of

Practice prescribes.

(d) Special appearances. The Director of Practice may, subject to such

conditions as he or she deems appropriate, authorize an individual who is not otherwise

eligible to practice before the Internal Revenue Service to represent another person in a

particular matter.

(e) Preparing tax returns and furnishing information. Any individual may prepare

a tax return, appear as a witness for the taxpayer before the Internal Revenue Service,

or furnish information at the request of the Internal Revenue Service or any of its

officers or employees.

(f) Fiduciaries. For purposes of this part, a fiduciary (i.e., a trustee, receiver,

guardian, personal representative, administrator, or executor) is considered to be the

taxpayer and not a representative of the taxpayer. 

'10.8 Customhouse brokers.

Nothing contained in the regulations in this part will affect or limit the right of a

customhouse broker, licensed as such by the Commissioner of Customs in accordance

with the regulations prescribed therefor, in any customs district in which he or she is so

licensed, at a relevant local office of the Internal Revenue Service or before the

National Office of the Internal Revenue Service, to act as a representative in respect to

any matters relating specifically to the importation or exportation of merchandise under

the customs or internal revenue laws, for any person for whom he or she has acted as

a customhouse broker. 

28
Par. 3. In part 10, subpart B is amended by revising ''10.20 through 10.32 and

revising '10.34.

Subpart B -- Duties and Restrictions Relating to Practice Before the Internal

Revenue Service

'10.20 Information to be furnished. 

(a) To the Internal Revenue Service. (1) A practitioner must, on a proper and

lawful request by a duly authorized officer or employee of the Internal Revenue Service,

promptly submit records or information in any matter before the Internal Revenue

Service unless the practitioner believes in good faith and on reasonable grounds that

the records or information are privileged. 

(2) Where the requested records or information are not in the possession of, or

subject to the control of, the practitioner or the practitioner=s client, the practitioner must

promptly notify the requesting Internal Revenue Service officer or employee and the

practitioner must provide any information that the practitioner has regarding the identity

of any person who the practitioner believes may have possession or control of the

requested records or information. The practitioner must make reasonable inquiry of his

or her client regarding the identity of any person who may have possession or control of

the requested records or information, but the practitioner is not required to make inquiry

of any other person or independently verify any information provided by the

practitioner=s client regarding the identity of such persons. 

(b) To the Director of Practice. When a proper and lawful request is made by the

Director of Practice, a practitioner must provide the Director of Practice with any

information the practitioner has concerning an inquiry by the Director of Practice into an

29
alleged violation of the regulations in this part by any person, and to testify regarding

this information in any proceeding instituted under this part, unless the practitioner

believes in good faith and on reasonable grounds that the information is privileged. 

(c) Interference with a proper and lawful request for records or information. A

practitioner may not interfere, or attempt to interfere, with any proper and lawful effort

by the Internal Revenue Service, its officers or employees, or the Director of Practice,

or his or her employees, to obtain any record or information unless the practitioner

believes in good faith and on reasonable grounds that the record or information is

privileged. 

'10.21 Knowledge of client's omission.

A practitioner who, having been retained by a client with respect to a matter

administered by the Internal Revenue Service, knows that the client has not complied

with the revenue laws of the United States or has made an error in or omission from

any return, document, affidavit, or other paper which the client submitted or executed

under the revenue laws of the United States, must advise the client promptly of the fact

of such noncompliance, error, or omission. The practitioner must advise the client of

the consequences as provided under the Code and regulations of such noncompliance,

error, or omission. 

'10.22 Diligence as to accuracy.

(a) In general. A practitioner must exercise due diligence--

(1) In preparing or assisting in the preparation of, approving, and filing tax

returns, documents, affidavits, and other papers relating to Internal Revenue Service

matters;

30
(2) In determining the correctness of oral or written representations made by the

practitioner to the Department of the Treasury; and

(3) In determining the correctness of oral or written representations made by the

practitioner to clients with reference to any matter administered by the Internal Revenue

Service.

(b) Reliance on others. Except as provided in ''10.33 and 10.34, a practitioner

will be presumed to have exercised due diligence for purposes of this section if the

practitioner relies on the work product of another person and the practitioner used

reasonable care in engaging, supervising, training, and evaluating the person, taking

proper account of the nature of the relationship between the practitioner and the

person.

'10.23 Prompt disposition of pending matters.

A practitioner may not unreasonably delay the prompt disposition of any matter

before the Internal Revenue Service.

'10.24 Assistance from or to disbarred or suspended persons and former Internal

Revenue Service employees.

A practitioner may not, knowingly and directly or indirectly:

(a) Accept assistance from or assist any person who is under disbarment or

suspension from practice before the Internal Revenue Service if the assistance relates

to a matter or matters constituting practice before the Internal Revenue Service.

(b) Accept assistance from any former government employee where the

provisions of '10.25 or any Federal law would be violated.

31
'10.25 Practice by former Government employees, their partners and their associates.

(a) Definitions. For purposes of this section--

(1) Assist means to act in such a way as to advise, furnish information to, or

otherwise aid another person, directly or indirectly.

(2) Government employee is an officer or employee of the United States or any

agency of the United States, including a special government employee as defined in 18

U.S.C. 202(a), or of the District of Columbia, or of any State, or a member of Congress

or of any State legislature. 

(3) Member of a firm is a sole practitioner or an employee or associate thereof,

or a partner, stockholder, associate, affiliate or employee of a partnership, joint venture,

corporation, professional association or other affiliation of two or more practitioners who

represent nongovernmental parties.

(4) Practitioner includes any individual described in paragraph (f) of '10.2.

(5) Official responsibility means the direct administrative or operating authority,

whether intermediate or final, and either exercisable alone or with others, and either

personally or through subordinates, to approve, disapprove, or otherwise direct

Government action, with or without knowledge of the action. 

(6) Participate or participation means substantial involvement as a Government

employee by making decisions, or preparing or reviewing documents with or without the

right to exercise a judgment of approval or disapproval, or participating in conferences

or investigations, or rendering advice of a substantial nature. 

(7) Rule includes Treasury Regulations, whether issued or under preparation for

issuance as Notices of Proposed Rule Making or as Treasury Decisions; revenue

32
rulings; and revenue procedures published in the Internal Revenue Bulletin. Rule does

not include a transaction as defined in paragraph (a)(8) of this section.

(8) Transaction means any decision, determination, finding, letter ruling,

technical advice, Chief Counsel advice, or contract or the approval or disapproval

thereof, relating to a particular factual situation or situations involving a specific party or

parties whose rights, privileges, or liabilities under laws or regulations administered by

the Internal Revenue Service, or other legal rights, are determined or immediately

affected therein and to which the United States is a party or in which it has a direct and

substantial interest, whether or not the same taxable periods are involved. Transaction

does not include rule as defined in paragraph (a)(7) of this section.

(b) General rules. (1) No former Government employee may, subsequent to his

or her Government employment, represent anyone in any matter administered by the

Internal Revenue Service if the representation would violate 18 U.S.C. 207 or any other

laws of the United States.

(2) No former Government employee who participated in a transaction may,

subsequent to his or her Government employment, represent or knowingly assist, in

that transaction, any person who is or was a specific party to that transaction.

(3) A former Government employee who within a period of one year prior to the

termination of Government employment had official responsibility for a transaction may

not, within two years after his or her Government employment is ended, represent or

knowingly assist in that transaction any person who is or was a specific party to that

transaction.

33
(4) No former Government employee may, within one year after his or her

Government employment is ended, appear before any employee of the Treasury

Department in connection with the publication, withdrawal, amendment, modification, or

interpretation of a rule in the development of which the former Government employee

participated or for which, within a period of one year prior to the termination of his or her

Government employment, he or she had official responsibility. This paragraph (b)(4)

does not, however, preclude such former employee from appearing on his or her own

behalf or from representing a taxpayer before the Internal Revenue Service in

connection with a transaction involving the application or interpretation of such a rule

with respect to that transaction, provided that such former employee does not utilize or

disclose any confidential information acquired by the former employee in the

development of the rule.

(c) Firm representation. (1) No member of a firm of which a former Government

employee is a member may represent or knowingly assist a person who was or is a

specific party in any transaction with respect to which the restrictions of paragraph

(b)(2) or (3) of this section apply to the former Government employee, in that

transaction, unless the firm isolates the former Government employee in such a way to

ensure that the former Government employee cannot assist in the representation.

(2) When isolation of a former Government employee is required under

paragraph (c)(1) of this section, a statement affirming the fact of such isolation must be

executed under oath by the former Government 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 transaction(s) requiring isolation and it must be

34
filed with the Director of Practice (and at such other place(s) directed by the Director of

Practice) and in such other place and in the manner prescribed by rule or regulation. 

(d) Pending representation. Practice by former Government employees, their

partners and associates with respect to representation in specific matters where actual

representation commenced before July 26, 2002, is governed by the regulations set

forth at 31 CFR Part 10 revised as of July 1, 2002. The burden of showing that

representation commenced before July 26, 2002, lies with the former Government

employees, and their partners and associates.

'10.26 Notaries.

A practitioner may not take acknowledgments, administer oaths, certify papers,

or perform any official act as a notary public with respect to any matter administered by

the Internal Revenue Service and for which he or she is employed as counsel, attorney,

or agent, or in which he or she may be in any way interested. 

'10.27 Fees.

(a) Generally. A practitioner may not charge an unconscionable fee for

representing a client in a matter before the Internal Revenue Service.

(b) Contingent fees. (1) For purposes of this section, a contingent fee is any fee

that is based, in whole or in part, on whether or not a position taken on a tax return or

other filing avoids challenge by the Internal Revenue Service or is sustained either by

the Internal Revenue Service or in litigation. A contingent fee includes any fee

arrangement in which the practitioner will reimburse the client for all or a portion of the

client=s fee in the event that a position taken on a tax return or other filing is challenged

by the Internal Revenue Service or is not sustained, whether pursuant to an indemnity

35
agreement, a guarantee, rescission rights, or any other arrangement with a similar

effect.

(2) A practitioner may not charge a contingent fee for preparing an original tax

return or for any advice rendered in connection with a position taken or to be taken on

an original tax return. 

(3) A contingent fee may be charged for preparation of or advice in connection

with an amended tax return or a claim for refund (other than a claim for refund made on

an original tax return), but only if the practitioner reasonably anticipates at the time the

fee arrangement is entered into that the amended tax return or refund claim will receive

substantive review by the Internal Revenue Service.

'10.28 Return of client=s records.

(a) In general, a practitioner must, at the request of a client, promptly return any

and all records of the client that are necessary for the client to comply with his or her

Federal tax obligations. The practitioner may retain copies of the records returned to a

client. The existence of a dispute over fees generally does not relieve the practitioner

of his or her responsibility under this section. Nevertheless, if applicable state law

allows or permits the retention of a client=s records by a practitioner in the case of a

dispute over fees for services rendered, the practitioner need only return those records

that must be attached to the taxpayer=s return. The practitioner, however, must provide

the client with reasonable access to review and copy any additional records of the client

retained by the practitioner under state law that are necessary for the client to comply

with his or her Federal tax obligations.

36
(b) For purposes of this section--Records of the client include all documents or

written or electronic materials provided to the practitioner, or obtained by the

practitioner in the course of the practitioner=s representation of the client, that

preexisted the retention of the practitioner by the client. The term also includes

materials that were prepared by the client or a third party (not including an employee or

agent of the practitioner) at any time and provided to the practitioner with respect to the

subject matter of the representation. The term also includes any return, claim for

refund, schedule, affidavit, appraisal or any other document prepared by the

practitioner, or his or her employee or agent, that was presented to the client with

respect to a prior representation if such document is necessary for the taxpayer to

comply with his or her current Federal tax obligations. The term does not include any

return, claim for refund, schedule, affidavit, appraisal or any other document prepared

by the practitioner or the practitioner=s firm, employees or agents if the practitioner is

withholding such document pending the client=s performance of its contractual

obligation to pay fees with respect to such document.

'10.29 Conflicting interests. 

(a) Except as provided by paragraph (b) of this section, a practitioner shall not

represent a client in his or her practice before the Internal Revenue Service if the

representation involves a conflict of interest. A conflict of interest exists if:

(1) The representation of one client will be directly adverse to another client; or

(2) There is a significant risk that the representation of one or more clients will be

materially limited by the practitioner=s responsibilities to another client, a former client or

a third person or by a personal interest of the practitioner.

37
(b) Notwithstanding the existence of a conflict of interest under paragraph (a) of

this section, the practitioner may represent a client if:

(1) The practitioner reasonably believes that the practitioner will be able to

provide competent and diligent representation to each affected client;

(2) The representation is not prohibited by law;

(3) Each affected client gives informed consent, confirmed in writing. 

(c) Copies of the written consents must be retained by the practitioner for at least

36 months from the date of the conclusion of the representation of the affected clients

and the written consents must be provided to any officer or employee of the Internal

Revenue Service on request. 

(Approved by the Office of Management and Budget under Control No. 1545-1726)

'10.30 Solicitation.

(a) Advertising and solicitation restrictions. (1) A practitioner may not, with

respect to any Internal Revenue Service matter, 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, in describing their professional designation, may not utilize the term of

art "certified" or imply an employer/employee relationship with the Internal Revenue

Service. Examples of acceptable descriptions are "enrolled to represent taxpayers

before the Internal Revenue Service," "enrolled to practice before the Internal Revenue

Service,@ and "admitted to practice before the Internal Revenue Service." 

(2) A practitioner may not make, directly or indirectly, an uninvited written or oral

solicitation of employment in matters related to the Internal Revenue Service if the

38
solicitation violates Federal or State law or other applicable rule, e.g., attorneys are

precluded from making a solicitation that is prohibited by conduct rules applicable to all

attorneys in their State(s) of licensure. Any lawful solicitation made by or on behalf of a

practitioner eligible to practice before the Internal Revenue Service must, nevertheless,

clearly identify the solicitation as such and, if applicable, identify the source of the

information used in choosing the recipient. 

(b) Fee information. (1)(i) A practitioner may publish the availability of a written

schedule of fees and disseminate the following fee information--

(A) Fixed fees for specific routine services.

(B) Hourly rates.

(C) Range of fees for particular services.

(D) Fee charged for an initial consultation.

(ii) Any statement of fee information concerning matters in which costs may be

incurred must include a statement disclosing whether clients will be responsible for

such costs.

(2) A practitioner may charge no more than the rate(s) published under

paragraph (b)(1) of this section for at least 30 calendar days after the last date on which

the schedule of fees was published.

(c) Communication of fee information. Fee information may be communicated in

professional lists, telephone directories, print media, mailings, electronic mail, facsimile,

hand delivered flyers, radio, television, and any other method. The method chosen,

however, must not cause the communication to become untruthful, deceptive, or

otherwise in violation of this part. A practitioner may not persist in attempting to contact

39
a prospective client if the prospective client has made it known to the practitioner that

he or she does not desire to be solicited. In the case of radio and television

broadcasting, the broadcast must be recorded and the practitioner must retain a

recording of the actual transmission. In the case of direct mail and e-commerce

communications, the practitioner must retain a copy of the actual communication, along

with a list or other description of persons to whom the communication was mailed or

otherwise distributed. The copy must be retained by the practitioner for a period of at

least 36 months from the date of the last transmission or use.

(d) Improper associations. A practitioner may not, in matters related to the

Internal Revenue Service, assist, or accept assistance from, any person or entity who,

to the knowledge of the practitioner, obtains clients or otherwise practices in a manner

forbidden under this section.

(Approved by the Office of Management and Budget under Control No. 1545-1726)

'10.31 Negotiation of taxpayer checks. 

A practitioner who prepares tax returns may not endorse or otherwise negotiate

any check issued to a client by the government in respect of a Federal tax liability.

'10.32 Practice of law.

Nothing in the regulations in this part may be construed as authorizing persons

not members of the bar to practice law.

* * * * *

'10.34 Standards for advising with respect to tax return positions and for preparing or

signing returns.

40
(a) Realistic possibility standard. A practitioner may not sign a tax return as a

preparer if the practitioner determines that the tax return contains a position that does

not have a realistic possibility of being sustained on its merits (the realistic possibility

standard) unless the position is not frivolous and is adequately disclosed to the Internal

Revenue Service. A practitioner may not advise a client to take a position on a tax

return, or prepare the portion of a tax return on which a position is taken, unless--

(1) The practitioner determines that the position satisfies the realistic possibility

standard; or

(2) The position is not frivolous and the practitioner advises the client of any

opportunity to avoid the accuracy-related penalty in section 6662 of the Internal

Revenue Code by adequately disclosing the position and of the requirements for

adequate disclosure.

(b) Advising clients on potential penalties. A practitioner advising a client to take

a position on a tax return, or preparing or signing a tax return as a preparer, must

inform the client of the penalties reasonably likely to apply to the client with respect to

the position advised, prepared, or reported. The practitioner also must inform the client

of any opportunity to avoid any such penalty by disclosure, if relevant, and of the

requirements for adequate disclosure. This paragraph (b) applies even if the

practitioner is not subject to a penalty with respect to the position.

(c) Relying on information furnished by clients. A practitioner advising a client to

take a position on a tax return, or preparing or signing a tax return as a preparer,

generally may rely in good faith without verification upon information furnished by the

client. The practitioner may not, however, ignore the implications of information

41
furnished to, or actually known by, the practitioner, and must make reasonable inquiries

if the information as furnished appears to be incorrect, inconsistent with an important

fact or another factual assumption, or incomplete.

(d) Definitions. For purposes of this section--

(1) Realistic possibility. A position is considered to have a realistic possibility of

being sustained on its merits if a reasonable and well informed analysis of the law and

the facts by a person knowledgeable in the tax law would lead such a person to

conclude that the position has approximately a one in three, or greater, likelihood of

being sustained on its merits. The authorities described in 26 CFR 1.6662-4(d)(3)(iii), or

any successor provision, of the substantial understatement penalty regulations may be

taken into account for purposes of this analysis. The possibility that a tax return will not

be audited, that an issue will not be raised on audit, or that an issue will be settled may

not be taken into account.

(2) Frivolous. A position is frivolous if it is patently improper.

Par. 4. In part 10, subparts C, D, and E are revised to read as follows:

Subpart C -- Sanctions for Violation of the Regulations

'10.50 Sanctions. 

(a) Authority to censure, suspend, or disbar. The Secretary of the Treasury, or

his or her delegate, after notice and an opportunity for a proceeding, may censure,

suspend or disbar any practitioner from practice before the Internal Revenue Service if

the practitioner is shown to be incompetent or disreputable, fails to comply with any

regulation in this part, or with intent to defraud, willfully and knowingly misleads or

threatens a client or prospective client. Censure is a public reprimand. 

42
(b) Authority to disqualify. The Secretary of the Treasury, or his or her delegate,

after due notice and opportunity for hearing, may disqualify any appraiser with respect

to whom a penalty has been assessed under section 6701(a) of the Internal Revenue

Code.

(1) If any appraiser is disqualified pursuant to this subpart C, such appraiser is

barred from presenting evidence or testimony in any administrative proceeding before

the Department of Treasury or the Internal Revenue Service, unless and until

authorized to do so by the Director of Practice pursuant to '10.81, regardless of

whether such evidence or testimony would pertain to an appraisal made prior to or after

such date. 

(2) Any appraisal made by a disqualified appraiser after the effective date of

disqualification will not have any probative effect in any administrative proceeding

before the Department of the Treasury or the Internal Revenue Service. An appraisal

otherwise barred from admission into evidence pursuant to this section may be

admitted into evidence solely for the purpose of determining the taxpayer's reliance in

good faith on such appraisal.

'10.51 Incompetence and disreputable conduct.

Incompetence and disreputable conduct for which a practitioner may be 

censured, suspended or disbarred from practice before the Internal Revenue Service

includes, but is not limited to-- 

(a) Conviction of any criminal offense under the revenue laws of the United

States;

(b) Conviction of any criminal offense involving dishonesty or breach of trust; 

43
(c) Conviction of any felony under Federal or State law for which the conduct

involved renders the practitioner unfit to practice before the Internal Revenue Service; 

(d) Giving false or misleading information, or participating in any way in the giving

of false or misleading information to the Department of the Treasury or any officer or

employee thereof, or to any tribunal authorized to pass upon Federal tax matters, in

connection with any matter pending or likely to be pending before them, knowing such

information to be false or misleading. Facts or other matters contained in testimony,

Federal tax returns, financial statements, applications for enrollment, affidavits,

declarations, or any other document or statement, written or oral, are included in the

term information.

(e) Solicitation of employment as prohibited under '10.30, the use of false or

misleading representations with intent to deceive a client or prospective client in order

to procure employment, or intimating that the practitioner is able improperly to obtain

special consideration or action from the Internal Revenue Service or officer or

employee thereof.

(f) Willfully failing to make a Federal tax return in violation of the revenue laws of

the United States, willfully evading, attempting to evade, or participating in any way in

evading or attempting to evade any assessment or payment of any Federal tax, or

knowingly counseling or suggesting to a client or prospective client an illegal plan to

evade Federal taxes or payment thereof.

(g) Misappropriation of, or failure properly and promptly to remit funds received

from a client for the purpose of payment of taxes or other obligations due the United

States.

44
(h) Directly or indirectly attempting to influence, or offering or agreeing to attempt

to influence, the official action of any officer or employee of the Internal Revenue

Service by the use of threats, false accusations, duress or coercion, by the offer of any

special inducement or promise of advantage or by the bestowing of any gift, favor or

thing of value.

(i) Disbarment or suspension from practice as an attorney, certified public

accountant, public accountant, or actuary by any duly constituted authority of any State,

 territory, possession of the United States, including a Commonwealth, or the District of

Columbia, any Federal court of record or any Federal agency, body or board.

(j) Knowingly aiding and abetting another person to practice before the Internal

Revenue Service during a period of suspension, disbarment, or ineligibility of such other

person. 

(k) Contemptuous conduct in connection with practice before the Internal

Revenue Service, including the use of abusive language, making false accusations and

statements, knowing them to be false, or circulating or publishing malicious or libelous

matter.

(l) Giving a false opinion, knowingly, recklessly, or through gross incompetence,

including an opinion which is intentionally or recklessly misleading, or engaging in a

pattern of providing incompetent opinions on questions arising under the Federal tax

laws. False opinions described in this paragraph (l) include those which reflect or result

from a knowing misstatement of fact or law, from an assertion of a position known to be

unwarranted under existing law, from counseling or assisting in conduct known to be

illegal or fraudulent, from concealing matters required by law to be revealed, or from

45
consciously disregarding information indicating that material facts expressed in the tax

opinion or offering material are false or misleading. For purposes of this paragraph (l),

reckless conduct is a highly unreasonable omission or misrepresentation involving an

extreme departure from the standards of ordinary care that a practitioner should

observe under the circumstances. A pattern of conduct is a factor that will be taken into

account in determining whether a practitioner acted knowingly, recklessly, or through

gross incompetence. Gross incompetence includes conduct that reflects gross

indifference, preparation which is grossly inadequate under the circumstances, and a

consistent failure to perform obligations to the client.

'10.52 Violation of regulations.

A practitioner may be censured, suspended or disbarred from practice before the

Internal Revenue Service for any of the following:

(a) Willfully violating any of the regulations contained in this part.

(b) Recklessly or through gross incompetence (within the meaning of '10.51(l))

violating '10.33 or 10.34.

'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 that a practitioner has

violated any provision of this part, the officer or employee will promptly make a written

report to the Director of Practice of the suspected violation. The report will explain the

facts and reasons upon which the officer=s or employee=s belief rests. 

(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

46
make an oral or written report of the alleged violation to the Director of Practice or any

officer or employee of the Internal Revenue Service. If the report is made to an officer

or employee of the Internal Revenue Service, the officer or employee will make a

written report of the suspected violation to the Director of Practice. 

(c) Destruction of report. No report made under paragraph (a) or (b) of this

section shall be maintained by the Director of Practice unless retention of such record is

permissible under the applicable records control schedule as approved by the National

Archives and Records Administration and designated in the Internal Revenue Manual. 

The Director of Practice must destroy such reports 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 precludes the Director of

Practice=s use of a copy of such report in a proceeding under subpart D of this part. 

Subpart D -- Rules Applicable to Disciplinary Proceedings

'10.60 Institution of proceeding. 

(a) Whenever the Director of Practice determines that a practitioner violated any

provision of the laws or regulations in this part, the Director of Practice may reprimand

the practitioner or, in accordance with '10.62, institute a proceeding for censure,

suspension, or disbarment of the practitioner. A proceeding for censure, suspension, or

disbarment of a practitioner is instituted by the filing of a complaint, the contents of

which are more fully described in '10.62. 

47
(b) Whenever the Director of Practice is advised or becomes aware that a

penalty has been assessed against an appraiser under section 6701(a) of the Internal

Revenue Code, the Director of Practice may reprimand the appraiser or, in accordance

with '10.62, institute a proceeding for disqualification of the appraiser. A proceeding for

disqualification of an appraiser is instituted by the filing of a complaint, the contents of

which are more fully described in '10.62. 

(c) Except as provided in '10.82, a proceeding will not be instituted under this

section unless the proposed respondent previously has been advised in writing of the

law, facts and conduct warranting such action and has been accorded an opportunity to

dispute facts, assert additional facts, and make arguments (including an explanation or

description of mitigating circumstances). 

'10.61 Conferences. 

(a) In general. The Director of Practice may confer with a practitioner or an

appraiser concerning allegations of misconduct irrespective of whether a proceeding for

censure, suspension, disbarment, or disqualification has been instituted against the

practitioner or appraiser. If the conference results in a stipulation in connection with an

ongoing proceeding in which the practitioner or appraiser is the respondent, the

stipulation may be entered in the record by either party to the proceeding. 

(b) Resignation or voluntary censure, suspension or disbarment. In lieu of a

proceeding being instituted or continued under paragraph (a) of '10.60, a practitioner

may offer his or her consent to the issuance of a censure, suspension or disbarment,

or, if the practitioner is an enrolled agent, may offer to resign. The Director of Practice

may, in his or her discretion, accept or decline the offered censure, suspension,

48
disbarment, or offer of resignation by an enrolled agent, in accordance with the consent

offered. In any declination, the Director of Practice may state that he or she would

accept an offer of censure, suspension, or disbarment, or, if the practitioner is an

enrolled agent, offer of resignation, containing different terms; the Director of Practice

may, in his or her discretion, accept or reject a revised offer of censure, suspension,

disbarment, or offer of resignation by an enrolled agent, submitted in response to the

declination or may counteroffer and act upon any accepted counteroffer.

(c) Voluntary disqualification. In lieu of a proceeding being instituted or

continued under paragraph (b) of '10.60, an appraiser may offer his or her consent to

disqualification. The Director of Practice may, in his or her discretion, accept or decline

the offered disqualification, in accordance with the consent offered. In any declination,

the Director of Practice may state that he or she would accept an offer of

disqualification containing different terms; the Director of Practice may, in his or her

discretion, accept or reject a revised offer of censure, suspension or disbarment

submitted in response to the declination or may counteroffer and act upon any

accepted counteroffer.

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'10.62 Contents of complaint.

(a) Charges. A complaint must name the respondent, provide a clear and

concise description of the facts and law that constitute the basis for the proceeding, and

be signed by the Director of Practice or a person representing the Director of Practice

under '10.69(a)(1). A complaint is sufficient if it fairly informs the respondent of the

charges brought so that he or she is able to prepare a defense. In the case of a

complaint filed against an appraiser, the complaint is sufficient if it refers to a penalty

imposed previously on the respondent under section 6701(a) of the Internal Revenue

Code.

(b) Specification of sanction. The complaint must specify the sanction sought by

the Director of Practice against the practitioner or appraiser. If the sanction sought is a

suspension, the duration of the suspension sought must be specified.

(c) Demand for answer. The Director of Practice must, in the complaint or in a

separate paper attached to the complaint, notify the respondent of the time for

answering the complaint, the time for which may not be less than15 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 person representing the

Director of Practice 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.

'10.63 Service of complaint; service and filing of other papers.

(a) Service of complaint. 

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(1) In general. The complaint or a copy of the complaint must be served on the

respondent by any manner described in paragraphs (a) (2) or (3) of this section. 

(2) Service by certified or first class mail. (i) Service of the complaint may be

made on the respondent by mailing the complaint by certified mail to the last known

address (as determined under section 6212 of the Internal Revenue Code and the

regulations thereunder) of the respondent. Where service is by certified mail, the

returned post office receipt duly signed by the respondent will be proof of service.

(ii) If the certified mail is not claimed or accepted by the respondent, or is

returned undelivered, service may be made on the respondent, by mailing the complaint

to the respondent by first class mail. Service by this method will be considered

complete upon mailing, provided the complaint is addressed to the respondent at the

respondent=s last known address as determined under section 6212 of the Internal

Revenue Code and the regulations thereunder.

(3) Service by other than certified or first class mail. (i) Service of the complaint

may be made on the respondent by delivery by a private delivery service designated

pursuant to section 7502(f) of the Internal Revenue Code to the last known address (as

determined under section 6212 of the Internal Revenue Code and the regulations

thereunder) of the respondent. Service by this method will be considered complete,

provided the complaint is addressed to the respondent at the respondent=s last known

address as determined under section 6212 of the Internal Revenue Code and the

regulations thereunder. 

(ii) Service of the complaint may be made in person on, or by leaving the

complaint at the office or place of business of, the respondent. Service by this method

51
will be considered complete and proof of service will be a written statement, sworn or

affirmed by the person who served the complaint, identifying the manner of service,

including the recipient, relationship of recipient to respondent, place, date and time of

service.

(iii) Service may be made by any other means agreed to by the respondent. 

Proof of service will be a written statement, sworn or affirmed by the person who served

the complaint, identifying the manner of service, including the recipient, relationship of

recipient to respondent, place, date and time of service.

(4) For purposes of this paragraph (a), Arespondent@ means the practitioner or

appraiser named in the complaint or any other person having the authority to accept

mail on behalf of the practitioner or appraiser.

(b) Service of papers other than complaint. Any paper other than the complaint

may be served on the respondent, or his or her authorized representative under

'10.69(a)(2) by:

(1) mailing the paper by first class mail to the last known address (as determined

under section 6212 of the Internal Revenue Code and the regulations thereunder) of

the respondent or the respondent=s authorized representative,

(2) delivery by a private delivery service designated pursuant to section 7502(f)

of the Internal Revenue Code to the last known address (as determined under section

6212 of the Internal Revenue Code and the regulations thereunder) of the respondent

or the respondent=s authorized representative, or

(3) as provided in paragraphs (a)(3)(ii) and (a)(3)(iii) of this section.

52
(c) Service of papers on the Director of Practice. Whenever a paper is required

or permitted to be served on the Director of Practice in connection with a proceeding

under this part, the paper will be served on the Director of Practice=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 Director of

Practice, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC

20224. 

(d) Filing of papers. Whenever the filing of a paper is required or permitted in

connection with a proceeding under this part, the original paper, plus one additional

copy, must be filed with the Administrative Law Judge at the address specified in the

complaint or at an address otherwise specified by the Administrative Law Judge. All

papers filed in connection with a proceeding under this part must be served on the

other party, unless the Administrative Law Judge directs otherwise. A certificate

evidencing such must be attached to the original paper filed with the Administrative Law

Judge.

'10.64 Answer; default.

(a) Filing. The respondent's answer must be filed with the Administrative Law

Judge, and served on the Director of Practice, within the time specified in the complaint

unless, on request or application of the respondent, the time is extended by the

Administrative Law Judge. 

(b) Contents. The answer must be written and contain a statement of facts that

constitute the respondent=s grounds of defense. General denials are not permitted. 

53
The respondent must specifically admit or deny each allegation set forth in the

complaint, except that the respondent may state that the respondent is without

sufficient information to admit or deny a specific allegation. The respondent,

nevertheless, may not deny a material allegation in the complaint that the respondent

knows to be true, or state that the respondent is without sufficient information to form a

belief, when the respondent possesses the required information. The respondent also

must state affirmatively any special matters of defense on which he or she relies.

(c) Failure to deny or answer allegations in the complaint. Every allegation in the

complaint that is not denied in the answer is deemed admitted and will be considered

proved; no further evidence in respect of such allegation need be adduced at a hearing.

(d) Default. Failure to file an answer within the time prescribed (or within the

time for answer as extended by the Administrative Law Judge), constitutes an

admission of the allegations of the complaint and a waiver of hearing, and the

Administrative Law Judge may make the decision by default without a hearing or further

procedure. A decision by default constitutes a decision under '10.76.

(e) Signature. The answer must be signed by the respondent or the

respondent=s authorized representative under '10.69(a)(2) and must include a

statement directly above the signature acknowledging that the statements made in the

answer are true and correct and that knowing and willful false statements may be

punishable under 18 U.S.C. 1001.

'10.65 Supplemental charges.

If it appears that the respondent, in his or her answer, falsely and in bad faith,

denies a material allegation of fact in the complaint or states that the respondent has

54
insufficient knowledge to form a belief, when the respondent in fact possesses such

information, or if it appears that the respondent has knowingly introduced false

testimony during proceedings for his or her censure, suspension, disbarment, or

disqualification, the Director of Practice may file supplemental charges against the

respondent. The supplemental charges may be heard with other charges in the case,

provided the respondent is given due notice of the charges and is afforded an

opportunity to prepare a defense to such charges.

'10.66 Reply to answer.

The Director of Practice may file a reply to the respondent=s answer, but unless

otherwise ordered by the Administrative Law Judge, no reply to the respondent=s

answer is required. If a reply is not filed, new matter in the answer is deemed denied.

'10.67 Proof; variance; amendment of pleadings.

In the case of a variance between the allegations in pleadings and the evidence

adduced in support of the pleadings, the Administrative Law Judge, at any time before

decision, may order or authorize amendment of the pleadings to conform to the

evidence. The party who would otherwise be prejudiced by the amendment must be

given a reasonable opportunity to address the allegations of the pleadings as amended

and the Administrative Law Judge must make findings on any issue presented by the

pleadings as amended.

'10.68 Motions and requests.

(a) Motions. At any time after the filing of the complaint, any party may file a

motion with the Administrative Law Judge. Unless otherwise ordered by the

Administrative Law Judge, motions must be in writing and must be served on the

55
opposing party as provided in '10.63(b). A motion must concisely specify its grounds

and the relief sought, and, if appropriate, must contain a memorandum of facts and law

in support. Before moving, a party must make a good faith effort to resolve with the

other party any dispute that gives rise to, or is a concern of, the motion. The movant

must certify such an attempt was made and state, if it is known, whether the opposing

party opposes the motion.

(b) Response. Unless otherwise ordered by the Administrative Law Judge, the

nonmoving party is not required to file a response to a motion. If the Administrative Law

Judge does not order the nonmoving party to file a response, the nonmoving party is

deemed to oppose the motion. 

(c) Oral motions and arguments. The Administrative Law Judge may, for good

cause and with notice to the parties, permit oral motions and oral opposition to motions.

 The Administrative Law Judge may, within his or her discretion, permit oral argument

on any motion.

'10.69 Representation; ex parte communication.

(a) Representation. (1) The Director of Practice may be represented in

proceedings 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

Director of Practice in a proceeding under this part may sign the complaint or any

document required to be filed in the proceeding on behalf of the Director of Practice.

(2) A respondent may appear in person, be represented by a practitioner, or be

represented by an attorney who has not filed a declaration with the Internal Revenue

Service pursuant to '10.3. A practitioner or an attorney representing a respondent or

56
proposed respondent may sign the answer or any document required to be filed in the

proceeding on behalf of the respondent.

(b) Ex parte communication. The Director of Practice, the respondent, and any

representatives of either party, may not attempt to initiate or participate in ex parte

discussions concerning a proceeding or potential proceeding with the Administrative

Law Judge (or any person who is likely to advise the Administrative Law Judge on a

ruling or decision) in the proceeding before or during the pendency of the proceeding. 

Any memorandum, letter 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 argument in the proceeding and shall be served on the other

party. 

'10.70 Administrative Law Judge.

(a) Appointment. Proceedings on complaints for the censure, suspension or

disbarment of a practitioner or the disqualification of an appraiser will be conducted by

an Administrative Law Judge appointed as provided by 5 U.S.C. 3105.

(b) Powers of the Administrative Law Judge. The Administrative Law Judge,

among other powers, has the authority, in connection with any proceeding under '10.60

assigned or referred to him or her, to do the following:

(1) Administer oaths and affirmations;

(2) Make rulings on motions and requests, which rulings may not be appealed

prior to the close of a hearing except in extraordinary circumstances and at the

discretion of the Administrative Law Judge; 

(3) Determine the time and place of hearing and regulate its course and conduct;

57
(4) Adopt rules of procedure and modify the same from time to time as needed 

for the orderly disposition of proceedings;

(5) Rule on offers of proof, receive relevant evidence, and examine witnesses;

(6) Take or authorize the taking of depositions;

(7) Receive and consider oral or written argument on facts or law;

(8) Hold or provide for the holding of conferences for the settlement or

simplification of the issues with the consent of the parties;

(9) Perform such acts and take such measures as are necessary or appropriate

to the efficient conduct of any proceeding; and

(10) Make decisions.

'10.71 Hearings.

(a) In general. An Administrative Law Judge will preside at the hearing on a

complaint filed under paragraph (c) of '10.60 for the censure, suspension, or

disbarment of a practitioner or disqualification of an appraiser. Hearings will be

stenographically recorded and transcribed and the testimony of witnesses will be taken

under oath or affirmation. Hearings will be conducted pursuant to 5 U.S.C. 556. A

hearing in a proceeding requested under paragraph (g) of '10.82 will be conducted de

novo. An evidentiary hearing must be held in all proceedings prior to the issuance of a

decision by the Administrative Law Judge unless: the Director of Practice withdraws the

complaint; the practitioner consents to a sanction pursuant to '10.61(b); a decision is

issued by default pursuant to '10.64(d), a decision is issued under '10.82(e); the

respondent requests a decision on the record without a hearing; or the Administrative

Law Judge issues a decision on a motion that disposes of the case prior to the hearing.

58
(b) Publicity of Proceedings. A request by a practitioner or appraiser that a

hearing in a disciplinary proceeding concerning him or her be public, and that the record

of such disciplinary proceeding be made available for inspection by interested persons

may be granted by the Administrative Law Judge where the parties stipulate in advance

to protect from disclosure confidential tax information in accordance with all applicable

statutes and regulations. 

(c) Location. The location of the hearing will be determined by the agreement of

the parties with the approval of the Administrative Law Judge, but, in the absence of

such agreement and approval, the hearing will be held in Washington, D.C. 

(d) Failure to appear. If either party to the proceeding fails to appear at the

hearing, after notice of the proceeding has been sent to him or her, the party will be

deemed to have waived the right to a hearing and the Administrative Law Judge may

make his or her decision against the absent party by default.

'10.72 Evidence.

(a) In general. The rules of evidence prevailing in courts of law and equity are

not controlling in hearings or proceedings conducted under this part. The

Administrative Law Judge may, however, exclude evidence that is irrelevant,

immaterial, or unduly repetitious, 

(b) Depositions. The deposition of any witness taken pursuant to '10.73 may be

admitted into evidence in any proceeding instituted under '10.60.

(c) Proof of documents. Official documents, records, and papers of the Internal

Revenue Service and the Office of Director of Practice are admissible in evidence

without the production of an officer or employee to authenticate them. Any such

59
documents, records, and papers may be evidenced by a copy attested or identified by

an officer or employee of the Internal Revenue Service or the Treasury Department, as

the case may be. 

(d) Withdrawal of exhibits. If any document, record, or other paper is introduced

in evidence as an exhibit, the Administrative Law Judge may authorize the withdrawal of

the exhibit subject to any conditions that he or she deems proper. 

(e) Objections. Objections to evidence are to be made in short form, stating the

grounds for the objection. Except as ordered by the Administrative Law Judge,

argument on objections will not be recorded or transcribed. Rulings on objections are

to be a part of the record, but no exception to a ruling is necessary to preserve the

rights of the parties.

'10.73 Depositions.

(a) Depositions for use at a hearing may be taken, with the written approval of

the Administrative Law Judge, by either the Director of Practice or the respondent or

their duly authorized representatives. Depositions may be taken before any officer duly

authorized to administer an oath for general purposes or before an officer or employee

of the Internal Revenue Service who is authorized to administer an oath in internal

revenue matters. 

(b) The party taking the deposition must provide the deponent and the other

party with 10 days written notice of the deposition, unless the deponent and the parties

agree otherwise. The notice must specify the name of the deponent, the time and

place where the deposition is to be taken, and whether the deposition will be taken by

oral or written interrogatories. When a deposition is taken by written interrogatories,

60
any cross-examination also will be by written interrogatories. Copies of the written

interrogatories must be served on the other party with the notice of deposition, and

copies of any written cross-interrogation must be mailed or delivered to the opposing

party at least 5 days before the date that the deposition will be taken, unless the parties

mutually agree otherwise. A party on whose behalf a deposition is taken must file the

responses to the written interrogatories or a transcript of the oral deposition with the

Administrative Law Judge and serve copies on the opposing party and the deponent. 

Expenses in the reporting of depositions will be borne by the party that requested the

deposition.

'10.74 Transcript.

In cases where the hearing is stenographically reported by a Government

contract reporter, copies of the transcript may be obtained from the reporter at rates not

to exceed the maximum rates fixed by contract between the Government and the

reporter. Where the hearing is stenographically reported by a regular employee of the

Internal Revenue Service, a copy will be supplied to the respondent either without

charge or upon the payment of a reasonable fee. Copies of exhibits introduced at the

hearing or at the taking of depositions will be supplied to the parties upon the payment

of a reasonable fee (Sec. 501, Public Law 82-137)(65 Stat. 290)(31 U.S.C. 483a).

'10.75 Proposed findings and conclusions.

Except in cases where the respondent has failed to answer the complaint or

where a party has failed to appear at the hearing, the parties must be afforded a

reasonable opportunity to submit proposed findings and conclusions and their

supporting reasons to the Administrative Law Judge.

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'10.76 Decision of Administrative Law Judge.

(a) As soon as practicable after the conclusion of a hearing and the receipt of

any proposed findings and conclusions timely submitted by the parties, the 

Administrative Law Judge will enter a decision in the case. The decision must include a

statement of findings and conclusions, as well as the reasons or basis for making such

findings and conclusions, and an order of censure, suspension, disbarment,

disqualification, or dismissal of the complaint. If the sanction is censure or a

suspension of less than six month=s duration, the Administrative Law Judge, in

rendering findings and conclusions, will consider an allegation of fact to be proven if it is

established by the party who is alleging the fact by a preponderance of evidence in the

record. In the event that the sanction is disbarment or a suspension of a duration of six

months or longer, an allegation of fact that is necessary for a finding against the

practitioner must be proven by clear and convincing evidence in the record. An

allegation of fact that is necessary for a finding of disqualification against an appraiser

must be proven by clear and convincing evidence in the record. The Administrative

Law Judge will provide the decision to the Director of Practice and a copy of the

decision to the respondent or the respondent=s authorized representative. 

(b) In the absence of an appeal to the Secretary of the Treasury or his or her

designee, or review of the decision on motion of the Secretary or his or her designee,

the decision of the Administrative Law Judge will, without further proceedings, become

the decision of the agency 30 days after the date of the Administrative Law Judge's

decision.

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'10.77 Appeal of decision of Administrative Law Judge.

Within 30 days from the date of the Administrative Law Judge's decision, either

party may appeal to the Secretary of the Treasury, or his or her delegate. The

respondent must file his or her appeal with the Director of Practice in duplicate and a

notice of appeal must include exceptions to the decision of the Administrative Law

Judge and supporting reasons for such exceptions. If the Director of Practice files an

appeal, he or she must provide a copy to the respondent. Within 30 days after receipt

of an appeal or copy thereof, the other party may file a reply brief in duplicate with the

Director of Practice. If the reply brief is filed by the Director of Practice, he or she must

provide a copy of it to the respondent. The Director of Practice must provide the entire

record to the Secretary of the Treasury, or his or her delegate, after the appeal and any

reply brief has been filed.

'10.78 Decision on appeal.

On appeal from or review of the decision of the Administrative Law Judge, the

Secretary of the Treasury, or his or her delegate, will make the agency decision. The

Secretary of the Treasury, or his or delegate, will provide a copy of the agency decision

to the Director of Practice and the respondent or the respondent=s authorized

representative. The decision of the Administrative Law Judge will not be reversed

unless the appellant establishes that the decision is clearly erroneous in light of the

evidence in the record and applicable law. Issues that are exclusively matters of law

will be reviewed de novo. In the event that the Secretary of the Treasury, or his or her

delegate, determines that there are unresolved issues raised by the record, the case

may be remanded to the Administrative Law Judge to elicit additional testimony or

63
evidence. A copy of the agency decision or that of his or her delegate will be provided

to the Director of Practice and the respondent contemporaneously.

'10.79 Effect of disbarment, suspension, or censure.

(a) Disbarment. 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 Director of Practice) 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 Director of Practice 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 Director of Practice) and such decision is for suspension, the respondent will not be

permitted to practice before the Internal Revenue Service during the period of

suspension. For periods after the suspension, the practitioner=s future representations

may be subject to conditions as authorized by paragraph (d) of this section. 

(c) Censure. When the final decision in the case is against the respondent (or

the respondent has offered his or her consent and such consent has been accepted by

the Director of Practice) and such decision is for censure, the respondent will be

permitted to practice before the Internal Revenue Service, but the respondent=s future

representations may be subject to conditions as authorized by paragraph (d) of this

section.

(d) Conditions. After being subject to the sanction of either suspension or

censure, the future representations of a practitioner so sanctioned shall be subject to

conditions prescribed by the Director of Practice designed to promote high standards of

64
conduct. These conditions can be imposed for a reasonable period in light of the

gravity of the practitioner=s violations. For example, where a practitioner is censured

because he or she failed to advise his or her clients about a potential conflict of interest

or failed to obtain the clients= written consents, the Director of Practice may require the

practitioner to provide the Director of Practice or another Internal Revenue Service

official with a copy of all consents obtained by the practitioner for an appropriate period

following censure, whether or not such consents are specifically requested.

'10.80 Notice of disbarment, suspension, censure, or disqualification.

On the issuance of a final order censuring, suspending, or disbarring a

practitioner or a final order disqualifying an appraiser, the Director of Practice may give

notice of the censure, suspension, disbarment, or disqualification to appropriate officers

and employees of the Internal Revenue Service and to interested departments and

agencies of the Federal government. The Director of Practice may determine the

manner of giving notice to the proper authorities of the State by which the censured,

suspended, or disbarred person was licensed to practice.

'10.81 Petition for reinstatement.

The Director of Practice may entertain a petition for reinstatement from any

person disbarred from practice before the Internal Revenue Service or any disqualified

appraiser after the expiration of 5 years following such disbarment or disqualification.

Reinstatement may not be granted unless the Director of Practice is satisfied that the

petitioner, thereafter, is not likely to conduct himself contrary to the regulations in this

part, and that granting such reinstatement would not be contrary to the public interest. 

65
'10.82 Expedited suspension upon criminal conviction or loss of license for cause.

(a) When applicable. Whenever the Director of Practice determines that a

practitioner is described in paragraph (b) of this section, the Director of Practice may

institute a proceeding under this section to suspend the practitioner from practice

before the Internal Revenue Service.

(b) To whom applicable. This section applies to any practitioner who, within

5 years of the date a complaint instituting a proceeding under this section is

served:

(1) Has had his or her license to practice as an attorney, certified public

accountant, or actuary suspended or revoked for cause (not including a failure to pay a

professional licensing fee) by any authority or court, agency, body, or board described

in '10.51(i); or

(2) Has, irrespective of whether an appeal has been taken, been convicted of

any crime under title 26 of the United States Code, any crime involving dishonesty or

breach of trust, or any felony for which the conduct involved renders the practitioner

unfit to practice before the Internal Revenue Service.

(3) Has violated conditions designed to promote high standards of conduct

established pursuant to '10.79(d).

(c) Instituting a proceeding. A proceeding under this section will be instituted by

a complaint that names the respondent, is signed by the Director of Practice or a

person representing the Director of Practice under '10.69(a)(1), is filed in the Director

of Practice's office, and is served according to the rules set forth in paragraph (a) of

66
'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--

(1) Of the place and due date for filing an answer;

(2) That a decision by default may be rendered if the respondent fails to file an

answer as required;

(3) That the respondent may request a conference with the Director of Practice

to address the merits of the complaint and that any such request must be made in the

answer; and

(4) That the respondent may be suspended either immediately following the

expiration of the period within which an answer must be filed or, if a conference is

requested, immediately following the conference.

(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

Director of Practice extends the time for filing. 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 with the Director of Practice only if the

conference is requested in a timely filed answer. 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 his or her right to a conference and the Director of Practice may suspend

such respondent at any time following the date on which the answer was due.

(e) Conference. The Director of Practice or his or her designee will preside at a

conference described in this section. The conference will be held at a place and time

selected by the Director of Practice, but no sooner than 14 calendar days after the date

67
by which the answer must be filed with the Director of Practice, unless the respondent

agrees to an earlier date. An authorized representative may represent the respondent

at the conference. Following the conference, upon a finding that the respondent is

described 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 Director of

Practice may immediately suspend the respondent from practice before the Internal

Revenue Service.

(f) Duration of suspension. A suspension under this section will commence on

the date that written notice of the suspension is issued. A practitioner's suspension will

remain effective until the earlier of the following--

(1) The Director of Practice lifts the suspension after determining that the

practitioner is no longer described in paragraph (b) of this section or for any other

reason; or

(2) The suspension is lifted by an Administrative 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 Director of Practice suspends a

practitioner under this section, the practitioner may ask the Director of Practice 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 Director of Practice must

issue a complaint requested under this paragraph within 30 calendar days of receiving

the request.

Subpart E -- General Provisions

68
'10.90 Records.

 Availability. The Director of Practice will make available for public inspection at

the Office of Director Practice the roster of all persons enrolled to practice, the roster of

all persons censured, suspended, or disbarred from practice before the Internal

Revenue Service, and the roster of all disqualified appraisers. Other records of the

Director of Practice may be disclosed upon specific request, in accordance with the

applicable disclosure rules of the Internal Revenue Service and the Treasury

Department.

'10.91 Saving clause.

Any proceeding instituted under regulations in effect prior to July 26, 2002, that is

not final prior to July 26, 2002, will not be affected by this part and will apply the rules

set forth at 31 CFR part 10 revised as of July 1, 2002. Any proceeding under this part

based on conduct engaged in prior to July 26, 2002, which is instituted after that date,

shall apply Subpart D and E of this part, but the conduct engaged in prior to July 26,

2002, shall be judged by the regulations in effect at the time the conduct occurred. 

'10.92 Special orders.

The Secretary of the Treasury reserves the power to issue such special orders

as he or she deems proper in any cases within the purview of this part.

69
'10.93 Effective date. 

Subject to '10.91, this part is applicable on July 26, 2002.

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue.

Approved: July 17, 2002 

David Aufhauser,

General Counsel,

Office of the Secretary.

70
Addendum to Treasury 

Department Circular No. 230 

(Rev. 7-2002) 

Any proceeding under this part based on conduct engaged 

in prior to July 26, 2002, which is instituted after that date, 

shall apply Subparts D and E of this part, but the conduct 

engaged in prior to July 26, 2002, shall be judged by the 

regulations in effect at the time the conduct occurred. 31 

CFR 10.91. In light of this, we are providing, as an 

addendum, the earlier version of Subparts B and C.

71
72
Subpart B — Duties and Restrictions

Relating to Practice Before the

Internal Revenue Service

§10.20 Information to be furnished.

(a) To the Internal Revenue Service. No

attorney, certified public accountant,

enrolled agent, or enrolled actuary shall

neglect or refuse promptly to submit records

or information in any matter before the

Internal Revenue Service, upon proper and

lawful request by a duly authorized officer

or employee of the Internal Revenue

Service, or shall interfere, or attempt to

interfere, with any proper and lawful effort

by the Internal Revenue Service or its

officers or employees to obtain any such

record or information, unless he believes in

good faith and on reasonable grounds that

such record or information is privileged or

that the request for, or effort to obtain, such

record or information is of doubtful legality,

has not complied with the revenue laws of

the United States or has made an error in

or omission from any return, document, affidavit, or other paper. which the client is

required by the revenue laws of the United

States to execute, shall advise the client

promptly of the fact of such noncompliance, error, or omission.

[42 FR 38352, July 28, 1977, as amended at 57

FR 41095, Sept. 9, 1992]

§10.22 Diligence as to accuracy.

(b) To the Director of Practice. It shall be

the duty of an attorney or certified public

accountant, who practices before the

Internal Revenue Service, or enrolled agent,

when requested by the Director of Practice,

to provide the Director with any information

he may, have concerning violation of the

regulations in this part by any person, and

to testify thereto in any proceeding instituted

under this part for the disbarment or

suspension of an attorney, certified public

accountant, enrolled agent, or enrolled

actuary, unless he believes in good faith

and on reasonable grounds that such

information is privileged or that the request

therefor is of doubtful legality.

Each attorney, certified public accountant, enrolled agent, or enrolled actuary shall

exercise due diligence:

(a) In preparing or assisting in the preparation of, approving, and filing returns,

documents, affidavits, and other papers relating to Internal Revenue Service matters;

(b) In determining the correctness of oral

or written representations made by him to

the Department of the Treasury; and

(c) In determining the correctness of oral

or written representations made by him to

clients with reference to any matter administered by the Internal Revenue Service.

[35 FR 13205, Aug. 19, 1970, as amended at 42

FR 38352, July 28,1977; 57 FR 41095, Sept. 9,

1992]

§10.23 Prompt disposition of pending

matters.

No attorney, certified public accountant,

enrolled agent, or enrolled actuary shall

unreasonably delay the prompt disposition

of any matter before the Internal Revenue

Service.

[31 FR 10773, Aug. 13, 1966, as amended at 57

FR 41095, Sept. 9, 1992]

§10.21 Knowledge of client’s omission.

Each attorney, certified public accoun-

§10.24 Assistance from disbarred or

suspended persons and former Internal Revenue Service employees.

tant, enrolled agent, or enrolled actuary who, No attorney, certified public accountant,

having been retained by a client with re- enrolled agent, or enrolled actuary shall, in

spect to a matter administered by the Inter- practice before the Internal Revenue Service,

nal Revenue Service, knows that the client knowingly and directly or indirectly:

73
(a) Employ or accept assistance from any

person who is under disbarment or suspension from practice before the Internal Revenue Service.

(b) Accept employment as associate, correspondent, or subagent from, or share fees

with, any such person.

(c) Accept assistance from any former

government employee where the provisions

of §10.26 of these regulations or any Federal law would be violated.

[44 FR 4943, Jan. 24, 1979, as amended at 57

FR 41095, Sept. 9; 1992]

§10.25 Practice by partners of Government employees.

No partner of an officer or employee of

the executive branch of the US. Government, of any independent agency of the

United States,, or of the District of Columbia, shall represent anyone in any matter

administered by the Internal Revenue

Service in which such officer or employee

of the Government participates or has participated personally and substantially as a

Government employee or which is the subject of his official responsibility.

[31 FR 10773; Aug. 13, 1966, as amended at 35

FR 13205, Aug. 19,1970]

§10.26 Practice by former Government

employees, their partners and their

associates.

(a) Definitions. For purposes of §10.26:

(1) Assist means to act in such a way as to

advise, furnish information to, or otherwise

aid another person, directly of indirectly.

(2) Government employee is an officer or

employee of the United States or any agency

of the United States,, including a special

government employee as defined in 18

U.S.C. 202(a), or of the District of Columbia, or of any State, or a member of Congress or of any State legislature.

(8) Transaction means any decision, determination, finding, letter ruling, technical

advice, contract or approval or disapproval

thereof, relating to a particular factual situation or situations involving a specific party

or parties whose rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service, or

other legal rights, are determined or immediately affected therein and to which the

United States is a party or in which it has a

direct and substantial interest, whether or

not the same taxable periods are involved.

Transaction does not include rule as defined in paragraph (a)(7) of this section.

(3) Member of a firm is a sole practitioner

or an employee or associate thereof, or a

partner, stockholder, associate, affiliate or

(b) General rules. (1) No former Government employee shall, subsequent to his

Government employment, represent anyone

74

employee of a partnership, joint venture,

corporation, professional association or

other affiliation of two or more practitioners who represent non-Government

parties.

(4) Practitioner includes any individual

described in §10.3(e).

(5) Official responsibility means the direct administrative or operating authority,

whether intermediate or final, and either

exercisable’ alone or with others, and either

personally or through subordinates, to approve, disapprove, or otherwise direct Government action, with or without knowledge

of the action.

(6) Participate or participation means

substantial involvement as a Government

employee by making decisions, or preparing or reviewing documents with or without the right to exercise a judgment of approval or disapproval, or participating in

conferences or investigations, or rendering

advice of a substantial nature.

(7) Rule includes Treasury Regulations,

whether issued or under preparation for issuance as Notices of Proposed Rule Making or as Treasury Decisions, and revenue

rulings and revenue procedures published

in the Internal Revenue bulletin. Rule shall

not. include a transaction as defined in

paragraph (a)(9) of this section.
in any matter administered by the Internal

Revenue Service if the representation would

violate 18 U.S.C. 207 (a) or (b) or any other

laws of the United States.

(2) No former Government employee who

participated in a transaction shall, subsequent to his Government employment, represent or knowingly assist, in that transaction, any person who is or was a specific

party to that transaction.

(3) No former Government employee who

within a period of one year prior to the termination of his Government employment had

official responsibility for a transaction shall,

within one year after his Government employment is ended, represent or knowingly

assist in that transaction any person who is

or was a specific party to that transaction.

(4) No former Government employee

shall, within one year after his Government

employment, is ended, appear before any

employee of the Treasury Department in

connection with the publication, withdrawal,

amendment, modification, or interpretation

of a rule in the development of which the

former Government employee participated

or for which, within a period of one year

prior to the termination of his Government

employment, he had official responsibility.

However, this subparagraph does not preclude such former employee for appearing

on his own behalf or from representing a

taxpayer before the Internal Revenue

Service in connection with a transaction involving the application or interpretation of

such a rule with respect to that transaction:

Provided, That such former employee shall

not utilize or disclose any confidential information acquired by the former employee

in the development of the rule, and shall

 not contend that the rule is invalid or illegal. In. addition, this subparagraph does not

preclude such former employee from otherwise advising or acting for any person.

(c) Firm representation. ( 1) No member

of a firm of which a former Government

employee is a membermay represent or

knowingly assist a person who was or is a

specific party in any. transaction. with respect to which the restrictions of paragraph

(b)(l) (other than 18 U.S.C. 207 (b)) or

(b)(2) of this section apply to the former

Government employee, in that transaction;

unless:

(i) No member of the firm who had

knowledge of the participation by the Government employee in the transaction initiated discussions with the Government employee concerning his becoming a member

of the firm until. his Government employment is ended or six months after the termination of his participation in the transaction, whichever is earlier;

(ii) The former Government employee did

not initiate any discussions concerning becoming a member of the firm while participating in the transaction or, if such discussions were initiated, they conformed with

the requirements of 18 U.S.C. 208(b); and

(iii) The firm isolates the former. Government employee in such a way that he

does not assist in the representation.

(2) No member of a firm of which a

former Government employee is a member

may represent or knowingly assist a person

who was or is a specific party in any transaction with respect to which the restrictions

of paragraph (b)(3) of this section apply to

the former employee, in that transaction,

unless the firm isolates the former Government employee in such a way that he does

not assist in the representation.

(3) When isolation of the former Government employee is required under paragraphs (c)(l) or (c)(2) of this section, a

statement affirming the fact of such isolation shall be executed under oath by the

former Government employee and by a

member of the firm acting on behalf of the

firm, and shall be filed with the Director of

Practice and in such other place and in the

manner prescribed by regulation. This

statement shall clearly identify the firm, the

former Government employee, and the

transaction or transactions requiring such

isolation.

75
(d) Pending representation. Practice by

former Government employees, their partners and associates with respect to representation in Specific matters where actual

representation commenced before publication of this regulation is governed by the

regulations set forth in the June 1972

amendments to the regulations of this part

(published at 37 FR 11676): Provided, That

the burden of showing that representation

commenced before publication is with the

former Government employees, their partners and. associates:

[42 FR 38352, July 28, 1977, as amended at 57

FR 41095, Sept. 9,1992; 59 FR 31527, June 20,

1994]

§10.27 Notaries.

No attorney, certified public accountant,

enrolled agent, or enrolled actuary as notary public shall with respect to any matter

administered by the Internal Revenue

Service, take acknowledgments, administer

oaths, certify papers, or perform any official

act in connection with matters in which he

is employed as counsel, attorney, or agent,

or in which he may be in any way interested before the Internal Revenue Service

(26 Op. Atty. Gen. 236).

[31 FR 10773, Aug. 13, 1966, as amended at 57

FR 41095, Sept. 9, 1992]

§10.28 Fees.

(a) Generally. A practitioner may not

charge ah unconscionable fee for representing a client in a matter before the Internal

Revenue Service.

(b) Contingent fees for return

preparation. A practitioner may not charge

a contingent fee for preparing’ an original

return. A practitioner may charge a contingent fee for preparing an amended return

or a claim for refund (other than a claim

for refund made on an original return) if

the practitioner reasonably anticipates at the

time the fee arrangement is entered into that

the amended return or claim will receive

substantive review by the Service. A

contingent fee includes a fee that is based

on a percentage of the refund on a

return or a percentage of the taxes saved,

or that otherwise depends on the specific

result attained.

[59 FR 31527, June 20, 1994]

§10.29 Conflicting interests.

No attorney, certified public accountant,

enrolled agent, or enrolled actuary shall

represent conflicting interests in his practice before the Internal Revenue Service,

except by express consent of all directly

interested parties after full disclosure has

been made.

[31 FR 10773, Aug. 13, 1966, as amended at 57

FR 41095, Sept. 9, 1992]

§10.30 Solicitation.

(a) Advertising and solicitation restrictions. (1) No attorney, certified public accountant, enrolled agent, enrolled actuary,

or other individual eligible to practice before the Internal Revenue Service shall, with

respect to any Internal Revenue Service

matter, in any way use or participate in the

use of any form of public communication

containing (i) A false, fraudulent, unduly

influencing, coercive, or unfair statement

or claim; or (ii) a misleading or deceptive

statement or claim.

Enrolled agents, in describing their professional designation, may not utilize the

term of art “certified” or indicate an employer/employee relationship with the Internal Revenue Service. Examples of

acceptable descriptions are “enrolled to

represent taxpayers before the Internal

Revenue Service,” “enrolled to practice before the Internal Revenue Service,” and

“admitted to practice before the Internal

76
Revenue Service.” Enrolled agents and enrolled actuaries may abbreviate such designation to either EA or E.A.

(2) No attorney, certified public accountant, enrolledagent, enrolled actuary, or other

individual eligible to practice before the Internal Revenue Service shall make, directly

or indirectly, an uninvited solicitation of employment in matters related to the Internal

Revenue Service. Solicitation includes, but

is not limited to, in-person contacts and telephone communications. This restriction does

not apply to (i) Seeking new business from

an existing or former client in a related matter;

(ii) communications with family members;

(iii) making the availability of professional

services known to other practitioners, so long

as the person or firm contacted is not a potential client; (iv) solicitation by mailings; or

(v) non-coercive in-person solicitation by

those eligible to practice before the Internal

Revenue Service while acting as an employee, member, or officer of an exempt organization‘ listed in sections 501(c)(3) or (4)

of the Internal Revenue Code of 1954 (26

U.S.C.).

Any targeted direct mail solicitation, i.e.

a mailing to those whose unique circumstances are the basis for the solicitation,

distributed by or on behalf of an attorney,

certified public accountant, enrolled agent,

enrolled actuary, or other individual eligible

to practice, before the Internal Revenue

Service shall be clearly marked as such in

capital letters on the envelope and at the

top of the first page of such mailing. In

addition, all such solicitations must clearly

identify the source of the information used

in choosing the recipient.

(b) Fee information. (1) Attorneys, certified public accountants, enrolled agents, or

enrolled actuaries and other individuals eligible to practice before the Internal Revenue Service may disseminate the following

fee information:

(i) Fixed fees for specific routine services.

(ii) Hourly rates.

(iii) Range of fees for particular services.

(iv) Fee charged for an initial consultation;

Any statement of fee information concerning matters in which costs may be incurred

shall include a statement disclosing whether

clients will be responsible for such costs.

(2) Attorneys, certified public accountants,

enrolled agents, or enrolled actuaries and

other individuals eligible to practice before

the Internal Revenue Service may also publish the availability of a written schedule of

fees. 

(3) Attorneys, certified public accountants,

enrolled agents, or enrolled actuaries and

other individuals eligible to practice before

the Internal Revenue Service shall be bound

to charge the hourly rate, the fixed fee for

specific routine services, the range of fees

for particular services, or the fee for an initial consultation published for a reasonable

period of time, but no less than thirty days

from the last publication of such hourly rate

or fees.

(c) Communications. Communication, including fee information, may include professional lists, telephone directories, print media, mailings, radio and television, and any

other method: Provided, that the method

chosen does not cause the communication to

become untruthful, deceptive, unduly influencing or otherwise in violation of these

regulations. It shall be construed as a violation of these regulations for a practitioner to

persist in attempting to contact a prospective

client, if such client has made known to the

practitioner a desire not to be solicited. In

the case of radio and television broadcasting,

the broadcast shall be prerecorded and the

practitioner shall retain a recording of the

actual audio transmission. In the case of direct mail communications, the practitioner

shall retain a copy of the actual mailing, along

with a list or other description of persons to

whom the communication was mailed or

otherwise distributed. Such copy shall be retained by the practitioner for a period of at

least 36 months from the date of the last

transmission or use.

77
(d) Improper associations. An attorney, fects of a tax shelter investment shall comcertified public-accountant, enrolled agent, ply with each of the following requirements:

or enrolled actuary may, in matters related to (1) Factual matters. (i) The practitioner

the Internal Revenue Service, employ or ac- must make inquiry, as to all relevant facts,

cept employment or assistance as an associ- be satisfied that the material facts are accuate, correspondent, or subagent from, or share rately and completely described in the offees, with; any- person or entity who, to the fering materials, and assure that any repreknowledge of the practitioner, obtains cli- sentations as to future activities are clearly

ents or otherwise practices in a manner for- identified, reasonable and complete.

bidden under this section: Provided, That a (ii) A practitioner may not accept as true

practitioner does, not, directly or indirectly, asserted facts pertaining to the tax shelter

act or hold himself out as an Internal Revenue which he/she should not, based on his/her

Service practitioner in connection, with that background and knowledge, reasonably berelationship. Nothing herein shall prohibit an lieve to be true. However, a practitioner

attorney, certified public accountant, or en- need not conduct an audit or independent

rolled agent from practice before the Internal verification of the asserted facts, or assume

Revenue Service in a capacity other than that that a client’s statement of the facts cannot

described above. be relied upon, unless he/she has reason to

believe that any relevant facts asserted to

[44 FR 4943, Jan. 24, 1979, as amended at 57 him/her are untrue.

FR 41095, Sept. 9, 1992]. (iii) If the fair market value of property

or the expected financial performance of

§10.31 Negotiation of taxpayer refund an investment is relevant to the tax shelter,

checks, a practitioner may not accept an appraisal

No attorney, certified public accountant, or financial projection as support for the

matters claimed therein unless:

enrolled agent, or enrolled actuary who is (A) The appraisal or financial projection an income tax return preparer shall endorse makes sense on its face; or otherwise negotiate any check made in (B) The practitioner reasonably believes respect of income taxes which. is issued to that the person making the appraisal or fi- a taxpayer other than the attorney, certified nancial projection is competent to do so public accountant or enrolled agent. and is not of dubious reputation; and

[42 FR 38353, July 28, 1977, as amended at 57 (C) The appraisal is based on the definiFR 41095, Sept. 9, 1992] tion of fair market value prescribed under

the relevant Federal tax provisions.

§10.32 Practice of law. (iv) If the fair market value of purchased

Nothing in the regulations in this part property is to be established by reference

to its stated purchase price, the practitioner shall be construed as authorizing persons must examine the terms and conditions upon not members of the bar to practice law. which the property was (or is to be) pur-

[31 FR 10773, Aug. 13, 1966. Redesignated at chased to determine whether the stated pur42 FR 38353, July 28, 1977] chase price reasonably may be considered

to be its fair market value.

§10.33 Tax shelter opinions. (2) Relate law to facts. The practitioner

must relate the law to the actual facts and,

(a) Tax shelter opinions and offering ma- when addressing issues based on future acterials. A practitioner who provides a tax tivities, clearly identify what facts are asshelter opinion analyzing the Federal tax ef- sumed.

78
(3) Identication of material issues. The

practitioner must ascertain that all material

Federal tax issues have been considered,

and that a11 of those issues which involve

the reasonable possibility of a challenge by

the Internal Revenue Service have been

fully and fairly addressed in the offering

materials,

(4) Opinion on each material issue.

Where possible, the practitioner must provide an opinion whether it is more likely

than not that an investor will prevail on the

merits of each material tax issue presented

by the offering which involves a reasonable possibility of a challenge by the Internal Revenue Service. Where such an opinion carnnot be given with respect to any

material tax issue, the opinion should fully

describe the reasons for the practitioner’s

inability to opine as to the likely outcome.

(5) Overall evaluation. (i) Where possible, the practitioner must provide an

overall evaluation whether the material tax

benefits in the aggregate more likely than

not will be realized. Where such an overall

evaluation cannot be given, the opinion

should fully describe the reasons for the

practitioner’s inability to make an overall

evaluation. Opinions concluding that an

overall evaluation cannot be provided will

be given special scrutiny to determine if

the stated reasons are adequate.

(ii) A favorable overall evaluation may

not be rendered unless it is based on a conclusion that substantially more than half of

the material tax benefits, in terms of their

financial impact on a typical investor, more

likely than not will be realized if challenged

by the Internal Revenue Service.

(iii) If it is not possible to give an overall

evaluation, or if the overall evaluation is

that the material tax benefits in the aggregate will not be realized, the fact that the

practitioner’s opinion does not constitute a

favorable overall evaluation, or that it is an

unfavorable overall evaluation, must be

clearly and prominently disclosed in the offering materials.

(iv) The following examples illustrate the

principles of this paragraph:

Example (1). A limited partnership acquires real property in a sale-lease back

transaction. The principal tax benefits of-.

fered to investing partners consist of depreciation and interest deductions. Lesser tax

benefits are offered to investors by reason

of several deductions under Internal Revenue Code section 162 (ordinary and necessary business expenses). If a practitioner

concludes that it is more likely than not

that the partnership will not be treated as

the owner of the property for tax purposes

(which is required to allow the interest and

depreciation deductions), then he/she may

not opine to the effect that it is more likely

than not that the material tax benefits in the

aggregate will be realized, regardless of

whether favorable opinions may be given

with respect to the deductions claimed under Code section 162.

Example (2). A corporation electing under subchapter S of the Internal Revenue

Code is formed to engage in research and

development activities. The offering materials forecast that deductions for research

and experimental expenditures equal to 75%

of the total investment in the corporation

will be available during the first two years

of the corporation’s operations, other expenses will account for another 15% of the

total investment, and that little or no gross

income will be received by the corporation

during this period. The practitioner concludes that it is more likely than not that

deductions for research and experimental

expenditures will be allowable. The practitioner may render an opinion to the effect

that based on this conclusion, it is more

likely than not that the material tax benefits in the aggregate will be realized, regardless of whether he/she can opine that it

is more likely than not that any of the other

tax benefits will be achieved.

Example (3). An investment program is

established to acquire offsetting positions

in commodities contracts. The objective of

79
the program is to close the loss positions in

year one and to close the profit positions in

year two, The principal tax benefit offered

by the program is a loss in the first year,

coupled with the deferral of offsetting gain

until the following year. The practitioner

concludes that the losses will not be de-

 ductible in year one. Accordingly, he/she

may not render an opinion to the effect that

it is more likely than not that the material

tax benefits in the aggregate will be realized, regardless of the fact that he/she is of

the opinion that losses not allowable in year

one will be allowable in year two, because

the principal tax benefit offered is a oneyear deferral of income.

Example (4). A limited partnership is

formed to acquire, own and operate residential rental real estate. The offering material forecasts gross income of $2,000,000

and total deductions of $lO,OOO,OOO, resulting in net losses of $8,000,000 over the

first six taxable years. Of the total deductions, depreciation and interest are projected

to be $7,000,000, and other deductions

$3,000,000. The practitioner concludes that

it is more likely than not that all of the

depreciation and interest deductions will be

allowable, and that it is more likely than

not that the other deductions will not be

allowed. The practitioner may render an

opinion to the effect that it is more likely

than not that the material tax benefits in the

aggregate will be realized.

(6) Description of opinion. The practitioner must assure that the offering materials

correctly and fairly represent the nature and

extent of the tax shelter opinion.

(b) Reliance on other opinions — (1) In

general. A practitioner may provide an

opinion on less than all of the material tax

issues only if:

(i) At least one other competent practitioner provides an opinion on the likely

outcome with respect to all of the other

material tax issues which involve a reasonable possibility of challenge by the Internal Revenue Service, and an overall

evaluation whether the material tax benefits in the aggregate more likely than not

will be realized, which is disseminated in

the same manner as the practitioner’s opinion; and

(ii) The practitioner, upon reviewing such

other opinions and any offering materials,

has no reason to believe that the standards

of paragraph (a) of this section have not

been complied with.

Notwithstanding the foregoing, a practitioner who has not been retained to provide

an overall evaluation whether the material

tax benefits in the aggregate more likely

than not will be realized may issue an opinion on less than all the material tax issues

only if he/she has no reason to believe,

based on his/her knowledge and experience,

that the overall evaluation given by the

practitioner who furnishes the overall

evaluation is incorrect on its face.

(2) Forecasts and projections. A practitioner who is associated with forecasts or projections relating to or based upon the tax consequences of the tax shelter offering that are

included in the offering materials, or are disseminated to potential investors other than

the practitioner’s clients, may rely on the

opinion of another practitioner as to any or

all material tax issues, provided that the

practitioner who desires to rely on the other

opinion has no reason to believe that the

standards of paragraph (a) of this section have

not been complied with by the practitioner

rendering such other opinion, and the requirements of paragraph (b)( 1) of this section are satisfied. The practitioner’s report

shall disclose any material tax issue not covered by, or incorrectly opined upon, by the

other opinion, and shall set forth his/her

opinion with respect to each such issue in a

manner that satisfies the requirements of

paragraph (a) of this section.

(c) Definitions. For purposes of this section:

(1) Practitioner includes any individual

described in §10.3(e).

80
(2) A tax shelter, as the term is used in

this section, is an investment which has as

a significant and intended feature for Federal income or excise tax purposes either

of the following attributes:

(i) Deductions in excess of income from

the investment being available in any year

to reduce income from other sources in that

year, or

(ii) Credits in excess of the tax attributable to the income from the investment being available in any year to offset taxes on

income from other sources in that year.

Excluded from the term are municipal

bonds; annuities; family trusts (but not including schemes or arrangements that are

marketed to the public other than in a direct practitioner-client relationship); qualified retirement plans; individual retirement

accounts; stock option plans; securities issued in a corporate reorganization; mineral

development ventures, if the only tax benefit would be percentage depletion; and real

estate where it is anticipated that in no year

is it likely that deductions will exceed the

tax attributable to the income from the investment in that year. Whether an investment is intended to have tax shelter features

depends on the objective facts and circumstances of each case. Significant weight will

be given to the features described in the

offering materials to determine whether the

investment is a tax shelter.

(3) A tax shelter opinion, as the term is

used in this section, is advice by a practitioner concerning the Federal tax aspects

of a tax shelter either appearing or referred

to in the offering materials, or used or referred to in connection with sales promotion

efforts, and directed to persons other than

the client who engaged the practitioner, to

give the advice. The term includes the tax

aspects or tax risks portion of the offering

materials prepared by or at the direction of

a practitioner, whether or not a separate

opinion letter is issued or whether or not

the practitioner’s name is referred to in the

offering materials or in connection with the

sales promotion efforts. In addition, a financial forecast or projection prepared by a

practitioner is a tax shelter opinion if it is

predicated on assumptions regarding Federal tax aspects of the investment, and it

meets the other requirements of the first

sentence of this paragraph. The term does

not, however, include rendering advice

solely to the offeror or reviewing parts of

the offering materials, so long as neither

the name of the practitioner, nor the fact

that a practitioner has rendered advice concerning the tax aspects, is referred to in the

offering materials or in connection with the

sales promotion efforts.

(4) A material tax issue as the term is

used in this section is

(i) Any Federal income or excise tax issue

relating to a tax shelter that would make a

significant contribution toward sheltering

from Federal taxes income from other sources

by providing deductions in excess of the income from the tax shelter investment in any

year, or tax credits available to offset tax

liabilities in excess of the tax attributable to

the tax shelter investment in any year;

(ii) Any other Federal income or excise

tax issue relating to a tax shelter that could

have a significant impact (either beneficial

or adverse) on a tax shelter investor under

any reasonably foreseeable circumstances

(e.g., depreciation or investment tax credit

recapture, availability of long-term capital

gain treatment, or realization of taxable income in excess of cash flow, upon sale or

other disposition of the tax shelter investment); and

(iii) The potential applicability of penalties, additions to tax, or interest charges that

reasonably could be asserted against a tax

shelter investor by the Internal Revenue

Service with respect to the tax shelter. The

determination of what is material is to be

made in good faith by the practitioner, based

on information available at the time the offering materials are circulated.

(d) For purposes of advising the Director

of Practice whether an individual may have

violated §10.33, the Director of Practice is

authorized to establish an Advisory Com81
 mittee, composed of at least five individuals authorized to practice before the Internal Revenue Service. Under procedures established by the Director of Practice, such

Advisory Committee shall, at the request

of the Director of Practice, review and make

recommendations with regard to alleged

violations of §10.33.

(Sec. 3, 23 Stat. 258, secs. 2-12, 60 Stat. 237 et

seq.; 5 U.S.C. 301; 31 U.S.C. 330; 31 U.S.C.

321 (Reorg. Plan No. 26 of 1950, 15 FR 4935,

64 Stat. 1280,3 CFR, 1949-53 Comp., p. 1017))

[49 FR 6722, Feb. 23, 1984; 49 FR 7116, Feb.

27,1984; 59 FR 31527,31528, June 20,1994]

§10.34 Standards for advising with respect to tax return positions and for

preparing or signing returns.

(a) Standards of conduct — (1) Realistic

possibility standard. A practitioner may not

sign a return as a preparer if the practitioner determines that the return contains a

position that does not have a realistic possibility of being sustained on its merits (the

realistic possibility standard) unless the position is not frivolous, and is adequately

disclosed to the Service. A practitioner may

not advise a client to take a position on a

return, or prepare the portion of a return on

which a position is taken, unless —

(i) The practitioner determines that the

position satisfies the realistic possibility

standard; or

(ii) The position is not frivolous and the

practitioner advises the client of any opportunity to avoid the accuracy-related

penalty in section 6662 of the Internal Revenue Code of 1986 by adequately disclosing

the position and of the requirements for adequate disclosure.

(2) Advising clients on potential penalties. A practitioner advising a client to take

practitioner also must inform the client‘ of

any opportunity to avoid any such penalty

by disclosure, if relevant, and of the requirements for adequate disclosure. This

paragraph (a)(2) applies even if the practitioner is not subject to a penalty with respect to the position.

(3) Relying on information furnished by

clients. A practitioner advising a client to

take a position on-a return, or preparing or

signing a return as a preparer, generally may

rely in good faith without verification upon

information furnished by the client. However, the practitioner may not ignore the

implications of information furnished to, or

actually known by, the practitioner, and

must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent, or incomplete.

(4) Definitions. For purposes of this section:

(i) Realistic possibility. A position is

considered to have a realistic possibility of

being sustained on its merits if a reasonable and well-informed analysis by a person

knowledgeable in the tax law would lead

such a person to conclude that the position

has approximately a one in three, or greater,

likelihood of being sustained on its merits.

The authorities described in 26 CFR 1.6662

- 4(d)(3)(iii), or any successor provision, of

the substantial understatement penalty

regulations may be taken into account for

purposes of this analysis. The possibility

that a position will not be challenged by

the Service (e.g., because the taxpayer’s return may not be audited or because the issue may not be raised on audit) may not be

taken into account.

(ii) Frivolous. A position is frivolous if it

is patently improper.

a position on a return, or preparing or signing a return as a preparer, must inform the

client of the penalties reasonably likely to

apply to the client with respect to the position advised, prepared, or reported. The

(b) Standard of discipline. As provided in

§10.52, only violations of this section that

are willful, reckless, or a result of gross

incompetence will subject a practitioner to

suspension or disbarment from practice before the Service.

[59 FR 31527, June 20,1994]

8 2
Subpart C — Rules Applicable to

Disciplinary Proceedings

 §10.50 Authority to disbar or suspend.

Pursuant to 31 U.S.C. 330(b), the Secretary of the Treasury after notice and an opportunity for a proceeding, may suspend ‘or

disbar any practitioner from practice before

the Internal Revenue Service. The Secretary

may take such action against any practitioner

who is shown to be incompetent or disreputable, who refuses to comply with any regulation in this part, or who, with intent to defraud, willfully and knowingly misleads or

threatens a client or prospective client.

[59 FR 31528, June 20, 1994]

§10.51 Disreputable conduct.

Disreputable conduct for which an attorney,

certified public accountant, enrolled agent, or

enrolled actuary may be disbarred or suspended from practice before the Internal Revenue Service includes, but is not limited to:

(a) Conviction of any criminal offense

under the revenue laws of the United States,

or of any offense involving dishonesty, or

breach of trust.

(b) Giving false or misleading information, or participating in any way in the giving of false or misleading information to the

Department of the Treasury or any officer

or employee thereof, or to any tribunal authorized to pass upon Federal tax matters, in

connection. with any matter pending or likely

to be pending before them, knowing such

information to be false or misleading. Facts

or other matters contained in testimony,

Federal tax returns, financial statements,

applications for enrollment, affidavits, declarations, or any other document or statement, written. or oral, are included in the

term “information.”

(c) Solicitation of employment as prohibited under §10.30 of this part, the use of

false or misleading representations with intent to deceive a client or prospective client

in order to procure employment, or intimating that the practitioner is able improperly

to obtain special consideration or action

from the Internal Revenue Service or officer or employee thereof.

(d) Willfully failing: to make a Federal

tax return in violation of the revenue laws

of the United States, or evading, attempting

to evade, or participating in any way in

evading or attempting to evade any Federal

tax or payment thereof, knowingly counseling or suggesting to a client or prospective

client an illegal plan to evade Federal taxes

or payment thereof, or concealing assets of

himself or another to evade Federal taxes

or payment thereof:

(e) Misappropriation of, or failure properly and promptly, to remit funds received

from a client for the purpose of payment of

taxes or other obligations due the United

States.

(f) Directly or indirectly attempting to

influence, or offering or agreeing to attempt

to influence, the official action of any officer or employee of the Internal Revenue

Service by the use of threats, false accusations, duress or coercion, by the offer of

any special inducement or promise of advantage or by the bestowing of any gift,

favor or thing of value.

(g) Disbarment or suspension from practice as an attorney, certified public accountant, public accountant, or actuary by any

duly constituted authority of any State,

possession, territory, Commonwealth, the

District of Columbia, any Federal court of

record or any Federal agency, body or

board.

(h) Knowingly aiding and abetting another person to practice before the Internal

Revenue Service during a period of suspension, disbarment, or ineligibility of such

other person. Maintaining a partnership for

the practice of law, accountancy, or other

related professional service with a person

who is under disbarment from practice before the Service shall be presumed to be a

violation of this provision.

83
(i) Contemptuous conduct in connection §10.52 Violation of regulations.

with practice before the Internal Revenue

Service, including the use of abusive lan- A practitioner may be disbarred or susguage, making false accusations and state- pended, from practice before the Internal

ments knowing them to be false, or circu- Revenue Service for any of the following;

lating or publishing malicious or libelous (a) Willfully violating any of the regulamatter. tions contained in this part.

(j) Giving a false opinion, knowingly, (b) Recklessly or through gross incomrecklessly, or through gross incompetence, petence (within the meaning of §10.51(j))

including an opinion which is intentionally violating §10.33 or §10.34 of this part.

or recklessly misleading, or a pattern of

providing incompetent opinions on ques-

[59 FR 31528, June 20, 1994]

§10.53 Receipt of information concern- tions arising under the Federal tax laws.

False opinions described in this paragraph ing attorneys, certified public acinclude those which reflect or result from a countants, enrolled agents, or enknowing misstatement of fact or law; from rolled actuaries.

an assertion of a position known to be unwarranted under existing law; from coun- If an officer or employee of the Internal

seling or assisting in conduct known to be Revenue Service has reason to believe that

illegal or fraudulent; from concealment of

matters required by law to be revealed; or

an attorney, certified public accountant, enfrom conscious disregard of information

rolled agent, or enrolled actuary has vioindicating that material facts expressed in

lated any provision of this part, or if any

such officer or employee receives informathe tax opinion or offering material are false tion to that effect,he shall promptly make

or misleading. For purposes of this para- a written report thereof, which report or a

graph, reckless conduct is a highly unreasonable omission or misrepresentation incopy thereof shall be forwarded to the Director of Practice. If any other person has

volving an extreme departure from the information of such violations, he may make

standards of ordinary care that a practitioner

should observe under the circumstances. A

a report thereof to the Director of Practice

pattern of conduct is a factor that Will be

or to any officer or employee of the Internal

Revenue Service.

taken into account-in determining whether

a practitioner acted knowingly, recklessly, [31 FR 10773, Aug. 13,1966, as amended at 57

or through gross incompetence. Gross in- FR 41095, Sept. 9, 1992]

competence includes conduct that reflects

gross indifference, preparation which is

grossly inadequate under the circumstances,

and a consistent failure to perform obligations to the client.

(Sec. 3, 23 Stat. 258, secs. 2-12, 60 Stat. 237 et

seq.; 5 U.S.C. 301; 31 U.S.C. 330; 31 U.S.C.

321 (Reorg; Han No. 26 of 1950, 15 FR 4935,

64 Stat. 1280,3 CFR, 1949-53 Comp.,p. 1017))

[131 FR 10773, Aug. 13,1966., as amended at 35

FR 13205, Aug. 19, 1970; 42 .FR 38353, July

28, 1977; 44FR 4946, Jan. 24, 1979; 49 FR

6723, Feb. 23,1984; 57 FR 41095, Sept. 9,1992;

59 FR 3 1528, June 2&1994]

84