Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 75439 

§ 190.08(a)(1)(i)(G), and by adding a new 

paragraph (a)(1)(i)(F): 

§ 190.08 Allocation of property and 

allowance of claims. 

* * * * * 

(a) * * * 

(1) * * * 

(i) * * * 

(F) To the extent not otherwise 

included, securities held in a portfolio 

margining account carried as a futures 

account; 

* * * * * 

Issued in Washington, DC, on November 

19, 2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Statement of Chairman Gary Gensler 

Protection of Collateral of 

Counterparties to Uncleared Swaps; 

Treatment of Securities in a Portfolio 

Margining Account in a Commodity 

Broker Bankruptcy 

I support the proposed rulemaking 

concerning protection of collateral of 

counterparties to uncleared swaps. The 

proposal includes important protections for 

end-users when entering into bilateral or 

customized swaps. The proposal follows the 

Congressional direction that end-users must 

have a choice to have any initial margin that 

they post with a swap dealer to be kept in 

a segregated account and with a third party 

custodian. The proposed rules would protect 

market participants while promoting the 

financial integrity of the marketplace. The 

proposal also includes necessary 

housekeeping details with regard to the 

Bankruptcy code. 

[FR Doc. 2010–29831 Filed 12–2–10; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[REG–100194–10] 

RIN 1545–BJ52 

Specified Tax Return Preparers 

Required To File Individual Income Tax 

Returns Using Magnetic Media 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations relating to the 

requirement for ‘‘specified tax return 

preparers,’’ generally tax return 

preparers who reasonably expect to file 

more than 10 individual income tax 

returns in a calendar year, to file 

individual income tax returns using 

magnetic media pursuant to section 

6011(e)(3) of the Internal Revenue Code 

(Code). The proposed regulations reflect 

changes to the law made by the Worker, 

Homeownership, and Business 

Assistance Act of 2009. The proposed 

regulations affect specified tax return 

preparers who prepare and file 

individual income tax returns, as 

defined in section 6011(e)(3)(C). For 

calendar year 2011, the proposed 

regulations define a specified tax return 

preparer as a tax return preparer who 

reasonably expects to file (or if the 

preparer is a member of a firm, the 

firm’s members in the aggregate 

reasonably expect to file) 100 or more 

individual income tax returns during 

the year, while beginning January 1, 

2012 a specified tax return preparer is 

a tax return preparer who reasonably 

expects to file (or if the preparer is a 

member of a firm, the firm’s members in 

the aggregate reasonably expect to file) 

11 or more individual income tax 

returns in a calendar year. The proposed 

regulations are unrelated to and are not 

intended to address the requirements for 

obtaining a preparer tax identification 

number (PTIN) under section 6109. See 

the final regulations under section 6109 

published in the Federal Register (75 

FR 60309–01). This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by January 3, 2011. 

Outlines of topics to be discussed at the 

public hearing scheduled for January 7, 

2011 must be received by January 3, 

2011. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–100194–10), room 

5205, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–100194– 

10), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC 20224, or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS—REG– 

100194–10). The public hearing will be 

held in the auditorium, Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC 20224. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Keith L. Brau, (202) 622–4940; 

concerning submissions of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Oluwafunmilayo Taylor of the 

Publications and Regulations Branch at 

(202) 622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collection of information 

contained in this notice of proposed 

rulemaking has been submitted to the 

Office of Management and Budget for 

review in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)). Comments on the 

collection of information should be sent 

to the Office of Management and 

Budget, Attn: Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, with copies to 

the Internal Revenue Service, Attn: IRS 

Reports Clearance Officer, 

SE:CAR:MP:T:T:SP, Washington, DC 

20224. Comments on the collection of 

information should be received by 

January 3, 2011. Comments are 

specifically requested concerning: 

Whether the proposed collection of 

information is necessary for the proper 

performance of the Internal Revenue 

Service, including whether the 

information will have practical utility; 

The accuracy of the estimated burden 

associated with the proposed collection 

of information (see below) or of the 

certification contained under the 

heading ‘‘Special Analyses’’; 

How the quality, utility, and clarity of 

the information to be collected may be 

enhanced; 

How the burden of complying with 

the proposed collection of information 

may be minimized; and 

Estimates of capital or start-up costs 

and costs of operation, maintenance, 

and purchases of service to provide 

information. 

The collection of information in this 

proposed regulation is in § 301.6011– 

6(a)(4)(ii). This information can be used 

by tax return preparers and specified tax 

return preparers, if necessary, to 

demonstrate to the IRS that the related 

individual income tax returns filed in 

paper format were not required to be 

filed electronically pursuant to section 

6011(e)(3) and § 301.6011–6. The 

collection of information is voluntary to 

obtain a benefit. The likely respondents 

are the individuals and small businesses 

who prepare individual income tax 

returns in exchange for compensation. It 

is estimated that 5 minutes of 

preparation time is needed for a tax 

return preparer to explain the purpose 

of the information and obtain it from the 

taxpayer in the manner prescribed by 

the IRS and 6 minutes for 

recordkeeping, consisting of 

maintaining a copy of the information 

submitted for the respondent’s records. 


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75440 Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 

Estimated total annual reporting 

burden: 1,222,815 hours in calendar 

year 2011 and 1,689,930 hours in 

calendar year 2012. 

Estimated average annual burden 

hours per respondent: 9.06 hours (per 

firm) in calendar year 2011 and 5.42 

hours (per firm) in calendar year 2012. 

Estimated number of respondents or 

recordkeepers: 135,000 in calendar year 

2011 and 312,000 in calendar year 2012. 

Estimated annual frequency of 

responses per respondent: 49 in 

calendar year 2011 and 29.5 in calendar 

year 2012. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. 

Background 

Recognizing the benefits of electronic 

filing, Congress enacted section 2001(a) 

of the IRS Restructuring and Reform Act 

of 1998, Public Law 105–206 (112 Stat. 

727), which states that a policy of 

Congress is to promote paperless filing. 

Electronic filing of tax returns benefits 

taxpayers and the IRS by reducing errors 

that are more likely to occur during the 

manual preparation and processing of 

paper returns. Electronic filing of tax 

returns results in faster settling of 

accounts and better customer service 

because the time required to process 

paper returns is eliminated. Electronic 

filing of tax returns improves taxpayer 

satisfaction and confidence in the filing 

process, and may be more cost effective. 

Electronic filing of tax returns enables 

the IRS to review taxpayer submissions 

expeditiously to reduce audit cycle time 

and helps the IRS identify emerging 

trends more efficiently. 

Section 6011(e)(1) generally 

authorizes the Secretary to prescribe 

regulations providing the standards for 

determining which returns must be filed 

on magnetic media, including electronic 

filing. Prior to passage of the Worker, 

Homeownership, and Business 

Assistance Act of 2009, Public Law 111– 

92 (123 Stat. 2984, 2997 (2009)) (Act), 

section 6011(e)(1) provided that, 

without exception, the Secretary may 

not require returns of any tax imposed 

by subtitle A on individuals, estates, 

and trusts to be other than on paper 

forms supplied by the Secretary. Under 

section 6011(e)(2)(A), in prescribing 

regulations under section 6011(e)(1), the 

Secretary shall not require any person 

(taxpayer) to file on magnetic media 

(including electronically) unless the 

person is required to file at least 250 

returns during the calendar year. 

With respect to the restriction that the 

Secretary may not require returns of any 

tax imposed by subtitle A on 

individuals, estates, and trusts to be 

filed in any format other than paper 

forms supplied by the Secretary, the Act 

amended section 6011(e)(1) to provide 

an exception for individual income tax 

returns filed by specified tax return 

preparers, as set forth in new section 

6011(e)(3). New section 6011(e)(3) 

provides that the Secretary shall require 

the filing on magnetic media of any 

individual income tax returns prepared 

and filed by a specified tax return 

preparer. As more fully discussed 

below, filing on magnetic media 

includes electronic filing. 

The Act’s amendment to section 

6011(e) requires the Secretary to issue 

regulations to implement the statute. 

These proposed regulations require that 

the individual income tax returns 

prepared and filed by specified tax 

return preparers be filed electronically. 

To enhance compliance and to promote 

effective and efficient administration of 

the congressionally-mandated 

requirement of section 6011(e)(3), the 

proposed regulations provide a 

transition rule for certain specified tax 

return preparers. 

Explanation of Provisions 

1. Specified Tax Return Preparers 

Required To File Individual Income Tax 

Returns Using Magnetic Media 

In General 

With certain exclusions, discussed in 

the next section, the proposed 

regulations provide that any individual 

income tax return prepared and filed by 

a specified tax return preparer must be 

filed using magnetic media, as required 

under section 6011(e)(3). For purposes 

of these proposed regulations, magnetic 

media is defined in § 301.6011–2(a)(1), 

which generally includes magnetic tape, 

tape cartridge, and diskette, as well as 

other media, such as electronic filing, 

specifically permitted under the 

applicable regulations, procedures, or 

publications. Also, for purposes of these 

proposed regulations and as defined 

under section 6011(e)(3)(C), an 

individual income tax return is any 

return of income tax imposed by subtitle 

A on individuals, estates, and trusts. 

This includes any return of income tax 

in the Form 1040 series and Form 1041 

series. It also includes Form 990–T 

(Exempt Organization Business Income 

Tax Return) when the exempt 

organization is a trust subject to tax on 

unrelated business taxable income 

under section 511(b). 

The electronic filing requirement in 

these proposed regulations applies to 

specified tax return preparers. A 

specified tax return preparer is defined 

as any person who is a tax return 

preparer, as defined in section 

7701(a)(36) and § 301.7701–15, unless 

the tax return preparer reasonably 

expects to file 10 or fewer individual 

income tax returns in a calendar year, 

and if a person who is a tax return 

preparer is a member of a firm, that 

person is a specified tax return preparer 

unless the person’s firm members in the 

aggregate reasonably expect to file 10 or 

fewer individual income tax returns in 

a calendar year. The proposed 

regulations do not apply to individuals 

described in section 7701(a)(36)(B)(i) 

through (iv) and § 301.7701–15(f) who 

are not defined as tax return preparers 

under that Code section and regulation, 

such as an individual who provides tax 

assistance under a Volunteer Income 

Tax Assistance (VITA) program, a 

person who merely prepares a return of 

the employer (or of an officer or 

employee of the employer) by whom the 

person is regularly and continuously 

employed, or a person who prepares a 

return as a fiduciary for any person. 

Solely for the 2011 calendar year, a tax 

return preparer will not be considered a 

specified tax return preparer if the tax 

return preparer reasonably expects, or 

the preparer’s firm members in the 

aggregate reasonably expect, to file 

fewer than 100 individual income tax 

returns in the 2011 calendar year. 

Under section 6011(e)(3), the concept 

of ‘‘file’’ or ‘‘filed’’ individual income tax 

returns affects both tax return preparers 

and specified tax return preparers. Tax 

return preparers are affected by this 

concept because a tax return preparer’s 

classification as a specified tax return 

preparer is based upon the number of 

individual income tax returns the tax 

return preparer reasonably expects to 

file in a given calendar year. Specified 

tax return preparers are further affected 

by this concept because the electronic 

filing requirement for any particular or 

specific individual income tax return 

depends upon whether the specified tax 

return preparer files the return. 

Therefore, for purposes of section 

6011(e)(3) and these regulations only, an 

individual income tax return is 

considered to be ‘‘filed’’ by a tax return 

preparer or a specified tax return 

preparer if the preparer or any member, 

employee, or agent of the preparer or the 

preparer’s firm submits the tax return to 

the IRS on the taxpayer’s behalf, either 

electronically (by e-file or other 

magnetic media) or in non-electronic or 


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Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 75441 

non-magnetic media (paper) form. 

Submission of a tax return in paper form 

includes the direct or indirect 

transmission, sending, mailing, or 

otherwise delivering of the paper tax 

return to the IRS by the tax return 

preparer or the specified tax return 

preparer, or by any member, employee, 

or agent of the tax return preparer or the 

preparer’s firm, and may include any act 

or acts of assistance that go beyond the 

provision of filing or delivery 

instructions to the taxpayer. For 

example, this can include the preparer 

or a member of the preparer’s firm 

dropping the return in the mailbox for 

the taxpayer. The assistance of others is 

considered for purposes of determining 

whether a return is filed by a tax return 

preparer or specified tax return 

preparer, to prevent a preparer from 

avoiding these rules by merely handing 

the return to an employee or someone 

else in the firm to mail to the IRS. 

A tax return preparer or specified tax 

return preparer, or if the preparer is a 

member of a firm, the preparer’s firm, 

will be able to affirmatively 

demonstrate, if asked, that it was a 

taxpayer’s choice to file an individual 

income tax return in paper format if the 

preparer who prepared the return 

obtains a signed statement from the 

taxpayer that states the taxpayer chooses 

to file the return in paper format and 

that the taxpayer, and not the preparer, 

will submit the paper return to the IRS. 

This statement must be signed by the 

taxpayer (by both spouses if a joint 

return) and dated on or before the date 

the taxpayer files the return. The IRS 

may provide guidance through forms, 

instructions or other appropriate 

guidance regarding how preparers can 

document taxpayer choices to file 

individual income tax returns in paper 

format. A Notice containing a proposed 

revenue procedure outlining the 

requirements and format of statements 

to document when a taxpayer chooses to 

file individual income tax returns in 

paper format is being published in the 

Internal Revenue Bulletin (IRB) 

concurrently with these proposed 

regulations. 

In addition, the proposed regulations 

provide that the definition of file or 

filed does not alter or affect a taxpayer’s 

obligation to file any type of tax return 

required under any other provision of 

law. The definition of file or filed by a 

tax return preparer or a specified tax 

return preparer contained in these 

proposed regulations applies only for 

the purposes of section 6011(e)(3) and 

these regulations, and does not apply for 

any other purpose under any other 

provision of law, such as the statutory 

period of limitations based on the filing 

of a tax return. 

2. Exclusions 

The proposed regulations provide the 

following exclusions from the electronic 

filing requirement. 

A. Undue Hardship Waivers 

Under the proposed regulations, the 

IRS may grant a waiver of the 

requirement of this rule in cases of 

undue hardship. A waiver may 

generally be granted to a specified tax 

return preparer for an undue hardship 

that can be identified in advance, before 

the specified tax return preparer would 

otherwise be required to file individual 

income tax returns electronically. 

Because this electronic filing 

requirement is statutorily imposed, the 

IRS will ordinarily grant undue 

hardship waivers only in rare cases. An 

undue hardship waiver may be granted 

to a specified tax return preparer for a 

series or class of individual income tax 

returns or for a specified period of time. 

A determination of undue hardship will 

be based upon all facts and 

circumstances. A specified tax return 

preparer shall request an undue 

hardship waiver in the manner 

prescribed by the IRS in forms, 

instructions, or other appropriate 

guidance. A Notice containing a 

proposed revenue procedure outlining 

the requirements and format for undue 

hardship waiver requests is being 

published concurrently with these 

proposed regulations. 

B. Administrative Exemptions 

The IRS may provide administrative 

exemptions for certain classes of 

specified tax return preparers or types of 

individual income tax returns as the IRS 

determines necessary to promote 

effective and efficient tax 

administration. For example, the IRS 

may provide a broad administrative 

exemption applicable to all tax return 

preparers for a particular type of form if 

the IRS does not yet provide the 

capability to file the form electronically, 

or for individual income tax returns 

prepared by specified tax return 

preparers who meet certain conditions 

defined by the IRS. The IRS may also 

provide an administrative exemption for 

individual income tax returns that 

contain or require documentation or 

attachments that the IRS does not yet 

provide the capability to file 

electronically, for example, 

documentation for the First-Time 

Homebuyer Credit, section 6707A 

disclosures, or required appraisals to 

support charitable contributions. The 

IRS may also provide a limited 

administrative exemption for specified 

tax return preparers who are certified 

members of, and follow the teachings of, 

a recognized religious group that is 

conscientiously opposed to using 

electronic media, which would include 

filing electronically. Unlike undue 

hardship waivers, specified tax return 

preparers who meet the criteria of an 

administrative exemption generally 

need not submit a request to the IRS to 

claim applicability of the administrative 

exemption. The IRS may provide the 

criteria and procedures, if any are 

necessary, for administrative 

exemptions through forms, instructions, 

or other appropriate guidance. 

3. Reasonably Expect To File 

A. In General 

The determination of whether a tax 

return preparer (or if the preparer is a 

member of a firm, the preparer’s firm 

members in the aggregate) reasonably 

expects to file 10 or fewer individual 

income tax returns (or, in the case of the 

2011 calendar year, fewer than 100 

individual income tax returns) is made 

by adding together all of the individual 

income tax returns (forms in the Form 

1040 series, Form 1041 series, and 

Forms 990–T (when the exempt 

organizations are trusts subject to tax on 

unrelated business taxable income 

under section 511(b)), in the aggregate) 

the tax return preparer and, if the 

preparer is a member of a firm, the 

firm’s members, reasonably expect to 

prepare and file in each calendar year. 

In making this determination individual 

income tax returns that are excluded 

from the electronic filing requirement 

due to taxpayer choice or under the 

administrative exemption exclusion, as 

provided in these proposed regulations, 

are not to be counted. Returns excluded 

under the undue hardship waiver 

exclusion are to be counted, however, 

because it is expected that such waivers 

will generally be sought by tax return 

preparers who are specified tax return 

preparers and who would ordinarily 

have to file these returns electronically 

but for the waivers granted by the IRS 

in cases of undue hardship. 

B. Time for Making Determination of 

Reasonable Expectations 

The determination regarding 

reasonable expectations is made 

separately for each calendar year in 

order to ascertain whether the electronic 

filing requirement applies to a tax return 

preparer for that year. For each calendar 

year, the determination of whether a tax 

return preparer and the preparer’s firm 

reasonably expect to file 10 or fewer 

individual income tax returns (or, in the 


emcdonald on DSK2BSOYB1PROD with PROPOSALS-1
75442 Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 

case of the 2011 calendar year, fewer 

than 100 individual income tax returns) 

is made based on all relevant, objective, 

and demonstrable facts and 

circumstances prior to the time the tax 

return preparer and the preparer’s firm 

first file an individual income tax return 

during the calendar year. 

4. Additional Guidance 

The proposed regulations authorize 

the IRS to implement the requirements 

of section 6011(e)(3) and the regulations 

through additional guidance, including 

by revenue procedures, notices, 

publications, forms, and instructions, 

including those issued electronically. 

5. Proposed Effective and Applicability 

Dates 

The proposed regulations are effective 

and applicable on January 1, 2011. To 

promote the effective and efficient 

administration of the electronic filing 

requirement in section 6011(e)(3), the 

proposed regulations provide a 

transition rule for 2011, based upon the 

number of individual income tax 

returns a tax return preparer files, to 

permit the IRS and affected tax return 

preparers sufficient time to prepare for 

and implement the requirements of 

section 6011(e)(3) and these proposed 

regulations. Beginning January 1, 2011, 

tax return preparers who reasonably 

expect to file (if a member of a firm 

whose firm members in the aggregate 

reasonably expect to file) 100 or more 

individual income tax returns in 

calendar year 2011 are specified tax 

return preparers who are subject to 

these regulations in 2011. Beginning 

January 1, 2012, tax return preparers 

who reasonably expect to file (if a 

member of a firm whose firm members 

in the aggregate reasonably expect to 

file) 11 or more individual income tax 

returns in a calendar year are specified 

tax return preparers who are subject to 

these regulations for that calendar year. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. 

It is hereby certified that the 

collection of information contained in 

these proposed regulations would not 

have a significant economic impact on 

a substantial number of small entities. 

Accordingly, a Regulatory Flexibility 

Analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. This certification is based 

on a determination that these proposed 

regulations would impose, at most, a 

minimal additional reporting or 

recordkeeping requirement. As 

discussed in the Paperwork Reduction 

Act section of this preamble, the 

economic impact on affected small 

entities is not significant. 

It also has been determined that 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. chapter 5) does 

not apply to these proposed regulations. 

Pursuant to section 7805(f) of the 

Internal Revenue Code, this notice of 

proposed rulemaking has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on their 

impact on small business. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The 

Treasury Department and the IRS 

request comments on the clarity of the 

proposed rules and how they can be 

made easier to understand. The 

Treasury Department and the IRS also 

request comments on the procedures 

and criteria to be established to 

document taxpayer choices to file in 

paper format and to request the undue 

hardship waiver, as well as 

circumstances that may warrant the 

granting of an administrative exemption 

for the 2011 calendar year. Finally, the 

Treasury Department and the IRS 

request comments on the accuracy of 

the certification that the regulations in 

this document will not have a 

significant economic impact on a 

substantial number of small entities as 

well as comments on the Paperwork 

Reduction Act burden estimates 

contained in the Special Analysis 

section of this preamble. All comments 

that are submitted by the public will be 

available for public inspection and 

copying. 

A public hearing has been scheduled 

for Tuesday, January 7, 2011 at 10 a.m. 

in the auditorium of the Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. Due to 

building security procedures, all visitors 

must enter at the Constitution Avenue 

entrance. In addition, all visitors must 

present photo identification to enter the 

building. Because of access restrictions, 

visitors will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit written or electronic 

comments and an outline of the topics 

to be discussed and the time to be 

devoted to each topic by January 3, 

2011. 

A period of 10 minutes will be 

allotted to each person for making 

comments. An agenda showing the 

scheduling of the speakers will be 

prepared after the deadline for receiving 

outlines has passed. Copies of the 

agenda will be available free of charge 

at the hearing. 

Drafting Information 

The principal author of these 

proposed regulations is Keith L. Brau, 

Office of the Associate Chief Counsel 

(Procedure and Administration). 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR parts 1 and 301 

are proposed to be amended as follows: 

PART 1—INCOME TAXES 

Paragraph 1. The authority citation 

for part 1 is amended by adding an entry 

in numerical order to read, in part, as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 1.6011–6 also issued under 26 

U.S.C. 6011. * * * 

Par. 2. Section 1.6011–6 is added to 

read as follows: 

§ 1.6011–6 Specified tax return preparers 

required to file individual income tax 

returns using magnetic media. 

Individual income tax returns that are 

required to be filed on magnetic media 

by tax return preparers under 

§ 301.6011–6 of this chapter must be 

filed in accordance with Internal 

Revenue Service regulations, revenue 

procedures, revenue rulings, 

publications, forms or instructions, 

including those posted electronically. 

PART 301—PROCEDURE AND 

ADMINISTRATION 

Par. 3. The authority citation for part 

301 is amended by adding an entry in 


emcdonald on DSK2BSOYB1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 75443 

numerical order to read, in part, as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 301.6011–6 also issued under 26 

U.S.C. 6011. * * * 

Par. 4. Section 301.6011–6 is added to 

read as follows: 

§ 301.6011–6 Specified tax return 

preparers required to file individual income 

tax returns using magnetic media. 

(a) Definitions. 

(1) Magnetic media. For purposes of 

this section, the term magnetic media 

has the same meaning as in § 301.6011– 

2(a)(1). 

(2) Individual income tax return. The 

term individual income tax return 

means any return of tax imposed by 

subtitle A on individuals, estates, and 

trusts. 

(3) Specified tax return preparer. The 

term specified tax return preparer 

means any person who is a tax return 

preparer, as defined in section 

7701(a)(36) and § 301.7701–15, unless 

that person reasonably expects to file 10 

or fewer individual income tax returns 

in a calendar year. If a person who is a 

tax return preparer is a member of a 

firm, that person is a specified tax 

return preparer unless the person’s firm 

members in the aggregate reasonably 

expect to file 10 or fewer individual 

income tax returns in a calendar year. 

Solely for the 2011 calendar year, a 

person will not be considered a 

specified tax return preparer if that 

person reasonably expects, or if the 

person is a member of a firm, the firm’s 

members in the aggregate reasonably 

expect, to file fewer than 100 individual 

income tax returns in the 2011 calendar 

year. Solely for purposes of this section, 

an individual is considered a member of 

a firm if the individual is an employee, 

agent, member, partner, shareholder, or 

other equity holder of the firm. 

(4) File or Filed. (i) For purposes of 

section 6011(e)(3) and these regulations 

only, an individual income tax return is 

considered to be ‘‘filed’’ by a tax return 

preparer or a specified tax return 

preparer if the preparer submits the tax 

return to the IRS on the taxpayer’s 

behalf, either electronically (by e-file or 

other magnetic media) or in nonelectronic (paper) form. Submission of 

an individual income tax return by a tax 

return preparer or a specified tax return 

preparer in non-electronic form 

includes the direct or indirect 

transmission, sending, mailing or 

otherwise delivering of the paper tax 

return to the IRS by the preparer, any 

member, employee, or agent of the 

preparer, or any member, employee, or 

agent of the preparer’s firm, and 

includes any act or acts of assistance 

beyond providing filing or delivery 

instructions to the taxpayer. 

(ii) An individual income tax return 

will not be considered to be filed, as 

defined in paragraph (a)(4)(i) of this 

section, by a tax return preparer or 

specified tax return preparer if the tax 

return preparer or specified tax return 

preparer who prepared the return 

obtains, on or prior to the date the 

return is filed, a signed (by both spouses 

if a joint return) and dated written 

statement from the taxpayer that states 

the taxpayer chooses to file the return in 

paper format, and that the taxpayer, and 

not the preparer, will submit the paper 

return to the IRS. The IRS may provide 

guidance through forms, instructions or 

other appropriate guidance regarding 

how preparers can document taxpayer 

choices to file individual income tax 

returns in paper format. 

(iii) The rules contained in this 

section do not alter or affect a taxpayer’s 

obligation to file returns under any 

other provision of law. The definition of 

file or filed by a tax return preparer or 

specified tax return preparer contained 

in paragraph (a)(4)(i) of this section 

applies only for the purposes of section 

6011(e)(3) and these regulations and 

does not apply for any other purpose 

under any other provision of law. 

(b) Magnetic media filing requirement. 

Except as provided in paragraphs 

(a)(4)(ii) and (c) of this section, any 

individual income tax return prepared 

by a specified tax return preparer in a 

calendar year must be filed on magnetic 

media if the return is filed by the 

specified tax return preparer. 

(c) Exclusions. The following 

exclusions apply to the magnetic media 

filing requirement in this section: 

(1) Undue hardship waiver. The IRS 

may grant a waiver of the requirement 

of this section in cases of undue 

hardship. An undue hardship waiver 

may be granted upon application by a 

specified tax return preparer consistent 

with instructions provided in published 

guidance and as prescribed in relevant 

forms and instructions. A determination 

of undue hardship will be based upon 

all facts and circumstances. The undue 

hardship waiver provided to a specified 

tax return preparer may apply to a series 

or class of individual income tax returns 

or for a specified period of time, subject 

to the terms and conditions regarding 

the method of filing prescribed in such 

waiver. 

(2) Administrative exemptions. The 

IRS may provide administrative 

exemptions from the requirement of this 

section for certain classes of specified 

tax return preparers, or regarding certain 

types of individual income tax returns, 

as the IRS determines necessary to 

promote effective and efficient tax 

administration. The IRS may provide 

administrative exemptions and any 

criteria or procedures necessary to claim 

an administrative exemption through 

forms, instructions, or other appropriate 

guidance. 

(d) Reasonably expect to file—(1) In 

general. The determination of whether a 

tax return preparer reasonably expects, 

or if the preparer is a member of a firm, 

the firm’s members in the aggregate 

reasonably expect, to file 10 or fewer 

individual income tax returns (or, in the 

case of the 2011 calendar year, fewer 

than 100 individual income tax returns) 

is made by adding together all of the 

individual income tax returns the tax 

return preparer and, if the preparer is a 

member of a firm, the firm’s members 

reasonably expect to prepare and file in 

the calendar year. In making this 

determination, individual income tax 

returns that the tax return preparer 

reasonably expects will not be subject to 

the magnetic media filing requirement 

under paragraph (a)(4)(ii) of this section 

or are excluded from the requirement 

under (c)(2) of this section are not to be 

counted. Returns excluded from the 

magnetic media filing requirement 

under paragraph (c)(1) of this section are 

to be counted for purposes of making 

this determination. 

(2) Time for making determination of 

reasonable expectations. The 

determination regarding reasonable 

expectations is made separately for each 

calendar year in order to ascertain 

whether the magnetic media filing 

requirement applies to a tax return 

preparer for that year. For each calendar 

year, the determination of whether a tax 

return preparer and the preparer’s firm 

reasonably expect to file 10 or fewer 

individual income tax returns (or, in the 

case of the 2011 calendar year, fewer 

than 100 individual income tax returns) 

is made based on all relevant, objective, 

and demonstrable facts and 

circumstances prior to the time the tax 

return preparer and the preparer’s firm 

first file an individual income tax return 

during the calendar year. 

(e) Examples. The examples read as 

follows: 

Example 1. Tax Return Preparer A is an 

accountant who recently graduated from 

college with an accounting degree and has 

opened his own practice. A has not prepared 

individual income tax returns for 

compensation in the past and does not plan 

to focus his practice on individual income 

tax return preparation. A intends instead to 

focus his practice on providing specialized 

accounting services to certain health care 

service providers. A has no plans to, and 

does not, employ or engage any other tax 

return preparers. A estimates that he may be 


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75444 Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules 

asked by some clients to prepare and file 

their individual income tax returns for 

compensation, but A expects that the number 

of people who do ask him to provide this 

service will be no more than seven in 2012. 

In fact, A actually prepares and files six 

paper Form 1040 (U.S. Individual Income 

Tax Return) returns in 2012. Due to a 

growing client base, and based upon his 

experience in 2012, A expects that the 

number of individual income tax returns he 

will prepare and file in 2013 will at least 

double, estimating he will prepare and file 12 

Form 1040 returns in 2013. A does not 

qualify as a specified tax return preparer for 

2012 because A reasonably expects to file 10 

or fewer (seven) in 2012. Consequently, A is 

not required to electronically file the 

individual income tax returns he prepares 

and files in 2012. He does not qualify as a 

specified tax return preparer for that year 

because A reasonably expects to file 10 or 

fewer returns (seven) in 2012. A’s 

expectation is reasonable based on his 

business projections, individual income tax 

return filing history, and staffing decisions. A 

is a specified tax return preparer in 2013, 

however, because based on those same 

factors A reasonably expects to file more than 

10 individual income tax returns (12) during 

that calendar year. A, therefore, must 

electronically file all individual income tax 

returns that A prepares and files in 2013 that 

are not otherwise excluded from the 

electronic filing requirement. 

Example 2. Same facts as in Example 1, 

except three of Tax Return Preparer A’s 

clients specifically chose to have A prepare 

their individual income tax returns in paper 

format in 2012 with the clients mailing their 

respective returns to the IRS. A expects that 

these three clients will similarly choose to 

have him prepare their returns in paper 

format in 2013, with the clients being 

responsible for mailing their returns to the 

IRS. A is not required to electronically file 

these three returns in 2013 because the 

taxpayers chose to file their returns in paper 

format, and A obtained a dated written 

statement from each of those taxpayers, 

indicating that they chose to file their returns 

in paper format. These three individual 

income tax returns are not counted in 

determining how many individual income 

tax returns A reasonably expects to file in 

2013. Because the total number of individual 

income tax returns A reasonably expects to 

file in 2013 (nine) does not exceed 10, A is 

not a specified tax return preparer for 

calendar year 2013, and A is not required to 

electronically file any individual income tax 

return that he prepares and files in 2013. 

Example 3. Tax Return Preparer B is a solo 

general practice attorney in a small county. 

Her practice includes the preparation of wills 

and assisting executors in administering 

estates. As part of her practice, B infrequently 

prepares and files Forms 1041 (U.S. Income 

Tax Return for Estates and Trusts) for 

executors. In the past three years, she 

prepared and filed an average of five Forms 

1041 each year and never exceeded more 

than seven Forms 1041 in any year. Based on 

B’s prior experience and her estimate for 

2012, made prior to the time she first files an 

individual income tax return in 2012, she 

reasonably expects to prepare and file no 

more than five Forms 1041 in 2012. Due to 

the unforeseen deaths of several of her clients 

in late 2011, B actually prepares and files 12 

Forms 1041 in 2012. B does not find out 

about these deaths until after she has already 

filed the first Form 1041 in 2012 for another 

client. B is not required to electronically file 

these returns in 2012. She does not qualify 

as a specified tax return preparer for calendar 

year 2012 because prior to the time she filed 

the first Form 1041 in 2012, she reasonably 

expected to file 10 or fewer individual 

income tax returns in 2012. 

Example 4. Same facts as Example 3, 

except, in addition to the five Forms 1041 

that she expects to prepare and file in 2012, 

Tax Return Preparer B also expects to prepare 

and file 10 paper Forms 1040 (U.S. 

Individual Income Tax Return) in 2012, 

based upon the requests that she has received 

from some of her clients. Because the total 

number of individual income tax returns B 

reasonably expects to file in 2012 (fifteen) 

exceeds 10, B is a specified tax return 

preparer for calendar year 2012, and B must 

electronically file all individual income tax 

returns that B prepares and files in 2012 that 

are not otherwise excluded from the 

electronic filing requirement. 

Example 5. Firm X consists of two tax 

return preparers, Tax Return Preparer C who 

owns Firm X, and Tax Return Preparer D 

who is employed by C in Firm X. Based upon 

the firm’s experience over the past three 

years, C and D reasonably expect to file nine 

and ten individual income tax returns for 

compensation, respectively, in 2012. Both C 

and D must electronically file the individual 

income tax returns that they prepare in 2012, 

unless the returns are otherwise excluded 

from the electronic filing requirement, 

because they are members of the same firm 

and the aggregated total of individual income 

tax returns that they reasonably expect to file 

in 2012 (nineteen), exceeds 10 individual 

income tax returns. 

(f) Additional guidance. The IRS may 

implement the requirements of this 

section through additional guidance, 

including by revenue procedures, 

notices, publications, forms and 

instructions, including those issued 

electronically. 

(g) Proposed effective/applicability 

dates. This section is proposed to be 

effective and applicable on January 1, 

2011. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2010–30500 Filed 12–1–10; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 201, 245, and 252 

RIN Number 0750–AG38 

Defense Federal Acquisition 

Regulation Supplement; Government 

Property (DFARS Case 2009–D008) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule with request for 

comments. 

SUMMARY: DoD is proposing to amend 

the Defense Federal Acquisition 

Regulation Supplement (DFARS) to 

revise DFARS part 245, Government 

Property, to reflect the recent revisions 

to FAR part 45, Government Property. 

DATES: Comments on the proposed rule 

should be submitted in writing to the 

address shown below on or before 

February 1, 2011, to be considered in 

the formation of the final rule. 

ADDRESSES: Submit comments 

identified by DFARS Case 2009–D008, 

using any of the following methods: 

Æ Regulations.gov: http:// 

www.regulations.gov. 

Submit comments via the Internet. 

Follow the instructions provided at the 

‘‘Submit a Comment’’ screen. Please 

include ‘‘DFARS Case 2009–D008’’. 

Æ E-mail: dfars@osd.mil. Include 

DFARS Case 2009–D008 in the subject 

line of the message. 

Æ Fax: 703–602–0350. 

Æ Mail: Defense Acquisition 

Regulations System, Attn: Ms. Mary 

Overstreet, OUSD(AT&L) DPAP/DARS, 

Room 3B855, 3060 Defense Pentagon, 

Washington, DC 20301–3060. Please cite 

DFARS Case 2009–D008. 

Comments received generally will be 

posted without change, including any 

personal information provided. Please 

check http://www.regulations.gov 

approximately two to three days after 

electronic submission to verify 

posting—allow 30 days for posting of 

comments submitted by mail. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Mary Overstreet, 703–602–0311. 

SUPPLEMENTARY INFORMATION: 

I. Background 

This rule proposes to update and 

reorganize DFARS subparts 245.6 and 

245.7 for consistency with FAR changes 

published at 72 FR 27364 on May 15, 

2007, that address management of 

Government property in the possession 

of contractors, as well as the related 


emcdonald on DSK2BSOYB1PROD with PROPOSALS-1