Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Proposed Rules 51179 

§ 1.1502–12 Separate taxable income. 

* * * * * 

(s) The exclusion from gross income 

of previously taxed earnings and profits 

shall be determined by the rules of 

§ 1.959–3(g). 

Par. 11. In § 1.1502–32, add a 

sentence after the second sentence in 

paragraph (b)(3)(ii)(D), add a sentence 

after the fourth sentence in paragraph 

(b)(3)(iii)(B), and add Example 11 in 

paragraph (b)(5)(ii) to read as follows: 

§ 1.1502–32 Investment adjustments. 

* * * * * 

(b) * * * 

(3) * * * 

(ii) * * * 

(D) * * * Further, an increase to a 

member’s previously taxed earnings and 

profits account under § 1.959–

3(g)(1)(i)(B) that pursuant to section 

961(a) and § 1.961–1(b) results in an 

increase to a member’s basis in the stock 

in a CFC shall be treated as the receipt 

of tax exempt income. * * * 

(iii) * * * 

(B) * * * Also included as a 

noncapital, nondeductible expense is a 

decrease to a member’s previously taxed 

earnings and profits account under 

§ 1.959–3(g)(1)(i)(A) that results in a 

decrease to a member’s basis in the 

stock in a CFC pursuant to section 

961(b) and § 1.961–2(a). * * * 

* * * * * 

(5) * * * 

(ii) * * * 

Example 11. (a) Facts. P owns all of the 

stock of S and S1. S, a United States 

shareholder, owns 50 percent of the stock in 

FC, a CFC that uses the U.S. dollar as its 

functional currency. S1, a United States 

shareholder owns the remaining 50 percent 

of the stock in FC. Entering year 1, S has a 

previously taxed earnings and profits account 

with respect to its stock in FC consisting of 

$50x of section 959(c)(2) earnings and profits 

and S1 has a previously taxed earnings and 

profits account with respect to its stock in FC 

consisting of $200x of section 959(c)(2) 

earnings and profits. Entering year 1, FC has 

section 959(c)(2) earnings and profits of 

$250x and non-previously taxed earnings and 

profits of $100x. In year 1, FC generates no 

earnings and profits and makes a $100x 

distribution of earnings and profits on FC 

stock held by S and a $100x distribution of 

earnings and profits on the FC stock held by 

S1. 

(b) Analysis. First, pursuant to § 1.959–

3(e)(2)(ii), the section 959(c)(2) earnings and 

profits in S’s previously taxed earnings and 

profits account with respect to its FC stock 

are decreased from $50x to $0 and the section 

959(c)(2) earnings and profits in S1’s 

previously taxed earnings and profits account 

with respect to its FC stock are decreased 

from $200x to $100x. Then, pursuant to 

§ 1.959–2(e)(2)(v) and (g)(1)(i)(A), the section 

959(c)(2) earnings and profits in S1’s 

previously taxed earnings and profits account 

with respect to its FC stock are decreased 

from $100x to $50x and, pursuant to § 1.959–

3(e)(2)(ii)(B) and (g)(1)(i)(B), the section 

959(c)(2) earnings and profits in S’s 

previously taxed earnings and profits account 

with respect to its FC stock are increased 

from $0 to $50x and then decreased from 

$50x to $0. Pursuant to § 1.959–1(c) of this 

section, the entire $100x distribution to S 

and $100x distribution to S1 are excluded 

from S’s and S1’s gross incomes. Pursuant to 

paragraph (b)(3)(ii)(D) of this section, the 

$50x increase to the section 959(c)(2) 

earnings and profits in S’s previously taxed 

earnings and profits account with respect to 

its FC stock pursuant to § 1.959–3(g)(1)(i)(B) 

is treated as the receipt of $50x of tax-exempt 

income by S. Pursuant to paragraph (b)(2)(ii) 

of this section, P’s basis in S’s stock is 

increased by $50x. Pursuant to paragraph 

(b)(3)(iii)(B) of this section, the $50x decrease 

to the section 959(c)(2) earnings and profits 

in S1’s previously taxed earnings and profits 

account with respect to its FC stock pursuant 

to § 1.959–3(g)(1)(i)(A) is treated as a 

noncapital nondeductible expense to S1. 

Pursuant to paragraph (b)(2)(iii) of this 

section, P’s basis in S1’s stock is decreased 

by $50x. 

* * * * * 

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 06–7195 Filed 8–28–06; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 300 

[REG–145154–05] 

RIN 1545–BF68 

User Fees Relating to Enrollment 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed amendments to the 

regulations relating to user fees for the 

special enrollment examination to 

become an enrolled agent, the 

application for enrollment of enrolled 

agents, and the renewal of this 

enrollment. The charging of user fees is 

authorized by the Independent Offices 

Appropriations Act (IOAA) of 1952. 

This document also contains a notice of 

public hearing on these proposed 

regulations. 

DATES: Written or electronicallygenerated comments must be received 

by September 28, 2006. Outlines of 

topics to be discussed at the public 

hearing scheduled for September 29, 

2006, must be received by September 

28, 2006. 

ADDRESSES: Comments are encouraged 

to be submitted to: CC:PA:LPD:PR 

(REG–145154–05), room 5203, Internal 

Revenue Service, P.O. Box 7604, Ben 

Franklin Station, Washington, DC 

20044. Submissions may be sent 

electronically via the IRS Internet site at 

http://www.irs.gov/regs or via the 

Federal eRulemaking Portal at http:// 

www.regulations.gov (IRS–REG–

145154–05). 

FOR FURTHER INFORMATION CONTACT: 

Concerning submissions of comments 

and/or to be placed on the building 

access list to attend the hearing, Richard 

Hurst at 

Richard.A.Hurst@irscounsel.treas.gov or 

at (202) 622–7180; concerning cost 

methodology, Eva Williams at (202) 

622–6400; concerning the proposed 

regulations, Matthew Cooper at (202) 

622–4940 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 330 of Title 31 of the United 

States Code authorizes the Secretary of 

the Treasury to regulate practice before 

the Treasury Department. Pursuant to 

section 330 of Title 31, the Secretary has 

published regulations governing 

practice before the IRS in 31 CFR part 

10 and reprinted them as Treasury 

Department Circular No. 230 (Circular 

230). These regulations are administered 

by the IRS Office of Professional 

Responsibility (OPR). 

Section 10.3 of Circular 230 generally 

authorizes attorneys, certified public 

accountants, enrolled agents and 

enrolled actuaries to practice before the 

IRS. An enrolled agent is defined as an 

individual enrolled as an agent pursuant 

to the provisions of Circular 230. The 

provisions of Circular 230 provide that 

an individual desiring to become an 

enrolled agent is eligible for enrollment 

through either the successful passing of 

a written examination or through 

demonstration of sufficient expertise in 

tax administration based on former 

employment with the IRS. Specifically, 

section 10.4(a) authorizes the Director of 

OPR to grant enrollment to an applicant 

who demonstrates special competence 

in tax matters by passing a written 

examination administered by, or 

administered under the oversight of, the 

Director of OPR and who has not 

engaged in any conduct that would 

justify the censure, suspension, or 

disbarment of any practitioner under the 

provisions of Circular 230. Accordingly, 

every year OPR develops and 

administers a Special Enrollment 


jlentini on PROD1PC65 with PROPOSAL
51180 Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Proposed Rules 

Examination (SEE) that is given to all 

applicants desiring to become enrolled 

agents so that they can practice before 

the IRS. The IRS charged applicants a 

user fee of $55 ($45 if taking the 

examination in part) in order to take the 

2005 SEE. 

Section 10.4(b) authorizes the Director 

of OPR to grant enrollment for former 

IRS employees if the former employee 

meets certain requirements, including 

length of employment with the IRS and 

substantive tax expertise. Application 

for enrollment based on former 

employment with the IRS must be made 

within three years from the date of 

separation from such employment. 

Once eligible for enrollment, by either 

passing the examination or because of 

former employment with the IRS, an 

applicant must file an application for 

enrollment on Form 23, ‘‘Application 

for Enrollment to Practice before the 

Internal Revenue Service,’’ with the 

Director of OPR. As part of the 

application for enrollment process, the 

applicant must enclose a check or 

money order payable to the IRS in the 

amount set forth on Form 23, which 

constitutes a fee charged to each 

applicant for enrollment. The fee is 

nonrefundable regardless of whether the 

applicant is granted enrollment. The 

current user fee for enrollment on the 

Form 23 (Rev. February 2005) is $80. 

The Director of OPR will act upon an 

application for enrollment and issue an 

enrollment card to each individual 

whose application for enrollment to 

practice before the IRS is approved. 

Pursuant to section 10.6(d), each 

individual, once enrolled, is required to 

renew the enrollment every three years 

to maintain an active enrollment to 

practice before the IRS. In order to 

qualify for renewal, an applicant must 

certify the completion of the continuing 

professional education requirements set 

forth in section 10.6(e) of Circular 230. 

A nonrefundable user fee of $80 is 

currently charged for each application 

for renewal of enrollment filed with the 

Director of OPR on Form 8554, 

‘‘Application for Renewal of Enrollment 

to Practice Before the Internal Revenue 

Service.’’

Contracting Out of Special Enrollment 

Examination 

OPR has recently contracted out 

certain functions pertaining to the SEE 

to a private contractor. The contractor 

will furnish the resources, facilities, and 

services necessary to administer the 

entire SEE program, which includes 

examination development, 

administration of SEE, notification to 

IRS of candidates who took the 

examination, and the results of the 

examination. The contractor will receive 

payment for its services by charging a 

fee to exam applicants. OPR will, 

nonetheless, still maintain an oversight 

role with respect to the SEE. The 

contractor will collect a user fee on 

behalf of the IRS based on the full costs 

incurred by the IRS. These proposed 

regulations only establish a user fee 

with respect to the government costs for 

overseeing the SEE and do not include 

any fee that the contractor may charge 

for its services. Accordingly, while the 

user fee imposed pursuant to these 

regulations is less than the user fee that 

applicants were charged in 2005, the 

total fee that applicants will be charged 

is greater. The IRS estimates that by 

using a contractor, however, the total 

fees incurred will be less than the total 

fees that would otherwise be charged by 

the IRS in order to recover the full cost 

of the IRS administering all aspects of 

the SEE. 

User Fees for Special Enrollment 

Examination, Enrollment, and Renewal 

of Enrollment 

The user fee that the IRS currently 

charges applicants in order to take the 

SEE is being modified to reflect the 

change in IRS costs of administering the 

exam program as a result of the 

contracting out of the exam. The user 

fees that the IRS currently charge 

applicants for the enrollment and 

renewal of enrollment process are less 

than the actual cost of overseeing the 

enrollment process. The IRS is 

proposing new user fees to take the SEE 

to become an enrolled agent, the 

application for enrollment and the 

renewal of such enrollment. 

Proposed section 300.4 establishes an 

$11 per part user fee for the SEE. 

Proposed sections 300.5 and 300.6 

establish separate $125 user fees for the 

enrollment and renewal of enrollment 

process. 

Authority 

The IOAA of 1952 (31 U.S.C. 9701) 

authorizes agencies to prescribe 

regulations that establish charges for 

services provided by the agency. The 

charges must be fair and be based on the 

costs to the Government, the value of 

the service to the recipient, the public 

policy or interest served, and other 

relevant facts. The IOAA of 1952 

provides that regulations implementing 

user fees are subject to policies 

prescribed by the President, which are 

currently set forth in OMB Circular A–

25, 58 FR 38142 (July 15, 1993) (the 

OMB Circular). 

The OMB Circular encourages user 

fees for Government-provided services 

that confer benefits on identifiable 

recipients over and above those benefits 

received by the general public. Under 

the OMB Circular, an agency that seeks 

to impose a user fee for Governmentprovided services must calculate its full 

cost of providing those services. In 

general, a user fee should be set at an 

amount in order for the agency to 

recover the cost of providing the special 

service, unless the Office of 

Management and Budget grants an 

exception. Pursuant to the guidelines in 

the OMB Circular, the IRS has 

calculated its cost of providing services 

under the enrolled agents program. The 

IRS has determined that the full cost to 

the IRS of overseeing the SEE is $11 per 

part per applicant. The IRS has 

determined that the full cost of 

administering the enrollment and 

renenrollment process is $125 per 

enrolled agent. 

The proposed user fees will be 

implemented under the authority of the 

IOAA of 1952 and the OMB Circular. 

Proposed Effective Date 

These regulations are proposed to 

apply thirty days after the date of 

publication in the Federal Register of 

the final regulations. 

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 these regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. Accordingly, a regulatory 

flexibility analysis is not required. This 

certification is based on the information 

that follows. The economic impact of 

these regulations on any small entity 

would result from a small entity, 

including a sole proprietor, being 

required to pay a fee prescribed by these 

regulations in order to obtain a 

particular service. The dollar amount of 

the fee is not, however, substantial 

enough to have a significant economic 

impact on any entity subject to the fee. 

Moreover, payment of the fee is 

voluntary. The only persons subject to 

the fee are those who elect to take the 

special enrollment exam. Persons who 

elect to take the exam will have 

determined that it is in their economic 

interest to do so. Pursuant to section 

7805(f) of the Internal Revenue Code, 

this notice of proposed rulemaking will 

be submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact. 


jlentini on PROD1PC65 with PROPOSAL
Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Proposed Rules 51181 

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 IRS 

and Treasury Department request 

comments on the substance of the 

proposed regulations, as well as on the 

clarity of the proposed rules and how 

they can be made easier to understand. 

All comments will be available for 

public inspection and copying. 

A public hearing has been scheduled 

for September 29, 2006, at 10 a.m. in the 

11th floor conference room at 1901 S. 

Bell Street, Crystal City, VA. Due to 

building security procedures, 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 electronic or written 

comments and an outline of the 

comments to be discussed and the time 

to be devoted to each topic (signed 

original and eight (8) copies) by 

September 28, 2006. A period of ten (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 

regulations is Matthew S. Cooper of the 

Office of the Associate Chief Counsel 

(Procedure & Administration), 

Administrative Provisions & Judicial 

Practice Division. 

List of Subjects in 26 CFR Part 300 

Reporting and recordkeeping 

requirements, User fees. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 300 is 

proposed to be amended as follows: 

PART 300—USER FEES 

Paragraph 1. The authority citation 

for part 300 continues to read as 

follows: 

Authority: 31 U.S.C. 9701. 

Par. 2. Section 300.0 is amended as 

follows: 

1. Paragraphs (b)(4), (5), and (6) are 

added. 

2. Paragraph (c) is revised. 

The additions and revision read as 

follows: 

§ 300.0 User fees, in general. 

* * * * * 

(b) * * * 

(4) Taking the special enrollment 

examination to become an enrolled 

agent. 

(5) Enrolling an enrolled agent. 

(6) Renewing the enrollment of an 

enrolled agent. 

(c) Effective Date. This part 300 is 

applicable March 16, 1995, except that 

the user fee for processing offers in 

compromise is applicable November 1, 

2003, and the user fee for the special 

enrollment examination, enrollment, 

and renewal of enrollment for enrolled 

agents is applicable thirty days after the 

date of publication in the Federal 

Register of the final regulations. 

Par. 3. Section 300.4 is added to read 

as follows: 

§ 300.4 Special enrollment examination 

fee. 

(a) Applicability. This section applies 

to the special enrollment examination to 

become an enrolled agent pursuant to 31 

CFR 10.4(a). 

(b) Fee. The fee for taking the special 

enrollment examination is $11.00 per 

part. 

(c) Person liable for the fee. The 

person liable for the special enrollment 

examination fee is the applicant taking 

the examination. 

Par. 4. Section 300.5 is added to read 

as follows: 

§ 300.5 Enrollment of enrolled agent fee. 

(a) Applicability. This section applies 

to the initial enrollment of enrolled 

agents with the IRS Office of 

Professional Responsibility pursuant to 

31 CFR 10.5(b). 

(b) Fee. The fee for initially enrolling 

as an enrolled agent with the IRS Office 

of Professional Responsibility is 

$125.00. 

(c) Person liable for the fee. The 

person liable for the enrollment fee is 

the applicant filing for enrollment as an 

enrolled agent with the IRS Office of 

Professional Responsibility. 

Par. 5. Section 300.6 is added to read 

as follows: 

§ 300.5 Renewal of enrollment of enrolled 

agent fee. 

(a) Applicability. This section applies 

to the renewal of enrollment of enrolled 

agents with the IRS Office of 

Professional Responsibility pursuant to 

31 CFR 10.6(d)(6). 

(b) Fee. The fee for renewal of 

enrollment as an enrolled agent with the 

IRS Office of Professional Responsibility 

is $125.00. 

(c) Person liable for the fee. The 

person liable for the renewal of 

enrollment fee is the person renewing 

their enrollment as an enrolled agent 

with the IRS Office of Professional 

Responsibility. 

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 06–7246 Filed 8–25–06; 12:09 pm] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R07–OAR–2006–0484; FRL–8213–8] 

Approval and Promulgation of 

Implementation Plans; State of Iowa 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA proposes to approve the 

State Implementation Plan (SIP) 

revision submitted by the state of Iowa 

for the purpose of establishing 

exemptions for indoor sources of air 

pollution that are not directly vented to 

the outside but have emissions that 

leave the building through doors, vents 

or other means. This revision also 

clarifies that the permitting exemptions 

do not relieve the owner or operator of 

any source from any obligation to 

comply with any other applicable 

requirements. The state has 

demonstrated that air pollution 

emissions from this equipment are 

negligible and these exemptions are 

likely to result in no significant impact 

on human health or the environment. 

We have reviewed the state’s 

justification for the revisions and agree 

with its conclusions. 

DATES: Comments on this proposed 

action must be received in writing by 

September 28, 2006. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R07–

OAR–2006–0484 by one of the following 

methods: 

1. http://www.regulations.gov: Follow 

the on-line instructions for submitting 

comments. 

2. E-mail: Hamilton.heather@epa.gov. 

3. Mail: Heather Hamilton, 

Environmental Protection Agency, Air 


jlentini on PROD1PC65 with PROPOSAL