[Federal Register Volume 71, Number 193 (Thursday, October 5, 2006)]
[Rules and Regulations]
[Pages 58740-58742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8525]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 9288]
RIN 1545-BF68


User Fees Relating to Enrollment

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains 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.

DATES: Effective Date: November 6, 2006.
    Applicablity Date: For date of applicability, see Sec.  300.0(c).

FOR FURTHER INFORMATION CONTACT: Concerning cost methodology, Eva 
Williams, (202) 622-6400; concerning the regulations, Matthew Cooper, 
(202) 622-4940 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document amends 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 IOAA of 
1952, which is codified at 31 U.S.C. 9701.
    The IOAA of 1952 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 Government-provided 
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.
    On August 29, 2006, a notice of proposed rulemaking (REG-145154-05) 
was published in the Federal Register. Approximately 40 written 
comments responding to the proposed regulations were received. A public 
hearing was held on September 29, 2006, but there were no requests to 
speak at the hearing. After consideration of the comments, the proposed 
regulations are adopted by this Treasury decision.

[[Page 58741]]

Enrolled Agent Program

    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, Sec.  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 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 parts) 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 Sec.  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 Sec.  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 examination 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 final 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 the efficiencies resulting from using a 
contractor will reduce 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. Further information about the contracting out 
of the SEE can be found at http://www.irs.gov/taxpros/agents/index.html.

Summary of Comments

    The final regulations establish an $11 per part user fee for the 
SEE. The final regulations establish separate $125 user fees for the 
enrollment and renewal of enrollment process. Most of the comments on 
the proposed regulations did not favor the higher fees. These comments 
focused on the increased economic burden on enrolled agents resulting 
from the higher fees. Several comments also stated that the Request for 
Proposal (RFP) for the examination implied that the IRS would collect 
its fee from the amount that the contractor is charging for its 
services. One comment requested that the IRS publicly release the 
costing methodology and the schedule for reevaluating the user fees, as 
well as provide a clarification of the ``Special Analyses'' section of 
the preamble. For the following reasons, these final regulations follow 
the proposed regulations without change.
    The OMB Circular requires the IRS to calculate and recover its full 
cost of providing services under the enrolled agent program. In 
accordance with the OMB Circular, these final regulations increase the 
fees to bring them in line with actual costs based upon a recent review 
of the enrolled agent program. The IRS is in compliance with the OMB 
Circular in its methodology for computation of the actual cost and will 
follow the OMB Circular's direction providing for a biennial 
reevaluation of the fees.
    The IRS has determined that the full cost to the IRS of overseeing 
the SEE is $11 per part per applicant. This revised user fee reflects 
the change in IRS costs of administering the examination program as a 
result of contracting out of the examination to a private contractor. 
For the first examination cycle (October 5, 2006 to December 1, 2006), 
the contractor is not collecting any user fee on behalf of the IRS. In 
future years, consistent with the RFP, the contractor will collect the 
user fee based on the full costs incurred by the IRS in overseeing the 
examination, which is separate and distinct from the fee that the 
contractor is charging for its services.
    The IRS has determined that the full cost of administering the 
enrollment and renenrollment process is $125 per enrolled agent. Before 
this final regulation, the most recent increase in user fees for the 
enrollment and renewal of enrollment process was in September 1995.
    The Chief Counsel for Advocacy of the Small Business Administration 
(SBA) commented that the certification in the proposed regulations 
regarding

[[Page 58742]]

the economic impact on small entities in the ``Special Analyses'' 
section of the preamble could be clearer. Specifically, the SBA 
requested that the certification identify the number of enrolled agents 
and the appropriate North American Industry Classification System 
(NAICS) codes for enrolled agents, estimate the percent of enrolled 
agents that are operating as or employed by small entities based upon 
the small business size standards established by the SBA, and further 
explain why the increased fees are not economically significant. The 
``Special Analyses'' section of the final regulations adopts these 
recommended changes.

Special Analyses

    It has been determined that this final rule 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. This final rule affects enrolled agents, 
of which there are currently 45,261 active. 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 
appropriate NAICS codes for enrolled agents relate to tax preparation 
services (NAICS code 541213) and other accounting services (NAICS code 
541219). Entities identified under these codes are considered small 
under the SBA size standards (13 CFR 121.201) if their annual revenue 
is less than $6.5 million or $7.5 million respectively. The IRS 
estimates that 99 percent of enrolled agents are operating as or 
employed by small entities. Therefore, the IRS has determined that this 
final rule will affect a substantial number of small entities. The 
dollar amounts of the increases in fees are not, however, substantial 
enough to have a significant economic impact on any entity subject to 
the fees. The amounts of the fees are commensurate with, if not less 
than, the amount of fees charged for other professional examination and 
enrollment fees. Persons who elect to take the examination and apply 
for enrollment or renewal of enrollment also receive benefits from 
obtaining the enrolled agent designation. The Chief Counsel for 
Advocacy of the Small Business Administration submitted comments on the 
regulation, which are discussed elsewhere in this preamble.

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.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 300 is amended as follows:

PART 300--USER FEES

0
Paragraph 1. The authority citation for part 300 continues to read in 
part as follows:

    Authority: 31 U.S.C. 9701.


0
Par. 2. Section 300.0 is amended as follows:
0
1. Paragraphs (b)(4), (b)(5), and (b)(6) are added.
0
2. Paragraph (c) is revised.
    The additions and revision read as follows:


Sec.  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 November 6, 2006.
0
Par. 3. Section 300.4 is added to read as follows:


Sec.  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 per part, which is the government cost for overseeing the 
examination and does not include any fees charged by the examination 
administrator.
    (c) Person liable for the fee. The person liable for the special 
enrollment examination fee is the applicant taking the examination.

0
Par. 4. Section 300.5 is added to read as follows:


Sec.  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.
    (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.

0
Par. 5. Section 300.6 is added to read as follows:


Sec.  300.6  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.
    (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.
    Approved: October 2, 2006,
Eric Solomon,
Acting Deputy Assistant Secretary for Tax Policy.
[FR Doc. 06-8525 Filed 10-3-06; 10:00 am]
BILLING CODE 4830-01-P