`[Federal Register Volume 89, Number 247 (Thursday, December 26, 2024)]
[Proposed Rules]
[Pages 104915-104934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29371]


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

DEPARTMENT OF THE TREASURY

Office of the Secretary

31 CFR Part 10

[REG-116610-20]
RIN 1545-BQ12


Regulations Governing Practice Before the Internal Revenue 
Service

AGENCY: Office of the Secretary, Treasury.

ACTION: Notice of proposed rulemaking, notice of public hearing, and 
withdrawal of notice of proposed rulemaking.

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

SUMMARY: This document contains proposed amendments to the regulations 
governing practice before the IRS. These regulations propose to 
eliminate provisions related to

[[Page 104916]]

registered tax return preparers, classify the use of certain contingent 
fee arrangements by practitioners as disreputable conduct, establish 
new standards for appraisals and the disqualification of appraisers, 
and update certain provisions as appropriate. This document also 
provides notice of a public hearing on the proposed regulations and 
withdraws the notice of proposed rulemaking published on July 28, 2009. 
The regulations would affect registered tax return preparers, enrolled 
agents (EAs), enrolled retirement plan agents, enrolled actuaries, 
Annual Filing Season Program (AFSP) participants, attorneys, certified 
public accountants (CPAs), appraisers, and other practitioners.

DATES: Electronic or written comments must be received by February 24, 
2025. The public hearing is being held on March 6, 2025, at 10 a.m. 
Eastern Time (ET). Requests to speak and outlines of topics to be 
discussed at the public hearing must be submitted as prescribed in the 
``Comments and Public Hearing'' section. The IRS must receive speakers' 
outlines of the topics to be discussed at the public hearing by 
February 24, 2025. If no outlines are received by February 24, 2025, 
the public hearing will be cancelled. Requests to attend the public 
hearing must be received by 5 p.m. ET on March 4, 2025. As of December 
26, 2024, the notice of proposed rulemaking (REG-113289-08) published 
on July 28, 2009 (74 FR 37183), is withdrawn.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically. Submit electronic submissions via the Federal 
eRulemaking Portal at https://www.regulations.gov (indicate IRS and 
REG-116610-20) by following the online instructions for submitting 
comments. Once submitted to the Federal eRulemaking Portal, comments 
cannot be edited or withdrawn. The Department of the Treasury (Treasury 
Department) and the IRS will publish for public availability any 
comment submitted electronically or on paper to the public docket. Send 
paper submissions to: CC:PA:01:PR (REG-116610-20), room 5203, Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
William J. Prater at (202) 317-6251; concerning submissions of comments 
or the public hearing, The Publications and Regulations Section at 
(202) 317-6901 (not toll-free numbers) or by sending an email to 
[email protected] (preferred).

SUPPLEMENTARY INFORMATION:

Authority

    This document contains proposed regulations that would amend the 
regulations under 31 U.S.C. 330 relating to the regulation of practice 
before the IRS, which are codified at 31 CFR part 10 and reprinted as 
Treasury Department Circular No. 230 (Circular 230). Since 1884, 
Federal law (now codified at 31 U.S.C. 330), has expressly authorized 
the Secretary of the Treasury (Secretary) to regulate practice before 
the Treasury Department. Specifically, 31 U.S.C. 330(a) provides that 
subject to section 500 of title 5, the Secretary may ``regulate the 
practice of representatives of persons before the Department of the 
Treasury.'' In addition, before admitting a representative to practice, 
the Secretary may require that the representative demonstrate ``good 
character,'' ``good reputation,'' the ``necessary qualifications to 
enable the representative to provide to persons valuable service,'' and 
``competency to advise and assist persons in presenting their cases.'' 
See 31 U.S.C. 330(a). The Secretary may delegate these duties and 
powers to another officer or employee of the Treasury Department under 
31 U.S.C. 321(b).

Background

    The provisions of 31 CFR part 10 are currently designated as 
Sec. Sec.  10.0 through 10.93 and a section of the current regulations 
is referred to as, as an example, ``current Sec.  10.0'' in this 
Background and the Explanation of Provisions. Circular 230, which 
contains current Sec. Sec.  10.0 through 10.93 related to governing 
practice before the IRS, has been amended periodically since it was 
first published in 1921.

A. Tax Return Preparation

    Prior to 2011, individual tax return preparers were generally not 
subject to Circular 230 unless the tax return preparer was an attorney, 
certified public accountant (CPA), enrolled agent (EA), or other type 
of practitioner identified in Circular 230. On June 3, 2011, the 
Treasury Department and the IRS published final regulations (TD 9527) 
in the Federal Register (76 FR 32286) to establish qualifications for 
tax return preparers, which required them to become registered tax 
return preparers subject to the requirements under Circular 230 and 
describing the allowable scope of a registered tax return preparer's 
practice before the IRS (2011 amendments).
    The 2011 amendments were challenged in Loving v. IRS, 917 F.Supp.2d 
67 (D.D.C. 2013), in which case the plaintiffs argued that the Treasury 
Department and the IRS did not have authority under 31 U.S.C. 330 to 
regulate tax return preparation because return preparation was not 
practice before the IRS. The United States District Court for the 
District of Columbia (District Court for the District of Columbia or 
district court) concluded that under 31 U.S.C. 330(a), practice before 
the IRS is limited to representing taxpayers before the IRS by 
assisting them in presenting their cases. Because the district court 
considered preparing and filing tax returns as falling short of 
``presenting a case,'' it held that the Treasury Department and the IRS 
lacked statutory authority to regulate tax return preparation as 
practice before the IRS under 31 U.S.C. 330(a) and enjoined the 
Treasury Department and the IRS from enforcing the 2011 amendments to 
Circular 230 related to registered tax return preparers. The United 
States Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit or court of appeals) affirmed the district court's opinion and 
order for injunction. The court of appeals upheld the district court's 
statutory construction, explaining that, while tax return preparers 
assist taxpayers, they do not represent taxpayers before the IRS or 
formally act as their agent. Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 
2014).

B. Contingent Fees

    Final regulations (TD 9359) published in the Federal Register (72 
FR 54540) on September 26, 2007, amended the rules under Circular 230 
regarding charging contingent fees in current Sec.  10.27 (2007 
amendments). The 2007 amendments amended the exceptions to the general 
prohibition on contingent fees, which prohibited practitioners from 
charging contingent fees for original returns, to permit practitioners 
to charge a contingent fee for services rendered in connection with the 
IRS's examination of, or challenge to, (i) an original tax return or 
(ii) an amended return or claim for refund or credit where the amended 
return or claim for refund or credit was filed within 120 days of the 
taxpayer receiving a written notice of the examination or a written 
challenge to the original tax return. The Treasury Department and the 
IRS subsequently clarified the 2007 amendments in Notice 2008-43, 2008-
1 C.B. 748 (March 26, 2008) to provide that a practitioner may charge a 
contingent fee for services rendered in connection with the IRS's 
examination of, or challenge to, an amended return or claim for

[[Page 104917]]

refund or credit filed (1) before the taxpayer received a written 
notice of examination of, or a written challenge to, the original tax 
return or (2) no later than 120 days after the receipt of such written 
notice or written challenge. Notice 2008-43 also provided an exception 
that allows practitioners to charge a contingent fee with respect to 
whistleblower claims under section 7623 of the Internal Revenue Code 
(Code). Current Sec.  10.27 also permits practitioners to charge 
contingent fees in connection with the determination of statutory 
interest and penalties and for services rendered in connection with 
judicial proceedings arising under the Code. Current Sec.  10.27 
prohibits contingent fee arrangements for services rendered in 
connection with any other matter before the IRS, including the 
preparation of original returns, amended returns, and claims for refund 
or credit.
    On July 28, 2009, the Treasury Department and the IRS published in 
the Federal Register (74 FR 37183) a notice of proposed rulemaking 
(REG-113289-08) proposing modifications to the rules relating to 
contingent fees under Circular 230 (2009 proposed regulations). The 
2009 proposed regulations have not been finalized.
    In 2014, the District Court for the District of Columbia held that 
preparing and filing ordinary refund claims, like preparing original 
tax returns, did not involve representing taxpayers or practice before 
the IRS. Ridgely v. Lew, 55 F. Supp.3d 89 (D.D.C. 2014). As a result, 
according to the district court, the IRS lacked authority to treat the 
preparation of ordinary refund claims as practice before the IRS as 
described under 31 U.S.C. 330(a). Id. Thus, the district court 
concluded that the IRS cannot prohibit charging contingent fees for 
ordinary refund claims based on its authority to regulate practice 
before the IRS under 31 U.S.C. 330(a).

C. Written Tax Advice

    Circular 230 was most recently amended in TD 9668, which was 
published in the Federal Register (79 FR 33685) on June 12, 2014, to, 
among other changes, revise rules relating to written tax advice and 
eliminate the covered opinion rules (in former Sec.  10.35) that 
previously governed written tax advice.
Explanation of Provisions
    The proposed regulations contained in this notice of proposed 
rulemaking would amend Circular 230 by eliminating provisions related 
to registered tax return preparers or that imposed standards on tax 
return preparation that are unrelated to representation before the 
Treasury Department and the IRS. The proposed regulations would also 
amend Circular 230 by eliminating current Sec.  10.27, which, among 
other things, treats the preparation of tax returns and claims for 
refund or credit as matters before the IRS for which contingent fees 
may not be charged, and defining certain contingent fee arrangements as 
disreputable conduct. Specifically, the proposed regulations would 
establish that contingent fee arrangements for services in connection 
with preparing an original tax return, amended tax return, or claim for 
refund or credit constitute disreputable conduct subject to sanction. 
Because the proposed regulations would make substantial changes to the 
regulation of contingent fees under Circular 230, this document also 
proposes to withdraw the 2009 proposed regulations.
    The proposed regulations would also revise or eliminate provisions 
that are out of date and incorporate new provisions to better align 
Circular 230 with the modern practice environment. The scope of the 
proposed regulations is limited to practice before the IRS. Therefore, 
the proposed regulations would not alter or supplant other ethical 
standards applicable to practitioners.
    A section of the proposed regulations is referred to as, as an 
example, ``proposed Sec.  10.0'' in this Explanation of Provisions and 
the Special Analyses.

A. Amendments Regarding Tax Return Preparation

1. Elimination of Regulation of Registered Tax Return Preparers as 
Practitioners
    As a result of the decision and injunction order in Loving, the 
2011 amendments that relate to registered tax return preparers are no 
longer enforceable. Therefore, the proposed regulations would eliminate 
rules regarding registered tax return preparers under current 
Sec. Sec.  10.3 through 10.6. The proposed regulations would also 
remove references to registered tax return preparers under current 
Sec. Sec.  10.0, 10.2, 10.30, 10.38, and 10.90 and redesignate current 
Sec.  10.90 as Sec.  10.110.
2. Revision of Standards Relating to Tax Return Preparation
    Circular 230 contains provisions that are unrelated to the 
registered tax return preparer program but impose specific standards on 
tax return preparation. Consistent with the holding in Loving, the 
proposed regulations would eliminate or revise these provisions to 
impose standards related to tax returns prepared, approved, or 
submitted in connection with representing a client in a matter before 
the IRS. This distinction would be also incorporated under the amended 
definition of ``practice before the IRS'' under proposed Sec.  
10.2(a)(4), which would clarify that practice before the IRS includes 
the preparation and submission of tax returns in connection with 
representing a client in a matter before the IRS.
    Current Sec.  10.8 provides rules related to tax return 
preparation, describes actions that individuals who did not prepare 
all, or substantially all, of a tax return can take before the IRS, and 
prohibits non-practitioners from preparing all, or substantially all, 
of a tax return. The proposed regulations would eliminate the current 
language under Sec.  10.8 in its entirety. However, guidance regarding 
what actions non-practitioners may take in response to IRS inquiries is 
still necessary and authorized under 31 U.S.C. 330. Therefore, the 
proposed regulations would retitle current Sec.  10.8 as 
``Participation in IRS proceedings by non-practitioners'' and would 
provide that, except for appraisers who have been disqualified pursuant 
to proposed Sec.  10.61(a), any individual may appear as a witness 
before the IRS or furnish information at the request of the IRS.
    Current Sec.  10.22 imposes standards related to diligence as to 
accuracy, including standards related to the preparation or approval of 
tax returns, documents, affidavits, and other papers. The proposed 
regulations would revise current Sec.  10.22 to specify that the 
diligence as to the accuracy requirement for tax returns is limited to 
tax returns prepared, approved, or submitted in connection with 
representing a client in a matter before the IRS. The proposed 
regulations would not revise existing diligence standards related to 
documents, affidavits, and other papers that are not tax returns. The 
diligence requirements in the proposed regulations would also apply to 
a practitioner's preparation of a tax return prior to representing a 
client in a matter before the IRS when the subsequent representation 
involves the tax return. When the representation involves a tax return 
prepared by a practitioner, the practitioner's diligence with respect 
to preparing the tax return would be treated under the proposed 
regulations as related to the practitioner's practice before the IRS 
under 31 U.S.C. 330(a).
    Current Sec.  10.34 imposes standards with respect to a 
practitioner's preparation of tax returns and other documents. The 
current regulations incorporate standards under the Code relating to 
tax return positions, describe standards for advising clients with

[[Page 104918]]

respect to potential penalties, and address the ability of a 
practitioner to rely on information furnished by a client. The proposed 
regulations would maintain these standards but clarify that the 
standards only apply to a tax return either when the tax return is 
prepared while representing a client before the IRS or when the tax 
return prepared prior to representation is submitted while representing 
a client before the IRS, regardless of whether the tax return was filed 
with the IRS before the representation begins. With respect to tax 
returns prepared prior to representation, the current standards relate 
to a practitioner's duty to not further an unreasonable return position 
taken on a previously prepared return while representing a client in a 
matter before the IRS. The proposed regulations would not impose the 
standards on the preparation of a tax return in the absence of a 
practitioner's representation of a client.

B. Amendments Regarding the Regulation of Contingent Fees

    Current Sec.  10.27 prohibits practitioners from entering into 
contingent fee arrangements for services rendered in connection with a 
``matter before the IRS,'' which Sec.  10.27(c)(2) defines to include 
assisting with filing tax returns or claims for refund or credit and 
``all matters connected with a presentation to the [IRS] . . . relating 
to a taxpayer's rights, privileges, or liabilities under the laws and 
regulations administered by the [IRS].'' Current Sec.  10.27 was 
intended to restrict contingent fee arrangements based on their 
potential to encourage practitioners and their clients to take 
aggressive positions with the hope that they will not be audited.
    As described in the Background, the District Court for the District 
of Columbia held in Ridgely that practitioners do not act in a 
representative capacity when they assist clients with ``ordinary refund 
claims,'' which are defined as refund claims, including amended 
returns, filed prior to the examination of a tax return for that 
taxable year or period. The district court also concluded that 
preparing an ordinary refund claim is not an activity that constitutes 
practice before the IRS under 31 U.S.C. 330(a). Thus, the court 
concluded that the IRS cannot prohibit charging contingent fees for 
ordinary refund claims based on its authority to regulate practice 
before the IRS under 31 U.S.C. 330(a). The court did not otherwise 
address the propriety of contingent fees.
    The proposed regulations would remove current Sec.  10.27 and, 
under subpart C, define disreputable conduct under proposed Sec.  10.51 
to include both charging contingent fees in connection with the 
preparation of an original or amended tax return or claim for refund or 
credit, and charging fees that, under the facts and circumstances, are 
unconscionable fees.
    Charging a contingent fee for the preparation of an original 
return, amended return, or claim for refund or credit prepared prior to 
the examination of a tax return is disreputable conduct because these 
circumstances encourage evasion or abuse of Federal tax laws by 
incentivizing practitioners to take unduly aggressive tax positions for 
their clients, which would increase their clients' reported tax 
benefits, thus resulting in personal gain for the practitioner. A 
practitioner with a direct, financial interest in the tax benefits of a 
client may be incentivized to increase such tax benefits. Therefore, 
these contingent fee arrangements reflect conduct that is incompatible 
with ethical practice before the Treasury Department or the IRS under 
Circular 230.
    Under 31 U.S.C. 330(c), the Treasury Department and the IRS have 
the authority to censure or suspend or disbar from practice before the 
Treasury Department or the IRS practitioners who engage in disreputable 
conduct whether or not the conduct constitutes representation of a 
client. Unlike the contingent fee standards under current Sec.  10.27, 
proposed Sec.  10.51 is not dependent upon the preparation of a tax 
return or claim for refund or credit constituting practice before the 
IRS. Charging contingent fees for preparing tax returns, amended 
returns, and claims for refund or credit is prohibited under the rules 
of professional conduct applicable to many accountants. The American 
Institute for Certified Public Accountants (AICPA) Code of Professional 
Conduct, for example, acknowledges the disreputable nature of 
contingent fees and prohibits CPAs from charging contingent fees for 
the preparation of original returns, amended returns, and ordinary 
refund claims because of the risk that these contingent fee 
arrangements would allow a CPA to benefit improperly from an interest 
in, or relationship with, a client. See AICPA Code of Professional 
Conduct 1.000.010.14(c); 1.510.001.01(b). Many state accountancy board 
rules also prohibit contingent fee arrangements for preparing an 
original or amended return or claim for refund or credit. See, e.g., 
N.J. Admin. Code section 13:29-3.8(e) (2019); Tenn. Code Ann. section 
62-1-123(b)(1)(B) (2016) (prohibiting contingent fees for preparation 
of an original return); Cal. Code Regs. Tit. 16 section 62(a)(2) & (3) 
(2021); cf. New York Society of Certified Public Accountants Code of 
Professional Conduct Rule 302 (March 2013).

C. Enrolled Retirement Plan Agent and Enrolled Agent Procedures

    Current Sec.  10.3(e)(1) provides that enrolled retirement plan 
agents (ERPAs) may practice before the IRS. Current Sec.  10.4(b) 
authorizes the IRS to grant status as ERPAs to individuals who 
demonstrate special competence in qualified retirement plan matters by 
passing a written examination and who have not engaged in any conduct 
that would justify suspension or disbarment under Circular 230. The IRS 
stopped offering the Enrolled Retirement Plan Agent Special Enrollment 
Examination (ERPA-SEE) on February 12, 2016, and no longer accepts 
applications for new enrollment as an ERPA. Because of a steady decline 
in ERPA-SEE test-takers, the cost to administer the ERPA-SEE no longer 
warranted offering the test. See 83 FR 58202, published in the Federal 
Register on November 19, 2018. Individuals who had passed the ERPA-SEE 
before February 12, 2016, and are currently enrolled as ERPAs can 
maintain their status. Therefore, the proposed regulations would 
clarify that ERPAs who passed the ERPA-SEE prior to February 12, 2016, 
remain authorized to practice before the IRS if they continue to pay 
the annual user fee described under 26 CFR 300.10(b) and complete the 
continuing education described in Sec.  10.6(e). The proposed 
regulations would also remove current Sec.  10.4(b), which describes 
the process to become an ERPA by special examination.
    Current Sec.  10.4(d) provides that a former IRS employee, based on 
past service and technical experience in the IRS, may be granted 
enrollment as an EA or ERPA without testing if certain criteria are 
met. There is no statutory requirement that the IRS provide this 
exemption to former employees and administering requests for this 
waiver has consumed substantial IRS resources. Accordingly, the 
proposed regulations would eliminate the opportunity for former IRS 
employees to apply for a waiver of enrollment requirements as of 30 
days after the date these regulations are published in the Federal 
Register as final regulations. Applications from former IRS employees 
submitted on or before that date would be processed according to the 
procedures under current Sec.  10.4(d).
    Current Sec.  10.5 includes ERPAs in the description of application 
procedures to become a practitioner under Circular 230. Because the IRS 
no longer offers

[[Page 104919]]

the special enrollment examination to become an ERPA and no longer 
accepts applications for new enrollment as an ERPA, these procedures 
are no longer relevant and references to ERPAs would be removed under 
proposed Sec.  10.5. The renewal period and procedures for existing 
ERPAs remains unchanged under current Sec.  10.6.
    Current Sec.  10.6(b) states that the IRS will provide confirmation 
of enrollment to EAs and ERPAs by issuing a registration card or 
certificate. Instead of specifying the form of confirmation, proposed 
Sec.  10.6(b) would provide that the IRS will issue a document, which 
may be an enrollment card or other document. This revision would give 
the IRS flexibility as to the form of enrollment confirmation provided 
to practitioners in the future without requiring an amendment to the 
regulations.
    Current Sec.  10.6(d)(2) provides an explanation of the renewal 
period for EAs. Proposed Sec.  10.6(d)(2) would make minor revisions to 
this description but makes no substantive changes to the renewal period 
or renewal process for EAs.

D. Limited Practice and Annual Filing Season Program (AFSP) 
Participants

    Proposed Sec.  10.7(c)(1)(viii) would provide that individuals who 
possess a current Annual Filing Season Program (AFSP) Record of 
Completion may engage in limited practice, by representing taxpayers 
before the IRS with respect to tax returns or claims for refund or 
credit the individuals prepared and signed during a calendar year for 
which a Record of Completion was issued. The individual must have a 
valid Record of Completion for the calendar year in which the tax 
return or claim for refund or credit was prepared and signed and a 
valid Record of Completion for the year or years in which the 
representation occurs. AFSP participants generally are otherwise 
unenrolled preparers who, pursuant to Rev. Proc. 2014-42, 2014-29 
I.R.B. 192 (July 14, 2014), voluntarily consent to be subject to 
Circular 230 duties and restrictions to participate in the AFSP, 
including prohibitions on incompetence or disreputable conduct, and 
must comply with the duties and restrictions to the extent they 
represent taxpayers before the IRS under the AFSP. The authority for 
the Treasury Department and the IRS to implement the AFSP was upheld by 
the D.C. Circuit, in AICPA v. IRS, 746 Fed. Appx. 1 (D.C. Cir. 2018).

E. Continuing Education Provider Fees

    Under current Sec.  10.9(a)(2), continuing education providers that 
provide education to practitioners on subject matters described under 
current Sec.  10.6(f) must be approved by the IRS, obtain a continuing 
education number, and pay any applicable user fee. Continuing education 
providers must follow the procedures outlined under Rev. Proc. 2012-12, 
2012-2 I.R.B. 275 (January 9, 2012) to become an accredited provider 
and obtain a continuing education provider number. Continuing education 
providers must renew their status annually by renewing their provider 
number and paying a user fee. Under current Sec.  10.9(a)(4), 
continuing education providers must seek approval for individual 
continuing education programs and obtain a program number.
    The continuing education program is administered by a third-party 
vendor through a five-year contract with the IRS. The vendor will 
charge continuing education providers a $650 application and renewal 
fee through 2025. Continuing education providers must renew for the 
upcoming calendar year before midnight on December 31 or incur late 
fees ranging between $100 and $200. Under the vendor's contract with 
the IRS, the vendor's fee is reviewed and approved by the IRS.
    Because the IRS does not incur any direct costs to administer the 
continuing education program, it does not currently charge a separate 
user fee to recover costs. In the future, however, the IRS may charge a 
user fee if circumstances change. Any future user fee will be 
calculated pursuant to the Independent Offices Appropriation Act of 
1952 (31 U.S.C. 9701) and OMB Circular A-25, User Charges. New proposed 
Sec.  10.9(c) explains that a potential user fee may be charged in 
addition to the current vendor fee for approval of continuing education 
providers and their programs.

F. Knowledge of Error or Omission

    Current Sec.  10.21 requires practitioners to advise a client of 
any noncompliance with internal revenue laws or any error or omission 
on a tax return or other document submitted to the IRS and the 
consequences under the Code and regulations of the noncompliance, 
error, or omission. Proposed Sec.  10.21 would clarify that the 
noncompliance, error, or omission may have been made by either the 
client or the practitioner or a prior practitioner, such as if the 
practitioner or prior practitioner made an inadvertent mistake on a tax 
return prepared and filed for the client that the practitioner later 
discovers.
    Proposed Sec.  10.21 would expand the current guidance by requiring 
practitioners to explain actions the client should take to correct the 
noncompliance, error, or omission. Knowingly failing to inform a client 
of the noncompliance, error, or omission is disreputable conduct under 
31 U.S.C. 330(c) because it causes practitioners to perpetuate false or 
misleading information to the IRS and potentially exposes the client to 
penalties and other adverse consequences. Proposed Sec.  10.21 would 
also instruct practitioners to consider whether they can continue to 
meet their obligation to exercise diligence under proposed Sec.  
10.22(a) as to the accuracy of tax returns and other documents if the 
client refuses to take corrective action during the course of the 
practitioner's representation. A practitioner's obligation under 
proposed Sec.  10.22(a) applies only to tax returns that are prepared, 
approved, or submitted in connection with representing a client in a 
matter before the IRS. Under those circumstances, the failure to 
correct inaccurate or unsupportable return positions would result in 
their perpetuation in submissions to the IRS during the course of the 
practitioner's representation. These changes would align Circular 230 
with similar professional standards relating to knowledge of a client's 
error. See AICPA Statement on Standards for Tax Services No. 6 
(Knowledge of Error: Return Preparation and Administrative Proceedings) 
(Rev. April 30, 2018); see also Schmitz v. Crotty, 528 NW 112 (Iowa 
1995) (holding that in a civil malpractice action, an attorney was 
negligent for, in part, failing to correct an error on tax returns that 
he was aware of).

G. Negotiation of Payments to Clients

    Current Sec.  10.31 provides that a practitioner may not endorse or 
otherwise negotiate any check issued to a client by the Government in 
respect of a Federal tax liability, including directing or accepting 
payment by any means, electronic or otherwise, into an account owned or 
controlled by the practitioner or any firm or other entity with which 
the practitioner is associated. When it was last amended in 2014, this 
regulation was revised to clarify that the prohibition on practitioner 
negotiation of taxpayer tax refunds applied to the electronic 
environment in which both the IRS and practitioners operated. Proposed 
Sec.  10.31 would maintain this prohibition and broaden it to apply to 
all electronic payments to clients with respect to a Federal tax 
liability, including prepaid debit cards, phone or mobile payments, or 
other forms of electronic payments, even if that payment method is not 
currently used by the Treasury Department. These changes

[[Page 104920]]

acknowledge the evolving electronic environment in which tax refunds 
and other payments to taxpayers are processed through a variety of 
means.

H. Best Practices for Tax Practitioners

    Current Sec.  10.33 provides best practices for practitioners 
related to client representation. Proposed Sec.  10.33 would replace 
references to ``tax advisors'' with ``tax practitioners'' to better 
align Sec.  10.33 with descriptions used elsewhere in Circular 230.
    Proposed Sec.  10.33(a)(4) would provide that it is a best practice 
for practitioners to create a data security policy to maintain 
safeguards with respect to client information and establish a plan and 
procedures for responding to data breaches. Practitioners who also 
prepare returns have a legal obligation to comply with the Federal 
Trade Commission's Safeguards Rule under the Gramm-Leach Bliley Act, 
which requires businesses to implement safeguards, including a written 
information security plan, to protect the security, confidentiality and 
integrity of customer information. 16 CFR part 314 (2002). This 
proposed change acknowledges this duty and complements the newly 
proposed duty to maintain technological competence under proposed Sec.  
10.35 and better aligns Circular 230 with other professional standards. 
See American Bar Association Formal Ethics Opinion 18-483; IRS 
Publication 4557, Safeguarding Taxpayer Data; IRS Publication 5708, 
Creating a Written Information Security Plan for Your Tax & Accounting 
Practice.
    Proposed Sec.  10.33(a)(5) would provide that it is a best practice 
for practitioners to identify, evaluate, and address a mental 
impairment arising out of, or related to, age, substance abuse, a 
physical or mental health condition, or some other circumstance that 
could adversely impact a practitioner's ability to effectively 
represent a client before the IRS. An impairment, left untreated, can 
have adverse consequences on a client's representation and to the 
health and well-being of a practitioner. The purpose of proposed Sec.  
10.33(a)(5) is to encourage practitioners who are suffering from a 
mental impairment to seek and obtain assistance or treatment. See, 
e.g., DC Legal Ethics Opinion 377.
    Proposed Sec.  10.33(a)(6) would provide that it is a best practice 
for practitioners to establish a business continuity and succession 
plan that includes procedures and safeguards related to both the 
cessation of a practitioner's practice or the occurrence of an outside 
event, such as a natural disaster or cyberattack. Business continuity 
and succession planning are essential because they proactively protect 
clients in the event of a practitioner's death or disability or from 
the occurrence of an unforeseen event.
    Finally, proposed Sec.  10.33 would eliminate current Sec.  
10.33(b), which provides steps to ensure that a firm's procedures are 
consistent with best practices. Current Sec.  10.33(b) would be 
duplicative of procedures under proposed Sec.  10.36 to ensure 
compliance with subparts A, B, and C of part 10, which instructs 
practitioners to take reasonable steps to ensure that the firm's 
procedures are consistent with the best practices under proposed Sec.  
10.33(a).

I. Duty To Maintain Technological Competence

    Current Sec.  10.35 provides that a practitioner must be competent 
when engaged in practice before the IRS. Specifically, practitioners 
are required to have the appropriate level of knowledge, skill, 
thoroughness, and preparation necessary for the matter in which the 
practitioner is engaged. Increasingly, competence also includes 
maintaining familiarity with technological tools used to represent a 
client. A similar standard for technological competency is included in 
the American Bar Association (ABA) Model Rules of Professional Conduct. 
Proposed Sec.  10.35 is based on Comment 8 to ABA Model Rule 1.1 and 
would define competency to include understanding the benefits and risks 
associated with relevant technology used by the practitioner to provide 
services to clients or to store or transmit confidential information, 
including tax return information.

J. Regulation of Written Tax Advice

    Current Sec.  10.37 provides basic principles to which all 
practitioners must adhere when giving written tax advice. Circular 230 
was amended in 2014 to eliminate the covered opinion rules (in former 
Sec.  10.35) and replace them with broad standards for written tax 
advice under a current Sec.  10.37. See TD 9668. Proposed Sec.  10.37 
would maintain these principles-based standards and make minor wording 
changes. Current Sec.  10.37(d) defines a ``Federal tax matter,'' for 
purposes of that section, as the application or interpretation of a 
revenue provision defined under section 6110(i)(1)(B) of the Code, any 
provision of law impacting a person's obligations under the internal 
revenue laws and regulations, and any other law or regulation 
administered by the IRS. Proposed Sec.  10.37 would amend this 
definition of a Federal tax matter under proposed Sec.  10.37(d) to 
clarify that it encompasses any transaction, plan, arrangement, or 
other matter (whether prospective or completed), which is of the type 
that the IRS determines has the potential for tax avoidance or evasion.
    This proposed change aligns standards for written tax advice under 
proposed Sec.  10.37 more closely with the statutory language of 31 
U.S.C. 330(e), which acknowledges that the Treasury Department may 
``impose standards applicable to the rendering of written advice with 
respect to any entity, transaction plan or arrangement, or other plan 
or arrangement, which is of a type which the Secretary determines as 
having a potential for tax avoidance or evasion.''
    Current Sec.  10.37(c)(1) imposes a reasonable practitioner 
standard, considering all of the facts and circumstances, to determine 
whether a practitioner has complied with the written advice standards 
under this section. Current Sec.  10.37(c)(2) imposes the same 
reasonable practitioner standard in the case of an opinion the 
practitioner knows or has reason to know will be used by another person 
to promote, market, or recommend to one or more taxpayers a partnership 
or other entity, investment plan, or arrangement a significant purpose 
of which is the avoidance or evasion of any tax (Significant Purpose 
Transactions). Current Sec.  10.37(c)(2) adds that, under the facts-
and-circumstances analysis for Significant Purpose Transactions, 
emphasis will be ``given to the additional risk caused by the 
practitioner's lack of knowledge of the taxpayer's particular 
circumstances.'' Considering a practitioner's knowledge of the 
taxpayer's circumstances is generally relevant to whether a 
practitioner has satisfied written tax advice standards. Therefore, the 
proposed regulations would remove paragraph (c)(2) in current Sec.  
10.37 and proposed Sec.  10.37(c) would include consideration of the 
practitioner's knowledge of the client's particular circumstances under 
the reasonable practitioner standard.

K. Incompetence or Disreputable Conduct

    Current Sec.  10.51 defines disreputable conduct for which a 
practitioner may be sanctioned. Incompetence or disreputable conduct 
under current Sec.  10.51 is a basis for imposing sanctions against 
practitioners that is separate from a failure to meet the duties and 
abide by the restrictions relating to practice before the IRS under 
subpart B. Subpart C, retitled to relate to

[[Page 104921]]

incompetence and disreputable conduct, would redesignate current Sec.  
10.51 as proposed Sec.  10.50 and, as described in part B of this 
Explanation of Provisions, proposed Sec.  10.51 would define certain 
fee arrangements that constitute disreputable conduct.
    Proposed Sec.  10.50(a) would explain that a practitioner can be 
sanctioned for conduct that relates to the practitioner's overall 
fitness to practice and is not limited to actions taken while 
representing clients in a matter before the IRS. Proposed Sec.  
10.50(a)(12) would clarify that contemptuous conduct subject to 
sanction includes conduct in connection with practice before the IRS, 
any proceeding pursuant to redesignated proposed Sec.  10.80 or any 
investigation by the Treasury Inspector General for Tax Administration. 
New proposed Sec.  10.50(a)(19) would provide that the willful failure 
to follow any Federal tax law is disreputable conduct because knowingly 
violating a Federal tax law reflects a lack of due regard for the tax 
laws.
    New proposed Sec.  10.50(b) would provide that any assessment 
against a practitioner of penalties relating to a willful attempt to 
understate tax liabilities under section 6694(b); aiding or abetting in 
the understatement of tax liabilities under section 6701; careless, 
reckless, or intentional disregard for the rules or regulations (within 
the meaning of 26 CFR 1.6662-3(b)(2) and 1.6694-3(c)) under section 
6662(b)(1); or promotion of abusive tax shelters under section 6700 
will be considered a violation of proposed Sec.  10.50(a)(7). The 
assessment of any of these penalties, however, would not be required to 
show a violation of proposed Sec.  10.50(a)(7).

L. Appraiser Standards

    The proposed regulations would incorporate new subpart D, which 
provides definitions related to appraisers and standards for the 
disqualification of appraisers. Current Sec.  10.50(b) references the 
authority of the Secretary, or her delegate, and the IRS to disqualify 
appraisers from presenting evidence or testimony in any administrative 
proceeding before the Treasury Department or the IRS. Current Circular 
230, however, does not provide a separate definition of appraisers or 
what constitutes an administrative proceeding for purposes of 
disqualification. The proposed regulations would provide separate 
definitions for both appraisers and administrative proceedings and 
explain how they would relate to the new appraiser standards. Current 
Sec.  10.60(b) provides that proceedings to disqualify appraisers can 
be instituted whenever a penalty has been assessed against an appraiser 
under the Code and the IRS determines that the appraiser acted 
willfully, recklessly, or through gross incompetence with respect to 
the conduct at issue.
    This penalty prerequisite limits the IRS's ability to respond to 
misconduct under Circular 230 when the misconduct is not covered by a 
specific penalty, an applicable penalty is not imposed, or a proposed 
penalty assessment has not yet been made. There is no penalty 
prerequisite for appraiser disqualification under 31 U.S.C. 330, and 
the only procedural requirement for the disqualification of appraisers 
under 31 U.S.C. 330(d) is notice and an opportunity for a hearing. An 
appraiser's conduct may be disreputable or fail to conform to appraisal 
standards even when the IRS has not assessed a penalty or when no 
penalty under the Code is applicable. Therefore, the proposed 
regulations would eliminate the penalty prerequisite under current 
Sec.  10.60(b) because it provides an unnecessary barrier to address 
misconduct.
    Proposed Sec.  10.61, under new subpart D, would require appraisals 
submitted in an administrative proceeding before the IRS to conform to 
the substance and principles of the Uniform Standards of Professional 
Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board 
of the Appraisal Foundation or the International Valuation Standards 
(IVS) promulgated by the International Valuation Standards Council. 
Proposed Sec.  10.61 would thus ensure that appraisals submitted in an 
administrative proceeding generally conform to broadly applicable 
standards without requiring strict compliance with such standards. 
Appraisers who willfully fail to meet these standards may be subject to 
disqualification under Circular 230. A failure to conform to the 
substance and principles of either USPAP or IVS standards that is not 
the result of willful, reckless, or grossly incompetent conduct is not 
sanctionable. In contrast, appraisers who recklessly or through gross 
incompetence engage in a pattern of submitting appraisals that do not 
conform to the substance and principles of USPAP or IVS standards may 
be subject to disqualification under the proposed regulations. The 
IRS's Office of Professional Responsibility (OPR) would determine 
whether an appraisal conforms to the substance and principles of these 
general appraisal guidelines during the Circular 230 investigatory and 
disciplinary process, prior to instituting any formal disciplinary 
proceeding under subpart F of 31 CFR part 10. An opinion by a court, 
such as the United States Tax Court (Tax Court), finding that an 
appraiser failed to comply with the substance and principles of USPAP 
(or otherwise violated the standards for appraisers) may be considered 
when making that determination. See, e.g., Oconee Landing Property, LLC 
v. Commissioner, T.C. Memo. 2024-25 (finding that the appraisers had 
reached an advance agreement with the donors to appraise the subject 
property ``in the neighborhood of'' a pre-determined overvalued price).
    Using the substance and principles of the USPAP or IVS appraisal 
standards as a basis for disqualification would enable the IRS to 
proactively address inadequate appraisals submitted in administrative 
proceedings. Both USPAP and IVS provide broad standards for general 
appraisal methodology. USPAP and IVS appraisal standards also provide a 
generally accepted standard of care that is widely followed in U.S. and 
international valuation matters for real property, personal property, 
and businesses. As such, they form a ``floor'' for appraiser 
competency, similar to how the ABA's Model Rules of Professional 
Conduct provide general standards for attorneys. Like state bars, other 
professional appraiser organizations and state licensing boards 
elaborate on and are free to impose stricter standards on appraisers. 
Further, USPAP is required for state-licensed and state-certified real 
property appraisers and has been widely adopted by professional 
appraisal societies. Internal Revenue Service Advisory Council Annual 
Report at 118-28 (November 2017). Under Notice 2006-96, 2006-46 I.R.B. 
902 (November 13, 2006), the IRS already recognizes USPAP as generally 
accepted appraisal standards relating to charitable contribution 
deductions under section 170(f)(11)(E)(i) of the Code. The Tax Court 
has also looked to adherence to USPAP as a measure of the credibility 
of an appraisal. See, e.g., Estate of Cecil v. Commissioner, T.C. Memo. 
2023-24 (giving no weight to a valuation that was inconsistent with 
USPAP). Therefore, the proposed regulations would provide additional 
clarity to appraisers with respect to the standard for appraisals 
submitted in an IRS administrative proceeding.
    Proposed Sec.  10.61(b)(2) would also provide that appraisers who 
know or reasonably should know that an appraisal will be used in an 
administrative proceeding by taxpayers to support a substantial 
valuation misstatement under section 6662(e), a substantial estate or 
gift tax valuation

[[Page 104922]]

understatement within the meaning of section 6662(g), or a gross 
valuation misstatement pursuant to section 6662(h), would be subject to 
disqualification if they act willfully, recklessly, or through gross 
incompetence. This standard would allow the IRS to address common 
appraiser misconduct related to tax return positions.
    Consistent with current Sec.  10.60(b), new proposed Sec.  10.61(c) 
would provide that an appraiser who has been assessed a penalty under 
section 6694, 6695A, 6700, or 6701 of the Code, for which it is 
determined that the appraiser acted willfully, recklessly, or through 
gross incompetence with respect to the proscribed conduct may be 
disqualified for engaging in disreputable conduct, although this 
assessment is not a prerequisite to disqualification. Appraisers who 
have been assessed penalties as a result of their willful, reckless, or 
grossly incompetent conduct have engaged in disreputable conduct that 
should disqualify them from presenting evidence or testimony in an 
administrative proceeding before the Treasury Department or the IRS and 
should result in the appraiser's appraisals having no probative effect 
in an administrative proceeding. If the penalty is later abated, an 
appraiser can petition for reinstatement under redesignated proposed 
Sec.  10.101.
    The proposed regulations also provide that an appraiser may show 
adherence to USPAP standards when issuing the relevant appraisal, which 
will be taken into account as a defense in determining whether an 
appraiser acted willfully, recklessly, or through gross incompetence 
with respect to potential disqualification under proposed Sec.  
10.61(b)(2) or (c).
    Because appraisers are not practitioners under Circular 230, it is 
appropriate to include standards relating to their disqualification 
under a separate subpart from standards relating to practitioners. 
However, because appraisers are subject to the same notice and 
opportunity for a hearing as practitioners under Circular 230, 
disqualification procedures for appraisers would remain the same as 
those for practitioners under new subpart F (Rules Applicable to 
Disciplinary Proceedings).

M. Effect of Disbarment, Suspension, or Censure

    In 2017, the United States District Court for the District of 
Nevada held in Sexton v. Hawkins, 119 A.F.T.R. 2d 2017-1187 (D. Nev. 
2017), that the Treasury Department and the IRS did not have 
jurisdiction to investigate whether suspended practitioners have 
violated the terms of their suspension because suspended individuals 
were not considered practitioners under Circular 230. The Treasury 
Department and the IRS disagree with this holding. The IRS has 
continuing jurisdiction to investigate suspended practitioners under 31 
U.S.C. 330(c), which provides authority to suspend, disbar, or censure 
practitioners under Circular 230. The ability to investigate compliance 
by practitioners with the terms of their censure or suspension is 
critical to ensure compliance and maintain the integrity of 
practitioner discipline under Circular 230. Practitioners who do not 
comply with requests for information from OPR or who violate the terms 
of their suspension may face further sanctions, such as monetary 
penalties or disbarment.
    Proposed Sec.  10.99(e) would clarify that suspended practitioners 
remain practitioners under Circular 230 for the purposes of 
investigating and acting on any violation of a suspension or any 
violation of the law or regulations governing practice before the IRS 
while suspended. It is also important to the enforcement of 31 U.S.C. 
330 and the integrity of Circular 230 for the IRS to ensure that 
individuals who are not authorized to practice before the IRS, either 
because they have been disbarred or because they do not have the 
required credentials, do not claim authority to practice. Proposed 
Sec.  10.99(f), therefore, would clarify that the IRS has jurisdiction 
to make inquiries to determine whether an individual has wrongly held 
themselves out as a practitioner.

N. Expedited Suspension

    Current Sec.  10.81 provides guidance on how practitioners can 
petition OPR for reinstatement, but it does not address practitioners 
or appraisers who have been suspended or disqualified through the 
expedited procedures under current Sec.  10.82. Moreover, while current 
Sec.  10.82 authorizes the immediate suspension of a practitioner who 
has engaged in certain conduct, it does not include expedited 
procedures for appraisers or address the voluntary forfeiture of a 
license or certification by practitioners or appraisers. Current Sec.  
10.81, which is proposed to be redesignated as Sec.  10.101, would 
allow practitioners or appraisers who have received an expedited 
suspension or disqualification to petition for reinstatement at any 
time upon a showing of good cause.
    The proposed changes to current Sec.  10.82, which is proposed to 
be redesignated as Sec.  10.102, explain that practitioners can 
establish good cause by showing that the conditions giving rise to 
their expedited suspension or disqualification no longer apply. For 
example, the restoration of a suspended license, the reversal of a 
conviction, or the removal of a sanction may be sufficient to show good 
cause. Proposed Sec.  10.102 would also extend expedited disciplinary 
proceedings to appraisers who have had a license or certification 
revoked or suspended by a state licensing or certification board or who 
have voluntarily forfeited their license or certification. Finally, 
proposed Sec.  10.102(e)(1)(iii) would clarify that, when a 
practitioner or appraiser responds to a show cause order but does not 
request a conference, the IRS will issue a written notice of expedited 
suspension immediately following consideration of a practitioner or 
appraiser's response.
    Proposed Sec.  10.102(a)(7)(i) and (ii), redesignated from Sec.  
10.82(b)(5)(i) and (ii), would only update the cross-references in 
those provisions. They are otherwise not proposed to be revised, though 
they are set out in their entirety below for the convenience of the 
reader. The Treasury Department and IRS do not seek comments on the 
substance of these provisions, and any such comments would be outside 
the scope of the proposed regulations.

O. Comments Requested

    The Treasury Department and the IRS request comments on all aspects 
of the proposed regulations. Comments are also specifically requested 
on whether, in a future regulation, the definition of practitioners 
eligible to practice before the IRS should be proposed to be expanded 
to include individuals admitted to practice law in a Tribal court.

Proposed Applicability Date

    The proposed regulations are proposed to apply 30 days after date 
of publication of final regulations in the Federal Register.

Special Analyses

I. Regulatory Planning and Review

    The Office of Information and Regulatory Affairs has determined 
that this regulation is not significant and not subject to review under 
Executive Order 12866 (June 9, 2023). Therefore, a regulatory impact 
assessment is not required.

II. Initial Regulatory Flexibility Analysis

    When the IRS issues a general notice of proposed rulemaking, the 
Regulatory Flexibility Act (RFA) requires the agency to ``prepare and 
make available

[[Page 104923]]

for public comment an initial regulatory flexibility analysis,'' which 
will ``describe the impact of the proposed rule on small entities.'' 5 
U.S.C. 603(a). Unless an agency determines that a proposal is not 
likely to have a significant economic impact on a substantial number of 
small entities, section 603 of the RFA requires the agency to present 
an initial regulatory flexibility analysis (IRFA) of the proposed rule. 
The proposed regulations will affect a substantial number of small 
entities. Because the proposed regulations do not impose new 
requirements on practitioners or appraisers, the Treasury Department 
and the IRS do not anticipate that the proposed regulations, if 
promulgated, would have a significant economic impact on any of the 
regulated entities. The Treasury Department and the IRS, however, 
request comments on the potential economic impact of the proposed 
regulations and include an IRFA.
    Description of the reasons why action by the agency is being 
considered and succinct statement of the objectives of, and the legal 
basis for, the proposed rule.
    As discussed in this preamble, current Circular 230 has not been 
amended since 2014 and many of its provisions have been made obsolete 
by current law or need to be updated to reflect the current practice 
environment. Accordingly, the proposed regulations would eliminate 
provisions related to tax return preparation outside of practice before 
the IRS, revise contingent fee rules, and update various standards and 
procedures. In addition, the definition of appraiser and the procedures 
for disqualifying appraisers from submitting appraisals in an 
administrative proceeding before the Treasury Department or the IRS are 
being amended and updated. Thus, the general objective of the proposed 
regulations is to align Circular 230 with current law and to clarify or 
update its standards. None of the revisions, however, propose to impose 
new standards or burdens on practitioners or appraisers. The proposed 
regulations would either update long-standing Circular 230 standards or 
incorporate standards that practitioners or appraisers comply with 
outside of practice before the IRS. For example, the proposed 
contingent fee restrictions are also incorporated in other widely 
applicable rules of professional conduct. Likewise, appraisers are 
generally already required to meet the broad appraisal standards 
referenced by the proposed regulations.
    The legal basis for the proposed regulations is 31 U.S.C. 330.
    Description of and, where feasible, an estimate of the number of 
small entities to which the proposed rule will apply.
    The proposed regulations would affect EAs, ERPAs, attorneys, CPAs, 
and AFSP participants who practice before the IRS. The proposed 
regulations would also affect appraisers who submit appraisals in an 
administrative proceeding before the Treasury Department or the IRS. 
Circular 230 affects both individual practitioners and firms. For 
example, the flush language of 31 U.S.C. 330(c) authorizes the 
Secretary, or her delegate, to impose a monetary penalty on a firm if 
the firm knew or should have known that a representative acting on its 
behalf intended to defraud a client. Further, proposed Sec.  10.36(a) 
would require practitioners who oversee a firm's practice to take 
reasonable steps to ensure that the firm has adequate procedures to 
comply with Circular 230. However, because the proposed regulations 
would only affect individual practitioners and appraisers, the economic 
impact of these regulations on any small entity generally will be the 
result of an individual practitioner or appraiser owning a small 
business, or a small business employing a practitioner or appraiser, 
and the business paying for the individual to maintain its status or to 
comply with other requirements in the Circular. Because an estimate of 
the number of small entities to which the proposed rule will apply is 
not available, the Treasury Department and the IRS considered the 
estimated number of practitioners and appraisers who will be affected 
by the proposed rule. Based on IRS records, the total number of 
impacted practitioners and appraisers is approximately 451,405. 
Specifically, Centralized Authorization File records, which reflect 
practitioners who filed third-party authorizations with the IRS, 
reflect approximately 200,000 unique CPAs, 65,000 unique attorneys, and 
40,000 unique practitioners who identify as both attorneys and CPAs as 
of May 17, 2024. Further, IRS Return Preparer Office (RPO) registration 
records show approximately 62,383 EAs, 608 ERPAs, 3,402 enrolled 
actuaries, and 75,357 AFSP participants. Finally, in 2022, the most 
recent year for which complete data are available, approximately 4,200 
unique appraisers signed the ``Declaration of Appraiser'' on a Form 
8283, Noncash Charitable Contributions. Appraisers sign Forms 8283 for 
appraisals that are used in connection with a tax return or claim of 
refund. Thus, the forms represent a reasonable approximation of 
appraisers who are likely to be covered by these proposed rules.
    A description of the projected recordkeeping, and other compliance 
requirements of the proposed rule, including an estimate of the classes 
of small entities that will be subject to such requirements that the 
type of professional skills necessary for preparation of the report or 
record.
    No reporting or recordkeeping requirements are projected to be 
associated with the proposed regulations.
    Identification, to the extent practicable, of all relevant Federal 
rules that may duplicate, overlap, or conflict with the proposed rule.
    The IRS is not aware of any Federal rules that duplicate, overlap, 
or conflict with the proposed rule.
    Description of any significant alternatives to the proposed rule 
that accomplish the stated objectives of applicable statutes and that 
minimize any significant economic impact of the proposed rule on small 
entities, including a discussion of significant alternatives.
    Section 330 of title 31, United States Code authorizes the 
Secretary, or her delegate, to impose standards on individuals who 
practice before the Treasury Department and the IRS; to suspend or 
disbar from practice certain individuals; and to bar certain appraisers 
from submitting evidence or testimony in any administrative proceeding 
before the Treasury Department or the IRS. The Treasury Department and 
the IRS have issued regulations under Circular 230 for these purposes 
since 1921 and have regularly updated them to reflect changing law and 
current standards of practice. These updates, including those found in 
the proposed regulations, are essential to ensure that practitioners 
and appraisers are competent, reputable and have the necessary 
requirements to provide taxpayers with valuable service. The proposed 
regulations could have created a new standard for appraisals submitted 
in an administrative proceeding before the IRS, but that would have 
been more burdensome to appraisers. Instead, requiring appraisals to 
conform in substance and principles to the USPAP or IVS is less costly 
and burdensome because appraisers are already required to abide by 
these standards. Further, the proposed regulations could have 
implemented case law to preclude regulating contingent fee arrangements 
for preparing original or amended returns and ordinary refund claims, 
but this position would not have met the objective to discourage unduly

[[Page 104924]]

aggressive tax positions that result in evasion or abuse of the Federal 
tax laws. Therefore, the proposed regulations would adopt a 
straightforward standard: charging a contingent fee for the preparation 
of an original return, amended return, or claim for refund or credit 
prepared prior to the examination of a tax return is disreputable 
conduct.

III. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditures in any one year by a 
State, local, or Tribal government, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. This proposed rule does not include any Federal mandate that 
may result in expenditures by State, local, or Tribal governments, or 
by the private sector in excess of that threshold.

IV. Executive Order 13132: Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial, direct compliance costs on State and local 
governments, and is not required by statute, or preempts State law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive order. These proposed regulations do not 
have federalism implications and do not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive order.

V. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments) prohibits an agency from publishing any rule that 
has Tribal implications if the rule either imposes substantial, direct 
compliance costs on Indian Tribal governments, and is not required by 
statute, or preempts Tribal law, unless the agency meets the 
consultation and funding requirements of section 5 of the Executive 
order.
    The Treasury Department and the IRS will hold a consultation with 
Tribal leaders to receive Tribal feedback on whether practitioners 
eligible to practice before the IRS should include individuals admitted 
to practice law in a Tribal court, which will inform the development of 
future regulations.

Statement of Availability of IRS Documents

    IRS Revenue Procedures, Revenue Rulings, Notices, and other 
guidance cited in this preamble are published in the Internal Revenue 
Bulletin (or Cumulative Bulletin) and are available from the 
Superintendent of Documents, U.S. Government Publishing Office, 
Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are timely submitted 
to the Treasury Department and the IRS as prescribed in this preamble 
under the ADDRESSES heading. The Treasury Department and the IRS 
request comments on all aspects of the proposed regulations. Any 
electronic and paper comments submitted will be available at https://www.regulations.gov or upon request. Once submitted to the Federal 
eRulemaking Portal, comments cannot be edited or withdrawn.
    A public hearing is being held on March 6, 2025, beginning at 10 
a.m. ET, in the Auditorium at the Internal Revenue Building, 1111 
Constitution Avenue NW, Washington, DC. Due to building security 
procedures, 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. Participants may alternatively attend the public 
hearing by telephone.
    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 an outline of 
the topics to be discussed as well as the time to be devoted to each 
topic by February 24, 2025. A period of ten minutes will be allocated 
to each person for making comments. After the deadline for receiving 
outlines has passed, the IRS will prepare an agenda containing the 
schedule of speakers. Copies of the agenda will be made available free 
of charge at the hearing. If no outlines of the topics to be discussed 
at the hearing are received by February 24, 2025, the public hearing 
will be cancelled. If the public hearing is cancelled, a notification 
of cancellation of the public hearing will be published in the Federal 
Register.
    Individuals who want to testify in person at the public hearing 
must send an email to [email protected] to have your name added to 
the building access list. The subject line of the email must contain 
the regulation number REG-116610-20 and, the language TESTIFY In 
Person. For example, the subject line may say: Request to TESTIFY In 
Person at Hearing for REG-116610-20.
    Individuals who want to testify by telephone at the public hearing 
must send an email to [email protected] to receive the telephone 
number and access code for the hearing. The subject line of the email 
must contain the regulation number REG-116610-20 and the language 
TESTIFY Telephonically. For example, the subject line may say: Request 
to TESTIFY Telephonically at Hearing for REG-116610-20.
    Individuals who want to attend the public hearing in person without 
testifying must also send an email to [email protected] to have 
your name added to the building access list. The subject line of the 
email must contain the regulation number (REG-116610-20) and the 
language ATTEND In Person. For example, the subject line may say: 
Request to ATTEND Hearing In Person for REG-116610-20. Requests to 
attend the public hearing must be received by 5 p.m. ET on March 4, 
2025.
    Individuals who want to attend the public hearing telephonically 
without testifying must also send an email to [email protected] to 
receive the telephone number and access code for the hearing. The 
subject line of the email must contain the regulation number (REG-
116610-20) and the language ATTEND Hearing Telephonically. For example, 
the subject line may say: Request to ATTEND Hearing Telephonically for 
REG-116610-20. Requests to attend the public hearing must be received 
by 5 p.m. ET on March 4, 2025.
    Hearings will be made accessible to people with disabilities. To 
request special assistance during the hearing, contact the Publications 
and Regulations Branch of the Office of Associate Chief Counsel 
(Procedure and Administration) by sending an email to 
[email protected] (preferred) or by telephone at (202) 317-6901 
(not a toll-free number) by at least March 3, 2025.

Drafting Information

    The principal author of these regulations is William J. Prater of 
the Office of the Associate Chief Counsel (Procedure and 
Administration). However, other personnel from the Treasury Department 
and the IRS participated in the development of the regulations.

[[Page 104925]]

Withdrawal of Notice of Proposed Rulemaking

    The Treasury Department and the IRS withdraw the notice of proposed 
rulemaking (REG-113289-08) that was published in the Federal Register 
on July 28, 2009 (74 FR 37183) under the authority of 31 U.S.C. 330.

List of Subjects in 31 CFR Part 10

    Accountants, Administrative practice and procedure, Lawyers, 
Reporting and recordkeeping requirements, Taxes.

Proposed Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS propose to amend 
31 CFR part 10 as follows:

PART 10--PRACTICE BEFORE THE INTERNAL REVENUE SERVICE

0
Paragraph 1. The authority for 31 CFR part 10 continues to read as 
follows:

    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; 
Reorg. Plan No. 26 of 1950, 15 FR 4935, 64 Stat. 1280, 3 CFR, 1949-
1953 Comp., P. 1017.

0
Par. 2. Part 10 is amended by removing the language ``taxpayer'', 
``taxpayers'', and ``taxpayer's'' wherever they appear and adding the 
language ``client'', ``clients'', and ``client's'' in their places, 
respectively.
0
Par. 3. Section 10.0 is revised to read as follows:


Sec.  10.0  Scope of part.

    (a) In general. This part contains rules governing the recognition 
of attorneys, certified public accountants, enrolled agents, enrolled 
retirement plan agents, enrolled actuaries, and other persons 
representing clients before the Internal Revenue Service. This part 
also establishes standards for appraisers who submit appraisals or 
present evidence or testimony to the Department of the Treasury or the 
Internal Revenue Service (IRS). Subpart A of this part sets forth rules 
relating to the authority to practice before the IRS; subpart B of this 
part prescribes the duties and restrictions relating to subpart A; 
subpart C of this part prescribes incompetence and disreputable 
conduct; subpart D of this part sets forth standards relating to the 
disqualification of appraisers and prescribes sanctions for violating 
the standards; subpart E of this part prescribes the sanctions for 
violating the standards in subparts B through D; subpart F of this part 
contains the rules applicable to disciplinary proceedings and general 
provisions relating to the availability of official records.
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 4. Section 10.2 is amended by:
0
1. Revising paragraphs (a)(4) through (6).
0
2. Removing paragraphs (a)(7) and (8).
0
3. Revising paragraph (b).
    The revisions read as follows:


Sec.  10.2  Definitions.

    (a) * * *
    (4) 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 client's rights, 
privileges, or liabilities under laws or regulations administered by 
the Internal Revenue Service. Such presentations include, but are not 
limited to, preparing documents; filing documents; corresponding and 
communicating with the Internal Revenue Service; rendering written 
advice with respect to any entity, transaction, plan or arrangement, or 
other plan or arrangement having a potential for tax avoidance or 
evasion; and representing a client at conferences, hearings, and 
meetings. Any action that supports a presentation to the Internal 
Revenue Service, including the preparation and submission of tax 
returns in connection with representing a client in a matter before the 
Internal Revenue Service, may constitute practice before the Internal 
Revenue Service.
    (5) Practitioner means any individual described in Sec.  10.3(a), 
(b), (c), (d), or (e).
    (6) A tax return includes an amended tax return and a claim for 
refund or credit within the meaning of section 6696(e)(2) of the 
Internal Revenue Code, such as a claim for refund or credit made on IRS 
Form 843, Claim for Refund and Request for Abatement.
    (b) This section is applicable beginning on [date 30 days after 
date of publication of final regulations in the Federal Register].
0
Par. 5. Section 10.3 is amended by:
0
1. Revising paragraphs (c), (d)(3), and (e)(1) and (3).
0
2. Removing paragraph (f).
0
3. Redesignating paragraphs (g) through (j) as paragraphs (f) through 
(i).
0
4. Revising newly redesignated paragraph (i).
    The revisions read as follows:


Sec.  10.3  Who may practice.

* * * * *
    (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, and whose valid 
enrollment is active and has not been terminated under Sec.  10.6, may 
practice before the Internal Revenue Service.
    (d) * * *
    (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, enrolled agents, and enrolled retirement plan 
agents.
    (e) * * *
    (1) Any individual enrolled prior to February 12, 2016, as a 
retirement plan agent pursuant to this part who is not currently under 
suspension or disbarment from practice before the Internal Revenue 
Service, and whose enrollment is not in inactive status or has not been 
terminated under Sec.  10.6, may practice before the Internal Revenue 
Service.
* * * * *
    (3) An individual who practices before the Internal Revenue Service 
pursuant to paragraph (e)(1) of this section is subject to the 
provisions of this part in the same manner as attorneys, certified 
public accountants, enrolled agents, and enrolled actuaries.
* * * * *
    (i) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 6. Section 10.4 is amended by:
0
1. Revising the section heading.
0
2. Removing paragraphs (b) through (d).
0
3. Redesignating paragraphs (e) and (f) as paragraphs (b) and (c).
0
4. Revising newly redesignated paragraph (c).
    The revisions read as follows:


Sec.  10.4  Eligibility to become an enrolled agent.

* * * * *
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register]. Former IRS employees must apply for special 
enrollment in accordance with 31 CFR 10.4(d), revised as of July 1, 
[year to be determined], on or before [date 30 days after date of 
publication of final regulations in the Federal Register].
0
Par. 7. Section 10.5 is amended by revising the section heading and 
paragraphs (a), (b), (d)(2), (e), and (g) to read as follows:

[[Page 104926]]

Sec.  10.5  Application to become an enrolled agent.

    (a) Form; address. An applicant to become an enrolled agent must 
apply as required by forms or procedures established and published by 
the Internal Revenue Service, including proper execution of required 
forms under oath or affirmation. The address on the application will be 
the address under which a successful applicant is enrolled and is the 
address to which all correspondence concerning enrollment will be sent.
    (b) Fee. A reasonable nonrefundable fee may be charged for each 
application to become an enrolled agent. See 26 CFR part 300.
* * * * *
    (d) * * *
    (2) If the applicant does not pass the tax compliance or 
suitability check, the applicant will not be issued a confirmation of 
enrollment pursuant to Sec.  10.6(b). An applicant who is initially 
denied enrollment for failure to pass a tax compliance check may 
reapply after the initial denial if the applicant becomes current with 
respect to the applicant's tax liabilities.
    (e) Temporary recognition. On receipt of a properly executed 
application, the Commissioner, or delegate, may grant the applicant 
temporary recognition to practice pending a determination as to whether 
status as an enrolled agent 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 granting the application to practice, or if the 
Commissioner, or delegate, has information indicating that the 
statements in the application are untrue or that the applicant would 
not otherwise qualify to become an enrolled agent. Issuance of 
temporary recognition does not constitute either a designation or a 
finding of eligibility as an enrolled agent, and the temporary 
recognition may be withdrawn at any time.
* * * * *
    (g) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 8. Section 10.6 is amended by:
0
1. Revising the section heading and paragraphs (a), (b), (c), and 
(d)(1) and (2).
0
2. Removing paragraph (d)(4).
0
3. Redesignating paragraphs (d)(5) through (7) as paragraphs (d)(4) 
through (6).
0
4. Revising newly redesignated paragraphs (d)(4) and (6) and paragraph 
(e) introductory text.
0
5. Removing paragraph (e)(1)(iii).
0
6. Redesignating paragraph (e)(1)(iv) as paragraph (e)(1)(iii).
0
7. Removing paragraphs (e)(3) and (f)(1)(iii).
0
8. Revising paragraphs (f)(2)(ii) heading, (f)(2)(iii)(C), (i)(4) and 
(5), and (j)(2).
0
9. In paragraph (j)(3), removing the language ``or inactive registered 
individuals'' from the end of the first sentence.
0
10. Revising paragraphs (j)(4) through (6), (k), (l), and (n).
    The revisions read as follows:


Sec.  10.6  Term and renewal of status as an enrolled agent or enrolled 
retirement plan agent.

    (a) Term. Each individual authorized to practice before the 
Internal Revenue Service as an enrolled agent or enrolled retirement 
plan agent will be accorded active enrollment status subject to renewal 
of enrollment as provided in this part.
    (b) Confirmation of enrollment. The Internal Revenue Service will 
issue an enrollment document (such as an enrollment card or other 
document) to an individual who meets the enrollment requirements in 
this paragraph (b) and whose application to practice before the 
Internal Revenue Service is approved. This approval will be valid for 
the period stated on the enrollment document. An enrolled agent or 
enrolled retirement plan agent may not practice before the Internal 
Revenue Service without a valid approval. The enrollment document is in 
addition to any notification that may be provided to each individual 
who obtains a preparer tax identification number.
    (c) Change of address. An enrolled agent or enrolled retirement 
plan agent must send notification of any change of address to the 
address specified by the Internal Revenue Service within 60 days of the 
change of address. This notification must include the enrolled agent's 
or enrolled retirement plan agent's name, prior address, new address, 
tax identification number(s) (including preparer tax identification 
number), and the date the change of address is effective. Unless this 
notification is sent, the address for purposes of any correspondence 
from the appropriate Internal Revenue Service office responsible for 
administering this part will be the address reflected on the 
practitioner's most recent application for enrollment, or application 
for renewal of enrollment. A practitioner's change of address 
notification under this part will not constitute a change of the 
practitioner's last known address for purposes of section 6212 of the 
Internal Revenue Code.
    (d) * * *
    (1) In general. Enrolled agents or enrolled retirement plan agents 
must renew their status with the Internal Revenue Service to maintain 
eligibility to practice before the Internal Revenue Service. Failure to 
receive notification from the Internal Revenue Service of the renewal 
requirement will not be justification for the individual's failure to 
satisfy the requirement of this paragraph (d).
    (2) Renewal period for enrolled agents. (i) Applications for 
renewal of status as an enrolled agent will be required between 
November 1 and January 31 every three years according to the last digit 
of the individual's Social Security number or tax identification 
number. Those individuals who receive initial enrollment as an enrolled 
agent 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.
    (ii) Enrolled agents 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 
November 1, 2024, must apply for renewal between November 1, 2024, and 
January 31, 2025. The renewal will be effective April 1, 2025.
    (iii) Enrolled agents 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, 2025, must apply for renewal between November 1, 2025, and January 
31, 2026. The renewal will be effective April 1, 2026.
    (iv) Enrolled agents who have a Social Security number or tax 
identification number that ends with the numbers 7, 8, or 9, or who do 
not have a Social Security number, except for those individuals who 
received their initial enrollment after November 1, 2026, must apply 
for renewal between November 1, 2026, and January 31, 2027. The renewal 
will be effective April 1, 2027.
* * * * *
    (4) Notification of renewal. After review and approval, the 
Internal Revenue Service will notify the individual of the renewal and 
will issue the individual a document evidencing

[[Page 104927]]

current status as an enrolled agent or enrolled retirement plan agent.
* * * * *
    (6) Forms. Forms required for renewal may be obtained by sending a 
written request to the address specified by the Internal Revenue 
Service or from such other source as the Internal Revenue Service will 
publish in the Internal Revenue Bulletin (see 26 CFR 
601.601(d)(2)(ii)(b)) and on the Internal Revenue Service website.
    (e) Condition for renewal: continuing education. To qualify for 
renewal as an enrolled agent or enrolled retirement plan agent an 
individual must certify in the manner prescribed by the Internal 
Revenue Service that the individual has satisfied the requisite number 
of continuing education hours.
* * * * *
    (f) * * *
    (2) * * *
    (ii) Correspondence or individual study programs (including 
recorded programs). * * *
    (iii) * * *
    (C) The maximum continuing education credit for instruction and 
preparation may not exceed six hours annually for enrolled agents and 
enrolled retirement plan agents.
* * * * *
    (i) * * *
    (4) If a request for waiver is not approved, the individual will be 
placed in inactive status. The individual will be notified that the 
waiver was not approved and that the individual has been placed on a 
roster of inactive enrolled agents or enrolled retirement plan agents.
    (5) If the request for waiver is not approved, the individual may 
file a protest as prescribed by the Internal Revenue Service in forms, 
instructions, or other appropriate guidance. A protest filed under this 
section is not governed by subpart F of this part.
* * * * *
    (j) * * *
    (2) The continuing education records of an enrolled agent or 
enrolled retirement plan agent may be reviewed to determine compliance 
with the requirements and standards for renewal as provided in 
paragraph (f) of this section. As part of this review, the enrolled 
agent or enrolled retirement plan agent may be required to provide the 
Internal Revenue Service with copies of any continuing education 
records required to be maintained under this part. If the enrolled 
agent or enrolled retirement plan agent fails to comply with the 
requirement in this paragraph (j)(2), any continuing education hours 
claimed may be disallowed.
* * * * *
    (4) Individuals in inactive status and individuals who are 
ineligible to practice before the Internal Revenue Service may not 
state or imply that they are eligible to practice before the Internal 
Revenue Service, or use the terms enrolled agent or enrolled retirement 
plan agent, the designations EA or ERPA, or other form of reference to 
eligibility to practice before the Internal Revenue Service.
    (5) An individual placed in inactive status may be reinstated to an 
active status by filing an application for renewal and providing 
evidence of the completion of all required continuing education hours 
for the enrollment cycle. Continuing education credit under this 
paragraph (j)(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 inactive status must file an 
application for renewal and satisfy the requirements for renewal as set 
forth in this section within three years of being placed in inactive 
status. Otherwise, the name of such individual will be removed from the 
inactive status roster and the individual's status as an enrolled agent 
or enrolled retirement plan agent will terminate. Future eligibility 
for active status must then be reestablished by the individual as 
provided in this section.
* * * * *
    (k) Inactive retirement status. An individual who no longer 
practices before the Internal Revenue Service may request to be placed 
in an inactive retirement 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. An 
individual who is placed in an inactive retirement status may be 
reinstated to an active status by filing an application for renewal and 
providing evidence of the completion of the required continuing 
education hours for the enrollment cycle. Inactive retirement status is 
not available to an individual who is ineligible to practice before the 
Internal Revenue Service or an individual who is the subject of a 
pending disciplinary matter under this part.
    (l) Renewal while under suspension or disbarment. An individual who 
is ineligible to practice before the Internal Revenue Service by virtue 
of disciplinary action under this part is required to conform to the 
requirements for renewal of enrollment before the individual's 
eligibility is restored.
* * * * *
    (n) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 9. Section 10.7 is amended by adding paragraph (c)(1)(viii) and 
revising paragraph (f) to read as follows:


Sec.  10.7  Representing oneself; participating in rulemaking; limited 
practice; and special appearances.

* * * * *
    (c) * * *
    (1) * * *
    (viii) An individual who possesses a current Annual Filing Season 
Program (AFSP) Record of Completion may represent a client before 
revenue agents, customer service representatives, or similar officers 
and employees of the Internal Revenue Service, including the Taxpayer 
Advocate Service, during an examination of a tax return or claim for 
refund or credit that the individual prepared and signed. The 
individual must have: a valid Record of Completion for the calendar 
year in which the tax return or claim for refund or credit was prepared 
and signed and a valid Record of Completion for the year or years in 
which the representation occurs.
* * * * *
    (f) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 10. Section 10.8 is revised to read as follows:


Sec.  10.8  Participation in IRS proceedings by non-practitioners.

    (a) Furnishing Information. Any individual, except appraisers who 
have been disqualified pursuant to Sec.  10.61(a), including non-
practitioners, may appear as a witness before the Internal Revenue 
Service, or furnish information at the request of the Internal Revenue 
Service or any of its officers or employees.
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 11. Section 10.9 is amended by:
0
1. In paragraph (a)(2)(i), removing the language ``and pay any 
applicable user fee'' from the end of the paragraph.
0
2. In paragraph (a)(2)(ii), removing the language ``and paying any 
applicable user fee'' from the end of the paragraph.
0
3. In paragraph (a)(4)(i), removing the language ``and pay any 
applicable user fee'' from the first sentence in the paragraph.
0
4. Revising paragraph (c).

[[Page 104928]]

0
5. Adding paragraph (d).
    The revision and addition read as follows:


Sec.  10.9  Continuing education providers and continuing education 
programs.

* * * * *
    (c) Fee. In addition to any vendor fees that are charged, a 
continuing education provider may be required to pay a user fee to 
obtain or renew a continuing education provider number or continuing 
education provider program number.
    (d) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 12. Section 10.21 is revised to read as follows:


Sec.  10.21  Knowledge of error or omission.

    (a) In general. A practitioner who, while representing a client in 
a matter before the Internal Revenue Service, knows that either the 
client, the practitioner, or a prior practitioner has not complied with 
the revenue laws of the United States and regulations, or has made an 
error in or omission from any return, document, affidavit, or other 
paper that the client submitted or executed under the revenue laws of 
the United States and regulations, must advise the client promptly of 
the fact of such noncompliance, error, or omission. The practitioner 
must advise the client of the consequences of the noncompliance, error, 
or omission, as provided under the internal revenue laws of the United 
States and regulations, and recommend the corrective actions, such as 
disclosure, to be taken.
    (b) Disclosure and continued representation. If a practitioner is 
representing a client in a matter before the Internal Revenue Service, 
the practitioner should request the client's agreement to disclose the 
noncompliance, error, or omission to the Internal Revenue Service. The 
practitioner must also take reasonable steps to ensure that the 
noncompliance, error, or omission is not repeated in subsequent 
submissions to the Internal Revenue Service. If the client does not 
agree to disclose the noncompliance, error, or omission, the 
practitioner should consider whether the practitioner can continue to 
represent the client before the Internal Revenue Service and meet the 
obligation to ensure diligence as to accuracy under Sec.  10.22.
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 13. Section 10.22 is amended by revising paragraphs (a)(1) through 
(3) and (c) to read as follows:


Sec.  10.22  Diligence as to accuracy.

    (a) * * *
    (1) In preparing or assisting in the preparation of, approving, or 
submitting documents, affidavits, and other papers, including tax 
returns prepared, approved or submitted in connection with representing 
a client in a matter before the Internal Revenue Service;
    (2) In determining the correctness of oral or written 
representations made by the practitioner when representing a client in 
a matter before the Internal Revenue Service; and
    (3) In determining the correctness of oral or written 
representations made by the practitioner to clients when representing 
clients in a matter before the Internal Revenue Service.
* * * * *
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].


Sec.  10.27  [Removed]

0
Par. 14. Section 10.27 is removed.
0
Par. 15. Section 10.30 is amended by revising paragraphs (a)(1) and (e) 
to read as follows:


Sec.  10.30  Solicitation.

    (a) * * *
    (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 and enrolled retirement 
plan agents, in describing their professional designation, may not 
utilize the term certified or imply an employer-employee relationship 
with the Internal Revenue Service. Examples of acceptable descriptions 
for enrolled agents are ``enrolled to represent clients before the 
Internal Revenue Service,'' ``enrolled to practice before the Internal 
Revenue Service,'' ``admitted to practice before the Internal Revenue 
Service,'' EA, or E.A. Similarly, examples of acceptable descriptions 
for enrolled retirement plan agents are ``enrolled to represent clients 
before the Internal Revenue Service as a retirement plan agent'' and 
``enrolled to practice before the Internal Revenue Service as a 
retirement plan agent,'' ERPA, or E.R.P.A.
* * * * *
    (e) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
* * * * *
0
Par. 16. Section 10.31 is revised to read as follows:


Sec.  10.31  Negotiation of payments to clients.

    (a) In general. A practitioner may not endorse or otherwise 
negotiate or transfer any paper or electronic check, prepaid or debit 
card, phone or mobile payment, or other form of payment issued to a 
client by the government in respect of a Federal tax liability. 
Negotiate or transfer includes directing or accepting payment by any 
means, electronic or otherwise, into an account owned, controlled by, 
or held for the benefit of the practitioner or any firm or other entity 
with which the practitioner is associated.
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 17. Section 10.33 is amended by:
0
1. Revising the section heading and paragraphs (a) introductory text 
and (a)(1).
0
2. Redesignating paragraph (a)(4) as paragraph (a)(7).
0
3. Adding new paragraph (a)(4) and paragraphs (a)(5) and (6).
0
4. Revising paragraph (b).
0
5. Removing paragraph (c).
    The revisions and additions read as follows:


Sec.  10.33  Best practices for tax practitioners.

    (a) Best practices. Tax practitioners should provide clients with 
the highest quality representation concerning Federal tax issues by 
adhering to best practices in providing advice and in preparing or 
assisting in the preparation of a submission to the Internal Revenue 
Service. In addition to compliance with the standards of practice 
provided elsewhere in this part, best practices include the following:
    (1) Communicating clearly with the client regarding the terms of 
the engagement, including those relating to fees, expenses, and 
payment. For example, the practitioner should determine the client's 
expected purpose for and use of the advice and should have a clear 
understanding with the client regarding the form and scope of the 
advice or assistance to be rendered.
* * * * *
    (4) Maintaining a policy related to data security safeguards with 
respect to a client's tax return or other confidential information. 
Practitioners should also consider developing an incident response plan 
with specific procedures for responding to a data breach and for 
disclosure of data breaches to clients.

[[Page 104929]]

    (5) Identifying, evaluating, and addressing a mental impairment, 
whether chronic or temporary, arising out of or related to age, 
substance abuse, a physical or mental health condition, or other 
circumstance that may have an adverse impact on a tax practitioner's 
ability to provide the highest quality representation of a client 
before the Internal Revenue Service.
    (6) Establishing a business continuity and succession plan that 
addresses procedures and safeguards in the event of the sale or 
cessation of the practitioner's practice, the practitioner's death or 
disability, or the occurrence of extraordinary events such as a natural 
disaster, cyberattack, or pandemic.
* * * * *
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 18. Section 10.34 is amended by revising the section heading and 
paragraphs (a) heading, (a)(1)(i) introductory text, (c)(1)(i) and 
(ii), and (d) and (e) to read as follows:


Sec.  10.34  Standards with respect to tax returns, documents, 
affidavits, and other papers prepared or submitted while representing a 
client before the Internal Revenue Service.

    (a) Tax returns prepared or submitted while representing a client 
in a matter before the IRS. (1) * * *
    (i) Prepare, while representing a client in a matter before the 
Internal Revenue Service or, for tax returns prepared by the 
practitioner prior to the representation, including returns already 
filed with the Internal Revenue Service, submit a tax return or claim 
for refund or a claim for a credit that the practitioner knows or 
reasonably should know contains a position that--
* * * * *
    (c) * * *
    (1) * * *
    (i) A position taken on a tax return that is relevant to the 
representation of a client in a matter before the Internal Revenue 
Service if--
    (A) The practitioner provided written advice, as defined under 
Sec.  10.37, to the client with respect to the position; or
    (B) The practitioner prepared and submitted the tax return while 
representing the client in a matter before the IRS.
    (ii) Any document, affidavit or other paper submitted in a matter 
before the Internal Revenue Service.
* * * * *
    (d) Relying on information furnished by clients. A practitioner 
advising a client to take a position on a tax return, document, 
affidavit or other paper submitted in a matter before the Internal 
Revenue Service, 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 with an 
important fact or another factual assumption, or incomplete.
    (e) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 19. Section 10.35 is amended by adding a sentence at the end of 
paragraph (a) and revising paragraph (b) to read as follows:


Sec.  10.35  Competence.

    (a) * * * Competency includes understanding the benefits and risks 
associated with relevant technology that is used by the practitioner to 
provide services to clients or to store and transmit tax return and 
other confidential information.
    (b) This section is applicable beginning on [date 30 days after 
date of publication of final regulations in the Federal Register].
0
Par. 20. Section 10.36 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec.  10.36  Procedures to ensure compliance.

    (a) Any individual subject to the provisions of this part who has 
(or individuals who have or share) principal authority and 
responsibility for overseeing a firm's practice governed by this part, 
including, while representing a client, the provision of advice 
concerning Federal tax matters or the preparation or submission of 
documents in a matter before the Internal Revenue Service, must take 
reasonable steps to ensure that the firm has adequate procedures in 
effect for all members, associates, and employees (whether or not those 
individuals are otherwise subject to this part) for purposes of 
complying with subparts A through C of this part, as applicable 
(including the best practices described in Sec.  10.33(a)). In the 
absence of a person or persons identified by the firm as having the 
principal authority and responsibility described in this paragraph (a), 
the Internal Revenue Service may identify one or more individuals 
subject to the provisions of this part responsible for compliance with 
the requirements of this section.
* * * * *
    (c) This section is applicable beginning on [date 30 days after 
date of publication of final regulations in the Federal Register].
0
Par. 21. Section 10.37 is amended by revising the section heading and 
paragraphs (b)(2), (c), (d) introductory text, (d)(2), and (e) to read 
as follows:


Sec.  10.37  Requirements for written tax advice.

* * * * *
    (b) * * *
    (2) The practitioner knows or reasonably should know that the other 
person is not competent or lacks the necessary qualifications to 
provide the advice, or is unaware of all relevant facts and 
circumstances; or
* * * * *
    (c) Standard of review. In evaluating whether a practitioner giving 
written advice concerning one or more Federal tax matters complied with 
the requirements of this section, the Commissioner, or delegate, will 
apply a reasonable practitioner standard, considering all facts and 
circumstances, including, but not limited to, the scope of the 
engagement, the practitioner's knowledge of the client's particular 
circumstances, and the type and specificity of the advice sought by the 
client.
    (d) Federal tax matter. A Federal tax matter, as used in this 
section, is any transaction, plan, arrangement, or other matter 
(whether prospective or completed), which is of a type that the 
Internal Revenue Service determines as having a potential for tax 
avoidance or evasion, concerning the application or interpretation of--
* * * * *
    (2) Any provision of law impacting a person's obligations under the 
internal revenue laws and regulations, including but not limited to the 
person's liability to pay tax, ability to take a specific return 
position (whether prospective or completed), or obligation to file 
returns; or
* * * * *
    (e) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].


Sec. Sec.  10.38, 10.91, and 10.93  [Removed]

0
Par. 22. Sections 10.38, 10.91, and 10.93 are removed.

[[Page 104930]]

Sec. Sec.  10.50, 10.51, 10.52, 10.53, 10.60, 10.61, 10.62, 10.63, 
10.64, 10.65, 10.66, 10.67, 10.68, 10.69, 10.70, 10.71, 10.72, 10.73, 
10.74, 10.75, 10.76, 10.77, 10.78, 10.79, 10.80, 10.81, 10.82, 10.90, 
and 10.92  [Redesignated as Sec. Sec.  10.70, 10.50, 10.71, 10.72, 
10.80, 10.81, 10.82, 10.83, 10.84, 10.85, 10.86, 10.87, 10.88, 10.89, 
10.90, 10.91, 10.92, 10.93, 10.94, 10.95, 10.96, 10.97, 10.98, 10.99, 
10.100, 10.101, 10.102, 10.100, and 10.113]

0
Par. 23. Redesignate the sections in the first column as the sections 
in the second column:

------------------------------------------------------------------------
                    Current section:                       New section:
------------------------------------------------------------------------
10.50...................................................           10.70
10.51...................................................           10.50
10.52...................................................           10.71
10.53...................................................           10.72
10.60...................................................           10.80
10.61...................................................           10.81
10.62...................................................           10.82
10.63...................................................           10.83
10.64...................................................           10.84
10.65...................................................           10.85
10.66...................................................           10.86
10.67...................................................           10.87
10.68...................................................           10.88
10.69...................................................           10.89
10.70...................................................           10.90
10.71...................................................           10.91
10.72...................................................           10.92
10.73...................................................           10.93
10.74...................................................           10.94
10.75...................................................           10.95
10.76...................................................           10.96
10.77...................................................           10.97
10.78...................................................           10.98
10.79...................................................           10.99
10.80...................................................          10.100
10.81...................................................          10.101
10.82...................................................          10.102
10.90...................................................          10.110
10.92...................................................          10.113
------------------------------------------------------------------------

0
Par. 24. Revise the heading for subpart C to read as follows:

Subpart C--Incompetence or Disreputable Conduct

0
Par. 25. Newly redesignated Sec.  10.50 is amended by:
0
1. Revising paragraphs (a) introductory text and (a)(12).
0
2. Adding paragraph (a)(19).
0
3. Revising paragraph (b).
0
4. Adding paragraph (c).
    The revisions and additions read as follows:


Sec.  10.50  Incompetence or disreputable conduct.

    (a) Incompetence or disreputable conduct. Incompetence or 
disreputable conduct for which a practitioner may be sanctioned under 
Sec.  10.70 includes actions that relate to a practitioner's fitness to 
practice before the Internal Revenue Service, regardless of whether 
those actions are connected to a presentation to the Internal Revenue 
Service as defined under Sec.  10.2(a)(4). Incompetence or disreputable 
conduct includes, but is not limited to--
* * * * *
    (12) Contemptuous conduct in connection with practice before the 
Internal Revenue Service (or during any proceeding pursuant to Sec.  
10.80 or an investigation by the Treasury Inspector General for Tax 
Administration), including the use of abusive or otherwise contemptuous 
acts or language, making false accusations or statements, knowing them 
to be false, or circulating or publishing malicious or libelous matter.
* * * * *
    (19) Willfully failing to follow any Federal tax law.
    (b) Assessment of certain penalties. Assessment against a 
practitioner of a penalty related to a willful attempt to understate 
tax liabilities under section 6694(b) of the Internal Revenue Code 
(Code); aiding or abetting in the understatement of tax liabilities 
under section 6701 of the Code; careless, reckless, or intentional 
disregard for applicable rules or regulations (within the meaning of 26 
CFR 1.6662-3(b)(2) and 1.6694-3(c)) under section 6662(b)(1) of the 
Code; or promotion of abusive tax shelters under section 6700 of the 
Code will be considered a violation of paragraph (a)(7) of this 
section. The assessment of any of these penalties, however, is not 
required to show a violation of paragraph (a)(7) of this section.
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 26. New Sec.  10.51 is added to subpart C to read as follows:


Sec.  10.51  Fees that constitute disreputable conduct.

    (a) Unconscionable fees. Charging an unconscionable fee is 
disreputable conduct.
    (b) Contingent fees. Charging a contingent fee in connection with 
the preparation of an original or amended tax return or claim for 
refund or credit prepared prior to the examination of the tax return is 
disreputable conduct.
    (1) Preparation of an original or amended tax return or claim for 
refund or credit includes providing advice that is directly relevant to 
determining the existence, character, or amount of an item, entry, or 
another portion of a tax return or claim for refund, including any 
schedules that are part of the tax return or claim for refund or 
credit.
    (2) 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 a 
fee that is based on a percentage of the refund reported on a tax 
return, that is based on a percentage of the taxes saved, or that 
otherwise depends on the specific tax result attained. A contingent fee 
also 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 on a tax return or other filing is challenged by 
the Internal Revenue Service or is not sustained, whether pursuant to 
an indemnity agreement, a guarantee, rescission rights, or any other 
arrangement with a similar effect.
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 27. Revise the heading for subpart D to read as follows:

Subpart D--Appraisers

0
Par. 28. Add new Sec. Sec.  10.60 through 10.62 to subpart D to read as 
follows:
* * * * *
Sec.
10.60 Definitions.
10.61 Disqualification of appraisers.
10.62 Receipt of information concerning appraisers.
* * * * *


Sec.  10.60  Definitions.

    (a) Appraiser. The term appraiser means any individual who 
determines the market value of any asset to support a position taken on 
a tax return or in an administrative proceeding. Appraisers include, 
but are not limited to, individuals who meet the definition of a 
``qualified appraiser'' under section 170(f)(11)(E) of the Internal 
Revenue Code.
    (b) Administrative proceeding. An administrative proceeding for 
purposes of this subpart, includes any matter or other action before 
the Department of the Treasury or the Internal Revenue Service that 
involves the presentation of documents, testimony, or other evidence. 
Administrative proceedings include, but are not limited to, 
investigations, examinations, appeals, and collection actions.
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].


Sec.  10.61  Disqualification of appraisers.

    (a) Authority to disqualify appraisers. The Commissioner, or 
delegate, after due notice and an opportunity for a

[[Page 104931]]

hearing, may disqualify an appraiser for violations of any of the 
standards under paragraph (b) of this section or for the disreputable 
conduct described under paragraph (c) of this section. Disqualification 
may include a finding that appraisals by such appraiser will have no 
probative effect in an administrative proceeding or barring an 
appraiser from presenting evidence or testimony in any administrative 
proceeding before the Department of the Treasury or the Internal 
Revenue Service.
    (1) The disqualification of an appraiser will remain in effect 
until the appraiser is authorized to present evidence or testimony 
pursuant to Sec.  10.101. The prohibition applies to appraisals, 
evidence, and testimony submitted or presented by the appraiser and is 
not limited to a specific appraisal or client. The prohibition also 
applies to appraisals made before the effective date of 
disqualification.
    (2) Any appraisal made by a disqualified appraiser after the 
effective date of disqualification will not have 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 client's reliance in 
good faith on such appraisal.
    (b) Appraisal standards and prohibited conduct. (1) All appraisals 
submitted in an administrative proceeding should conform to the 
substance and principles of generally accepted appraisal standards as 
evidenced by the Uniform Standards of Professional Appraisal Practice 
(USPAP) promulgated by the Appraisal Standards Board of the Appraisal 
Foundation or the International Valuation Standards (IVS) promulgated 
by the International Valuation Standards Council (IVSC).
    (2) An appraiser may not prepare an appraisal, where the appraiser 
knew or reasonably should have known that it would be submitted during 
an administrative proceeding and used to support a substantial 
valuation misstatement as defined in section 6662(e) of the Internal 
Revenue Code (Code), a substantial estate or gift tax valuation 
understatement as defined in section 6662(g), or a gross valuation 
misstatement as defined in section 6662(h).
    (c) Disreputable conduct. An appraiser who has been assessed a 
penalty under section 6694, 6695A, 6700, or 6701 of the Code, for which 
it is determined that the appraiser acted willfully, recklessly, or 
through gross incompetence with respect to the proscribed conduct may 
be disqualified for engaging in disreputable conduct.
    (d) Misconduct triggering disqualification. An appraiser may be 
disqualified under Sec.  10.61(a) if the appraiser:
    (1) Willfully violates any of the standards described in paragraphs 
(b)(1) and (2) of this section.
    (2) Recklessly or through gross incompetence engages in a pattern 
of submitting appraisals that violate the standards described in 
paragraph (b)(1) of this section.
    (3) Recklessly or through gross incompetence violates the standard 
described in paragraph (b)(2) of this section.
    (4) Engages in the disreputable conduct described in paragraph (c) 
of this section.
    (e) Defenses to disqualification. If an appraiser shows compliance 
with the substance and principles of USPAP standards or IVS with all 
relevant appraisals, the showing will be taken into account as a 
defense in determining whether the appraiser acted willfully, 
recklessly, or though gross incompetence with respect to a violation of 
paragraph (b)(2) or (c) of this section.
    (f) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].


Sec.  10.62  Receipt of information concerning appraisers.

    (a) Officer or employee of the Internal Revenue Service. If an 
officer or employee of the Internal Revenue Service has reason to 
believe an appraiser has violated Sec.  10.61(b)(1) or (2) or has been 
assessed a penalty under section 6694, 6695A, 6700, or 6701 of the 
Internal Revenue Code, the officer or employee will promptly make a 
written report of the suspected violation. The report will explain the 
facts and reasons upon which the officer's or employee's belief rests 
and must be submitted to the office(s) of the Internal Revenue Service 
responsible for administering or enforcing this part.
    (b) Other persons. Any person other than an officer or employee of 
the Internal Revenue Service having information of misconduct described 
in Sec.  10.61(d) may make an oral or written report of the alleged 
misconduct to the office(s) of the Internal Revenue Service responsible 
for administering or enforcing this part 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 misconduct and submit the report 
to the office(s) of the Internal Revenue Service responsible for 
administering and enforcing this part.
    (c) Destruction of report. No report made under paragraph (a) or 
(b) of this section will be maintained unless retention of the report 
is permissible under the applicable records control schedule as 
approved by the National Archives and Records Administration and 
designated in the Internal Revenue Manual. Reports must be destroyed as 
soon as permissible under the applicable records control schedule.
    (d) Effect on proceedings under subpart E of this part. The 
destruction of any report will not bar any proceeding under subpart E 
but will preclude the use of a copy of the report in a proceeding under 
subpart E.
    (e) Applicability date. This section is applicable to conduct 
occurring on or after [date 30 days after date of publication of final 
regulations in the Federal Register].
0
Par. 29. Revise the heading for subpart E to read as follows:

Subpart E--Sanctions for Violation of the Regulations


Sec. Sec.  10.70, 10.71, and 10.72  [Transferred to Subpart E]

0
Par. 30. Newly redesignated Sec. Sec.  10.70, 10.71, and 10.72 are 
transferred to subpart E.
0
Par. 31. Newly redesignated Sec.  10.70 is amended by:
0
1. Removing paragraph (b).
0
2. Redesignating paragraphs (c) through (f) as paragraphs (b) through 
(e).
0
3. Revising newly redesignated paragraph (e).
    The revision reads as follows:


Sec.  10.70  Sanctions.

* * * * *
    (e) Applicability date. This section is applicable to conduct 
occurring on or after [date 30 days after date of publication of final 
regulations in the Federal Register].
0
Par. 32. Newly redesignated Sec.  10.71 is revised to read as follows:


Sec.  10.71  Violations subject to sanction.

    (a) A practitioner may be sanctioned under Sec.  10.70 if the 
practitioner--
    (1) Willfully violates any of the regulations (other than Sec.  
10.33) contained in this part; or
    (2) Recklessly or through gross incompetence (within the meaning of 
Sec.  10.50(a)(13)) violates Sec.  10.34, Sec.  10.35, Sec.  10.36, or 
Sec.  10.37.
    (b) This section is applicable to conduct occurring on or after 
[date 30

[[Page 104932]]

days after date of publication of final regulations in the Federal 
Register].
0
Par. 33. Newly redesignated Sec.  10.72 is amended by revising 
paragraphs (d) and (e) to read as follows:


Sec.  10.72  Receipt of information concerning practitioner.

* * * * *
    (d) Effect on proceedings under subpart F of this part. The 
destruction of any report will not bar any proceeding under subpart F 
but will preclude the use of a copy of the report in a proceeding under 
subpart F.
    (e) Applicability date. This section is applicable to conduct 
occurring on or after [date 30 days after date of publication of final 
regulations in the Federal Register].
0
Par. 34. Add subpart F to read as follows:

Subpart F--Rules Applicable to Disciplinary Proceedings and General 
Provisions


Sec. Sec.  10.80 through 10.102, 10.110, and 10.113  [Transferred to 
Subpart F]

0
Par. 35. Newly redesignated Sec. Sec.  10.80 through 10.102, 10.110, 
and 10.113 are transferred to subpart F.
0
Par. 36. Newly redesignated Sec.  10.80 is amended by revising 
paragraphs (b) and (d) to read as follows:


Sec.  10.80  Institution of proceeding.

* * * * *
    (b) Whenever the Secretary of the Treasury, or delegate, determines 
that the appraiser acted willfully, recklessly, or through gross 
incompetence, or engaged in disreputable conduct, as defined under 
Sec.  10.61(d)(1) through (4), with respect to the proscribed conduct, 
the appraiser may, in accordance with this section, be subject to a 
proceeding for disqualification. A proceeding for disqualification of 
an appraiser is instituted by the filing of a complaint, the contents 
of which are more fully described in Sec.  10.82.
* * * * *
    (d) This section is applicable beginning on [date 30 days after 
date of publication of final regulations in the Federal Register].
0
Par. 37. Newly redesignated Sec.  10.85 is amended by:
0
1. Revising paragraph (a)(2).
0
2. Adding paragraph (a)(3).
0
3. Revising paragraph (c).
    The revisions and addition read as follows:


Sec.  10.85  Supplemental charges.

    (a) * * *
    (2) It appears that the respondent has knowingly introduced false 
testimony during the proceedings against the respondent; or
    (3) It appears that the respondent has engaged in contemptuous 
conduct within the meaning of Sec.  10.50(a)(12) during the proceedings 
against the respondent.
* * * * *
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 38. Newly redesignated Sec.  10.99 is amended by revising 
paragraph (e) and adding paragraphs (f) and (g) to read as follows:


Sec.  10.99  Effect of disbarment, suspension, or censure.

* * * * *
    (e) Jurisdiction to investigate compliance with censure, 
suspension, or disqualification. A practitioner or appraiser who is 
censured, suspended, or disqualified under Sec.  10.61(a), Sec.  10.70, 
or Sec.  10.102 will be considered a practitioner or appraiser for the 
purpose of investigating whether the practitioner or appraiser is in 
compliance with the terms of their censure, suspension, or 
disqualification. Censured, suspended, or disqualified practitioners or 
appraisers may face additional sanctions or disbarment for any 
violation.
    (f) Jurisdiction to investigate disbarred practitioners and non-
practitioners. The IRS may investigate a practitioner disbarred under 
Sec.  10.70 or a non-practitioner to determine whether they are wrongly 
holding themselves out as practitioners.
    (g) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 39. Newly redesignated Sec.  10.101 is revised to read as follows:


Sec.  10.101  Petition for reinstatement.

    (a) In general. A practitioner disbarred or suspended under Sec.  
10.70, or an appraiser disqualified under Sec.  10.61, may petition for 
reinstatement before the Internal Revenue Service after the expiration 
of 5 years following such disbarment, suspension, or disqualification 
(or immediately following the expiration of the suspension or 
disqualification period, if shorter than 5 years). A practitioner or 
appraiser suspended or disqualified under Sec.  10.102 may petition for 
reinstatement at any time upon a showing of good cause as described in 
Sec.  10.102(f)(2). Reinstatement will not be granted unless the 
Internal Revenue Service determines that the petitioner is not likely 
to engage thereafter in conduct contrary to the regulations in this 
part, and that granting such reinstatement would not be contrary to the 
public interest.
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 40. Newly redesignated Sec.  10.102 is amended by:
0
1. Revising the section heading.
0
2. Removing paragraph (a).
0
3. Redesignating paragraphs (b) through (h) as paragraphs (a) through 
(g).
0
4. Revising newly redesignated paragraphs (a), (b) introductory text, 
(b)(2) and (4), and (e) through (g).
    The revisions and additions read as follows:


Sec.  10.102  Expedited suspension or disqualification.

    (a) When applicable. The expedited suspension procedures in this 
section are initiated by issuing the show cause order described under 
paragraph (d) of this section. A show cause order will be issued to any 
practitioner or appraiser for whom paragraph (a)(1), (2), (3), (4), 
(5), (6), or (7) of this section is true within the 5 years prior to 
the date that the show cause order was issued. The expedited procedures 
described in this section may be used to suspend the practitioner from 
practice before the Internal Revenue Service, disqualify an appraiser 
from presenting evidence or testimony in any administrative proceeding 
before the Department of the Treasury or the Internal Revenue Service, 
or find that any appraisal made by a disqualified appraiser after the 
effective date of disqualification will not have probative effect in 
any administrative proceeding before the Department of the Treasury or 
the Internal Revenue Service.
    (1) A practitioner has a license to practice as an attorney, 
certified public accountant, or actuary suspended or revoked for cause 
(not including failure to pay a professional licensing fee) by any 
authority or court, agency, body, or board described in Sec.  
10.50(a)(10).
    (2) An appraiser has a license or certification to conduct 
appraisals revoked or suspended by any state licensing or certification 
board.
    (3) A practitioner or appraiser has voluntarily forfeited a 
practitioner's or appraiser's license or certification after any 
authority described in paragraph (a)(1) or (2) of this section 
initiated an investigation of, or proceeding against, the practitioner 
or appraiser for alleged violations of applicable standards or rules of 
conduct for which the practitioner's or appraiser's license or 
certification could be suspended or

[[Page 104933]]

revoked for cause, if proven. Voluntary forfeiture includes retirement, 
resignation, consensual permanent inactivation, or similar action.
    (4) A practitioner has, irrespective of whether an appeal has been 
taken, been convicted of any crime under title 26, 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.
    (5) A practitioner has violated conditions imposed on the 
practitioner pursuant to Sec.  10.99(d).
    (6) A practitioner has been sanctioned by a court of competent 
jurisdiction, whether in a civil or criminal proceeding (including 
suits for injunctive relief), relating to any client's tax liability or 
relating to the practitioner's own tax liability, for--
    (i) Instituting or maintaining proceedings primarily for delay;
    (ii) Advancing frivolous or groundless arguments; or
    (iii) Failing to pursue available administrative remedies.
    (7) A practitioner has demonstrated a pattern of willful 
disreputable conduct by--
    (i) Failing to make an annual Federal tax return, in violation of 
the Federal tax laws, during 4 of the 5 tax years immediately preceding 
the institution of a proceeding under paragraph (b) of this section and 
remains noncompliant with any of the practitioner's Federal tax filing 
obligations at the time the notice of suspension is issued under 
paragraph (e) of this section; or
    (ii) Failing to make a return required more frequently than 
annually, in violation of the Federal tax laws, during 5 of the 7 tax 
periods immediately preceding the institution of a proceeding under 
paragraph (b) of this section and remains noncompliant with any of the 
practitioner's Federal tax filing obligations at the time the notice of 
suspension is issued under paragraph (e) of this section.
    (b) Expedited suspension or disqualification procedures. A 
suspension or disqualification under this section will be proposed by a 
show cause order that names the respondent, is signed by an authorized 
representative of the Internal Revenue Service under Sec.  10.89(a)(1), 
and is served according to the rules set forth in Sec.  10.83(a). The 
show cause order must give a plain and concise description of the 
allegations that constitute the basis for the proposed suspension or 
disqualification. The show cause order must notify the respondent--
* * * * *
    (2) That an expedited suspension or disqualification decision by 
default may be rendered if the respondent fails to file a response as 
required;
* * * * *
    (4) That the respondent may be suspended or disqualified either 
immediately following the expiration of the period within which a 
response must be filed or, if a conference is requested, immediately 
following the conference.
* * * * *
    (e) Suspension or disqualification--(1) In general. The 
Commissioner, or delegate, may suspend the respondent from practice 
before the Internal Revenue Service or disqualify an appraiser from 
presenting evidence or testimony in any administrative proceeding 
before the Department of the Treasury or Internal Revenue Service by a 
written notice of expedited suspension or disqualification immediately 
following:
    (i) The expiration of the period within which a response to a show 
cause order must be filed if the respondent does not file a response as 
required by paragraph (c) of this section;
    (ii) The conference described in paragraph (d) of this section if 
the Internal Revenue Service finds that the respondent is described in 
paragraph (a) of this section;
    (iii) If the respondent has not requested a conference, upon 
consideration of any response described in paragraph (c) of this 
section; or
    (iv) The respondent's failure to appear, either personally or 
through an authorized representative, at a conference scheduled by the 
Internal Revenue Service under paragraph (d) of this section.
    (2) Duration of suspension or disqualification. A suspension or 
disqualification under this section will commence on the date that the 
written notice of expedited suspension or disqualification is served on 
the practitioner or appraiser, either personally or through an 
authorized representative. The suspension or disqualification will 
remain effective until the earlier of:
    (i) The date the Internal Revenue Service lifts the suspension or 
disqualification upon receipt of a petition for reinstatement under 
Sec.  10.101 and after determining that the practitioner or appraiser 
has shown good cause based on all the relevant facts and circumstances 
why the suspension or disqualification should be lifted and the 
individual reinstated to practice; or
    (ii) The date the suspension or disqualification is lifted or 
otherwise modified by an Administrative Law Judge or the Secretary of 
the Treasury, or delegate deciding appeals, in a proceeding referred to 
in paragraph (f) of this section and instituted under Sec.  10.80.
    (3) Good cause. For purposes of this paragraph (e), a suspended 
practitioner or disqualified appraiser may show good cause when, for 
example, the individual was suspended or disqualified:
    (i) Under paragraphs (a)(1) through (3) of this section, and the 
individual's license or certificate to practice as an attorney, 
certified public accountant, actuary, or appraiser has been restored;
    (ii) Under paragraph (a)(4) of this section, and the conviction was 
reversed on appeal, with no retrial underway or pending;
    (iii) Under paragraph (a)(5) of this section, and the individual is 
no longer in violation of the conditions imposed on the individual 
under Sec.  10.99(d) and the individual either fully satisfied the 
conditions or is compliant with them if they are still in effect;
    (iv) Under paragraph (a)(6) of this section, and the individual has 
satisfied any terms of the court-imposed sanction, such as payment of a 
monetary sanction or completion of mandated hours of pro bono work; has 
not been sanctioned again for the same or substantially similar conduct 
by a court or any other authority described in Sec.  10.50(a)(10); and 
has ceased the conduct that resulted in the sanction (for example, 
ceased advancing frivolous or groundless arguments in matters before 
the Internal Revenue Service and courts or other tribunals); or
    (v) Under paragraph (a)(7) of this section, and the individual is 
fully compliant with the individual's tax filing and payment 
obligations, including any installment agreement or other payment 
arrangement entered into with the Internal Revenue Service.
    (f) Demand for Sec.  10.80 proceeding. If the Internal Revenue 
Service suspends a practitioner or disqualifies an appraiser under the 
expedited suspension procedures described in this section, the 
practitioner or appraiser may demand that the Internal Revenue Service 
institute a proceeding under Sec.  10.80 and issue the complaint 
described in Sec.  10.82. The demand must be in writing, specifically 
reference the suspension or disqualification action under Sec.  10.82, 
and be made within 2 years from the date on which the practitioner's 
suspension or appraiser's disqualification commenced. The Internal 
Revenue Service must issue a complaint demanded under this paragraph 
(f) within 60 calendar days of

[[Page 104934]]

receiving the demand. If the Internal Revenue Service does not issue 
such complaint within 60 days of receiving the demand, the suspension 
or disqualification is lifted automatically. The preceding sentence 
does not, however, preclude the Commissioner, or delegate, from 
instituting a regular proceeding under Sec.  10.80.
    (g) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 41. Newly redesignated Sec.  10.110 is amended by:
0
1. Removing paragraph (a)(4).
0
2. Redesignating paragraphs (a)(5) and (6) as paragraphs (a)(4) and 
(5).
0
3. Revising paragraph (c).
    The revision reads as follows:


Sec.  10.110  Records.

* * * * *
    (c) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].
0
Par. 42. Sections 10.111 and 10.112 are added to read as follows:


Sec.  10.111  Establishment of advisory committees.

    (a) Advisory committees. To promote and maintain the public's 
confidence in tax advisors, the Internal Revenue Service is authorized 
to establish one or more advisory committees composed of at least six 
individuals authorized to practice before the Internal Revenue Service. 
Membership of an advisory committee must be balanced among those who 
practice as attorneys, accountants, enrolled agents, enrolled 
actuaries, and enrolled retirement plan agents. Under procedures 
prescribed by the Internal Revenue Service, an advisory committee may 
review and make general recommendations regarding the practices, 
procedures, and policies of the offices described in Sec.  10.1.
    (b) Applicability date. This section is applicable beginning on 
[date 30 days after date of publication of final regulations in the 
Federal Register].


Sec.  10.112  Saving provision.

    Any proceeding instituted under this part prior to [date 30 days 
after date of publication of final regulations in the Federal 
Register], for which a final decision has not been reached or for which 
judicial review is still available is not affected by the revisions to 
this part effective [effective date of final regulations]. Any 
proceeding under this part based on conduct engaged in prior to [date 
30 days after date of publication of final regulations in the Federal 
Register], which is instituted after that date, will apply this 
subpart, but the conduct engaged in prior to [effective date of final 
regulations], will be judged by the regulations in effect at the time 
the conduct occurred.
0
Par. 43. Section 10.114 is added to read as follows:


Sec.  10.114  Applicability date.

    Except as otherwise provided in any section of this part and 
subject to Sec.  10.112, the provisions of this part are applicable on 
[date 30 days after date of publication of final regulations in the 
Federal Register].

Douglas W. O'Donnell,
Deputy Commissioner.
Aviva R. Aron-Dine,
Deputy Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2024-29371 Filed 12-20-24; 4:15 pm]
BILLING CODE 4830-01-P`