1058 Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Rules and Regulations 

(2) For airplanes that have not previously 

been operated under an FAA-approved 

maintenance program, each initial task 

required by this AD must be accomplished 

either prior to the airplane’s being added to 

the air carrier’s operations specifications, or 

in accordance with a schedule approved by 

the Manager, Seattle ACO. 

Actions for Corrosion That Exceeds Level 1 

(n) If corrosion is found to exceed Level 1 

on any inspection after the initial inspection, 

the corrosion control program for the affected 

area must be reviewed and means 

implemented to reduce corrosion to Level 1 

or better. 

(1) Within 60 days after such a finding, if 

corrective action is necessary to reduce 

future findings of corrosion to Level 1 or 

better, such proposed corrective action must 

be submitted for approval to the Manager, 

Seattle ACO. 

(2) Within 30 days after the corrective 

action is approved, revise the FAA-approved 

maintenance program to include the 

approved corrective action. 

Alternative Methods of Compliance 

(AMOCs) 

(o)(1) The Manager, Seattle Aircraft 

Certification Office (ACO), FAA, ATTN: Ivan 

Li, Aerospace Engineer, Airframe Branch, 

ANM–120S, FAA, Seattle Aircraft 

Certification Office, 1601 Lind Avenue, SW., 

Renton, Washington 98057–3356; telephone 

(425) 917–6437; fax (425) 917–6590; has the 

authority to approve AMOCs for this AD, if 

requested using the procedures found in 14 

CFR 39.19. 

(2) To request a different method of 

compliance or a different compliance time 

for this AD, follow the procedures in 14 CFR 

39.19. Before using any approved AMOC on 

any airplane to which the AMOC applies, 

notify your appropriate principal inspector 

(PI) in the FAA Flight Standards District 

Office (FSDO), or lacking a PI, your local 

FSDO. 

(3) An AMOC that provides an acceptable 

level of safety may be used for any repair 

required by this AD, if it is approved by an 

Authorized Representative for the Boeing 

Commercial Airplanes Delegation Option 

Authorization Organization who has been 

authorized by the Manager, Seattle ACO, to 

make those findings. For a repair method to 

be approved, the repair must meet the 

certification basis of the airplane and the 

approval must specifically refer to this AD. 

(4) AMOCs approved previously in 

accordance with AD 90–25–05, are approved 

as AMOCs for the corresponding provisions 

of this AD. 

Material Incorporated by Reference 

(p) You must use Boeing Document 

Number D6–36022, ‘‘Aging Airplane 

Corrosion Prevention and Control Program, 

Model 747,’’ Revision A, dated July 28, 1989, 

to perform the actions that are required by 

this AD, unless the AD specifies otherwise. 

(1) The incorporation by reference of 

Boeing Document Number D6–36022, ‘‘Aging 

Airplane Corrosion Prevention and Control 

Program, Model 747,’’ Revision A, dated July 

28, 1989, was approved previously by the 

Director of the Federal Register as of 

December 31, 1990 (55 FR 49268, November 

27, 1990). 

(2) Contact Boeing Commercial Airplanes, 

P.O. Box 3707, Seattle, Washington 98124–

2207, for a copy of this service information. 

You may review copies at the FAA, 

Transport Airplane Directorate, 1601 Lind 

Avenue, SW., Renton, Washington 98057–

3356; or at the National Archives and 

Records Administration (NARA). For 

information on the availability of this 

material at NARA, call 202–741–6030, or go 

to: http://www.archives.gov/federal-register/ 

cfr/ibr-locations.html. 

Issued in Renton, Washington, on 

December 26, 2007. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E7–25616 Filed 1–4–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[TD 9375] 

RIN–1545–BA96 

Guidance Necessary To Facilitate 

Electronic Tax Administration—

Updating of Section 7216 Regulations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains 

regulations to update the rules regarding 

the disclosure and use of tax return 

information by tax return preparers. 

Among other things, the regulations 

finalize rules for taxpayers to consent to 

the disclosure or use of their tax return 

information by tax return preparers. 

DATES: Effective Date: These regulations 

are effective January 7, 2008. 

Applicability Date: The regulations 

apply to disclosures or uses of tax return 

information occurring on or after 

January 1, 2009. 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains amendments 

to the Regulations on Procedure and 

Administration (26 CFR Part 301) under 

section 7216 of the Internal Revenue 

Code. These regulations strengthen 

taxpayers’ ability to control their tax 

return information by requiring that tax 

return preparers give taxpayers specific 

information, including who will receive 

the tax return information and the 

particular items of tax return 

information that will be disclosed or 

used, to allow taxpayers to make 

knowing, informed, and voluntary 

decisions over the disclosure or use of 

their tax information by their tax return 

preparer. 

Section 7216 imposes criminal 

penalties on tax return preparers who 

knowingly or recklessly make 

unauthorized disclosures or uses of 

information furnished to them in 

connection with the preparation of an 

income tax return. In addition, tax 

return preparers are subject to civil 

penalties under section 6713 for 

disclosure or use of this information 

unless an exception under the rules of 

section 7216(b) applies to the disclosure 

or use. 

Section 7216 was enacted by section 

316 of the Revenue Act of 1971, Public 

Law 92–178 (85 Stat. 529). In 1988, 

Congress modified the section by 

limiting the criminal sanction to 

knowing or reckless, unauthorized 

disclosures. Public Law 100–647 (102 

Stat. 3749). At the same time, Congress 

enacted the civil penalty that is now 

found in section 6713. Public Law 100–

647, § 6242(a) (102 Stat. 3759). In 1989, 

Congress further modified section 7216, 

directing the Treasury Department to 

issue regulations permitting disclosures 

of tax return information for quality or 

peer reviews. Public Law 101–239, 

§ 7739(a) (103 Stat. 3759). 

The Treasury Department and the IRS 

proposed regulations under section 

7216 on December 20, 1972 (37 FR 

28070). Final regulations were issued on 

March 29, 1974 (39 FR 11537). These 

regulations are divided into three parts: 

§ 301.7216–1 for general provisions and 

definitions; § 301.7216–2 for disclosures 

and uses that do not require formal 

taxpayer consent; and § 301.7216–3 for 

disclosures and uses that require formal 

taxpayer consent. Since the regulations 

were adopted in 1974, the Treasury 

Department and the IRS have amended 

§ 301.7216–2 on occasion, but 

§§ 301.7216–1 and 301.7216–3 have 

remained unchanged. 

A notice of proposed rulemaking 

(REG–137243–02) was published in the 

Federal Register (70 FR 72954) on 

December 8, 2005. Concurrently with 

publication of the proposed regulations, 

the IRS published Notice 2005–93, 

2005–52 I.R.B. 1204 (December 07, 

2005), setting forth a proposed revenue 

procedure that would provide guidance 

to tax return preparers regarding the 

format and content of consents to 

disclose and consents to use tax return 

information under § 301.7216–3. 

Written comments were received in 

response to the notice of proposed 

rulemaking. A public hearing was held 

on April 4, 2006. Commentators 

appeared at the public hearing and 


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commented on the notice of proposed 

rulemaking. 

All comments were considered and 

are available for public inspection upon 

request. This preamble summarizes 

most of the comments received by the 

IRS and Treasury Department. After 

consideration of the written comments 

and the comments provided at the 

public hearing, the proposed regulations 

under section 7216 are adopted as 

revised by this Treasury decision. 

Concurrently with publication of 

these regulations, the IRS is publishing 

a revenue procedure and an advanced 

notice of proposed rulemaking. The 

revenue procedure provides guidance 

on the format and content of consents to 

disclose or use tax return information 

under § 301.7216–3 for taxpayers filing 

a return in the Form 1040 series, e.g., 

Form 1040, Form 1040NR, Form 1040A, 

or Form 1040EZ. The revenue procedure 

also provides specific guidance for 

electronic signatures when a taxpayer 

filing a return in the Form 1040 series 

executes an electronic consent to the 

disclosure or use of the taxpayer’s tax 

return information. 

The advanced notice of proposed 

rulemaking requests comments 

regarding a proposed rule under 

§ 301.7216–3 that a tax return preparer 

may not obtain a consent to disclose or 

use tax return information for the 

purpose of the tax return preparer 

soliciting, or the taxpayer obtaining, a 

refund anticipation loan (RAL) or 

certain other products. 

Summary of Comments 

1. Preamble 

Some commentators recommended 

that the final regulations specify the 

existing revenue rulings, notices, and 

other guidance under section 7216 that 

continue to have effect under the final 

regulations. While the final regulations 

do not identify all guidance that has 

continuing effect, the section of this 

Treasury decision entitled ‘‘Effect on 

Other Documents’’ specifies guidance 

that Treasury and the IRS have 

determined as contrary to the 

regulations. 

One commentator requested that the 

preamble of the regulations clarify 

whether a tax return preparer may offer 

for sale an insurance policy that will 

reimburse the taxpayer additional tax 

the taxpayer is required to pay under 

certain circumstances involving errors 

by the tax return preparer. Section 7216 

and the regulations thereunder govern 

only a tax return preparer’s disclosure 

or use of tax return information. To the 

extent that a tax return preparer offers 

a product, such as insurance, where the 

offer is based on the disclosure of tax 

return information to a third-party, or 

where use of such tax return 

information serves as the basis for 

making the offer, section 7216 and the 

regulations thereunder only govern 

whether use or disclosure of the tax 

return information requires taxpayer 

consent. 

2. Section 301.7216–1 Penalty for 

Disclosure or Use of Tax Return 

Information 

A. Statutory Provisions 

Some commentators recommended 

that Treasury and the IRS seek 

legislative changes to section 7216. 

More specifically, these commentators 

recommended that the amount of the 

section 7216 criminal penalty be 

increased, that the amount of the section 

6713 civil penalty be increased, and that 

the Code be amended to provide a 

private right of action against tax return 

preparers. Another commentator 

recommended amending section 7216 to 

provide a means to abate the penalty in 

cases where reasonable cause and good 

faith is established. This commentator 

also recommended that Treasury and 

the IRS not attempt to regulate the 

disclosure or use of tax return 

information in the context of a criminal 

statute, section 7216, but that only civil 

penalties should apply. 

Requests for statutory changes to 

sections 7216 and 6713 are outside of 

the scope of these regulations. Section 

7216 expressly provides for Treasury to 

promulgate regulations to exempt 

certain disclosures or uses of 

information from the statute’s criminal 

sanction. Although Treasury and the 

IRS do not have the regulatory authority 

to provide for a reasonable cause 

exception under section 7216, the 

criminal penalty provided for by that 

statute is premised on a finding of 

knowing or reckless conduct. 

B. Tax Return Preparer 

One commentator requested 

expanding the definition of tax return 

preparer to include clerical staff 

involved in preparation of a tax return. 

Because the definition of tax return 

preparer in the regulations already 

encompasses clerical staff involved in 

the preparation of a return, no change is 

needed to address this comment. 

While approving of the generally 

broad scope of the term ‘‘tax return 

preparer,’’ one commentator expressed 

concern that the term did not cover 

employees of tax return preparers who 

do not personally assist in the 

preparation of tax returns or the 

provision of auxiliary services. That 

commentator recommended that section 

7216 should nonetheless apply to any 

employee. This comment was not 

adopted. The statute applies only to 

persons ‘‘engaged in the business of 

preparing, or providing services in 

connection with the preparation of, 

returns.’’ The regulations, however, do 

not permit disclosure by one employee 

of a tax return preparer to another 

employee of the tax return preparer on 

the basis of employment status alone. 

See Treas. Reg. § 301.7216–2(c). 

Based on recent amendments to 

section 7701(a)(36) of the Code (which 

post-amendment applies more generally 

to tax return preparers other than 

income tax returns), the final 

regulations were revised to omit the 

language in the proposed regulations 

pertaining to the lack of uniformity of 

the definition of tax return preparer 

provided in section 7701(a)(36) and the 

definition of tax return preparer for 

purposes of section 7216. 

C. Tax Return Information 

Some commentators expressed 

concern that the definition of tax return 

information encompasses an overly 

broad amount of information. One 

commentator recommended that a 

taxpayer’s name, address, telephone 

number, e-mail address, and 

identification number should not be 

treated as tax return information. 

Another commentator recommended 

that a taxpayer’s name, address, and 

other contact information should be 

available for a tax return preparer to use 

to provide the taxpayer with any 

information that the tax return preparer 

believes may be of interest to the 

taxpayer. These recommendations 

regarding tax return information were 

not adopted because information 

revealing the identity of, or how to 

contact, a person is information central 

to one’s privacy and deserving of 

treatment as tax return information 

when submitted for, or in connection 

with, the preparation of a tax return. 

Section 301.7216–2(n), however, 

permits tax return preparers to make 

limited use of taxpayer’s contact 

information to offer tax information or 

additional tax return preparation 

services to previous customers. 

One commentator recommended 

eliminating language from the 

regulations providing that information 

maintained in a form that is associated 

with the tax return preparation becomes 

tax return information regardless of how 

the information was initially obtained. 

The commentator questioned whether 

non-tax return information could 

become tax return information as a 

result of the manner in which it is 


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stored and maintained by the tax return 

preparer. Treasury and the IRS agree 

that section 7216 protects only 

information furnished to a tax return 

preparer for, or in connection with, the 

preparation of a return and that 

information does not become tax return 

information merely by the method in 

which the information is stored. The 

language in the proposed regulations 

that is the subject of the comment was 

included to recognize that the 

protections of section 7216 may extend 

to information furnished by persons 

other than the taxpayer, including 

information furnished by one person 

within a firm to a tax return preparer 

employed by the same firm. In that 

situation, the information in the hands 

of the tax return preparer would be tax 

return information even if the person 

furnishing the information had obtained 

it other than in connection with the 

preparation of a tax return. Because this 

rule is evident from other provisions of 

the regulations, and the language 

commented upon may create confusion, 

the language has been removed from 

these regulations. 

One commentator expressed concern 

that the proposed regulations 

improperly expand upon section 7216 

by defining ‘‘tax return information’’ to 

include information derived or 

generated from tax return information. 

The commentator commented that 

section 7216 protects only information 

furnished to tax return preparers, and 

data that a tax return preparer derives 

from that information should not be 

considered data furnished to the tax 

return preparer. The commentator, 

therefore, recommended removing this 

language from the regulations. 

The commentator’s recommendation 

was not adopted. Information that a tax 

return preparer would typically derive 

from other information furnished in 

connection with the preparation of a 

return could include information on the 

taxpayer’s entitlement to deductions, 

credits, losses or gains, the amounts 

thereof, and the amount of tax due. It 

would frustrate the purpose of the 

statute not to protect this information 

when a taxpayer has furnished the tax 

return preparer the means to derive it. 

Similarly, the same commentator 

stated that the proposed regulations 

improperly expand upon the statute by 

defining ‘‘tax return information’’ to 

include ‘‘information received by the 

tax return preparer from the IRS in 

connection with the processing of such 

return.’’ The commentator 

recommended eliminating this language 

from the regulations. This 

recommendation was not adopted. The 

statute protects information furnished to 

a tax return preparer for, or in 

connection with, preparation of a return 

and does not require that the taxpayer 

have furnished the information. 

Some commentators approved of the 

proposed regulations’ definition of tax 

return information, but expressed 

concern that Example 1 in § 301.7216–

1(b)(3)(ii) suggests that information 

supplied to register tax preparation 

software is not tax return information 

unless the tax return preparer states 

during the registration process that it 

will provide updates to registrants. 

These commentators, therefore, 

recommended deleting that fact from 

the example. This recommendation was 

adopted to explicitly provide that all 

information furnished to register tax 

return preparation software is tax return 

information. 

Some commentators expressed 

concern that if information furnished to 

register tax return preparation software 

was treated as tax return information, 

then tax return preparers would be 

required to obtain consent from 

taxpayers prior to updating the tax 

return preparation software. To address 

this concern, section 301.7216–2(c) of 

the regulations has been revised. 

D. Disclosure and Use 

One commentator stated that the 

definition of ‘‘use’’ is overly broad. The 

commentator proposed that the ‘‘use’’ of 

tax return information should not 

include tax return preparers informing 

taxpayers of the availability of products 

and services that tax return preparers 

offer that could benefit taxpayers. As an 

example, the commentator stated that 

informing a taxpayer about the 

availability of a refund anticipation loan 

based on the taxpayer’s tax return 

information should not be a ‘‘use’’ of tax 

return information. This 

recommendation was not adopted. The 

regulations require consents for tax 

return preparers to use tax return 

information so that taxpayers 

themselves determine whether they 

want additional information regarding 

products and services that might benefit 

them. The potential uses of tax return 

information should be clearly described 

by tax return preparers and the potential 

uses must be consented to by taxpayers 

before such uses occur. 

Two commentators recommended 

that tax return preparers should be 

responsible for subsequent disclosures 

or uses of tax return information by 

third parties to whom tax return 

preparers made an authorized 

disclosure of tax return information. 

This recommendation was not adopted 

because section 7216 does not apply to 

third parties who are not tax return 

preparers. 

E. Providing Auxiliary Services 

Section 301.7216–1(b)(2)(iii) of the 

proposed regulations provides that a 

person is engaged in the business of 

providing auxiliary services in 

connection with the preparation of tax 

returns as described in paragraph 

(b)(2)(i)(B) of that section if, in the 

course of the person’s business, the 

person holds himself out to tax return 

preparers or to taxpayers as a person 

who performs auxiliary services, 

whether or not providing the auxiliary 

services is the person’s sole business 

activity and whether or not the person 

charges a fee for the auxiliary services. 

One commentator recommended 

broadening the definition of auxiliary 

services to include analysis of data for 

purposes of monitoring the tax return 

preparer’s business for fraud prevention 

and provision of data storage services. 

These services as well as similar 

services are typical of the types of 

auxiliary services that can be provided 

to tax return preparers as contemplated 

by § 301.7216–1(b)(2)(iii) and are 

already covered by the broad definition 

of auxiliary services in the regulations. 

The same commentator also 

recommended broadening the definition 

of auxiliary services to include the 

analysis of customer activity to improve 

services and assistance in connection 

with preparation for taxpayer audits. 

These services are already addressed in 

other parts of the regulations. See 

§§ 301.7216–2(o) and 301.7216–2(k). 

F. Exclusions Under § 301.7216–

1(b)(2)(v) 

One commentator recommended that 

the express exclusion under § 301.7216–

1(b)(2)(v) of the proposed regulations of 

certain persons from the definition of 

tax return preparer should be extended 

to include persons who provide ‘‘a 

broad range of financial products and 

services * * * to customers of tax 

return preparers, including savings, 

transaction, and retirement accounts.’’

The commentator’s recommendation 

was not adopted as the regulations do 

not provide an exhaustive list of the 

persons identified as excluded from the 

definition of tax return preparer. To the 

extent the service providers suggested to 

be excluded by the commentator 

provide services only incidentally 

related to the preparation of the return, 

these persons would be excluded under 

the regulation. 

G. Hyperlinks 

One commentator recommended that 

the regulations should not treat as a 


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disclosure by a tax return preparer the 

situation where a taxpayer is transferred 

from the tax return preparer’s website to 

a different website and the taxpayer 

separately enters information on the 

different website. This recommendation 

was not adopted because the regulations 

already do not treat this fact pattern as 

a disclosure by the tax return preparer. 

3. Section 301.7216–2 Permissible 

Disclosures or Uses Without Consent of 

the Taxpayer 

A. Disclosures to the IRS 

Section 301.7216–2(b) of the proposed 

regulations provides that tax return 

preparers may disclose to the IRS any 

tax return information the IRS requests 

to assist in the administration of 

electronic filing programs. One 

commentator requested limiting this 

rule to ‘‘specific necessary purposes, 

such as compliance by electronic return 

originators.’’ This recommendation was 

not adopted. Return information in the 

hands of the IRS is already protected 

from unauthorized disclosure. See, e.g., 

section 6103. 

Other commentators expressed 

concern regarding whether § 301.7216–

2(b) permitted disclosures of tax return 

information to the IRS in general. 

Because the purpose of these regulations 

is to protect taxpayers from the 

unauthorized uses and disclosures by 

tax return preparers, and because tax 

return information in the hands of the 

IRS is already protected from 

unauthorized disclosure, § 301.7216–

2(b) has been modified to clarify that 

return preparers may disclose any tax 

return information to the IRS for any 

purpose. 

B. Use By Tax Return Preparer for 

Purposes of Updating Software 

Section 301.7216–2(c)(1) of the final 

regulations has been revised to provide 

that if a tax return preparer provides 

software to a taxpayer that is used in 

connection with the preparation or 

filing of a tax return, the tax return 

preparer may use the taxpayer’s tax 

return information to update the 

taxpayer’s software for the purpose of 

addressing changes in IRS forms, e-file 

specifications and administrative, 

regulatory and legislative guidance or to 

test and ensure the software’s technical 

capabilities without obtaining the 

taxpayer’s consent under § 301.7216–3. 

C. Disclosure to a Tax Return Preparer 

Within the Same Firm Located Outside 

of the United States 

Section 301.7216–2(c) of the proposed 

regulations generally provides that an 

officer, employee, or member of a tax 

return preparer in the United States may 

disclose tax return information to 

another officer, employee, or member of 

the same tax return preparer located 

within the United States. Section 

301.7216–2(c)(1) of the proposed 

regulations provides that the taxpayer 

must give consent under § 301.7216–3 

prior to any disclosure of tax return 

information by an officer, employee, or 

member of a tax return preparer in the 

United States to an officer, employee, or 

member of the same tax return preparer 

located outside of the United States or 

any territory or possession of the United 

States. One commentator expressed 

concern that this rule was too strict with 

respect to multinational companies and 

employees on assignment outside of the 

United States. This commentator stated 

that such taxpayers anticipate that their 

tax return information will be disclosed 

outside of the United States. This 

commentator recommended that 

consent under § 301.7216–3 should not 

be required with respect to disclosures 

when the taxpayer is a multinational 

company or an individual taxpayer 

employed or on assignment outside of 

the United States and that an 

engagement letter explaining potential 

circumstances involving disclosures 

overseas ought to be permitted in these 

situations. 

This recommendation was not 

adopted. As explained in the preamble 

to the proposed regulations, the 

Treasury Department and IRS believe 

that a separate explanation is required 

under these circumstances in order to 

advise taxpayers that their tax return 

information is being disclosed to tax 

return preparers located outside the 

United States. The final regulations, 

however, address the commentator’s 

request for additional flexibility with 

respect to the form and manner of the 

consent for taxpayers other than 

individuals. For tax return preparers 

providing tax return preparation 

services to taxpayers who do not file an 

income tax return in the Form 1040 

series, e.g., Form 1040, Form 1040NR, 

Form 1040A, or Form 1040EZ, a consent 

to disclose tax return information 

outside the United States may be in any 

format, including an engagement letter 

to a client, as long as the consent 

provides sufficient information to 

enable the taxpayer to provide informed 

consent. For tax return preparers 

providing tax return preparation 

services to taxpayers who file an income 

tax return in the Form 1040 series, the 

regulations provide that the Secretary 

may issue guidance, by publication in 

the Internal Revenue Bulletin, 

prescribing the form and manner of the 

consent to disclose tax return 

information, including disclosure of 

return information outside the United 

States. This rule is consistent with the 

general rule adopted by these final 

regulations with respect to a tax return 

preparer’s request for consent to 

disclose tax return information. See 

section 301.7216–3(a)(3). 

Additionally, one commentator 

recommended that, rather than provide 

limitations on the disclosure of tax 

return information by a tax return 

preparer within the United States to 

another tax return preparer of the same 

firm who is located outside of the 

United States, the regulations should 

instead permit such disclosures without 

consent if the tax return preparer of the 

same firm outside of the United States 

consents to adhere to the rules of 

section 7216. This recommendation was 

not adopted because it does not inform 

taxpayers that their tax return 

information will be disclosed outside of 

the United States or allow taxpayers to 

control the decision whether their 

information is disclosed overseas. 

D. Disclosures to Other Tax Return 

Preparers 

Section 301.7216–2(d) of the 

proposed regulations provides that 

disclosures between tax return preparers 

are authorized when the disclosures (i) 

assist in the preparation of a return; (ii) 

the services provided by the recipient of 

the disclosure are not substantive 

determinations or advice affecting a 

taxpayer’s reported tax liability; and (iii) 

the disclosure is to a tax return preparer 

located in the United States. Two 

commentators expressed concern that 

the phrase ‘‘substantive determinations 

or advice’’ is a vague standard and 

recommended the use of examples in 

the regulations that adequately define 

the phrase. The final regulations clarify 

the meaning of substantive 

determinations and provide an example 

to illustrate the operation of this rule. 

One commentator recommended 

adopting the professional ethics rules of 

the American Institute of Certified 

Public Accountants (AICPA) on 

outsourcing in lieu of § 301.7216–2(d) of 

the proposed regulations. Rule 102 of 

the AICPA Code of Professional 

Conduct requires that, prior to sharing 

confidential client information (such as 

a tax return) with a third-party service 

provider, an AICPA member must 

inform the client, preferably in writing, 

that the member may use a third-party 

service provider when providing 

professional services to the client. 

Unlike the rules in the regulations, the 

AICPA Code of Professional Conduct 

does not require that the client consent 


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to the disclosure of tax return 

information when substantive 

determinations or advice are sought 

from third parties. Under the AICPA 

rules, AICPA members who use thirdparty service providers remain 

responsible for the work done by the 

service providers and they must 

contract with the third-party service 

provider for the service provider to 

monitor the confidentiality of the 

client’s information to the third-party 

Service provider. The commentator’s 

recommendation that the regulations 

adopt only the protections of the AICPA 

ethics rules was not adopted. The 

Treasury Department and the IRS are 

concerned that taxpayers and tax return 

information would not be adequately 

protected if a tax return preparer could 

disclose tax return information to any 

third-party service provider without 

taxpayer consent to that disclosure. 

One commentator recommended 

modifying § 301.7216–2(d) of the 

proposed regulations to allow 

disclosures between franchisors and 

franchisees in the tax return preparation 

business according to the terms of their 

franchise agreement. The commentator’s 

recommendation was not adopted 

because the existence of a written 

franchise agreement should not affect 

the confidentiality of a taxpayer’s tax 

return information. 

One commentator critiqued 

§ 301.7216–2(d) because it will limit the 

benefits tax return preparation firms 

may enjoy from using foreign 

outsourcing. Foreign outsourcing is not 

prohibited by the final regulations, 

which permit the disclosure of tax 

return information outside of the United 

States if the taxpayer consents to such 

disclosure. One commentator 

recommended that tax return preparers 

should be allowed to disclose tax return 

information to third-party service 

providers subject to the requirements of 

the privacy provisions of Title V of the 

Gramm-Leach-Bliley Act, Public Law 

106–102 (113 Stat. 1338) (GLBA). 

Specifically, the commentator proposed 

that the regulations should permit tax 

return preparers to: (1) Execute a written 

contract with a service provider limiting 

the service provider’s disclosure or use 

of tax return information; (2) select and 

retain service providers that are capable 

of safeguarding tax return information; 

and (3) implement contractual 

provisions requiring service providers to 

develop and maintain appropriate 

information safeguards. This 

recommendation was not adopted. 

While the requirements of section 7216 

and these regulations do not override 

any requirements or restrictions of the 

GLBA, the sensitivity of tax return 

information justifies affording tax return 

information stronger protections than 

other information subject to the GLBA. 

E. Disclosure Pursuant to an Order of a 

Court, or an Administrative Order, 

Demand, Request, Summons or 

Subpoena Which is Issued in the 

Performance of its Duties by a Federal 

or State Agency, the United States 

Congress, a Professional Association 

Ethics Committee or Board, or the 

Public Company Accounting Oversight 

Board 

One commentator recommended that 

the title of proposed § 301.7216–2(f) be 

revised to add the word ‘‘request’’

following the word ‘‘demand,’’ to align 

the subsection’s title with the 

regulation’s language in § 301.7216–

2(f)(5). This recommendation was 

adopted in the final regulation. 

One commentator recommended 

replacing the phrase ‘‘professional 

ethics board’’ in proposed § 301.7216–

2(f) with the phrase ‘‘certain 

professional association ethics 

committees or boards.’’ The 

commentator noted that this change 

would avoid confusion as to whether 

the reference to professional ethics 

boards means governmental entities that 

control licensing for CPAs or whether 

the phrase would include professional 

associations that have boards or 

committees that discipline their 

members, such as the AICPA or state 

and local bar associations. This 

recommendation was adopted, in part, 

by changing the phrase ‘‘professional 

ethics board’’ to ‘‘professional 

association ethics committee or board.’’

Section 301.7216–2(f)(4)(ii) separately 

addresses disclosures to government 

entities charged with licensing, 

registration, or regulation of tax return 

preparers. 

One commentator recommended 

permitting disclosure of tax return 

information without taxpayer consent 

pursuant to disclosures required by 

Federal or State laws and administrative 

rules, but did not identify any specific 

rule or law that required a disclosure in 

circumstances contrary to either the 

preexisting regulations or the proposed 

regulations. Preexisting regulations 

already permitted disclosures pursuant 

to an order of a court or a Federal or 

State agency. These final regulations 

permit disclosures pursuant to an order 

of a court or an administrative order, 

demand, summons or subpoena that is 

issued in the performance of its duties 

by a Federal or State agency, the United 

States Congress, a professional 

association ethics committee or board, 

or the Public Company Accounting 

Oversight Board. The protections 

offered by limiting disclosures to 

responses to specific governmental or 

quasi-governmental requests provide 

appropriate protection for taxpayer 

privacy. 

One commentator expressed concern 

about proposed § 301.7216–2(f)(5) and 

the safeguarding of tax return 

information received by a professional 

association board or committee 

conducting an ethics investigation. The 

commentator recommended revising 

§ 301.7216–2(f)(5) to expressly prohibit 

professional associations from 

publishing as part of any resulting 

professional disciplinary determination 

the tax return information of a taxpayer 

furnished to them during an ethics 

investigation of a preparer unless the 

taxpayer provides consent. This 

recommendation was not adopted 

because section 7216 does not provide 

for penalties against third parties who 

receive tax return information in this 

context. 

One commentator recommended 

rewording proposed § 301.7216–2(f)(6) 

to provide the following: ‘‘A written 

request from the Public Company 

Accounting Oversight Board (PCAOB) 

in connection with an inspection under 

section 104 of the Sarbanes-Oxley Act of 

2002, 15 U.S.C. 7214, or an investigation 

under section 105 of such Act, 15 U.S. 

7215, for use in accordance with such 

Act.’’ The commentator noted that this 

wording describes more clearly the 

situations in which disclosures to the 

PCAOB are permitted, and to permit 

registered firms and their associated 

persons to comply with their disclosure 

obligations under the Act. This 

recommendation was adopted. 

One commentator expressed concern 

that permitting the disclosure of tax 

return information pursuant to a 

subpoena issued by the United States 

Congress is inconsistent with the rules 

regarding disclosures by the IRS to 

Congress under section 6103(f). The 

commentator stated that the regulations 

may provide a method to avoid the 

specific disclosure rules of section 

6103(f), which are designed to protect 

taxpayers and prevent Congressional 

abuse of returns or return information. 

Another commentator recommended 

eliminating the term ‘‘demand’’ in 

§ 301.7216–2(f)(4)(i) because the 

commentator believes the term is too 

broad and could permit any Federal 

agency to simply ask for tax return 

information even if the agency does not 

have authority to issue ‘‘formal legal 

orders’’ compelling the disclosure. 

These recommendations were not 

adopted. Both Congress and Federal 

agencies are presumed to act in 

accordance with the law and there are 


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other limitations on their abilities to 

seek tax return information. 

F. Disclosure for Use in Securing Legal 

Advice, Treasury Investigations, or 

Court Proceedings 

Final section 301.7216–2(g) has been 

revised to confirm that a tax return 

preparer may disclose tax return 

information to an attorney for purposes 

of the preparer securing legal advice. 

G. Tax Return Preparers Working for the 

Same Firm 

Section 301.7216–2(h)(1)(ii) provides 

that a tax return preparer’s law or 

accounting firm does not include any 

related or affiliated firms. Some 

commentators expressed concern that 

this rule reduces the application of the 

§ 301.7216–2 exceptions for tax return 

preparers that are structured as separate 

legal entities, but are closely related. 

One commentator recommended that 

the regulations be revised to provide 

that the ‘‘same firm’’ standard be 

determined in a manner similar to the 

rules for qualified employee plans for a 

single employer. This recommendation 

was not adopted. Taxpayers should 

have a clear understanding with whom 

they are dealing. Adopting this 

recommendation would require that a 

taxpayer understand complex rules 

about which separate legal entities are 

part of the ‘‘same firm’’ as their tax 

return preparer to be able to understand 

who might receive their tax return 

information. Additionally, a tax return 

preparer has the ability to obtain 

consent from a taxpayer to disclose tax 

return information to a related or 

affiliated firm. 

H. Disclosure or Use of Tax Return 

Information in Preparation for Audit 

One commentator recommended that 

a tax return preparer should be 

permitted to disclose tax return 

information to another tax return 

preparer so that the second tax return 

preparer can provide assistance in 

connection with the audit of a return 

under the law of any State or political 

subdivision thereof, the District of 

Columbia, or any territory or possession 

of the United States. This comment was 

not adopted because § 301.7216–2(k) 

already permits such disclosures. 

I. Payment for Tax Preparation Services 

Section 301.7216–2(l) provides that a 

tax return preparer may disclose and 

use, without the taxpayer’s written 

consent, tax return information that the 

taxpayer provides to the tax return 

preparer to pay for tax preparation 

services to the extent necessary to 

process the payment. One commentator 

recommended applying this rule to the 

collection of payments. This 

recommendation was adopted. The 

exception under § 301.7216–2(l) for the 

collection of payments is subject to the 

same limitations as the rule for 

processing payments. Only tax return 

information that the taxpayer provided 

to the tax return preparer to pay for tax 

return preparation services may be used 

to collect payment. This limitation 

precludes tax return preparers from 

using any other tax return information 

to collect on delinquent payments. 

J. Lists for Solicitation of Tax Return 

Business 

Section 301.7216–2(n) of the 

proposed regulations provides that a tax 

return preparer may compile and 

maintain a separate list containing 

solely the names, addresses, e-mail 

addresses, and phone numbers of 

taxpayers whose tax returns the tax 

return preparer has prepared or 

processed. The proposed regulations 

also state that this list may be used by 

the compiler solely to contact the 

taxpayers on the list for the purpose of 

offering tax information or additional 

tax return preparation services. One 

commentator recommended adding that 

no mention of services or products other 

than those related to tax preparation 

services may be made. Treasury and the 

IRS agree that the prohibition on using 

the list to solicit business other than tax 

return preparation services could be 

strengthened, and have modified 

§ 301.7216–2(n) to address the 

commentator’s concern. 

K. Producing Statistical Information in 

Connection With Tax Return 

Preparation Business 

Section 301.7216–2(o) of the proposed 

regulations permits a tax return preparer 

to use tax return information to prepare 

anonymous statistical compilations for 

limited purposes related to management 

or support of the tax return preparer’s 

business. Two commentators 

recommended that the disclosure or use 

of tax return information in statistical 

compilations should be limited to 

‘‘internal management’’ because 

‘‘support’’ might be read to allow a tax 

return preparer to target specific 

customers with advertising. This 

recommendation was not adopted 

because § 301.7216–2(o) specifically 

prohibits the disclosure or use of 

statistical compilations in connection 

with, or in support of, businesses other 

than tax return preparation, and use of 

lists to solicit additional tax return 

preparation business is specifically 

governed, and limited, by § 301.7216–

2(n). 

One commentator recommended that 

statistical compilations of tax return 

information that do not identify 

taxpayers should not be considered ‘‘tax 

return information’’ for purposes of 

section 7216. The commentator stated 

that if statistical information is treated 

as ‘‘tax return information,’’ such a rule 

could prevent tax return preparers 

(especially tax return preparers that are 

publicly traded) from reporting essential 

data to financial regulators or to market 

participants to provide an accurate 

picture of the tax return preparer’s 

performance and financial condition. In 

response to the concern raised by the 

commentator, the final regulation was 

modified to provide that the compiler of 

the statistical compilation may not 

disclose the compilation, or any part 

thereof, to any other person unless the 

disclosure of the statistical compilation 

is made in order to comply with 

financial accounting or regulatory 

reporting requirements or occurs in 

conjunction with the sale or other 

disposition of the compiler’s tax return 

preparation business. 

One commentator recommended that 

tax return preparers located within the 

same firm should be permitted, without 

obtaining consent, to use tax return 

information for ‘‘the management, 

support or maintenance of the tax return 

preparer’s business.’’ This 

recommendation was not adopted. 

Because the regulations already permit 

a tax return preparer to use tax return 

information to prepare statistical 

compilations for limited purposes 

related to management or support of the 

tax return preparer’s business, it is 

unclear how the commentator’s 

recommendation would further aid in 

the management or support of a tax 

return preparer’s business. 

One commentator recommended that 

the regulations require that ‘‘taxpayer 

identifying’’ data, such as names and 

social security numbers, be redacted 

from statistical information. This 

recommendation was not adopted. The 

regulations already require that 

statistical compilations must be 

‘‘anonymous.’’

L. Quality or Peer Reviews 

Section 301.7216–2(p) of the 

proposed regulations provides that a 

quality or peer review may be 

conducted only by attorneys, certified 

public accountants, enrolled agents, and 

enrolled actuaries who are eligible to 

practice before the Internal Revenue 

Service. Some commentators 

recommended that this subsection of the 

proposed regulations should be revised 

to permit other professionals to 

participate in quality or peer reviews. 


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This recommendation was not adopted. 

The restriction helps to prevent 

unauthorized disclosures of tax return 

information by limiting participation in 

such reviews to those persons subject to 

Circular 230, 31 CFR Part 10. 

M. Extraction of Tax Return Information 

Within Software Only for the Purposes 

of Reducing Repetitive Data Entry 

One commentator recommended that 

the use of computer software designed 

to assist with the preparation of an 

income tax return should be allowed 

without consent to ‘‘extract’’ certain tax 

return information once entered, such as 

the taxpayer’s name and address, and 

reprint such information in required 

fields on the same return in order to 

eliminate repetitive data entry. This 

comment was not adopted because the 

regulations do not prohibit such a use 

of tax return information where the 

information is being used for the 

permitted purpose of preparing the 

taxpayer’s tax return. 

4. Proposed § 301.7216–3: Disclosures 

and Uses Authorized by Taxpayer 

Consent 

A. Consent To Disclose Tax Return 

Information 

Some commentators expressed 

concern that the proposed regulations 

authorize the IRS to make available for 

sale to third parties its internal records 

and data containing tax return 

information. This concern reflects a 

fundamental misunderstanding of the 

proposed regulations. The proposed 

regulations do not address any 

disclosure of tax return information by 

the IRS; the proposed regulations 

address only the disclosure and use of 

tax return information by tax return 

preparers. Separate laws, including 

section 6103, strictly protect the 

confidentiality of returns and return 

information in the hands of IRS 

employees and others. 

Some commentators expressed 

concern that the proposed regulations 

would loosen the current rules 

regarding a tax return preparer’s ability 

to disclose a client’s tax return 

information. This concern is based on a 

misunderstanding of the purpose and 

content of the proposed and preexisting 

regulations. Section 301.7216–3(a)(1) of 

the proposed regulations provides that, 

unless section 7216 or § 301.7216–2 

authorizes the disclosure of tax return 

information, a tax return preparer may 

not disclose a taxpayer’s tax return 

information prior to obtaining consent 

from the taxpayer. Since 1974, section 

301.7216–3(a)(2) has provided that, ‘‘[i]f 

a tax return preparer has obtained from 

a taxpayer a consent * * *, he may 

disclose the tax return information of 

such taxpayer to such third persons as 

the taxpayer may direct.’’ Thus, the 

proposed regulations contained the 

same substantive rule that has been in 

place for over 30 years. Throughout the 

long-standing existence of former 

§ 301.7216–3(a)(2), there has been no 

objection to the provision that allowed 

taxpayers to provide informed consent 

to tax return preparers disclosing tax 

return information to third parties. 

Nonetheless, commentators criticized 

the proposed rule, stating that it could 

allow tax return preparers to induce 

clients into providing unknowing or 

inadvertent consents to sell or otherwise 

disclose tax return information. 

Furthermore, they argue that disclosure 

to third parties could result in identity 

theft. Thus, one solution these 

commentators recommend is to prohibit 

taxpayers from ever consenting to the 

disclosure of their tax return 

information. 

The Treasury Department and IRS did 

not adopt the commentators’

recommendation. Rather, the final 

regulations retain the general rule that 

has been in place for more than 30 years 

recognizing that taxpayers should have 

control over their own tax return 

information and that taxpayers should, 

with appropriate limits and safeguards, 

be able to direct tax return preparers to 

disclose tax return information as 

taxpayers see fit. This rule parallels the 

statutory rule in section 6103(c) that 

allows taxpayers to consent to the IRS 

disclosing returns or return information 

to third parties of the taxpayer’s 

choosing. 

In addition, this rule is consistent 

with the privacy protection regime in 

the Health Insurance Portability and 

Accountability Act (HIPAA), Public Law 

104–191 (110 Stat. 1936). HIPAA 

permits health care providers and health 

plans to disclose information about 

health status, provision of health care, 

or payment to a third-party if they have 

obtained authorization from the 

individual patient. 

While identity theft is a significant 

concern, Treasury and the IRS do not 

believe a generalized concern regarding 

the potential for criminal activity by 

third parties should preclude taxpayers 

from being able to direct the disclosure 

of tax return information to third parties 

for legitimate reasons of the taxpayer’s 

own choosing, particularly in the 

absence of any evidence that disclosure 

of tax return information by tax return 

preparers has been a source of identity 

theft problems. 

While the idea of a complete 

prohibition on consent to disclosure 

was rejected, Treasury and the IRS did 

revise § 301.7216–3(b)(5), based on 

several factors. These factors include: 

(1) The fact that it is not necessary for 

tax return preparers to disclose certain 

taxpayer identifying information to 

other tax return preparers who are 

assisting them in preparing a return; (2) 

the important role a social security 

number (SSN) plays in the tax 

administration process, and the 

heightened potential for misuse when 

an SSN is readily associated with 

confidential information, such as tax 

return information; and (3) the 

heightened concern about the theft of an 

individual’s confidential information 

resulting from disclosures outside the 

United States. Section 301.7216–3(b)(4) 

now provides that a tax return preparer 

located within the United States, 

including any territory or possession of 

the United States, may not obtain 

consent to disclose a taxpayer’s SSN to 

a tax return preparer located outside of 

the United States or any territory or 

possession of the United States. Thus, if 

a tax return preparer located within the 

United States obtains consent from a 

taxpayer to disclose tax return 

information to another tax return 

preparer located outside of the United 

States, as provided under §§ 301.7216–

2(c) and 301.7216–2(d), the tax return 

preparer located in the United States 

may not disclose the taxpayer’s SSN, 

and the tax return preparer must redact 

or otherwise mask the taxpayer’s SSN 

before the tax return information is 

disclosed outside of the United States. 

If a tax return preparer located within 

the United States initially receives or 

obtains a taxpayer’s SSN from another 

tax return preparer located outside of 

the United States, however, the tax 

return preparer within the United States 

may, without consent, retransmit the 

taxpayer’s SSN to the tax return 

preparer located outside the United 

States that initially provided the SSN to 

the tax return preparer located within 

the United States. Where a taxpayerclient requests that a tax return preparer 

within the United States transfer the 

return preparation engagement to a tax 

return preparer located outside the 

United States, the preparer must still 

redact or otherwise mask the taxpayer’s 

SSN before the information is disclosed 

and, in this situation, it will be 

incumbent upon the taxpayer to provide 

the SSN directly to the tax return 

preparer located abroad. 

Some commentators recommended 

that the regulations provide taxpayers 

with the ability to informally initiate a 

request for the disclosure of tax return 

information from their tax return 


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Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Rules and Regulations 1065 

preparers without formally following 

the consent rules of § 301.7216–3. This 

recommendation was not adopted. As a 

practical matter, it would be difficult to 

distinguish when a taxpayer informally 

initiates a request for the disclosure of 

tax return information and when tax 

return preparers merely claim that a 

taxpayer initiated the request for 

disclosure. Additionally, tax return 

preparers are always free to provide 

taxpayers their own returns and 

taxpayers may disclose tax return 

information to others directly. 

Other commentators recommended 

that the regulations should prohibit 

disclosure to third-party solicitors and 

not allow taxpayers to consent to 

disclosures for the purpose of receiving 

solicitations because the risks to the 

taxpayer of providing consent 

inadvertently are too great in 

comparison to the benefit of receiving 

solicitations from third parties. This 

recommendation was not adopted 

because it denies taxpayers the ability to 

control and direct the disclosure of their 

own tax return information. If taxpayers 

do not wish to receive offers or 

solicitations from third parties, they can 

simply refuse to provide the consent 

needed for third parties to receive their 

tax return information. If a tax return 

preparer obtains written consent under 

circumstances that make the consent 

unknowing or uninformed, the consent 

would be invalid under the 

requirements of the regulations. 

B. Consent To Use of Tax Return 

Information 

Section 301.7216–3 of the preexisting 

regulations provides that a consent to 

use tax return information does not 

apply for purposes of facilitating the 

solicitation of the taxpayer’s use of any 

services or facilities furnished by a 

person other than the tax return 

preparer, unless the other person and 

the tax return preparer are members of 

the same affiliated group of corporations 

within the meaning of section 1504. The 

proposed regulations removed this 

‘‘affiliated group’’ limitation because the 

affiliated group concept has little 

application in the context of modern 

return preparation businesses. The 

proposed regulations also reflected a 

determination by the IRS and Treasury 

Department that a taxpayer’s ability to 

consent to a preparer’s use of tax return 

information to solicit additional 

business should not be limited by 

arbitrary factors largely beyond the 

taxpayer’s knowledge or control, such as 

the size, diversity, or organizational 

structure of the tax return preparer. 

Some commentators expressed concern 

that removal of the ‘‘affiliated group’’

limitation would make it easier for tax 

return preparers to disclose tax return 

information to third parties for 

marketing purposes. This comment 

reflects a misunderstanding of the 

nature of a consent governing a tax 

return preparer’s use of tax return 

information. Use consents are limited to 

what a tax return preparer can do with 

tax return information in the tax return 

preparer’s own hands; use consents 

cannot be used in connection with 

disclosures to third parties. Thus, 

identity theft or other abuses by third 

parties could not arise from taxpayers 

providing use consents to tax return 

preparers. 

Further, prohibiting the commercial 

use of tax return information outright 

would result in no longer allowing 

legitimate uses of tax return information 

that have evolved over time as standard 

commercial practices. For example, tax 

return preparers could not use tax 

return information to advise taxpayers 

of strategies that may positively affect 

the taxpayers’ finances such as 

individual retirement accounts or 

qualified tuition programs, or of the 

taxpayers’ eligibility to participate in 

government benefit programs, such as 

food stamps. 

C. Prohibit Tax Return Preparers From 

Disclosing Tax Return Information for 

Any Reason Unrelated to the 

Preparation of a Tax Return 

Many commentators recommended 

prohibiting tax return preparers from 

disclosing tax return information for any 

purpose unrelated to the preparation of 

tax returns. This recommendation was 

not adopted because there are many 

legitimate purposes for the disclosure of 

tax return information identified in 

§ 301.7216–2, such as the disclosure of 

tax return information for the reporting 

of a crime or for an ethics investigation. 

Similarly, there are legitimate purposes, 

other than tax return preparation, when 

a taxpayer would choose to consent to 

the tax return preparer’s disclosure of 

tax return information. 

As an alternative, some commentators 

recommended that the regulations 

prohibit or greatly restrict the use or 

disclosure of tax return information for 

marketing purposes. They specifically 

recommended banning tax return 

preparers from disclosing tax return 

information in association with 

taxpayers seeking refund anticipation 

loans (RALs) and similar products. 

Treasury and the IRS did not adopt this 

recommendation because it was not 

contained in the proposed regulations 

and could have a significant impact on 

existing business practices. 

Concurrently with the publication of 

these final regulations, however, 

Treasury and the IRS are requesting 

comments on a proposed rule that, if 

ultimately adopted as final, would 

prohibit tax return preparers from using 

or disclosing tax return information for 

the purpose of soliciting, or the taxpayer 

obtaining, a RAL or certain other 

products. 

Commentators also recommended that 

disclosure of tax return information by 

tax return preparers should be 

conditioned upon the existence of an 

agreement by third parties receiving the 

information that the tax return 

information will not be used for any 

purpose other than the purpose for 

which the information was provided. 

This recommendation was not adopted 

because policing agreements by third 

parties are outside the scope of section 

7216. Section 7216 governs only the 

actions of tax return preparers. 

D. Obtaining Consent Through 

Engagement Letters 

Some commentators recommended 

that when the regulations require 

consent to disclose or use tax return 

information, tax return preparers should 

be permitted to obtain such consent 

from ‘‘large taxpayers,’’ such as large 

corporations, through an engagement 

letter. These commentators observed 

that it is ordinary business practice for 

tax return preparers and large taxpayers 

to negotiate and set the terms of the 

provision of services, including the 

preparation of income tax returns, in an 

engagement letter. This 

recommendation was adopted. Treasury 

and the IRS agree that requiring 

multiple, separate consents would 

impose a significant burden and could 

frustrate these taxpayers’ ability to 

comply with tax laws and other 

regulatory and reporting requirements. 

Section 301.7216–3(a)(3) has been 

modified to provide a set of 

requirements regarding the format and 

content of consents to disclose and use 

tax return information with respect to 

taxpayers filing income tax returns in 

the Form 1040 series, e.g., Form 1040, 

Form 1040NR, Form 1040A, or Form 

1040EZ, and a separate set of 

requirements regarding the format and 

content of consents to disclose and use 

tax return information with respect to 

taxpayers filing all other tax returns. 

Under § 301.7216–3(a)(3)(iii), for tax 

return preparers providing tax return 

preparation services to taxpayers who 

do not file an income tax return in the 

Form 1040 series, a consent to use or a 

consent to disclose may be in any 

format, including an engagement letter 

to a client, as long as the consent 


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complies with the requirements of 

§ 301.7216–3(a)(3)(i). 

E. Conditioning Services on Consent 

Section 301.7216–3(a)(1) provides 

that a consent to use or disclose tax 

return information must be knowing 

and voluntary. Section 301.7216–3(a)(1) 

has been modified to clarify that to 

condition the provision of services on 

the taxpayer’s consent will make the 

consent involuntary and invalid unless 

§ 301.7216–3(a)(2) applies. 

Section 301.7216–3(a)(2) provides 

that a tax return preparer may condition 

its provision of preparation services 

upon a taxpayer’s consenting to 

disclosure of the taxpayer’s tax return 

information to another tax return 

preparer for the purpose of performing 

services that assist in the preparation of, 

or provide auxiliary services in 

connection with the preparation of, the 

tax return of the taxpayer. One 

commentator requested a clarification 

regarding whether a tax return preparer 

with offices within and outside of the 

United States is permitted to condition 

its provision of tax preparation services 

to a taxpayer outside of the United 

States on the taxpayer consenting to 

disclosure. The final regulations permit 

a tax return preparer with offices within 

and outside of the United States to 

condition its provision of tax 

preparation services to a taxpayer on the 

taxpayer’s consenting to disclosure to a 

return preparer located outside the 

United States. An example was added to 

the final regulations to clarify this rule. 

Other commentators recommended 

that the regulations should prohibit tax 

return preparers from conditioning the 

provision of any services upon consent. 

This recommendation was adopted by 

inserting the word ‘‘any’’ before 

‘‘services’’ in § 301.7216–3(a)(1), to 

which § 301.7216–3(a)(2) provides the 

only exception. 

F. Requests To Consent After Completed 

Tax Return Provided to Taxpayer 

Proposed section 301.7216–3(b)(2) 

provides that a tax return preparer may 

not request a taxpayer’s consent to 

disclose or use tax return information 

after the tax return preparer provides a 

completed tax return to the taxpayer for 

signature. Commentators suggested that 

there may be legitimate circumstances 

where a request to consent is necessary 

in light of taxpayer preferences and is 

part of client service provided by the 

preparer. Specifically, the commentators 

gave the example of a taxpayer 

requesting that his or her tax return 

preparer disclose the past three years of 

the taxpayer’s tax returns to his or her 

attorney for purposes of preparing the 

client’s estate plan. Under the proposed 

regulation, a request for consent to 

disclose would be untimely in this 

situation, even though the taxpayer 

requests the disclosure as part of the 

client service provided by the tax return 

preparer. As indicated by the provisions 

regarding solicitation of other business 

that were included in the previous final 

regulations, the Treasury Department 

and IRS believe that taxpayers should 

not be the subject of repetitive 

solicitation requests for business made 

by tax return preparers after the tax 

preparation engagement has ended. 

Consistent with previous final 

regulations, the final regulation in 

section 301.7216–3(b)(2) has been 

modified to state that a tax return 

preparer may not request a taxpayer’s 

consent to disclose or use tax return 

information for purposes of solicitation 

of business unrelated to tax return 

preparation after the tax return preparer 

provides a completed tax return to the 

taxpayer for signature. Under the final 

regulations, the preparer would not be 

precluded from requesting consent to 

disclose the past three years of the 

taxpayer’s tax returns to his or her 

attorney for purposes of preparing the 

client’s estate plan according to the 

example provided by commentators. 

G. Prohibition on Multiple Requests for 

Consent 

Proposed section 301.7216–3(b)(3) 

provides that if a taxpayer declines to 

provide consent to a disclosure or use 

of tax return information, a tax return 

preparer cannot make another request 

for consent. Some commentators 

recommended that the regulations 

permit a tax return preparer to clarify 

the purpose and extent of the consent if 

necessary after the taxpayer declines to 

provide consent, and that such a 

clarification should not be treated as a 

second request by the tax return 

preparer to obtain a consent. Another 

commentator stated that tax return 

preparers should be permitted to request 

consent whenever they wish so long as 

the consent properly describes the 

nature of, and reasons for, potential 

disclosures or uses. The commentators’

recommendations were based upon the 

recognition that there may be legitimate 

reasons for the preparer to more 

thoroughly explain the request for 

consent and how the consent relates to 

the tax preparation engagement. 

However, Treasury and the IRS are 

concerned that lack of restrictions 

regarding multiple requests for consent 

regarding the same or similar request 

may cause undue pressure to consent 

where there are repetitious requests. In 

light of these concerns, section 

301.7216–3(b)(3) has been modified to 

provide that, for purposes unrelated to 

a tax preparation engagement, if a 

taxpayer declines a request for consent 

to the disclosure or use of tax return 

information, the tax return preparer may 

not solicit from the taxpayer another 

consent for a purpose substantially 

similar to that of the rejected request. 

Under this rule, there is no prohibition 

regarding the taxpayer independently 

asking the tax return preparer about a 

disclosure or use of the taxpayer’s same 

tax return information after a declined 

consent request. 

H. Multiple Disclosures or Multiple 

Uses Within a Single Consent Form 

Section 301.7216–3(c)(1) of the 

proposed regulations provides that a 

taxpayer may consent to multiple 

disclosures within the same written 

document, or multiple uses within the 

same written document. One 

commentator recommended permitting 

taxpayers to consent to multiple 

disclosures and multiple uses with the 

same form. Another commentator 

recommended prohibiting a taxpayer 

from consenting to multiple disclosures 

within the same written document, or 

multiple uses within the same written 

document, in order to avoid potential 

taxpayer confusion. These 

recommendations were not adopted. 

The proposed rule was intended to 

emphasize that disclosure and use are 

two distinct concepts, and a taxpayer 

may consider consenting to one and not 

the other. The comments to the 

proposed regulations demonstrated that 

there is potential for confusion 

regarding the distinction between 

disclosure and use. Treasury and the 

IRS believe it is appropriate to require 

separate consents in situations where 

there is a probability that the taxpayer 

could become confused over the 

distinction between use and disclosure. 

Section 301–7216–3(c)(1) of the final 

regulations provides that for taxpayers 

who are filers of returns in the Form 

1040 series, the proposed rule is 

retained. The rule requiring separate 

consents is limited to individuals 

because use or disclosure of that tax 

return information involves situations 

where confusion is most likely to occur. 

I. Disclosure of All Information 

Contained Within a Return 

Section 301.7216–3(c)(2) of the 

proposed regulations provides that a 

consent authorizing the disclosure of all 

information contained within a return 

must set forth an explanation of the 

reason why a consent authorizing a 

more limited disclosure of tax return 

information is unsatisfactory for the 


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purpose of the consent. Some 

commentators characterized this 

requirement as burdensome in certain 

situations and recommended 

eliminating this requirement. 

Commentators reasoned that a third 

party service provider, such as the 

taxpayer’s attorney, may request a copy 

of the return and the requirement to 

provide an explanation would interject 

the preparer between the requirements 

imposed by the third party service 

provider and the taxpayer. In light of 

these concerns, section 301.7216–3(c)(2) 

of the final regulations modifies this 

provision to provide that where a 

consent authorizes the disclosure of a 

copy of the taxpayer’s tax return or all 

information contained within a return, 

the consent must provide that the 

taxpayer has the ability to request a 

more limited disclosure of tax return 

information as the taxpayer may direct. 

Some commentators concerned with 

marketing of tax return information 

recommended that disclosure of the 

entire tax return should not be 

permitted under any circumstances. The 

commentators’ rationale was that 

disclosure of the entire return is never 

necessary for marketing purposes. This 

recommendation was not adopted 

because, in general, taxpayers should 

have control over their own tax return 

information and they should be able to 

direct tax return preparers to disclose 

tax return information as the taxpayers 

see fit. 

J. Duration of Consent 

Section 301.7216–3(b)(5) of the 

proposed regulations provides that no 

consent to the disclosure or use of tax 

return information may be effective for 

a period longer than one year from the 

date the taxpayer signed the consent. 

Some commentators expressed concern 

that the duration of consent may need 

to be effective for a period greater than 

one year. One commentator observed 

that when preparing expatriate tax 

returns, there may be circumstances 

when the due date for a foreign tax 

return or other related document is 

more than one year after the taxpayer 

signs the consent. Some commentators 

recommended that taxpayers should be 

permitted to establish the duration of 

consent, and the one-year period should 

apply only if the taxpayer fails to 

specify a different duration of consent. 

This recommendation was adopted in 

the final regulations. 

K. Consents Read Aloud 

Some commentators recommended 

that § 301.7216–3 require that consents 

be read aloud by audio output. This 

recommendation was not adopted. This 

recommendation would impose a 

burdensome rule that is outside the 

norm of standard practices for obtaining 

consent. 

5. General Comments 

Several commentators recommended 

rejecting all of the provisions of the 

proposed regulations under section 

7216. The recommendations to reject 

the proposed regulations were not 

adopted. The proposed regulations were 

finalized to provide updates relating to 

uses and disclosures of tax return 

information in the electronic return 

preparation context and create an 

environment that allows taxpayers to 

make informed decisions regarding the 

disclosure or use of their tax return 

information. 

Effect on Other Documents 

The following publication is obsolete 

on or after January 1, 2009: Rev. Rul. 

79–114, 1979–1 C.B. 441 (1979). 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and, because these 

regulations do not impose a collection 

of information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f), the notice of proposed 

rulemaking preceding these regulations 

was submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Drafting Information 

The principal author of these 

regulations is Dillon Taylor, formerly of 

the Office of the Associate Chief 

Counsel (Procedure and 

Administration). For further information 

regarding these regulations contact 

Lawrence Mack of the Office of the 

Associate Chief Counsel (Procedure and 

Administration) at 202–622–4940 (not a 

toll-free call). 

List of Subjects in 26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Amendment to the Regulations 

■ Accordingly, 26 CFR part 301 is 

amended as follows: 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Paragraph 1. The authority citation 

for part 301 continues to read, in part, 

as follows: 

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

■ Par. 2. Section 301.7216–0 is added to 

read as follows: 

§ 301.7216–0 Table of contents. 

This section lists captions contained 

in §§ 301.7216–1 through 301.7216–3. 

§ 301.7216–1 Penalty for disclosure or use 

of tax return information. 

(a) In general. 

(b) Definitions. 

(c) Gramm-Leach-Bliley Act. 

(d) Effective date. 

§ 301.7216–2 Permissible disclosures or 

uses without consent of the taxpayer. 

(a) Disclosure pursuant to other provisions 

of the Internal Revenue Code. 

(b) Disclosures to the IRS. 

(c) Disclosures or uses for preparation of a 

taxpayer’s return. 

(d) Disclosures to other tax return 

preparers. 

(e) Disclosure or use of information in the 

case of related taxpayers. 

(f) Disclosure pursuant to an order of a 

court, or an administrative order, demand, 

request, summons or subpoena which is 

issued in the performance of its duties by a 

Federal or State agency, the United States 

Congress, a professional association ethics 

committee or board, or the Public Company 

Accounting Oversight Board. 

(g) Disclosure for use in securing legal 

advice, Treasury investigations or court 

proceedings. 

(h) Certain disclosures by attorneys and 

accountants. 

(i) Corporate fiduciaries. 

(j) Disclosure to taxpayer’s fiduciary. 

(k) Disclosure or use of information in 

preparation or audit of State or local tax 

returns or assisting a taxpayer with foreign 

country tax obligations. 

(l) Payment for tax preparation services. 

(m) Retention of records. 

(n) Lists for solicitation of tax return 

business. 

(o) Producing statistical information in 

connection with tax return preparation 

business. 

(p) Disclosure or use of information for 

quality or peer reviews. 

(q) Disclosure to report the commission of 

a crime. 

(r) Disclosure of tax return information due 

to a tax return preparer’s incapacity or death. 

(s) Effective date. 

§ 301.7216–3 Disclosure or use permitted 

only with the taxpayer’s consent. 

(a) In general. 

(b) Timing requirements and limitations. 

(c) Special rules. 

(d) Effective date. 

■ Par. 3. Section 301.7216–1 is revised 

to read as follows: 


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§ 301.7216–1 Penalty for disclosure or use 

of tax return information. 

(a) In general. Section 7216(a) 

prescribes a criminal penalty for tax 

return preparers who knowingly or 

recklessly disclose or use tax return 

information for a purpose other than 

preparing a tax return. A violation of 

section 7216 is a misdemeanor, with a 

maximum penalty of up to one year 

imprisonment or a fine of not more than 

$1,000, or both, together with the costs 

of prosecution. Section 7216(b) 

establishes exceptions to the general 

rule in section 7216(a) prohibiting 

disclosure and use. Section 7216(b) also 

authorizes the Secretary to promulgate 

regulations prescribing additional 

permitted disclosures and uses. Section 

6713(a) prescribes a related civil penalty 

for disclosures and uses that constitute 

a violation of section 7216. The penalty 

for violating section 6713 is $250 for 

each prohibited disclosure or use, not to 

exceed a total of $10,000 for a calendar 

year. Section 6713(b) provides that the 

exceptions in section 7216(b) also apply 

to section 6713. Under section 7216(b), 

the provisions of section 7216(a) will 

not apply to any disclosure or use 

permitted under regulations prescribed 

by the Secretary. 

(b) Definitions. For purposes of 

section 7216 and §§ 301.7216–1 through 

301.7216–3: 

(1) Tax return. The term tax return 

means any return (or amended return) of 

income tax imposed by chapter 1 of the 

Internal Revenue Code. 

(2) Tax return preparer—(i) In 

general. The term tax return preparer 

means: 

(A) Any person who is engaged in the 

business of preparing or assisting in 

preparing tax returns; 

(B) Any person who is engaged in the 

business of providing auxiliary services 

in connection with the preparation of 

tax returns, including a person who 

develops software that is used to 

prepare or file a tax return and any 

Authorized IRS e-file Provider; 

(C) Any person who is otherwise 

compensated for preparing, or assisting 

in preparing, a tax return for any other 

person; or 

(D) Any individual who, as part of 

their duties of employment with any 

person described in paragraph 

(b)(2)(i)(A), (B), or (C) of this section 

performs services that assist in the 

preparation of, or assist in providing 

auxiliary services in connection with 

the preparation of, a tax return. 

(ii) Business of preparing returns. A 

person is engaged in the business of 

preparing tax returns as described in 

paragraph (b)(2)(i)(A) of this section if, 

in the course of the person’s business, 

the person holds himself out to tax 

return preparers or taxpayers as a 

person who prepares tax returns or 

assists in preparing tax returns, whether 

or not tax return preparation is the 

person’s sole business activity and 

whether or not the person charges a fee 

for tax return preparation services. 

(iii) Providing auxiliary services. A 

person is engaged in the business of 

providing auxiliary services in 

connection with the preparation of tax 

returns as described in paragraph 

(b)(2)(i)(B) of this section if, in the 

course of the person’s business, the 

person holds himself out to tax return 

preparers or to taxpayers as a person 

who performs auxiliary services, 

whether or not providing the auxiliary 

services is the person’s sole business 

activity and whether or not the person 

charges a fee for the auxiliary services. 

Likewise, a person is engaged in the 

business of providing auxiliary services 

if, in the course of the person’s business, 

the person receives a taxpayer’s tax 

return information from another tax 

return preparer pursuant to the 

provisions of § 301.7216–2(d)(2). 

(iv) Otherwise compensated. A tax 

return preparer described in paragraph 

(b)(2)(i)(C) of this section includes any 

person who—

(A) Is compensated for preparing a tax 

return for another person, but not in the 

course of a business; or 

(B) Is compensated for helping, on a 

casual basis, a relative, friend, or other 

acquaintance to prepare their tax return. 

(v) Exclusions. A person is not a tax 

return preparer merely because he 

leases office space to a tax return 

preparer, furnishes credit to a taxpayer 

whose tax return is prepared by a tax 

return preparer, furnishes information 

to a tax return preparer at the taxpayer’s 

request, furnishes access (free or 

otherwise) to a separate person’s tax 

return preparation Web site through a 

hyperlink on his own Web site, or 

otherwise performs some service that 

only incidentally relates to the 

preparation of tax returns. 

(vi) Examples. The application of 

§ 301.7216–1(b)(2) may be illustrated by 

the following examples: 

Example 1. Bank B is a tax return preparer 

within the meaning of paragraph (b)(2)(i)(A) 

of this section, and an Authorized IRS e-file 

Provider. B employs one individual, Q, to 

solicit the necessary tax return information 

for the preparation of a tax return; another 

individual, R, to prepare the return on the 

basis of the information that is furnished; a 

secretary, S, who types the information on 

the returns into a computer; and an 

administrative assistant, T, who uses a 

computer to file electronic versions of the tax 

returns. Under these circumstances, only R is 

a tax return preparer for purposes of section 

7701(a)(36), but all four employees are tax 

return preparers for purposes of section 7216, 

as provided in paragraph (b) of this section. 

Example 2. Tax return preparer P contracts 

with department store D to rent space in D’s 

store. D advertises that taxpayers who use P’s 

services may charge the cost of having their 

tax return prepared to their charge account 

with D. Under these circumstances, D is not 

a tax return preparer because it provides 

space, credit, and services only incidentally 

related to the preparation of tax returns. 

(3) Tax return information—(i) In 

general. The term tax return information 

means any information, including, but 

not limited to, a taxpayer’s name, 

address, or identifying number, which is 

furnished in any form or manner for, or 

in connection with, the preparation of a 

tax return of the taxpayer. This 

information includes information that 

the taxpayer furnishes to a tax return 

preparer and information furnished to 

the tax return preparer by a third party. 

Tax return information also includes 

information the tax return preparer 

derives or generates from tax return 

information in connection with the 

preparation of a taxpayer’s return. 

(A) Tax return information can be 

provided directly by the taxpayer or by 

another person. Likewise, tax return 

information includes information 

received by the tax return preparer from 

the IRS in connection with the 

processing of such return, including an 

acknowledgment of acceptance or notice 

of rejection of an electronically filed 

return. 

(B) Tax return information includes 

statistical compilations of tax return 

information, even in a form that cannot 

be associated with, or otherwise 

identify, directly or indirectly, a 

particular taxpayer. See § 301.7216–2(o) 

for limited use of tax return information 

to make statistical compilations without 

taxpayer consent and to use the 

statistical compilations for limited 

purposes. 

(C) Tax return information does not 

include information identical to any tax 

return information that has been 

furnished to a tax return preparer if the 

identical information was obtained 

otherwise than in connection with the 

preparation of a tax return. 

(D) Information is considered ‘‘in 

connection with tax return 

preparation,’’ and therefore tax return 

information, if the taxpayer would not 

have furnished the information to the 

tax return preparer but for the intention 

to engage, or the engagement of, the tax 

return preparer to prepare the tax 

return. 

(ii) Examples. The application of this 

paragraph (b)(3) may be illustrated by 

the following examples: 


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Example 1. Taxpayer A purchases 

computer software designed to assist with the 

preparation and filing of her income tax 

return. When A loads the software onto her 

computer, it prompts her to register her 

purchase of the software. In this situation, 

the software provider is a tax return preparer 

under paragraph (b)(2)(i)(B) of this section 

and the information that A provides to 

register her purchase is tax return 

information because she is providing it in 

connection with the preparation of a tax 

return. 

Example 2. Corporation A is a brokerage 

firm that maintains a Web site through which 

its clients may access their accounts, trade 

stocks, and generally conduct a variety of 

financial activities. Through its Web site, A 

offers its clients free access to its own tax 

preparation software. Taxpayer B is a client 

of A and has furnished A his name, address, 

and other information when registering for 

use of A’s Web site to use A’s brokerage 

services. In addition, A has a record of B’s 

brokerage account activity, including sales of 

stock, dividends paid, and IRA contributions 

made. B uses A’s tax preparation software to 

prepare his tax return. The software 

populates some fields on B’s return on the 

basis of information A already maintains in 

its databases. A is a tax return preparer 

within the meaning of paragraph (b)(2)(i)(B) 

of this section because it has prepared and 

provided software for use in preparing tax 

returns. The information in A’s databases 

that the software accesses to populate B’s 

return, i.e., the registration information and 

brokerage account activity, is not tax return 

information because A did not receive that 

information in connection with the 

preparation of a tax return. Once A uses the 

information to populate the return, however, 

the information associated with the return 

becomes tax return information. If A retains 

the information in a form in which A can 

identify that the information was used in 

connection with the preparation of a return, 

the information in that form is tax return 

information. If, however, A retains the 

information in a database in which A cannot 

identify whether the information was used in 

connection with the preparation of a return, 

then that information is not tax return 

information. 

(4) Use—(i) In general. Use of tax 

return information includes any 

circumstance in which a tax return 

preparer refers to, or relies upon, tax 

return information as the basis to take 

or permit an action. 

(ii) Example. The application of this 

paragraph (b)(4) may be illustrated by 

the following example: 

Example. Preparer G is a tax return 

preparer as defined by paragraph (b)(2)(i)(A) 

of this section. If G determines, upon 

preparing a return, that the taxpayer is 

eligible to make a contribution to an 

individual retirement account (IRA), G will 

ask whether the taxpayer desires to make a 

contribution to an IRA. G does not ask about 

IRAs in cases in which the taxpayer is not 

eligible to make a contribution. G is using tax 

return information when it asks whether a 

taxpayer is interested in making a 

contribution to an IRA because G is basing 

the inquiry upon knowledge gained from 

information that the taxpayer furnished in 

connection with the preparation of the 

taxpayer’s return. 

(5) Disclosure. The term disclosure 

means the act of making tax return 

information known to any person in any 

manner whatever. To the extent that a 

taxpayer’s use of a hyperlink results in 

the transmission of tax return 

information, this transmission of tax 

return information is a disclosure by the 

tax return preparer subject to penalty 

under section 7216 if not authorized by 

regulation. 

(6) Hyperlink. For purposes of section 

7216, a hyperlink is a device used to 

transfer an individual using tax 

preparation software from a tax return 

preparer’s Web page to a Web page 

operated by another person without the 

individual having to separately enter the 

Web address of the destination page. 

(7) Request for consent. A request for 

consent includes any effort by a tax 

return preparer to obtain the taxpayer’s 

consent to use or disclose the taxpayer’s 

tax return information. The act of 

supplying a taxpayer with a paper or 

electronic form that meets the 

requirements of a revenue procedure 

published pursuant to § 301.7216–3(a) is 

a request for a consent. When a tax 

return preparer requests a taxpayer’s 

consent, any associated efforts of the tax 

return preparer, including, but not 

limited to, verbal or written 

explanations of the form, are part of the 

request for consent. 

(c) Gramm-Leach-Bliley Act. Any 

applicable requirements of the GrammLeach-Bliley Act, Public Law 106–102 

(113 Stat. 1338), do not supersede, alter, 

or affect the requirements of section 

7216 and §§ 301.7216–1 through 

301.7216–3. Similarly, the requirements 

of section 7216 and §§ 301.7216–1 

through 301.7216–3 do not override any 

requirements or restrictions of the 

Gramm-Leach-Bliley Act, which are in 

addition to the requirements or 

restrictions of section 7216 and 

§§ 301.7216–1 through 301.7216–3. 

(d) Effective/applicability date. This 

section applies to disclosures or uses of 

tax return information occurring on or 

after January 1, 2009. 

■ Par. 4. Section 301.7216–2 is revised 

to read as follows: 

§ 301.7216–2 Permissible disclosures or 

uses without consent of the taxpayer. 

(a) Disclosure pursuant to other 

provisions of the Internal Revenue Code. 

The provisions of section 7216(a) and 

§ 301.7216–1 shall not apply to any 

disclosure of tax return information if 

the disclosure is made pursuant to any 

other provision of the Internal Revenue 

Code or the regulations thereunder. 

(b) Disclosures to the IRS. The 

provisions of section 7216(a) and 

§ 301.7216–1 shall not apply to any 

disclosure of tax return information to 

an officer or employee of the IRS. 

(c) Disclosures or uses for preparation 

of a taxpayer’s return—(1) Updating 

Taxpayers’ Tax Return Preparation 

Software. If a tax return preparer 

provides software to a taxpayer that is 

used in connection with the preparation 

or filing of a tax return, the tax return 

preparer may use the taxpayer’s tax 

return information to update the 

taxpayer’s software for the purpose of 

addressing changes in IRS forms, e-file 

specifications and administrative, 

regulatory and legislative guidance or to 

test and ensure the software’s technical 

capabilities without the taxpayer’s 

consent under § 301.7216–3. 

(2) Tax return preparers located 

within the same firm in the United 

States. If a taxpayer furnishes tax return 

information to a tax return preparer 

located within the United States, 

including any territory or possession of 

the United States, an officer, employee, 

or member of a tax return preparer may 

use the tax return information, or 

disclose the tax return information to 

another officer, employee, or member of 

the same tax return preparer, for the 

purpose of performing services that 

assist in the preparation of, or assist in 

providing auxiliary services in 

connection with the preparation of, the 

taxpayer’s tax return. If an officer, 

employee, or member to whom the tax 

return information is to be disclosed is 

located outside of the United States or 

any territory or possession of the United 

States, the taxpayer’s consent under 

§ 301.7216–3 prior to any disclosure is 

required. 

(3) Furnishing tax return information 

to tax return preparers located outside 

the United States. If a taxpayer initially 

furnishes tax return information to a tax 

return preparer located outside of the 

United States or any territory or 

possession of the United States, an 

officer, employee, or member of a tax 

return preparer may use tax return 

information, or disclose any tax return 

information to another officer, 

employee, or member of the same tax 

return preparer, for the purpose of 

performing services that assist in the 

preparation of, or assist in providing 

auxiliary services in connection with 

the preparation of, the tax return of a 

taxpayer by or for whom the 

information was furnished without the 

taxpayer’s consent under § 301.7216–3. 


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(4) Examples. The following examples 

illustrate this paragraph (c): 

Example 1. Preparer P provides tax return 

preparation software to Taxpayer T for T to 

use in the preparation of its 2009 income tax 

return. For the 2009 tax year, and using T’s 

tax return information furnished while 

registering for the software, P would like to 

update the tax return preparation software 

that T is using to account for last minute 

changes made to the tax laws for the 2009 tax 

year. P is not required to obtain T’s consent 

to update the tax return preparation software. 

P may perform a software update regardless 

of whether the software update will affect T’s 

particular return preparation activities. 

Example 2. T is a client of Firm, which is 

a tax return preparer. E, an employee at 

Firm’s State A office, receives tax return 

information from T for use in preparing T’s 

income tax return. E discloses the tax return 

information to P, an employee in Firm’s State 

B office; P uses the tax return information to 

process T’s income tax return. Firm is not 

required to receive T’s consent under 

§ 301.7216–3 prior to E’s disclosure of T’s tax 

return information to P because the tax return 

information is disclosed to an employee 

employed by the same tax return preparer 

located within the United States. 

Example 3. Same facts as Example 2 except 

T’s tax return information is disclosed to FE 

who is located in Firm’s Country F office. FE 

uses the tax return information to process T’s 

income tax return. After processing, FE 

returns the processed tax return information 

to E in Firm’s State A office. Because FE is 

outside of the United States, Firm is required 

to obtain T’s consent under § 301.7216–3 

prior to E’s disclosure of T’s tax return 

information to FE. 

Example 4. T, Firm’s client, is temporarily 

located in Country F. She initially furnishes 

her tax return information to employee FE in 

Firm’s Country F office for the purpose of 

having Firm prepare her U.S. income tax 

return. FE makes the substantive 

determinations concerning T’s tax liability 

and forwards T’s tax return information to 

FP, an employee in Firm’s Country P office, 

for the purpose of processing T’s tax return 

information. FP processes the return 

information and forwards it to Partner at 

Firm’s State A office in the United States for 

review and delivery to T. Because T initially 

furnished the tax return information to a tax 

return preparer outside of the United States, 

T’s prior consent for disclosure or use under 

§ 301.7216–3 was not required. An officer, 

employee, or member of Firm in the United 

States may use T’s tax return information or 

disclose the tax return information to another 

officer, employee, or member of Firm without 

T’s prior consent under § 301.7216–3 as long 

as any disclosure or use of T’s tax return 

information is within the United States. Firm 

is required to receive T’s consent under 

§ 301.7216–3 prior to any subsequent 

disclosure of T’s tax return information to a 

tax return preparer located outside of the 

United States. 

(d) Disclosures to other tax return 

preparers—(1) Preparer-to-preparer 

disclosures. Except as limited in 

paragraph (d)(2) of this section, an 

officer, employee, or member of a tax 

return preparer may disclose tax return 

information of a taxpayer to another tax 

return preparer (other than an officer, 

employee, or member of the same tax 

return preparer) located in the United 

States (including any territory or 

possession of the United States) for the 

purpose of preparing or assisting in 

preparing a tax return, or obtaining or 

providing auxiliary services in 

connection with the preparation of any 

tax return, so long as the services 

provided are not substantive 

determinations or advice affecting the 

tax liability reported by taxpayers. A 

substantive determination involves an 

analysis, interpretation, or application 

of the law. The authorized disclosures 

permitted under this paragraph (d)(1) 

include one tax return preparer 

disclosing tax return information to 

another tax return preparer for the 

purpose of having the second tax return 

preparer transfer that information to, 

and compute the tax liability on, a tax 

return of the taxpayer by means of 

electronic, mechanical, or other form of 

tax return processing service. The 

authorized disclosures permitted under 

this paragraph (d)(1) also include 

disclosures by a tax return preparer to 

an Authorized IRS e-file Provider for the 

purpose of electronically filing the 

return with the IRS. Authorized 

disclosures also include disclosures by 

a tax return preparer to a second tax 

return preparer for the purpose of 

making information concerning the 

return available to the taxpayer. This 

would include, for example, whether 

the return has been accepted or rejected 

by the IRS, or the status of the 

taxpayer’s refund. Except as provided in 

paragraph (c) of this section, a tax return 

preparer may not disclose tax return 

information to another tax return 

preparer for the purpose of the second 

tax return preparer providing 

substantive determinations without first 

receiving the taxpayer’s consent in 

accordance with the rules under 

§ 301.7216–3. 

(2) Disclosures to contractors. A tax 

return preparer may disclose tax return 

information to a person under contract 

with the tax return preparer in 

connection with the programming, 

maintenance, repair, testing, or 

procurement of equipment or software 

used for purposes of tax return 

preparation only to the extent necessary 

for the person to provide the contracted 

services, and only if the tax return 

preparer ensures that all individuals 

who are to receive disclosures of tax 

return information receive a written 

notice that informs them of the 

applicability of sections 6713 and 7216 

to them and describes the requirements 

and penalties of sections 6713 and 7216. 

Contractors receiving tax return 

information pursuant to this section are 

tax return preparers under section 7216 

because they are performing auxiliary 

services in connection with tax return 

preparation. See § 301.7216–1(b)(2)(i)(B) 

and (D). 

(3) Examples. The following examples 

illustrate this paragraph (d): 

Example 1. E, an employee at Firm’s State 

A office, receives tax return information from 

T for Firm’s use in preparing T’s income tax 

return. E makes substantive determinations 

and forwards the tax return information to P, 

an employee at Processor; Processor is 

located in State B. P places the tax return 

information on the income tax return and 

furnishes the finished product to E. E is not 

required to receive T’s prior consent under 

§ 301.7216–3 before disclosing T’s tax return 

information to P because Processor’s services 

are not substantive determinations and the 

tax return information remained in the 

United States at Processor’s State B office 

during the entire course of the tax return 

preparation process. 

Example 2. Firm, a tax return preparer, 

offers income tax return preparation services. 

Firm’s contract with its software provider, 

Contractor, requires Firm to periodically 

randomly select certain taxpayers’ tax return 

information solely for the purpose of testing 

the reliability of the software sold to Firm. 

Under its agreement with Contractor, Firm 

discloses tax return information to 

Contractor’s employee, C, who services 

Firm’s contract without providing Contractor 

or C with a written notice that describes the 

requirements of and penalties under sections 

7216 and 6713. C uses the tax return 

information solely for quality assurance 

purposes. Firm’s disclosure of tax return 

information to C was an impermissible 

disclosure because Firm failed to ensure that 

C received a written notice that describes the 

requirements and penalties of sections 7216 

and 6713. 

Example 3. E, an employee of Firm in State 

A in the United States, receives tax return 

information from T for use in preparing T’s 

income tax return. After E enters T’s tax 

return information into Firm’s computer, that 

information is stored on a computer server 

that is physically located in State A. Firm 

contracts with Contractor, located in Country 

F, to prepare its clients’ tax returns. FE, an 

employee of Contractor, uses a computer in 

Country F and inputs a password to view T’s 

income tax information stored on the 

computer server in State A to prepare T’s tax 

return. A computer program permits FE to 

view T’s tax return information, but prohibits 

FE from downloading or printing out T’s tax 

return information from the computer server. 

Because Firm is disclosing T’s tax return 

information outside of the United States, 

Firm is required to obtain T’s consent under 

§ 301.7216–3 prior to the disclosure to FE. As 

provided in § 301.7216–3(b)(5), however, 

Firm may not obtain consent to disclose T’s 

social security number (SSN) to a tax return 


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preparer located outside of the United States 

or any territory or possession of the United 

States. 

Example 4. A, an employee at Firm A, 

receives tax return information from T for 

Firm’s use in preparing T’s income tax 

return. A forwards the tax return information 

to B, an employee at another firm, Firm B, 

to obtain advice on the issue of whether T 

may claim a deduction for a certain business 

expense. A is required to receive T’s prior 

consent under § 301.7216–3 before disclosing 

T’s tax return information to B because B’s 

services involve a substantive determination 

affecting the tax liability that T will report. 

(e) Disclosure or use of information in 

the case of related taxpayers. (1) In 

preparing a tax return of a second 

taxpayer, a tax return preparer may use, 

and may disclose to the second taxpayer 

in the form in which it appears on the 

return, any tax return information that 

the tax return preparer obtained from a 

first taxpayer if—

(i) The second taxpayer is related to 

the first taxpayer within the meaning of 

paragraph (e)(2) of this section; 

(ii) The first taxpayer’s tax interest in 

the information is not adverse to the 

second taxpayer’s tax interest in the 

information; and 

(iii) The first taxpayer has not 

expressly prohibited the disclosure or 

use. 

(2) For purposes of paragraph (e)(1)(i) 

of this section, a taxpayer is related to 

another taxpayer if they have any one of 

the following relationships: Husband 

and wife, child and parent, grandchild 

and grandparent, partner and 

partnership, trust or estate and 

beneficiary, trust or estate and fiduciary, 

corporation and shareholder, or 

members of a controlled group of 

corporations as defined in section 1563. 

(3) See § 301.7216–3 for disclosure or 

use of tax return information of the 

taxpayer in preparing the tax return of 

a second taxpayer when the 

requirements of this paragraph are not 

satisfied. 

(f) Disclosure pursuant to an order of 

a court, or an administrative order, 

demand, request, summons or subpoena 

which is issued in the performance of its 

duties by a Federal or State agency, the 

United States Congress, a professional 

association ethics committee or board, 

or the Public Company Accounting 

Oversight Board. The provisions of 

section 7216(a) and § 301.7216–1 will 

not apply to any disclosure of tax return 

information if the disclosure is made 

pursuant to any one of the following 

documents: 

(1) The order of any court of record, 

Federal, State, or local. 

(2) A subpoena issued by a grand jury, 

Federal or State. 

(3) A subpoena issued by the United 

States Congress. 

(4) An administrative order, demand, 

summons or subpoena that is issued in 

the performance of its duties by—

(i) Any Federal agency as defined in 

5 U.S.C. 551(1) and 5 U.S.C. 552(f), or 

(ii) A State agency, body, or 

commission charged under the laws of 

the State or a political subdivision of the 

State with the licensing, registration, or 

regulation of tax return preparers. 

(5) A written request from a 

professional association ethics 

committee or board investigating the 

ethical conduct of the tax return 

preparer. 

(6) A written request from the Public 

Company Accounting Oversight Board 

in connection with an inspection under 

section 104 of the Sarbanes-Oxley Act of 

2002, 15 U.S.C. 7214, or an investigation 

under section 105 of such Act, 15 U.S.C. 

7215, for use in accordance with such 

Act. 

(g) Disclosure for use in securing legal 

advice, Treasury investigations or court 

proceedings. A tax return preparer may 

disclose tax return information—

(1) To an attorney for purposes of 

securing legal advice; 

(2) To an employee of the Treasury 

Department for use in connection with 

any investigation of the tax return 

preparer (including investigations 

relating to the tax return preparer in its 

capacity as a practitioner) conducted by 

the IRS or the Treasury Department; or 

(3) To any officer of a court for use in 

connection with proceedings involving 

the tax return preparer (including 

proceedings involving the tax return 

preparer in its capacity as a 

practitioner), or the return preparer’s 

client, before the court or before any 

grand jury that may be convened by the 

court. 

(h) Certain disclosures by attorneys 

and accountants. The provisions of 

section 7216(a) and § 301.7216–1 shall 

not apply to any disclosure of tax return 

information permitted by this paragraph 

(h). 

(1)(i) A tax return preparer who is 

lawfully engaged in the practice of law 

or accountancy and prepares a tax 

return for a taxpayer may use the 

taxpayer’s tax return information, or 

disclose the information to another 

officer, employee or member of the tax 

return preparer’s law or accounting 

firm, consistent with applicable legal 

and ethical responsibilities, who may 

use the tax return information for the 

purpose of providing other legal or 

accounting services to the taxpayer. As 

an example, a lawyer who prepares a tax 

return for a taxpayer may use the tax 

return information of the taxpayer for, 

or in connection with, rendering legal 

services, including estate planning or 

administration, or preparation of trial 

briefs or trust instruments, for the 

taxpayer or the estate of the taxpayer. In 

addition, the lawyer who prepared the 

tax return may disclose the tax return 

information to another officer, employee 

or member of the same firm for the 

purpose of providing other legal 

services to the taxpayer. As another 

example, an accountant who prepares a 

tax return for a taxpayer may use the tax 

return information, or disclose it to 

another officer, employee or member of 

the firm, for use in connection with the 

preparation of books and records, 

working papers, or accounting 

statements or reports for the taxpayer. In 

the normal course of rendering the legal 

or accounting services to the taxpayer, 

the attorney or accountant may make 

the tax return information available to 

third parties, including stockholders, 

management, suppliers, or lenders, 

consistent with the applicable legal and 

ethical responsibilities, unless the 

taxpayer directs otherwise. For rules 

regarding disclosures outside of the 

United States, see § 301.7216–2(c) and 

(d). 

(ii) A tax return preparer’s law or 

accounting firm does not include any 

related or affiliated firms. For example, 

if law firm A is affiliated with law firm 

B, officers, employees and members of 

law firm A must receive a taxpayer’s 

consent under § 301.7216–3 before 

disclosing the taxpayer’s tax return 

information to an officer, employee or 

member of law firm B. 

(2) A tax return preparer who is 

lawfully engaged in the practice of law 

or accountancy and prepares a tax 

return for a taxpayer may, consistent 

with the applicable legal and ethical 

responsibilities, take the tax return 

information into account, and may act 

upon it, in the course of performing 

legal or accounting services for a client 

other than the taxpayer, or disclose the 

information to another officer, employee 

or member of the tax return preparer’s 

law or accounting firm to enable that 

other officer, employee or member to 

take the information into account, and 

act upon it, in the course of performing 

legal or accounting services for a client 

other than the taxpayer. This is 

permissible when the information is, or 

may be, relevant to the subject matter of 

the legal or accounting services for the 

other client, and consideration of the 

information by those performing the 

services is necessary for the proper 

performance of the services. In no event, 

however, may the tax return information 

be disclosed to a person who is not an 

officer, employee or member of the law 


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or accounting firm, unless the 

disclosure is exempt from the 

application of section 7216(a) and 

§ 301.7216–1 by reason of another 

provision of §§ 301.7216–2 or 301.7216–

3. 

(3) Examples. The application of this 

paragraph may be illustrated by the 

following examples: 

Example 1. A, a member of an accounting 

firm, renders an opinion on a financial 

statement of M Corporation that is part of a 

registration statement filed with the 

Securities and Exchange Commission. After 

the registration statement is filed, but before 

its effective date, B, a member of the same 

accounting firm, prepares an income tax 

return for N Corporation. In the course of 

preparing N’s income tax return, B discovers 

that N does business with M and concludes 

that the information given by N should be 

considered by A to determine whether the 

financial statement opined on by A contains 

an untrue statement of material fact or omits 

a material fact required to keep the statement 

from being misleading. B discloses to A the 

tax return information of N for this purpose. 

A determines that there is an omission of 

material fact and that an amended statement 

should be filed. A so advises M and the 

Securities and Exchange Commission. A 

explains that the omission was revealed as a 

result of confidential information that came 

to A’s attention after the statement was filed, 

but A does not disclose the identity of the 

taxpayer or the tax return information itself. 

Section 7216(a) and § 301.7216–1 do not 

apply to B’s disclosure of N’s tax return 

information to A and A’s use of the 

information in advising M and the Securities 

and Exchange Commission of the necessity 

for filing an amended statement. Section 

7216(a) and § 301.7216–1 would apply to a 

disclosure of N’s tax return information to M 

or to the Securities and Exchange 

Commission unless the disclosure is exempt 

from the application of section 7216(a) and 

§ 301.7216–1 by reason of another provision 

of either this section or § 301.7216–3. 

Example 2. A, a member of an accounting 

firm, is conducting an audit of M 

Corporation, and B, a member of the same 

accounting firm, prepares an income tax 

return for D, an officer of M. In the course 

of preparing the return, B obtains information 

from D indicating that D, pursuant to an 

arrangement with a supplier doing business 

with M, has been receiving from the supplier 

a percentage of the amounts that the supplier 

invoices to M. B discloses this information to 

A who, acting upon it, searches in the course 

of the audit for indications of a kickback 

scheme. As a result, A discovers information 

from audit sources that independently 

indicate the existence of a kickback scheme. 

Without revealing the tax return information 

A has received from B, A brings to the 

attention of officers of M the audit 

information indicating the existence of the 

kickback scheme. Section 7216(a) and 

§ 301.7216–1 do not apply to B’s disclosure 

of D’s tax return information to A, A’s use of 

D’s information in the course of the audit, 

and A’s disclosure to M of the audit 

information indicating the existence of the 

kickback scheme. Section 7216(a) and 

§ 301.7216–1 would apply to a disclosure to 

M, or to any other person not an employee 

or member of the accounting firm, of D’s tax 

return information furnished to B. 

(i) Corporate fiduciaries. A trust 

company, trust department of a bank, or 

other corporate fiduciary that prepares a 

tax return for a taxpayer for whom it 

renders fiduciary, investment, or other 

custodial or management services may, 

unless the taxpayer directs otherwise—

(1) Disclose or use the taxpayer’s tax 

return information in the ordinary 

course of rendering such services to or 

for the taxpayer; or 

(2) Make the information available to 

the taxpayer’s attorney, accountant, or 

investment advisor. 

(j) Disclosure to taxpayer’s fiduciary. 

If, after furnishing tax return 

information to a tax return preparer, the 

taxpayer dies or becomes incompetent, 

insolvent, or bankrupt, or the taxpayer’s 

assets are placed in conservatorship or 

receivership, the tax return preparer 

may disclose the information to the duly 

appointed fiduciary of the taxpayer or 

his estate, or to the duly authorized 

agent of the fiduciary. 

(k) Disclosure or use of information in 

preparation or audit of State or local tax 

returns or assisting a taxpayer with 

foreign country tax obligations. The 

provisions of paragraphs (c) and (d) of 

this section shall apply to the disclosure 

by any tax return preparer of any tax 

return information in the preparation of, 

or in connection with the preparation 

of, any tax return of the taxpayer under 

the law of any State or political 

subdivision thereof, of the District of 

Columbia, of any territory or possession 

of the United States, or of a country 

other than the United States. The 

provisions of section 7216(a) and 

§ 301.7216–1 shall not apply to the use 

by any tax return preparer of any tax 

return information in the preparation of, 

or in connection with the preparation 

of, any tax return of the taxpayer under 

the law of any State or political 

subdivision thereof, of the District of 

Columbia, of any territory or possession 

of the United States, or of a country 

other than the United States. The 

provisions of section 7216(a) and 

§ 301.7216–1 shall not apply to the 

disclosure or use by any tax return 

preparer of any tax return information 

in the audit of, or in connection with 

the audit of, any tax return of the 

taxpayer under the law of any State or 

political subdivision thereof, the District 

of Columbia, or any territory or 

possession of the United States. 

(l) Payment for tax preparation 

services. A tax return preparer may use 

and disclose, without the taxpayer’s 

written consent, tax return information 

that the taxpayer provides to the tax 

return preparer to pay for tax 

preparation services to the extent 

necessary to process or collect the 

payment. For example, if the taxpayer 

gives the tax return preparer a credit 

card to pay for tax preparation services, 

the tax return preparer may disclose the 

taxpayer’s name, credit card number, 

credit card expiration date, and amount 

due for tax preparation services to the 

credit card company, as necessary, to 

process the payment. Any tax return 

information that the taxpayer did not 

give the tax return preparer for the 

purpose of making payment for tax 

preparation services may not be used or 

disclosed by the tax return preparer 

without the taxpayer’s prior written 

consent, unless otherwise permitted 

under another provision of this section. 

(m) Retention of records. A tax return 

preparer may retain tax return 

information of a taxpayer, including 

copies of tax returns, in paper or 

electronic format, prepared on the basis 

of the tax return information, and may 

use the information in connection with 

the preparation of other tax returns of 

the taxpayer or in connection with an 

examination by the Internal Revenue 

Service of any tax return or subsequent 

tax litigation relating to the tax return. 

The provisions of paragraph (n) of this 

section regarding the transfer of a 

taxpayer list also apply to the transfer of 

any records and related papers to which 

this paragraph applies. 

(n) Lists for solicitation of tax return 

business. A tax return preparer may 

compile and maintain a separate list 

containing solely the names, addresses, 

e-mail addresses, and phone numbers of 

taxpayers whose tax returns the tax 

return preparer has prepared or 

processed. This list may be used by the 

compiler solely to contact the taxpayers 

on the list for the purpose of offering tax 

information or additional tax return 

preparation services to such taxpayers. 

The compiler of the list may not transfer 

the taxpayer list, or any part thereof, to 

any other person unless the transfer 

takes place in conjunction with the sale 

or other disposition of the compiler’s 

tax return preparation business. A 

person who acquires a taxpayer list, or 

a part thereof, in conjunction with a sale 

or other disposition of a tax return 

preparation business is subject to the 

provisions of this paragraph with 

respect to the list. The term list, as used 

in this paragraph (n), includes any 

record or system whereby the names 

and addresses of taxpayers are retained. 

The provisions of this paragraph (n) also 

apply to the transfer of any records and 


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related papers to which this paragraph 

(n) applies. 

(o) Producing statistical information 

in connection with tax return 

preparation business. A tax return 

preparer may use, for the limited 

purpose specified in this paragraph (o), 

tax return information to produce a 

statistical compilation of data described 

in § 301.7216–1(b)(3)(i)(B). The purpose 

and use of the statistical compilation 

must relate directly to the internal 

management or support of the tax return 

preparer’s tax return preparation 

business. The tax return preparer may 

not disclose or use the tax return 

information in connection with, or in 

support of, businesses other than tax 

return preparation. The compiler of the 

statistical compilation may not disclose 

the compilation, or any part thereof, to 

any other person unless disclosure of 

the statistical compilation is made in 

order to comply with financial 

accounting or regulatory reporting 

requirements or occurs in conjunction 

with the sale or other disposition of the 

compiler’s tax return preparation 

business. A person who acquires a 

compilation, or a part thereof, in 

conjunction with a sale or other 

disposition of a tax return preparation 

business is subject to the provisions of 

this paragraph (o) with respect to the 

compilation as if the acquiring person 

had compiled it. 

(p) Disclosure or use of information 

for quality or peer reviews. The 

provisions of section 7216(a) and 

§ 301.7216–1 shall not apply to any 

disclosure for the purpose of a quality 

or peer review to the extent necessary to 

accomplish the review. A quality or 

peer review is a review that is 

undertaken to evaluate, monitor, and 

improve the quality and accuracy of a 

tax return preparer’s tax preparation, 

accounting, or auditing services. A 

quality or peer review may be 

conducted only by attorneys, certified 

public accountants, enrolled agents, and 

enrolled actuaries who are eligible to 

practice before the Internal Revenue 

Service. See Department of the Treasury 

Circular 230, 31 CFR part 10. Tax return 

information may also be disclosed to 

persons who provide administrative or 

support services to an individual who is 

conducting a quality or peer review 

under this paragraph (p), but only to the 

extent necessary for the reviewer to 

conduct the review. Tax return 

information gathered in conducting a 

review may be used only for purposes 

of a review. No tax return information 

identifying a taxpayer may be disclosed 

in any evaluative reports or 

recommendations that may be 

accessible to any person other than the 

reviewer or the tax return preparer being 

reviewed. The tax return preparer being 

reviewed will maintain a record of the 

review including the information 

reviewed and the identity of the persons 

conducting the review. After completion 

of the review, no documents containing 

information that may identify any 

taxpayer by name or identification 

number may be retained by a reviewer 

or by the reviewer’s administrative or 

support personnel. Any person 

(including administrative and support 

personnel) receiving tax return 

information in connection with a 

quality or peer review is a tax return 

preparer for purposes of sections 

7216(a) and 6713(a). 

(q) Disclosure to report the 

commission of a crime. The provisions 

of section 7216(a) and § 301.7216–1 

shall not apply to the disclosure of any 

tax return information to the proper 

Federal, State, or local official in order, 

and to the extent necessary, to inform 

the official of activities that may 

constitute, or may have constituted, a 

violation of any criminal law or to assist 

the official in investigating or 

prosecuting a violation of criminal law. 

A disclosure made in the bona fide but 

mistaken belief that the activities 

constituted a violation of criminal law 

is not subject to section 7216(a) and 

§ 301.7216–1. 

(r) Disclosure of tax return 

information due to a tax return 

preparer’s incapacity or death. In the 

event of incapacity or death of a tax 

return preparer, disclosure of tax return 

information may be made for the 

purpose of assisting the tax return 

preparer or his legal representative (or 

the representative of a deceased tax 

return preparer’s estate) in operating the 

business. Any person receiving tax 

return information under the provisions 

of this paragraph (r) is a tax return 

preparer for purposes of sections 

7216(a) and 6713(a). 

(s) Effective/applicability date. This 

section applies to disclosures or uses of 

tax return information occurring on or 

after January 1, 2009. 

■ Par. 5. Section 301.7216–3 is revised 

to read as follows: 

§ 301.7216–3 Disclosure or use permitted 

only with the taxpayer’s consent. 

(a) In general—(1) Taxpayer consent. 

Unless section 7216 or § 301.7216–2 

specifically authorizes the disclosure or 

use of tax return information, a tax 

return preparer may not disclose or use 

a taxpayer’s tax return information prior 

to obtaining a written consent from the 

taxpayer, as described in this section. A 

tax return preparer may disclose or use 

tax return information as the taxpayer 

directs as long as the preparer obtains a 

written consent from the taxpayer as 

provided in this section. The consent 

must be knowing and voluntary. Except 

as provided in paragraph (a)(2) of this 

section, conditioning the provision of 

any services on the taxpayer’s 

furnishing consent will make the 

consent involuntary, and the consent 

will not satisfy the requirements of this 

section. 

(2) Taxpayer consent to a tax return 

preparer furnishing tax return 

information to another tax return 

preparer. (i) A tax return preparer may 

condition its provision of preparation 

services upon a taxpayer’s consenting to 

disclosure of the taxpayer’s tax return 

information to another tax return 

preparer for the purpose of performing 

services that assist in the preparation of, 

or provide auxiliary services in 

connection with the preparation of, the 

tax return of the taxpayer. 

(ii) Example. The application of this 

paragraph (a)(2) may be illustrated by 

the following example: 

Example. Preparer P, who is located within 

the United States, is retained by Company C 

to provide tax return preparation services for 

employees of Company C. An employee of 

Company C, Employee E, works for C outside 

of the United States. To provide tax return 

preparation services for E, P requires the 

assistance of and needs to disclose E’s tax 

return information to a tax return preparer 

who works for P’s affiliate located in the 

country where E works. P may condition its 

provision of tax return preparation services 

upon E consenting to the disclosure of E’s tax 

return information to the tax return preparer 

in the country where E works. 

(3) The form and contents of taxpayer 

consents—(i) In general. All consents to 

disclose or use tax return information 

must satisfy the following 

requirements—

(A) A taxpayer’s consent to a tax 

return preparer’s disclosure or use of tax 

return information must include the 

name of the tax return preparer and the 

name of the taxpayer. 

(B) If a taxpayer consents to a 

disclosure of tax return information, the 

consent must identify the intended 

purpose of the disclosure. Except as 

provided in § 301.7216–3(a)(3)(iii), if a 

taxpayer consents to a disclosure of tax 

return information, the consent must 

also identify the specific recipient (or 

recipients) of the tax return information. 

If the taxpayer consents to use of tax 

return information, the consent must 

describe the particular use authorized. 

For example, if the tax return preparer 

intends to use tax return information to 

generate solicitations for products or 

services other than tax return 


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preparation, the consent must identify 

each specific type of product or service 

for which the tax return preparer may 

solicit use of the tax return information. 

Examples of products or services that 

must be identified include, but are not 

limited to, balance due loans, mortgage 

loans, mutual funds, individual 

retirement accounts, and life insurance. 

(C) The consent must specify the tax 

return information to be disclosed or 

used by the return preparer. 

(D) If a tax return preparer to whom 

the tax return information is to be 

disclosed is located outside of the 

United States, the taxpayer’s consent 

under § 301.7216–3 prior to any 

disclosure is required. See § 301.7216–

2(c) and (d). 

(E) A consent to disclose or use tax 

return information must be signed and 

dated by the taxpayer. 

(ii) The form and contents of taxpayer 

consents with respect to taxpayers filing 

a return in the Form 1040 series—

guidance describing additional 

requirements for taxpayer consents with 

respect to Form 1040 series filers. The 

Secretary may issue guidance, by 

publication in the Internal Revenue 

Bulletin (see § 601.601(d)(2)(ii)(b) of this 

chapter), describing additional 

requirements for tax return preparers 

regarding the format and content of 

consents to disclose and use tax return 

information with respect to taxpayers 

filing a return in the Form 1040 series, 

e.g., Form 1040, Form 1040NR, Form 

1040A, or Form 1040EZ. 

(iii) The form and contents of 

taxpayer consents with respect to all 

other taxpayers. A consent to disclose or 

use tax return information with respect 

to a taxpayer not filing a return in the 

Form 1040 series may be in any format, 

including an engagement letter to a 

client, as long as the consent complies 

with the requirements of § 301.7216–

3(a)(3)(i). Additionally, the 

requirements of § 301.7216–3(c)(1) are 

inapplicable to consents to disclose or 

use tax return information with respect 

to taxpayers not filing a return in the 

Form 1040 series. Solely for purposes of 

a consent issued under § 301.7216–

3(a)(3)(iii), in lieu of identifying specific 

recipients of an intended disclosure 

under § 301.7216–3(a)(3)(i)(B), a consent 

may allow disclosure to a descriptive 

class of entities engaged by a taxpayer 

or the taxpayer’s affiliate for purposes of 

services in connection with the 

preparation of tax returns, audited 

financial statements, or other financial 

statements or financial information as 

required by a government authority, 

municipality or regulatory body. 

(iv) Examples. The application of 

§ 301.7216–3(a)(3)(iii) may be illustrated 

by the following examples: 

Example 1. Consistent with applicable 

legal and ethical responsibilities, Preparer Z 

sends its client, a corporation, Taxpayer C, an 

engagement letter. Part of the engagement 

letter requests the consent of Taxpayer C for 

the purpose of disclosing tax return 

information to an investment banking firm to 

assist the investment banking firm in 

securing long term financing for Taxpayer C. 

The engagement letter includes language and 

information that meets the requirements of 

§ 301.7216–3(a)(3)(i), including: (I) Preparer 

Z’s name, Taxpayer C’s name, and a signature 

and date line for Taxpayer C; and (II) a 

statement that ‘‘Taxpayer C authorizes 

Preparer Z to disclose the portions of 

Taxpayer C’s 2009 tax return information to 

the firm retained by Taxpayer C necessary for 

the purposes of assisting Taxpayer C secure 

long term financing.’’ The engagement letter 

satisfies the requirements of § 301.7216–

3(a)(3) for the disclosure of the information 

provided therein for the specific purpose 

stated. 

Example 2. Consistent with applicable 

legal and ethical responsibilities, Preparer N 

sends its client, a corporation, Taxpayer D, 

an engagement letter. Part of the engagement 

letter requests the consent of Taxpayer D for 

the purpose of disclosing tax return 

information to Preparer N’s affiliated firms 

located outside of the United States for the 

purposes of preparation of Taxpayer D’s 2009 

tax return’’. The engagement letter includes 

language and information that meets the 

requirements of § 301.7216–3(a)(3)(i), 

including: (I) Preparer N’s name, Taxpayer 

D’s name, and a signature and date line for 

Taxpayer D; (II) a statement that ‘‘Taxpayer 

D authorizes Preparer N to disclose Taxpayer 

D’s 2009 tax return information to Preparer 

N’s affiliates located outside of the United 

States for the purposes of assisting Preparer 

N prepare Taxpayer D’s 2009 tax return’’; and 

(III) a statement that, in providing consent, 

Taxpayer D acknowledges that its tax return 

information for 2009 will be disclosed to tax 

return preparers located abroad. The 

engagement letter satisfies the requirements 

of § 301.7216–3(a)(3) for the disclosure of the 

information provided therein for the specific 

purpose stated. 

(b) Timing requirements and 

limitations—(1) No retroactive consent. 

A taxpayer must provide written 

consent before a tax return preparer 

discloses or uses the taxpayer’s tax 

return information. 

(2) Time limitations on requesting 

consent in solicitation context. A tax 

return preparer may not request a 

taxpayer’s consent to disclose or use tax 

return information for purposes of 

solicitation of business unrelated to tax 

return preparation after the tax return 

preparer provides a completed tax 

return to the taxpayer for signature. 

(3) No requests for consent after an 

unsuccessful request. With regard to tax 

return information for each income tax 

return that a tax return preparer 

prepares, if a taxpayer declines a request 

for consent to the disclosure or use of 

tax return information for purposes of 

solicitation of business unrelated to tax 

return preparation, the tax return 

preparer may not solicit from the 

taxpayer another consent for a purpose 

substantially similar to that of the 

rejected request. 

(4) No consent to the disclosure of a 

taxpayer’s social security number to a 

return preparer outside of the United 

States. A tax return preparer located 

within the United States, including any 

territory or possession of the United 

States, may not obtain consent to 

disclose the taxpayer’s social security 

number (SSN) to a tax return preparer 

located outside of the United States or 

any territory or possession of the United 

States. Thus, if a tax return preparer 

located within the United States 

(including any territory or possession of 

the United States) obtains consent from 

a taxpayer to disclose tax return 

information to another tax return 

preparer located outside of the United 

States, as provided under §§ 301.7216–

2(c) and 301.7216–2(d), the tax return 

preparer located in the United States 

may not disclose the taxpayer’s SSN, 

and the tax return preparer must redact 

or otherwise mask the taxpayer’s SSN 

before the tax return information is 

disclosed outside of the United States. 

If a tax return preparer located within 

the United States initially receives or 

obtains a taxpayer’s SSN from another 

tax return preparer located outside of 

the United States, however, the tax 

return preparer within the United States 

may, without consent, retransmit the 

taxpayer’s SSN to the tax return 

preparer located outside the United 

States that initially provided the SSN to 

the tax return preparer located within 

the United States. 

(5) Duration of consent. A consent 

document may specify the duration of 

the taxpayer’s consent to the disclosure 

or use of tax return information. If a 

consent agreed to by the taxpayer does 

not specify the duration of the consent, 

the consent to the disclosure or use of 

tax return information will be effective 

for a period of one year from the date 

the taxpayer signed the consent. 

(c) Special rules—(1) Multiple 

disclosures within a single consent form 

or multiple uses within a single consent 

form. A taxpayer may consent to 

multiple uses within the same written 

document, or multiple disclosures 

within the same written document. A 

single written document, however, 

cannot authorize both uses and 

disclosures; rather one written 

document must authorize the uses and 


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Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Rules and Regulations 1075 

another separate written document must 

authorize the disclosures. Furthermore, 

a consent that authorizes multiple 

disclosures or multiple uses must 

specifically and separately identify each 

disclosure or use. See § 301.7216–

3(a)(3)(iii) for an exception to this rule 

for certain taxpayers. 

(2) Disclosure of entire return. A 

consent may authorize the disclosure of 

all information contained within a 

return. A consent authorizing the 

disclosure of an entire return must 

provide that the taxpayer has the ability 

to request a more limited disclosure of 

tax return information as the taxpayer 

may direct. 

(3) Copy of consent must be provided 

to taxpayer. The tax return preparer 

must provide a copy of the executed 

consent to the taxpayer at the time of 

execution. The requirements of this 

paragraph (c)(3) may also be satisfied by 

giving the taxpayer the opportunity, at 

the time of executing the consent, to 

print the completed consent or save it 

in electronic form. 

(d) Effective/applicability date. This 

section applies to disclosures or uses of 

tax return information occurring on or 

after January 1, 2009. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 21, 2007. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 08–1 Filed 1–3–08; 8:58 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 3 

RIN 2900–AM72 

Dependents’ Educational Assistance 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: This document amends the 

Department of Veterans Affairs (VA) 

regulation regarding dependents’

educational assistance. A recent 

statutory change provides eligibility for 

dependents’ educational assistance for 

dependents of servicepersons who meet 

certain criteria. This final rule is 

necessary to incorporate statutory 

amendments into VA regulations. 

DATES: Effective Date: This final rule is 

effective January 7, 2008. 

Applicability Date: In accordance 

with statutory provisions, the 

amendment in this final rule will be 

applied retroactively. The amendment 

to 38 CFR 3.807 is applicable for a 

course of education pursued after 

December 22, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Maya Ferrandino, Regulations Staff 

(211D), Compensation and Pension 

Service, Veterans Benefits 

Administration, Department of Veterans 

Affairs, 810 Vermont Avenue, NW., 

Washington, DC 20420, (202) 273–7210. 

(This is not a toll-free number.) 

SUPPLEMENTARY INFORMATION: Section 

301 of the Veterans Benefits, Health 

Care, and Information Technology Act 

of 2006, Public Law 109–461, amended 

the basic eligibility criteria for 

dependents’ educational assistance 

(DEA) in 38 U.S.C. 3501(a). Under prior 

law, spouses and children of 

servicemembers missing in action, 

captured in the line of duty by a hostile 

force, or forcibly detained or interned in 

the line of duty by a foreign government 

or power had eligibility for DEA. The 

amendments expand eligibility, for 

pursuit of a course of education that 

occurs after December 22, 2006, to 

include spouses and children of 

servicemembers receiving treatment for 

permanent and total disability incurred 

in the line of duty and likely to result 

in discharge or release from service. 

VA’s DEA regulations, specifically 38 

CFR 3.807(a)(5), restate the statutory 

basic eligibility criteria for spouses and 

children of servicemembers. 

Accordingly, we are amending that 

provision, consistent with the 

amendments to section 3501(a), to 

clarify that spouses and children of 

certain permanently and totally disabled 

servicemembers are eligible for DEA for 

pursuit of a course of education that 

occurs after December 22, 2006. 

Administrative Procedures Act 

Substantive changes made by this 

final rule merely reflect statutory 

requirements. Accordingly, there is a 

basis for dispensing with prior notice 

and comment and a delayed effective 

date under the provisions of 5 U.S.C. 

553. Use of those procedures would be 

impracticable, unnecessary, and 

contrary to the public interest. 

Paperwork Reduction Act 

This document contains no provisions 

constituting a new collection of 

information under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501–

3521). 

The Office of Management and Budget 

(OMB) assigns a control number for 

each collection of information it 

approves. VA may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid OMB 

control number. 

In § 3.807 (concerning certification of 

basic eligibility for dependents’

educational assistance), the final rule 

amends provisions concerning 

information collection requirements that 

are currently approved by OMB under 

the following control numbers: 2900–

0049 (VA Form 21–674, Request for 

Approval of School Attendance), 2900–

0098 (VA Form 22–5490, Application 

for Survivors’ and Dependents’

Educational Assistance), 2900–0099 (VA 

Form 22–5495, Request for Change of 

Program or Place of Training Survivors’

and Dependents’ Educational 

Assistance). 

Regulatory Flexibility Act 

The initial and final regulatory 

flexibility analysis requirements of 

sections 603 and 604 of the Regulatory 

Flexibility Act, 5 U.S.C. 601–612, are 

not applicable to this rule because a 

notice of proposed rulemaking is not 

required for this rule. Even so, the 

Secretary of Veterans Affairs hereby 

certifies that this final rule will not have 

a significant economic impact on a 

substantial number of small entities as 

they are defined in the Regulatory 

Flexibility Act. This final rule would 

not affect any small entities. Only 

individual VA beneficiaries would be 

directly affected. Therefore, pursuant to 

5 U.S.C. 605(b), this final rule is also 

exempt from the regulatory flexibility 

analysis requirements of sections 603 

and 604. 

Executive Order 12866 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

when regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity). The 

Executive Order classifies a ‘‘significant 

regulatory action,’’ requiring review by 

OMB unless OMB waives such review, 

as any regulatory action that is likely to 

result in a rule that may: (1) Have an 

annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or tribal 

governments or communities; (2) create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 


sroberts on PROD1PC70 with RULES