Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Proposed Rules 1131 

flows, i.e., on or before 9:00 a.m. central 

clock time for flows occurring on the gas 

day that ended 24 hours before. 

(b) Exemptions to daily posting 

requirement. The following categories of 

major non-interstate pipelines are 

exempt from the reporting requirement 

of paragraph (a) of this section: 

(1) Those that fall entirely upstream of 

a processing plant; and 

(2) Those that deliver more than 

ninety-five percent (95%) of the natural 

gas volumes they flow directly to endusers. 

(3) To determine eligibility for the 

exemption in paragraph (b)(2) of this 

section, a major non-interstate pipeline 

must measure volumes by average 

deliveries over the preceding three 

calendar years. 

[FR Doc. E7–25435 Filed 1–4–08; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–143326–05] 

RIN 1545–BE95 

S Corporation Guidance Under AJCA 

of 2004 and GOZA of 2005; Hearing 

Cancellation 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Cancellation of notice of public 

hearing on proposed rulemaking. 

SUMMARY: This document cancels a 

public hearing on proposed regulations 

that provide guidance regarding certain 

changes made to the rules governing S 

corporations under the American Jobs 

Creation Act of 2004 and the Gulf 

Opportunity Zone Act of 2005. 

DATES: The public hearing, originally 

scheduled for January 16, 2008, at 10 

a.m. is cancelled. 

FOR FURTHER INFORMATION CONTACT: 

Kelly Banks of the Publications and 

Regulations Branch, Legal Processing 

Division, Associate Chief Counsel 

(Procedure and Administration) at (202) 

622–0392 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: A notice 

of proposed rulemaking and notice of 

public hearing that appeared in the 

Federal Register on Friday, September 

28, 2007 (72 FR 55132), announced that 

a public hearing was scheduled for 

January 16, 2008, at 10 a.m. in the IRS 

Auditorium, Internal Revenue Building, 

1111 Constitution Avenue, NW., 

Washington, DC. The subject of the 

public hearing is under section 361 of 

the Internal Revenue Code. 

The public comments and outlines of 

oral testimony were due on December 

27, 2007. The notice of proposed 

rulemaking and notice of public hearing 

instructed those interested in testifying 

at the public hearing to submit an 

outline of the topics to be addressed. As 

of Wednesday, January 2, 2008, no one 

has requested to speak. Therefore, the 

public hearing scheduled for January 16, 

2008, is cancelled. 

Cynthia E. Grigsby, 

Senior Federal Register Liaison Officer, 

Publications and Regulations Branch, Legal 

Processing Division, Associate Chief Counsel 

(Procedure and Administration). 

[FR Doc. E8–24 Filed 1–4–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[REG–136596–07] 

RIN 1545–BH12 

Guidance Regarding Marketing of 

Refund Anticipation Loans (RALs) and 

Certain Other Products in Connection 

With the Preparation of a Tax Return 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Advance notice of proposed 

rulemaking (ANPRM). 

SUMMARY: This document describes 

rules that the Treasury Department and 

the IRS are considering proposing, in a 

notice of proposed rulemaking, 

regarding the disclosure and use of tax 

return information by tax return 

preparers. The rules would apply to the 

marketing of refund anticipation loans 

(RALs) and certain other products in 

connection with the preparation of a tax 

return and, as an exception to the 

general principle that taxpayers should 

have control over their tax return 

information that is reflected in final 

regulations published in T.D. 9375, 

which is published elsewhere in this 

issue of the Federal Register, provide 

that a tax return preparer may not obtain 

a taxpayer’s consent to disclose or use 

tax return information for the purpose of 

soliciting taxpayers to purchase such 

products. This document invites 

comments from the public regarding 

these contemplated rules. All materials 

submitted will be available for public 

inspection and copying. 

DATES: Written or electronic comments 

must be received by April 7, 2008. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–136596–07), Room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–136596–07), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–136596–

07). 

FOR FURTHER INFORMATION CONTACT: 

Concerning submissions of comments, 

Kelly Banks at (202) 622–7180; 

concerning the proposals, Lawrence 

Mack at (202) 622–4940 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document describes rules that 

the Treasury Department and the IRS 

are considering proposing in a notice of 

proposed rulemaking regarding the 

marketing of refund anticipation loans 

(RALs) and certain other products 

identified below in connection with the 

preparation of a tax return. 

The proposed rules would amend the 

Regulations on Procedure and 

Administration (26 CFR part 301) under 

section 7216 of the Internal Revenue 

Code. Section 7216 was enacted by 

section 316 of the Revenue Act of 1971, 

Public Law 92–178 (85 Stat. 529, 1971), 

and has been amended several times 

since 1971. 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. 

A notice of proposed rulemaking 

(REG–137243–02) was published in the 

Federal Register (70 FR 72954) on 

December 8, 2005. Concurrent with 

publication of the proposed regulations, 

the IRS published Notice 2005–93, 

2005–52 I.R.B. 1204 (December 7, 2005), 

setting forth a proposed revenue 

procedure that would provide guidance 

to tax return preparers regarding the 

format and content of consents to use 

and consents to disclose tax return 

information under § 301.7216–3. 

Among other recommendations 

received in response to the notice of 


jlentini on PROD1PC65 with PROPOSALS
1132 Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Proposed Rules 

proposed rulemaking published on 

December 8, 2005, a number of 

commentators recommended that the 

regulations prohibit or substantially 

restrict the disclosure or use of tax 

return information for marketing 

purposes. As described in the preamble 

of the final regulations published in 

T.D. 9375, which is published 

elsewhere in this issue of the Federal 

Register, these commentators 

specifically recommended banning tax 

return preparers from disclosing or 

using tax return information for the 

purpose of soliciting refund anticipation 

loans (RALs) and similar products. The 

Treasury Department and the IRS did 

not adopt this recommendation in the 

final regulations that are being 

published concurrently with this 

ANPRM because of the significant 

policy issues that need to be considered 

and because they had not previously 

proposed a rule regarding the use or 

disclosure of tax return information for 

purposes of marketing of RALs and 

similar products. 

This ANPRM addresses two major 

areas of concern that have been raised 

and describes rules that the Treasury 

Department and the IRS are considering 

proposing regarding the marketing of 

RALs and certain other products 

identified below in connection with the 

preparation of a tax return. It also 

solicits comments on specific issues as 

described herein. 

Concerns Raised by RALs and Certain 

Other Products 

Financial Incentive To Inflate Refunds 

The Treasury Department and the IRS 

are concerned that RALs and certain 

other products may provide tax 

preparers with a financial incentive to 

take improper tax return positions in 

order to inappropriately inflate refund 

claims. In general, RAL amounts are 

capped by the amount of the refund 

claimed on a tax return. Therefore, a 

preparer who inappropriately inflates 

the amount of a refund is able, directly 

or indirectly through arrangement with 

a RAL provider, to collect a higher fee. 

Additionally, a significant number of 

RALs are made to taxpayers who claim 

the earned income tax credit (EITC). The 

Treasury Department and the IRS are 

concerned that the financial benefits of 

selling a RAL to a taxpayer can create 

an incentive for the preparer to not fully 

comply with due diligence requirements 

designed to ensure the accuracy of EITC 

claims. See section 6695(g). 

Even when a flat fee is charged for 

RALs, it may be possible that a financial 

incentive to inappropriately inflate the 

amount of a refund exists. As an 

example, some merchants who offer tax 

preparation services may encourage 

customers to obtain RALs and spend the 

funds on the merchant’s products or 

services. To the extent that the preparer 

prepares a return that claims an 

inappropriately large refund, the 

taxpayer is enabled to purchase more of 

the merchant’s products or services. 

The Treasury Department and the IRS 

are concerned that overall tax 

compliance suffers when tax advisors or 

tax preparers benefit directly from 

maximizing a refund in preparing a tax 

return. Treasury Department Circular 

230 restricts the ability of tax 

practitioners to charge contingent fees 

in certain circumstances when there are 

tax administration concerns. See 31 CFR 

10.27. The Treasury Department and the 

IRS are considering whether similar 

restrictions should be placed on use or 

disclosure of tax return information by 

preparers who receive a financial 

benefit from the sale of an ancillary 

product, such as a RAL, rather than 

directly from the determination of a 

taxpayer’s tax liability. 

There are two other products that 

potentially raise similar concerns—

refund anticipation checks (RACs) and 

audit insurance. A RAC is a post-refund 

product that allows taxpayers to pay for 

return preparation services out of their 

refunds. As with a RAL, a taxpayer will 

only qualify to purchase a RAC if a 

refund is claimed on the return. Audit 

insurance is a type of insurance that 

covers professional fees and other 

expenses incurred in responding to or 

defending against an audit by the IRS. 

Taxpayers who purchase audit 

insurance may be encouraged to take 

aggressive tax reporting positions if they 

believe the insurance will provide 

protection against the risk of an 

adjustment. The Treasury Department 

and the IRS generally believe that 

arrangements that create financial 

incentives for taxpayers or tax preparers 

to exploit the audit selection process 

undermine tax compliance. 

Potential for Inappropriate Use by Tax 

Preparers 

In responding to the proposed 

regulations, some commentators 

expressed concern that tax preparers are 

inappropriately profiting from 

marketing RALs and certain other 

products to relatively unsophisticated 

taxpayers who do not comprehend the 

full costs of the products. These 

commentators noted that RALs are 

marketed primarily to low-income 

taxpayers who receive the EITC, that 

these taxpayers generally have relatively 

low levels of financial expertise, and 

that these taxpayers are more likely than 

other taxpayers to rely on the advice of 

their preparers. These commentators 

urged the IRS to amend the proposed 

regulations to protect these taxpayers 

from exploitation. The National 

Taxpayer Advocate also expressed 

similar concerns. See National Taxpayer 

Advocate FY 2007 Objectives Report to 

Congress, vol. II, The Role of the IRS in 

the Refund Anticipation Loan Industry, 

at 18 (June 30, 2006). 

As a general rule, the Treasury 

Department and the IRS believe that 

taxpayers should have the ability to 

control the use or disclosure of their tax 

return information. Taxpayer control, 

however, must be balanced against the 

ability of the government to effectively 

administer the internal revenue laws, 

which includes guarding against (1) the 

potential lessening of tax compliance, 

(2) the potential exploitation of 

taxpayers described by certain 

commentators, and (3) the potential 

existence of inappropriate financial 

incentives for tax preparers to inflate tax 

refunds. 

Explanation of Contemplated Rules 

Sections 7216 and 6713 provide a 

broad prohibition against the disclosure 

and use of tax return information by 

return preparers. Statutory exceptions 

are provided for a ‘‘disclosure’’ pursuant 

to any other provision of the Internal 

Revenue Code or an order of a court and 

for a ‘‘use’’ by a preparer to assist the 

taxpayer in preparing his or her state 

and local tax returns and declarations of 

estimated tax. The statutory language 

also authorizes the Secretary to 

prescribe regulations permitting 

additional exceptions. Thus, tax return 

preparers may use or disclose tax return 

information beyond the statutory 

exceptions only if, and to the extent 

that, Treasury regulations expressly 

authorize such acts. 

Among other exceptions, the 

regulations under section 7216 generally 

provide that preparers may use or 

disclose tax return information if the 

taxpayer provides consent. As a general 

rule, taxpayers should have the ability 

to control the use or disclosure of their 

tax return information. To address the 

tax administration concerns described 

above, the Treasury Department and the 

IRS are considering proposing 

regulations that would create an 

exception from the general consent 

framework prescribed by § 301.7216–3 

for RALs, RACs, audit insurance, and 

similar products. This exception would 

effectively separate the act of return 

preparation from the act of marketing or 

purchasing certain financial products by 

prohibiting the use of information 

obtained during the tax-preparation 


jlentini on PROD1PC65 with PROPOSALS
Federal Register / Vol. 73, No. 4 / Monday, January 7, 2008 / Proposed Rules 1133 

process for the non-tax administration 

purpose of marketing: (i) a RAL or a 

substantially similar product or service; 

(ii) a RAC or a substantially similar 

product or service; or (iii) audit 

insurance or a substantially similar 

product or service. 

Proposed Effective Date 

The Treasury Department and the IRS 

anticipate that these new proposed rules 

would apply for returns filed on or after 

January 1st of the year following the 

date of publication in the Federal 

Register as final or temporary 

regulations. 

Request for Comments 

Before a notice of proposed 

rulemaking is issued, consideration will 

be given to any written comments (a 

signed original and eight (8) copies) or 

electronic comments that are submitted 

timely to the IRS. All comments will be 

available for public inspection and 

copying. 

Specifically, comments are 

encouraged on the following questions: 

1. If RALs and certain other products 

create a direct financial incentive for 

preparers to inflate tax refunds, are 

there alternative approaches that would 

eliminate or reduce this incentive? 

2. If the marketing of RALs and 

certain other products exploit or have 

the potential to exploit certain 

taxpayers, is the approach described in 

this ANPRM better viewed as protecting 

taxpayers from exploitation or as 

restricting taxpayers’ ability to control 

their tax return information? If the 

latter, is there an alternative approach 

that would address the concerns 

described above? 

3. Should RACs be treated the same 

way as RALs and audit insurance, or do 

RACs present lesser concerns? 

4. Are there other products that 

present significant concerns for tax 

compliance or taxpayer exploitation that 

should be addressed by regulation? 

Drafting Information 

The principal author of this advance 

notice of proposed rulemaking is Dillon 

Taylor, formerly of the Office of the 

Associate Chief Counsel (Procedure and 

Administration). For further 

information, contact Lawrence Mack of 

the Office of Associate Chief Counsel 

(Procedure and Administration) at 202–

622–4940 (not a toll-free call). 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 08–2 Filed 1–3–08; 8:58 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2007–0195] 

RIN 1625–AA87 

Security Zone; Waters Surrounding 

U.S. Forces Vessel SBX–1, HI 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a permanent 500-yard moving 

security zone around the U.S. Forces 

vessel SBX–1 during transit within the 

Honolulu Captain of the Port Zone. This 

zone is necessary to protect the SBX–1 

from threats associated with vessels and 

persons approaching too close during 

transit. Entry of persons or vessels into 

this security zone would be prohibited 

unless authorized by the Captain of the 

Port (COTP). 

DATES: Comments and related material 

must reach the Coast Guard on or before 

February 6, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2007–0195 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590–

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: 

Lieutenant (Junior Grade) Jasmin Parker, 

U.S. Coast Guard Sector Honolulu at 

(808) 842–2600. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation (DOT) 

to use the Docket Management Facility. 

Please see DOT’s ‘‘Privacy Act’’

paragraph below. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2007–0195), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. We recommend that you 

include your name and a mailing 

address, an e-mail address, or a phone 

number in the body of your document 

so that we can contact you if we have 

questions regarding your submission. 

You may submit your comments and 

material by electronic means, mail, fax, 

or delivery to the Docket Management 

Facility at the address under ADDRESSES, 

but please submit your comments and 

material by only one means. If you 

submit them by mail or delivery, submit 

them in an unbound format, no larger 

than 81⁄2 by 11 inches, suitable for 

copying and electronic filing. If you 

submit them by mail and would like to 

know that they reached the Facility, 

please enclose a stamped, self-addressed 

postcard or envelope. We will consider 

all comments and material received 

during the comment period. We may 

change this proposed rule in view of 

them. 

Viewing Comments and Documents 

To view comments, as well as 

documents mentioned in this preamble 

as being available in the docket, go to 

http://www.regulations.gov at any time, 

click on ‘‘Search for Dockets,’’ and enter 

the docket number for this rulemaking 

(USCG–2007–0195) in the Docket ID 

box, and click enter. You may also visit 

the Docket Management Facility in 

Room W12–140 on the ground floor of 

the DOT West Building, 1200 New 

Jersey Avenue, SE., Washington, DC 

20590, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. 

Privacy Act 

Anyone can search the electronic 

form of all comments received into any 

of our dockets by the name of the 

individual submitting the comment (or 

signing the comment, if submitted on 

behalf of an association, business, labor 

union, etc.). You may review the 

Department of Transportation’s Privacy 

Act Statement in the Federal Register 

published on April 11, 2000 (65 FR 

19477), or you may visit http:// 

DocketsInfo.dot.gov. 


jlentini on PROD1PC65 with PROPOSALS