Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Proposed Rules 37183 

§ 515.11 General exemptions. [Reserved] 

§ 515.12 Specific exemptions. 

(a) The following systems of records 

are exempt from 5 U.S.C. 552a(c)(3), (d), 

(e)(1) and (f): 

(1) Indian Gaming Individuals 

Records System. 

(2) Management Contract Individuals 

Record System. 

(b) The exemptions under paragraph 

(a) of this section apply only to the 

extent that information in these systems 

is subject to exemption under 5 U.S.C. 

552a(k)(2). When compliance would not 

appear to interfere with or adversely 

affect the overall responsibilities of the 

Commission, with respect to licensing 

of key employees and primary 

management officials for employment in 

an Indian gaming operation, the 

applicable exemption may be waived by 

the Commission. 

(c) Exemptions from the particular 

sections are justified for the following 

reasons: 

(1) From 5 U.S.C. 552a(c)(3), because 

making available the accounting of 

disclosures to an individual who is the 

subject of a record could reveal 

investigative interest. This would 

permit the individual to take measures 

to destroy evidence, intimidate potential 

witnesses, or flee the area to avoid the 

investigation. 

(2) From 5 U.S.C. 552a(d), (e)(1), and 

(f) concerning individual access to 

records, when such access could 

compromise classified information 

related to national security, interfere 

with a pending investigation or internal 

inquiry, constitute an unwarranted 

invasion of privacy, reveal a sensitive 

investigative technique, or pose a 

potential threat to the Commission or its 

employees or to law enforcement 

personnel. Additionally, access could 

reveal the identity of a source who 

provided information under an express 

promise of confidentiality. 

(3) From 5 U.S.C. 552a(d)(2), because 

to require the Commission to amend 

information thought to be incorrect, 

irrelevant, or untimely, because of the 

nature of the information collected and 

the length of time it is maintained, 

would create an impossible 

administrative and investigative burden 

by continually forcing the Commission 

to resolve questions of accuracy, 

relevance, timeliness, and 

completeness. 

(4) From 5 U.S.C. 552a(e)(1) because: 

(i) It is not always possible to 

determine relevance or necessity of 

specific information in the early stages 

of an investigation. 

(ii) Relevance and necessity are 

matters of judgment and timing in that 

what appears relevant and necessary 

when collected may be deemed 

unnecessary later. Only after 

information is assessed can its relevance 

and necessity be established. 

(iii) In any investigation the 

Commission may receive information 

concerning violations of law under the 

jurisdiction of another agency. In the 

interest of effective law enforcement 

and under 25 U.S.C. 2716(b), the 

information could be relevant to an 

investigation by the Commission. 

(iv) In the interviewing of individuals 

or obtaining evidence in other ways 

during an investigation, the Commission 

could obtain information that may or 

may not appear relevant at any given 

time; however, the information could be 

relevant to another investigation by the 

Commission. 

Dated: June 21, 2009. 

Philip N. Hogen, 

Chairman. 

Norman DesRosiers, 

Vice Chairman. 

[FR Doc. E9–17745 Filed 7–27–09; 8:45 am] 

BILLING CODE 7565–01–P 

DEPARTMENT OF THE TREASURY 

Office of the Secretary 

31 CFR Part 10 

[REG–113289–08] 

RIN 1545–BH81 

Contingent Fees Under Circular 230 

AGENCY: Office of the Secretary, 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document proposes 

modifications of the regulations 

governing practice before the Internal 

Revenue Service (Circular 230). These 

proposed regulations affect individuals 

who practice before the IRS. The 

proposed amendments modify the rules 

relating to contingent fees under 

Circular 230. This document also 

provides notice of a public hearing on 

the proposed regulations. 

DATES: Written or electronically 

generated comments must be received 

by September 10, 2009. Outlines of 

topics to be discussed at the public 

hearing scheduled for November 20, 

2009 at 10 a.m. must be received by 

September 10, 2009. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–113289–08), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to: CC:PA:LPD:PR (REG–113289– 

08), 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 and REG– 

113289–08). The public hearing will be 

held in Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Amy L. Mielke at (202) 622–4940; 

concerning submissions of comments 

and the public hearing, Regina Johnson 

at (202) 622–7180; (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 330 of title 31 of the United 

States Code authorizes the Secretary of 

the Treasury to regulate practice before 

the Treasury Department. The Secretary 

has published the regulations in 

Circular 230 (31 CFR part 10). On 

September 26, 2007, the Treasury 

Department and the IRS published final 

regulations in the Federal Register (72 

FR 54540) modifying rules governing 

the general standards of practice before 

the IRS, including the rules relating to 

contingent fees in § 10.27 of Circular 

230. Section 10.27 of the final 

regulations generally precludes a 

practitioner from charging a contingent 

fee for services rendered in connection 

with any matter before the Internal 

Revenue Service, including the 

preparation or filing of a tax return, 

amended tax return or claim for refund 

or credit. The final regulations, 

however, permit a practitioner to charge 

a contingent fee for services rendered in 

connection with the IRS examination of, 

or challenge to: (i) An original tax 

return, or (ii) an amended return or 

claim for refund or credit when the 

amended return or claim for refund or 

credit was filed within 120 days of the 

taxpayer receiving a written notice of 

the examination of, or a written 

challenge to, the original tax return. The 

final regulations also permit a 

practitioner to charge a contingent fee 

for services rendered in connection with 

a claim for refund or credit of interest 

and penalties assessed by the IRS, and 

for services rendered in connection with 

a judicial proceeding arising under the 

Internal Revenue Code. The final 

amendments to § 10.27 made by the 

final regulations apply to fee 


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37184 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Proposed Rules 

arrangements entered into after March 

26, 2008. 

Section 406 of the Tax Relief and 

Health Care Act of 2006, Public Law 

109–432 (120 Stat. 2958) (December 20, 

2006) (the Act) amended section 7623 of 

the Internal Revenue Code concerning 

the payment of awards to certain 

persons who detect underpayments of 

tax. Prior statutory authority to pay 

awards at the discretion of the Secretary 

was re-designated as section 7623(a), 

and a new section 7623(b) was added to 

the Code. Additional off-Code 

provisions in section 406 of the Act 

established a Whistleblower Office 

within the IRS and addressed reward 

program administration issues. See 

Notice 2008–4, 2008–2 IRB 253, for 

interim guidance applicable to award 

claims submitted under the authority of 

section 7623. 

After consideration of comments 

received following the publication of 

the final regulations on contingent fees 

and the Act, on March 26, 2008, the 

Treasury Department and the IRS 

published Notice 2008–43, 2008–15 IRB 

748, providing interim guidance and 

information concerning contingent fees 

under Circular 230. The interim 

guidance in Notice 2008–43 clarified 

that § 10.27(b)(2)(ii) of Circular 230 does 

not require the IRS to furnish a written 

notice of examination to a taxpayer as 

a prerequisite to a practitioner charging 

a contingent fee for services rendered in 

connection with an IRS examination of, 

or challenge to, an amended return. The 

interim guidance also clarified that 

§ 10.27 permits practitioners to charge a 

contingent fee with respect to 

whistleblower claims under section 

7623. The interim rules in Notice 2008– 

43 are applicable to fee arrangements 

entered into after March 26, 2008, and 

will remain in effect until these 

proposed regulations are finalized. 

Explanation of Provisions 

This document proposes 

modifications to the standards for 

contingent fees consistent with the 

interim guidance provided in Notice 

2008–43. Section 10.27 generally 

prohibits a practitioner from charging a 

contingent fee for services rendered in 

connection with any matter before the 

IRS. The primary rationales behind the 

prohibition on contingent fees is to 

preclude any fee arrangement that is 

related to or requires a favorable ruling 

by the IRS and that has the potential to 

exploit the audit selection process or 

compromise a practitioner’s duty of 

independent judgment. Consistent with 

the interim guidance provided in Notice 

2008–43, proposed revisions to § 10.27 

provide that a practitioner may charge a 

contingent fee in three limited 

exceptions. Under proposed 

§ 10.27(b)(2)(i) and (ii), a practitioner 

may charge a contingent fee for services 

rendered in connection with the IRS’s 

examination of, or challenge to: (i) An 

original tax return; or (ii) an amended 

return or claim for refund or credit filed 

before the taxpayer received a written 

notice of examination of, or a written 

challenge to, the original tax return (or 

filed no later than 120 days after the 

receipt of such written notice or written 

challenge). The intent of this exception 

is to discourage the tactical preparation 

of a refund claim or amended return 

filed late in the examination process. 

The exception for contingent fee 

arrangements with respect to an 

amended return or claim for refund or 

credit may be used if the amended 

return or claim for refund or credit is 

filed before the taxpayer receives 

written notice of the examination or 

written challenge to the original return 

(or if the taxpayer never receives such 

notice or writing) or within 120 days of 

the taxpayer receiving the notice or 

writing. For purposes of proposed 

§ 10.27(b)(2)(ii), the 120 days is 

computed from the earlier of a written 

notice of the examination, if any, or a 

written challenge to the original return. 

Further, under proposed § 10.27(b)(3) 

and (4), practitioners also may charge a 

contingent fee for services rendered in 

connection with a claim for refund or 

credit of interest and penalties assessed 

by the IRS, and for services rendered in 

connection with a claim under section 

7623. 

In response to comments received 

following the publication of the final 

regulations on contingent fees, this 

document also clarifies the definition of 

a contingent fee in § 10.27(c)(1) to 

provide that a contingent fee includes a 

fee that is based on a percentage of the 

refund reported on a return, that is 

based on a percentage of the taxes 

saved, or that otherwise depends on the 

specific tax result attained. The 

definition in § 10.27(c)(1) states that a 

contingent fee depends on the specific 

result attained without directly 

providing that it is the specific tax result 

that is relevant to the definition of a 

contingent fee. Contingent fees based on 

the closing of a transaction or other nontax contingencies do not present the 

same concerns posed by tax-related 

contingent fees. Accordingly, this 

document clarifies the existing 

definition to provide that a contingent 

fee includes, but is not limited to, any 

fee that depends on the specific tax 

result obtained in any given transaction. 

The scope of these regulations is 

limited to the rules relating to 

contingent fees under the general 

standards of practice before the IRS. 

These regulations do not alter or 

supplant other ethical standards 

applicable to practitioners. 

Effect on Other Documents 

Notice 2008–43, 2008–15 IRB 257, 

will be obsolete when regulations 

finalizing these proposed regulations are 

published in the Federal Register. 

Special Analyses 

It has been determined that this 

proposed rule is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

is hereby certified that these regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. Persons authorized to practice 

before the IRS have long been required 

to comply with certain standards of 

conduct. These regulations do not alter 

the basic nature of the obligations and 

responsibilities of these practitioners. 

These regulations clarify when a 

practitioner may charge a contingent fee 

under § 10.27(b)(2) in response to public 

comments. Therefore, a regulatory 

flexibility analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. Pursuant to section 7805(f) 

of the Internal Revenue Code, this 

notice of proposed rulemaking will be 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small businesses. 

Comments and Public Hearing 

Before the regulations are adopted as 

final regulations, consideration will be 

given to any written comments (a signed 

original and eight (8) copies) and 

electronic comments that are submitted 

timely to the IRS. The Treasury 

Department and the IRS specifically 

request comments on the clarity of the 

proposed regulations and how they can 

be made easier to understand. All 

comments will be available for public 

inspection and copying. 

The public hearing is scheduled for 

November 20, 2009, at 10 a.m., and will 

be held in the Auditorium, Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. Due to 

building security procedures, visitors 

must enter at the Constitution Avenue 

entrance. All visitors must present 

photo identification to enter the 

building. Because of access restrictions, 

visitors will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 


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Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Proposed Rules 37185 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit written or electronic 

comments by September 10, 2009 and 

an outline of the topics to be discussed 

and the time to be devoted to each topic 

by September 10, 2009. A period of 10 

minutes will be allocated to each person 

for making comments. 

An agenda showing the scheduling of 

the speakers will be prepared after the 

deadline for receiving outlines has 

passed. Copies of the agenda will be 

available free of charge at the hearing. 

Drafting Information 

The principal author of the 

regulations is Amy L. Mielke of the 

Office of the Associate Chief Counsel 

(Procedure and Administration). 

List of Subjects in 31 CFR Part 10 

Accountants, Administrative practice 

and procedure, Lawyers, Reporting and 

recordkeeping requirements, Taxes. 

Proposed Amendments to the 

Regulations 

Accordingly, 31 CFR part 10 is 

proposed to be amended as follows: 

Paragraph 1. The authority citation 

for 31 CFR part 10 continues to read as 

follows: 

Authority: Sec. 3, 23 Stat. 258, secs. 2–12, 

60 Stat. 237 et seq.; 5 U.S.C. 301, 500, 551– 

559; 31 U.S.C. 321; 31 U.S.C. 330; Reorg. Plan 

No. 26 of 1950, 15 FR 4935, 64 Stat. 1280, 

3 CFR, 1949–1953 Comp., p. 1017. 

Paragraph. 2. Section 10.27 is 

amended by revising paragraphs (b), 

(c)(1), and (d), and by adding paragraph 

(e) to read as follows: 

§ 10.27 Fees. 

* * * * * 

(b) Contingent fees—(1) Except as 

provided in paragraphs (b)(2), (3), (4), 

and (5) of this section, a practitioner 

may not charge a contingent fee for 

services rendered in connection with 

any matter before the Internal Revenue 

Service. 

(2) A practitioner may charge a 

contingent fee for services rendered in 

connection with the Internal Revenue 

Service’s examination of, or challenge 

to— 

(i) An original tax return; or 

(ii) An amended return or claim for 

refund or credit filed before the taxpayer 

received a written notice of examination 

of, or a written challenge to, the original 

tax return; or filed no later than 120 

days after the receipt of such written 

notice or written challenge. The 120 

days is computed from the earlier of a 

written notice of the examination, if 

any, or a written challenge to the 

original return. 

(3) A practitioner may charge a 

contingent fee for services rendered in 

connection with a claim for credit or 

refund filed solely in connection with 

the determination of statutory interest or 

penalties assessed by the Internal 

Revenue Service. 

(4) A practitioner may charge a 

contingent fee for services rendered in 

connection with a claim under section 

7623 of the Internal Revenue Code. 

(5) A practitioner may charge a 

contingent fee for services rendered in 

connection with any judicial proceeding 

arising under the Internal Revenue 

Code. 

(c) * * * 

(1) Contingent fee is any fee that is 

based, in whole or in part, on whether 

or not a position taken on a tax return 

or other filing avoids challenge by the 

Internal Revenue Service or is sustained 

either by the Internal Revenue Service 

or in litigation. A contingent fee 

includes a fee that is based on a 

percentage of the refund reported on a 

return, that is based on a percentage of 

the taxes saved, or that otherwise 

depends on the specific tax result 

attained. A contingent fee also includes 

any fee arrangement in which the 

practitioner will reimburse the client for 

all or a portion of the client’s fee in the 

event that a position taken on a tax 

return or other filing is challenged by 

the Internal Revenue Service or is not 

sustained, whether pursuant to an 

indemnity agreement, a guarantee, 

rescission rights, or any other 

arrangement with a similar effect. 

(2) * * * 

(d) Applicability date. This section is 

applicable to fee arrangements entered 

into after March 26, 2008. 

(e) Effective date. This section is 

effective on the date that the final 

regulations are published in the Federal 

Register. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E9–17743 Filed 7–27–09; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R04–OAR–2009–0303(b); FRL–8936– 

1] 

Approval and Promulgation of 

Implementation Plans; South Carolina; 

Transportation Conformity 

Memorandum of Agreement Update 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to approve 

a revision to the South Carolina State 

Implementation Plan (SIP) submitted on 

November 28, 2008, through the South 

Carolina Department of Health and 

Environmental Control. This revision 

consists of transportation conformity 

criteria and procedures related to 

interagency consultation and 

enforceability of certain transportationrelated control measures and mitigation 

measures. The intended effect is to 

update the transportation conformity 

criteria and procedures in the South 

Carolina SIP. 

In the Final Rules Section of this 

Federal Register, EPA is approving the 

State’s SIP revision as a direct final rule 

without prior proposal because the 

Agency views this as a noncontroversial 

submittal and anticipates no adverse 

comments. A detailed rationale for the 

approval is set forth in the direct final 

rule. If no adverse comments are 

received in response to this rule, no 

further activity is contemplated. If EPA 

receives adverse comments, the direct 

final rule will be withdrawn and all 

public comments received will be 

addressed in a subsequent final rule 

based on this proposed rule. EPA will 

not institute a second comment period 

on this document. Any parties 

interested in commenting on this 

document should do so at this time. 

DATES: Written comments must be 

received on or before August 27, 2009. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R04– 

OAR–2009–0303, by one of the 

following methods: 

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

the on-line instructions for submitting 

comments. 

b. E-mail: Wood.amanetta@epa.gov. 

c. Fax: (404) 562–9019. 

d. Mail: EPA–R04–OAR–2009–0303, 

Air Quality Modeling and 

Transportation Section, Air Planning 

Branch, Air, Pesticides and Toxics 

Management Division, U.S. 

Environmental Protection Agency, 


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