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Proposed Rule2024-29371

Regulations Governing Practice Before the Internal Revenue Service

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Published

December 26, 2024

Issuing agencies

Treasury Department

Abstract

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

Full Text

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<title>Federal Register, Volume 89 Issue 247 (Thursday, December 26, 2024)</title>
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[Federal Register Volume 89, Number 247 (Thursday, December 26, 2024)]
[Proposed Rules]
[Pages 104915-104934]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29371]

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DEPARTMENT OF THE TREASURY

Office of the Secretary

31 CFR Part 10

[REG-116610-20]
RIN 1545-BQ12

Regulations Governing Practice Before the Internal Revenue
Service

AGENCY: Office of the Secretary, Treasury.

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

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

[[Page 104916]]

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

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

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

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
William J. Prater at (202) 317-6251; concerning submissions of comments
or the public hearing, The Publications and Regulations Section at
(202) 317-6901 (not toll-free numbers) or by sending an email to
<a href="/cdn-cgi/l/email-protection#d1a1a4b3bdb8b2b9b4b0a3b8bfb6a291b8a3a2ffb6bea7">[email&#160;protected]</a> (preferred).

SUPPLEMENTARY INFORMATION:

Authority

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

Background

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

A. Tax Return Preparation

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

B. Contingent Fees

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

[[Page 104917]]

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

C. Written Tax Advice

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

A. Amendments Regarding Tax Return Preparation

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

[[Page 104918]]

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

B. Amendments Regarding the Regulation of Contingent Fees

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

C. Enrolled Retirement Plan Agent and Enrolled Agent Procedures

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

[[Page 104919]]

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

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

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

E. Continuing Education Provider Fees

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

F. Knowledge of Error or Omission

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

G. Negotiation of Payments to Clients

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

[[Page 104920]]

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

H. Best Practices for Tax Practitioners

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

I. Duty To Maintain Technological Competence

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

J. Regulation of Written Tax Advice

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

K. Incompetence or Disreputable Conduct

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

[[Page 104921]]

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

L. Appraiser Standards

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

[[Page 104922]]

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

M. Effect of Disbarment, Suspension, or Censure

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

N. Expedited Suspension

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

O. Comments Requested

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

Proposed Applicability Date

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

Special Analyses

I. Regulatory Planning and Review

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

II. Initial Regulatory Flexibility Analysis

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

[[Page 104923]]

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

[[Page 104924]]

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

III. Unfunded Mandates Reform Act

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

IV. Executive Order 13132: Federalism

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

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

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

Statement of Availability of IRS Documents

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

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are timely submitted
to the Treasury Department and the IRS as prescribed in this preamble
under the ADDRESSES heading. The Treasury Department and the IRS
request comments on all aspects of the proposed regulations. Any
electronic and paper comments submitted will be available at <a href="https://www.regulations.gov">https://www.regulations.gov</a> or upon request. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn.
A public hearing is being held on March 6, 2025, beginning at 10
a.m. ET, in the Auditorium at the Internal Revenue Building, 1111
Constitution Avenue NW, Washington, DC. Due to building security
procedures, visitors must enter at the Constitution Avenue entrance. In
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. Participants may alternatively attend the public
hearing by telephone.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit an outline of
the topics to be discussed as well as the time to be devoted to each
topic by February 24, 2025. A period of ten minutes will be allocated
to each person for making comments. After the deadline for receiving
outlines has passed, the IRS will prepare an agenda containing the
schedule of speakers. Copies of the agenda will be made available free
of charge at the hearing. If no outlines of the topics to be discussed
at the hearing are received by February 24, 2025, the public hearing
will be cancelled. If the public hearing is cancelled, a notification
of cancellation of the public hearing will be published in the Federal
Register.
Individuals who want to testify in person at the public hearing
must send an email to <a href="/cdn-cgi/l/email-protection#5d2d283f31343e35383c2f34333a2e1d342f2e733a322b">[email&#160;protected]</a> to have your name added to
the building access list. The subject line of the email must contain
the regulation number REG-116610-20 and, the language TESTIFY In
Person. For example, the subject line may say: Request to TESTIFY In
Person at Hearing for REG-116610-20.
Individuals who want to testify by telephone at the public hearing
must send an email to <a href="/cdn-cgi/l/email-protection#9aeaeff8f6f3f9f2fffbe8f3f4fde9daf3e8e9b4fdf5ec">[email&#160;protected]</a> to receive the telephone
number and access code for the hearing. The subject line of the email
must contain the regulation number REG-116610-20 and the language
TESTIFY Telephonically. For example, the subject line may say: Request
to TESTIFY Telephonically at Hearing for REG-116610-20.
Individuals who want to attend the public hearing in person without
testifying must also send an email to <a href="/cdn-cgi/l/email-protection#fe8e8b9c92979d969b9f8c9790998dbe978c8dd0999188">[email&#160;protected]</a> to have
your name added to the building access list. The subject line of the
email must contain the regulation number (REG-116610-20) and the
language ATTEND In Person. For example, the subject line may say:
Request to ATTEND Hearing In Person for REG-116610-20. Requests to
attend the public hearing must be received by 5 p.m. ET on March 4,
2025.
Individuals who want to attend the public hearing telephonically
without testifying must also send an email to <a href="/cdn-cgi/l/email-protection#621217000e0b010a0703100b0c0511220b10114c050d14">[email&#160;protected]</a> to
receive the telephone number and access code for the hearing. The
subject line of the email must contain the regulation number (REG-
116610-20) and the language ATTEND Hearing Telephonically. For example,
the subject line may say: Request to ATTEND Hearing Telephonically for
REG-116610-20. Requests to attend the public hearing must be received
by 5 p.m. ET on March 4, 2025.
Hearings will be made accessible to people with disabilities. To
request special assistance during the hearing, contact the Publications
and Regulations Branch of the Office of Associate Chief Counsel
(Procedure and Administration) by sending an email to
<a href="/cdn-cgi/l/email-protection#e8989d8a84818b808d899a81868f9ba8819a9bc68f879e">[email&#160;protected]</a> (preferred) or by telephone at (202) 317-6901
(not a toll-free number) by at least March 3, 2025.

Drafting Information

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

[[Page 104925]]

Withdrawal of Notice of Proposed Rulemaking

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

List of Subjects in 31 CFR Part 10

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

Proposed Amendments to the Regulations

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

PART 10--PRACTICE BEFORE THE INTERNAL REVENUE SERVICE

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

Authority: Sec. 3, 23 Stat. 258, secs. 2-12, 60 Stat. 237 et
seq.; 5 U.S.C. 301, 500, 551-559; 31 U.S.C. 321; 31 U.S.C. 330;
Reorg. Plan No. 26 of 1950, 15 FR 4935, 64 Stat. 1280, 3 CFR, 1949-
1953 Comp., P. 1017.

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

Sec. 10.0 Scope of part.

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

Sec. 10.2 Definitions.

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

Sec. 10.3 Who may practice.

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

Sec. 10.4 Eligibility to become an enrolled agent.

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

[[Page 104926]]

Sec. 10.5 Application to become an enrolled agent.

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

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

(a) Term. Each individual authorized to practice before the
Internal Revenue Service as an enrolled agent or enrolled retirement
plan agent will be accorded active enrollment status subject to renewal
of enrollment as provided in this part.
(b) Confirmation of enrollment. The Internal Revenue Service will
issue an enrollment document (such as an enrollment card or other
document) to an individual who meets the enrollment requirements in
this paragraph (b) and whose application to practice before the
Internal Revenue Service is approved. This approval will be valid for
the period stated on the enrollment document. An enrolled agent or
enrolled retirement plan agent may not practice before the Internal
Revenue Service without a valid approval. The enrollment document is in
addition to any notification that may be provided to each individual
who obtains a preparer tax identification number.
(c) Change of address. An enrolled agent or enrolled retirement
plan agent must send notification of any change of address to the
address specified by the Internal Revenue Service within 60 days of the
change of address. This notification must include the enrolled agent's
or enrolled retirement plan agent's name, prior address, new address,
tax identification number(s) (including preparer tax identification
number), and the date the change of address is effective. Unless this
notification is sent, the address for purposes of any correspondence
from the appropriate Internal Revenue Service office responsible for
administering this part will be the address reflected on the
practitioner's most recent application for enrollment, or application
for renewal of enrollment. A practitioner's change of address
notification under this part will not constitute a change of the
practitioner's last known address for purposes of section 6212 of the
Internal Revenue Code.
(d) * * *
(1) In general. Enrolled agents or enrolled retirement plan agents
must renew their status with the Internal Revenue Service to maintain
eligibility to practice before the Internal Revenue Service. Failure to
receive notification from the Internal Revenue Service of the renewal
requirement will not be justification for the individual's failure to
satisfy the requirement of this paragraph (d).
(2) Renewal period for enrolled agents. (i) Applications for
renewal of status as an enrolled agent will be required between
November 1 and January 31 every three years according to the last digit
of the individual's Social Security number or tax identification
number. Those individuals who receive initial enrollment as an enrolled
agent after November 1 and before April 2 of the applicable renewal
period will not be required to renew their enrollment before the first
full renewal period following the receipt of their initial enrollment.
(ii) Enrolled agents who have a Social Security number or tax
identification number that ends with the numbers 0, 1, 2, or 3, except
for those individuals who received their initial enrollment after
November 1, 2024, must apply for renewal between November 1, 2024, and
January 31, 2025. The renewal will be effective April 1, 2025.
(iii) Enrolled agents who have a Social Security number or tax
identification number that ends with the numbers 4, 5, or 6, except for
those individuals who received their initial enrollment after November
1, 2025, must apply for renewal between November 1, 2025, and January
31, 2026. The renewal will be effective April 1, 2026.
(iv) Enrolled agents who have a Social Security number or tax
identification number that ends with the numbers 7, 8, or 9, or who do
not have a Social Security number, except for those individuals who
received their initial enrollment after November 1, 2026, must apply
for renewal between November 1, 2026, and January 31, 2027. The renewal
will be effective April 1, 2027.
* * * * *
(4) Notification of renewal. After review and approval, the
Internal Revenue Service will notify the individual of the renewal and
will issue the individual a document evidencing

[[Page 104927]]

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

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

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

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

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

[[Page 104928]]

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

Sec. 10.9 Continuing education providers and continuing education
programs.

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

Sec. 10.21 Knowledge of error or omission.

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

Sec. 10.22 Diligence as to accuracy.

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

Sec. 10.27 [Removed]

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

Sec. 10.30 Solicitation.

(a) * * *
(1) A practitioner may not, with respect to any Internal Revenue
Service matter, in any way use or participate in the use of any form of
public communication or private solicitation containing a false,
fraudulent, or coercive statement or claim; or a misleading or
deceptive statement or claim. Enrolled agents and enrolled retirement
plan agents, in describing their professional designation, may not
utilize the term certified or imply an employer-employee relationship
with the Internal Revenue Service. Examples of acceptable descriptions
for enrolled agents are ``enrolled to represent clients before the
Internal Revenue Service,'' ``enrolled to practice before the Internal
Revenue Service,'' ``admitted to practice before the Internal Revenue
Service,'' EA, or E.A. Similarly, examples of acceptable descriptions
for enrolled retirement plan agents are ``enrolled to represent clients
before the Internal Revenue Service as a retirement plan agent'' and
``enrolled to practice before the Internal Revenue Service as a
retirement plan agent,'' ERPA, or E.R.P.A.
* * * * *
(e) Applicability date. This section is applicable beginning on
[date 30 days after date of publication of final regulations in the
Federal Register].
* * * * *
0
Par. 16. Section 10.31 is revised to read as follows:

Sec. 10.31 Negotiation of payments to clients.

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

Sec. 10.33 Best practices for tax practitioners.

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

[[Page 104929]]

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

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

(a) Tax returns prepared or submitted while representing a client
in a matter before the IRS. (1) * * *
(i) Prepare, while representing a client in a matter before the
Internal Revenue Service or, for tax returns prepared by the
practitioner prior to the representation, including returns already
filed with the Internal Revenue Service, submit a tax return or claim
for refund or a claim for a credit that the practitioner knows or
reasonably should know contains a position that--
* * * * *
(c) * * *
(1) * * *
(i) A position taken on a tax return that is relevant to the
representation of a client in a matter before the Internal Revenue
Service if--
(A) The practitioner provided written advice, as defined under
Sec. 10.37, to the client with respect to the position; or
(B) The practitioner prepared and submitted the tax return while
representing the client in a matter before the IRS.
(ii) Any document, affidavit or other paper submitted in a matter
before the Internal Revenue Service.
* * * * *
(d) Relying on information furnished by clients. A practitioner
advising a client to take a position on a tax return, document,
affidavit or other paper submitted in a matter before the Internal
Revenue Service, generally may rely in good faith without verification
upon information furnished by the client. However, the practitioner may
not ignore the implications of information furnished to, or actually
known by, the practitioner, and must make reasonable inquiries if the
information as furnished appears to be incorrect, inconsistent with an
important fact or another factual assumption, or incomplete.
(e) Applicability date. This section is applicable beginning on
[date 30 days after date of publication of final regulations in the
Federal Register].
0
Par. 19. Section 10.35 is amended by adding a sentence at the end of
paragraph (a) and revising paragraph (b) to read as follows:

Sec. 10.35 Competence.

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

Sec. 10.36 Procedures to ensure compliance.

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

Sec. 10.37 Requirements for written tax advice.

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

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

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

[[Page 104930]]

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

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

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

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

Subpart C--Incompetence or Disreputable Conduct

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

Sec. 10.50 Incompetence or disreputable conduct.

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

Sec. 10.51 Fees that constitute disreputable conduct.

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

Subpart D--Appraisers

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

Sec. 10.60 Definitions.

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

Sec. 10.61 Disqualification of appraisers.

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

[[Page 104931]]

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

Sec. 10.62 Receipt of information concerning appraisers.

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

Subpart E--Sanctions for Violation of the Regulations

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

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

Sec. 10.70 Sanctions.

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

Sec. 10.71 Violations subject to sanction.

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

[[Page 104932]]

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

Sec. 10.72 Receipt of information concerning practitioner.

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

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

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

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

Sec. 10.80 Institution of proceeding.

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

Sec. 10.85 Supplemental charges.

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

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

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

Sec. 10.101 Petition for reinstatement.

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

Sec. 10.102 Expedited suspension or disqualification.

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

[[Page 104933]]

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

[[Page 104934]]

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

Sec. 10.110 Records.

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

Sec. 10.111 Establishment of advisory committees.

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

Sec. 10.112 Saving provision.

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

Sec. 10.114 Applicability date.

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

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

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