80 FR 66792 - Preparer Tax Identification Number (PTIN) User Fee Update

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 80, Issue 210 (October 30, 2015)

This document contains temporary regulations relating to the imposition of certain user fees on tax return preparers. The temporary regulations reduce the user fee to apply for or renew a preparer tax identification number (PTIN) and affect individuals who apply for or renew a PTIN. The Independent Offices Appropriations Act of 1952 authorizes the charging of user fees. The text of the temporary regulations also serves as the text of the proposed regulations (REG- 121496-15) set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register.

[Federal Register Volume 80, Number 210 (Friday, October 30, 2015)]
[Rules and Regulations]
[Pages 66792-66795]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27789]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[T.D. 9742]
RIN 1545-BN03


Preparer Tax Identification Number (PTIN) User Fee Update

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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[[Page 66793]]

SUMMARY: This document contains temporary regulations relating to the 
imposition of certain user fees on tax return preparers. The temporary 
regulations reduce the user fee to apply for or renew a preparer tax 
identification number (PTIN) and affect individuals who apply for or 
renew a PTIN. The Independent Offices Appropriations Act of 1952 
authorizes the charging of user fees. The text of the temporary 
regulations also serves as the text of the proposed regulations (REG-
121496-15) set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section of this issue of the Federal 
Register.

DATES: Effective Date: These regulations are effective on October 30, 
2015.
    Applicability Date: For date of applicability, see paragraph (d) of 
these temporary regulations.

FOR FURTHER INFORMATION CONTACT: Concerning the temporary regulations, 
Hollie M. Marx at (202) 317-6844; concerning cost methodology, Eva J. 
Williams at (202) 803-9728.

SUPPLEMENTARY INFORMATION: 

Background

    The Independent Offices Appropriations Act of 1952 (IOAA), which is 
codified at 31 U.S.C. 9701, authorizes agencies to prescribe 
regulations that establish user fees for services provided by the 
agency. The charges must be fair and must be based on the costs to the 
government, the value of the service to the recipient, the public 
policy or interest served, and other relevant facts. The IOAA provides 
that regulations implementing user fees are subject to policies 
prescribed by the President; these policies are set forth in the Office 
of Management and Budget Circular A-25, 58 FR 38142 (July 15, 1993) 
(OMB Circular A-25).
    Under OMB Circular A-25, federal agencies that provide services 
that confer benefits on identifiable recipients are to establish user 
fees that recover the full cost of providing the special benefit. An 
agency that seeks to impose a user fee for government-provided services 
must calculate the full cost of providing those services. In general, a 
user fee should be set at an amount that allows the agency to recover 
the direct and indirect costs of providing the service, unless the 
Office of Management and Budget grants an exception. OMB Circular A-25 
provides that agencies are to review user fees biennially and update 
them as necessary.

PTIN Requirement

    Section 6109(a)(4) of the Internal Revenue Code authorizes the 
Secretary to prescribe regulations for the inclusion of a tax return 
preparer's identifying number on a return, statement, or other document 
required to be filed with the IRS. On September 30, 2010, the Treasury 
Department and IRS published final regulations under section 6109 (REG-
134235-08) in the Federal Register (TD 9501) (75 FR 60315) (PTIN 
regulations) to provide that, for returns or claims for refund filed 
after December 31, 2010, the identifying number of a tax return 
preparer is the individual's PTIN or such other number prescribed by 
the IRS in forms, instructions, or other appropriate guidance. The PTIN 
regulations require a tax return preparer who prepares or who assists 
in preparing all or substantially all of a tax return or claim for 
refund after December 31, 2010 to have a PTIN. The PTIN regulations 
also state that the IRS will set forth in forms, instructions or other 
appropriate guidance PTIN application and renewal procedures, including 
the payment of a user fee. The PTIN regulations further state that the 
IRS may conduct a Federal tax compliance check on an individual who 
applies for or renews a PTIN.
    In accordance with section 1.6109-2(d) of the PTIN regulations, the 
IRS has set forth application and renewal procedures in Form W-12, IRS 
Paid Preparer Tax Identification Number (PTIN) Application and Renewal, 
and the Form W-12 Instructions. Individuals may also apply for or renew 
a PTIN and pay the user fee online at irs.gov/ptin. The annual PTIN 
application and renewal period generally begins in the fall (on October 
15 in previous years) of the year preceding the filing season to which 
the PTIN relates. A third-party vendor processes applications to obtain 
or renew a PTIN and charges a reasonable fee that is separate from the 
user fee charged by the government.
    Requiring the use of PTINs improves tax administration and tax 
compliance and benefits tax return preparers by allowing them to 
provide an identifying number on the return that is not an SSN. 
Requiring the use of PTINs enables the IRS to better collect and track 
data on tax return preparers, including the number of persons who 
prepare returns, the qualifications of those who prepare returns, and 
the number of returns each person prepares. PTIN use allows the IRS to 
more easily identify and communicate with tax return preparers who make 
errors on returns, which benefits tax return preparers by improving 
compliance and therefore reducing the number of client returns that are 
examined. The PTIN also enables the IRS to more easily locate and 
review returns prepared by a tax return preparer when instances of 
misconduct or potential misconduct are detected, which aids tax 
administration and compliance. These aids to tax administration and 
compliance in turn benefit taxpayers and tax return preparers by 
working to reduce preparer error and misconduct.
    Section 1.6109-2(d) states that only individuals authorized to 
practice before the IRS under 31 U.S.C. 330 are eligible to obtain a 
PTIN. Under section 1.6109-2(h), the IRS may prescribe in forms, 
instructions, or other appropriate guidance exceptions to the 
requirements of the PTIN regulations, including the requirement that an 
individual must be authorized to practice before the IRS to be eligible 
to receive a PTIN. On December 30, 2010, the IRS released Notice 2011-6 
(2011-3 IRB 315 (Jan. 17, 2011)), which stated that, until December 31, 
2013, a provisional PTIN could be renewed upon proper application and 
payment of the applicable user fee, even if the individual holding the 
provisional PTIN was not authorized to practice before the IRS.
    On June 3, 2011, the Treasury Department and the IRS published in 
the Federal Register (76 FR 32286) amendments to Treasury Department 
Circular No. 230 (31 CFR part 10), to regulate all tax return preparers 
under 31 U.S.C. 330. In Loving v. IRS, 917 F.Supp.2d 67 (D.D.C. 2013), 
the district court concluded that the IRS and Treasury Department 
lacked statutory authority to regulate tax return preparation as 
practice before the IRS under 31 U.S.C. 330 and enjoined the IRS and 
Treasury from enforcing the regulation of registered tax return 
preparers. The district court subsequently modified its order to 
clarify that the IRS's authority to require that tax return preparers 
obtain a PTIN is unaffected by the injunction. Loving v. IRS, 920 
F.Supp.2d 108, 109 (D.D.C. 2013) (stating ``Congress has specifically 
authorized the PTIN scheme by statute . . . [and that] scheme, 
therefore, does not fall within the scope of the injunction and may 
proceed as promulgated.''). The United States Court of Appeals for the 
District of Columbia Circuit affirmed the district court's decision and 
order for injunction. Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014).

PTIN User Fee

    Final regulations (REG-139343-08) published in the Federal Register 
(TD 9503) (75 FR 60316) (PTIN user fee regulations) on September 30, 
2010, established a $50 user fee to apply for

[[Page 66794]]

or renew a PTIN. The $50 user fee was based on an annual PTIN renewal 
period and an estimate that 1.2 million individuals would be applying 
for or renewing a PTIN each year.
    The IRS and Treasury Department determined that a $50 user fee to 
apply for or renew a PTIN would recover the full direct and indirect 
costs that the government incurs to administer the PTIN application and 
renewal process. The initial determination of a $50 annual fee took 
into account certain costs that the IRS ascertained it would incur to 
provide the special benefit associated with the provision of PTINs. As 
explained in the PTIN user fee regulations, the initial projected costs 
included the development and maintenance of the IRS information 
technology system that would interface with a third-party vendor, the 
development and maintenance of internal applications that would have 
the capacity to process and administer the anticipated increase in PTIN 
applications, customer service support activities, which included Web 
site development and maintenance and call center staffing to respond to 
questions regarding PTIN usage and renewal. The $50 user fee was also 
determined to recover costs for personnel, administrative, and 
management support needed to evaluate and address tax compliance issues 
of individuals applying for and renewing a PTIN, to investigate and 
address conduct and suitability issues, and otherwise support and 
enforce the programs that required an individual to apply for and renew 
a PTIN.
    The vendor's fee, currently set at $14.25 for new applications and 
$13 for renewal applications, is paid directly to the vendor and covers 
the costs incurred by the vendor to process applications and renewals. 
The agency user fee and the vendor fee pay for different aspects of the 
PTIN program, each of which is essential to the program.

Explanation of Provisions

    Pursuant to the guidelines in OMB Circular A-25, the IRS has re-
calculated its cost of providing services under the PTIN application 
and renewal process. The IRS has determined that the full cost of 
administering the PTIN program going forward has been reduced from $50 
to $33 per application or renewal. Individuals who prepare or assist in 
preparing all or substantially all of a tax return or claim for refund 
for compensation are required to have a PTIN. The ability to prepare 
tax returns and claims for refund for compensation is a special 
benefit, for which the IRS may charge a user fee to recover the full 
costs of providing the special benefit.
    The amount of the user fee is $33 for both initial PTIN 
applications and renewals because the activities the IRS is required to 
perform to issue a new PTIN or renew an existing PTIN are the same. 
Pursuant to the authority granted in section 6109(c), the IRS has 
determined that it requires certain information to assign (or, in the 
case of a renewal, re-assign) a PTIN to an individual. The required 
information is set forth in the Form W-12 and Form W-12 Instructions.
    The PTIN user fee is based on direct costs of the PTIN program, 
which include staffing and contract-related costs for activities, 
processes, and procedures related to the electronic and paper 
registration and renewal submissions; tax compliance and background 
checks; professional designation checks; foreign preparer processing; 
compliance and IRS complaint activities; information technology and 
contract-related expenses; and communications. The PTIN user fee also 
takes into account various indirect program costs, including management 
and support costs.
    The reduction in the fee amount is attributable to several factors, 
which include the reduced number of PTIN holders (approximately 
700,000) from the number originally projected (1.2 million) in 2010, 
which reduced associated costs; the absorption of certain development 
costs in the early years of the program; and the fact that certain 
activities that would have been required to regulate registered tax 
return preparers will not be performed. In particular, the 
determination of the user fee no longer includes expenses for personnel 
who perform functions primarily related to continuing education and 
testing for registered tax return preparers. Additionally, expenses 
related to personnel who perform continuing education and testing for 
enrolled agents and enrolled retirement plan agents were also removed 
from the user fee.
    Individuals who apply for or renew a PTIN will continue to pay a 
fee directly to a third-party vendor, which is separate from the user 
fee described in this Treasury decision. The vendor fee is increasing 
from $14.25 for original applications and $13 for renewal applications 
to $17 for original applications and $17 for renewal applications.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563.
    Historically, the annual PTIN application and renewal period has 
begun on October 15. For 2015, the date has been postponed to November 
1. There is insufficient time before November 1 to provide an 
opportunity for notice and public comment and issue a final regulation 
prior to that date. To enable the reduced fee amount to be in effect 
for PTINs issued or renewed by tax return preparers preparing returns 
in 2016, the IRS and Treasury find that there is good cause to dispense 
with (1) notice and public comment pursuant to 5 U.S.C. 553(b) and (c) 
and (2) a delayed effective date pursuant to 5 U.S.C. 553(d). It would 
be impracticable, unnecessary, and contrary to the public interest to 
continue to charge the current fee when the IRS has determined pursuant 
to the biennial review conducted under OMB Circular A-25 that the fee 
should be reduced going forward. The IRS and Treasury Department will 
consider public comments submitted in response to the cross-referenced 
notice of proposed rulemaking published elsewhere in this issue of the 
Federal Register and will promulgate a final rule after considering 
those comments.
    For applicability of the Regulatory Flexibility Act, please refer 
to the cross-referenced notice of proposed rulemaking published 
elsewhere in this issue of the Federal Register. Pursuant to section 
7805(f), this Treasury decision has been submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Drafting Information

    The principal author of these regulations is Hollie M. Marx, Office 
of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 300

    Reporting and recordkeeping requirements, User fees.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 300 is amended as follows:

0
Paragraph 1. The authority citation for part 300 continues to read as 
follows:

    Authority: 31 U.S.C. 9701.


0
Par. 2. Section 300.13 is amended by removing and reserving paragraph 
(b) to read as follows:

[[Page 66795]]

Sec.  300.13  Fee for obtaining a preparer tax identification number.

* * * * *
    (b) Fee. [Reserved]
* * * * *

0
Par. 3. Section 300.13T is added to read as follows:


Sec.  300.13T  Fee for obtaining a preparer tax identification number.

    (a) [Reserved]
    (b) Fee. The fee to apply for or renew a preparer tax 
identification number is $33 per year, which is the cost to the 
government for processing the application for a preparer tax 
identification number and does not include any fees charged by the 
vendor.
    (c) [Reserved]
    (d) Effective/applicability date. This section will be applicable 
for all PTIN applications filed on or after November 1, 2015.

Karen M. Schiller,
Acting Deputy Commissioner for Services and Enforcement.
    Approved: October 16, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-27789 Filed 10-29-15; 8:45 am]
BILLING CODE 4830-01-P