US Internal Revenue Service: pcir230

8/14/2019 US Internal Revenue Service: pcir230

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Treasury

Department

Circular No. 230

Cat 16586R (Rev. 6-2005)

Regulations Governing the

Practice of Attorneys,

Certified Public Accountants,

Enrolled Agents,

Enrolled Actuaries, and

Appraisers before theInternal Revenue ServiceDepartmentof theTreasury

Internal

Revenue

Service

Title 31 Code of Federal Regulations,

Subtitle A, Part 10, revised as ofJune 20, 2005


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PART 10 -- PRACTICE BEFORE

THE INTERNAL REVENUESERVICESec.

10.0 Scope of part....3

Subpart A -- Rules Governing

Authority to Practice

10.1 Director of Practice......310.2 Definitions. .................................310.3 Who may practice........................4

10.4 Eligibility for enrollment.............510.5 Application for enrollment...........610.6 Enrollment....................................710.7 Representing oneself; participating

in rulemaking; limited practice;special appearances; and returnpreparation..14

10.8 Customhouse brokers............. 15

Subpart B -- Duties and Restrictions

Relating to Practice Before the

Internal Revenue Service

10.20 Information to be furnished.......1510.21 Knowledge of clients omission1610.22 Diligence as to accuracy............1610.23 Prompt disposition of pending

matters.......................................1710.24 Assistance from or to disbarred

or suspended persons and formerInternal Revenue Serviceemployees.. 17

10.25 Practice by former Governmentemployees, their partners andtheir associates...................17

10.26 Notaries......................1910.27 Fees............................................1910.28 Return of clients records...........1910.29 Conflicting interests.......2010.30 Solicitation.................................20

10.31 Negotiation of taxpayer

checks.2210.32 Practice of law...............2210.33 Best practices for tax advisors...2210.34 Standards for advising with

respect to tax return positions andfor preparing or signingreturns....22

10.35 Requirements for coveredopinions..23

10.36 Procedures to ensurecompliance.....30

10.37 Requirements for other writtenadvice...3010.38 Establishment of advisory

committees31

Subpart C -- Sanctions for Violation

of the Regulations

10.50 Sanctions........................3110.51 Incompetence and disreputable

conduct...................................3210.52 Violation of regulations.............3310.53 Receipt of information

concerning practitioner......33

Subpart D -- Rules Applicable to

Disciplinary Proceedings

10.60 Institution of proceeding...........3410.61 Conferences...............................3410.62 Contents of complaint................3510.63 Service of complaint; service

and filing of other papers...........3510.64 Answer; default..........................3710.65 Supplemental charges........3710.66 Reply to answer.........................3810.67 Proof; variance; amendment of

pleadings....................................3810.68 Motions and requests............ 3810.69 Representation; ex parte


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communication..........................3810.70 Administrative Law Judge.........3910.71 Hearings.........................3910.72 Evidence....................................4010.73 Depositions................................41

10.74 Transcript...................................4110.75 Proposed findings andconclusions..41

10.76 Decision of Administrative LawJudge..........................................41

10.77 Appeal of decision ofAdministrative Law Judge..........42

10.78 Decision on appeal.....4210.79 Effect of disbarment, suspension,

or censure...............4310.80 Notice of disbarment,

suspension, censure ordisqualification..4310.81 Petition for reinstatement..........4310.82 Expedited suspension upon

criminal conviction or loss oflicense for cause........................44

Subpart E -- General Provisions

10.90 Records......................................4510.91 Saving clause.............................4510.92 Special orders.............................4510.93 Effective date.............46

Addendum..46

Paragraph 1. The authority citationfor subtitle A, part 10 is revised toread as follows:

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

10.0 Scope of part.

This part contains rules governing therecognition of attorneys, certified public

accountants, enrolled agents, and otherpersons representing taxpayers beforethe Internal Revenue Service. Subpart Aof this part sets forth rules relating to theauthority to practice before the Internal

Revenue Service; Subpart B of this partprescribes the duties and restrictionsrelating to such practice; Subpart C ofthis part prescribes the sanctions forviolating the regulations; Subpart D ofthis part contains the rules applicable todisciplinary proceedings; and Subpart Eof this part contains general provisionsincluding provisions relating to theavailability of official records.

Subpart A -- Rules GoverningAuthority to Practice

10.1 Director of Practice.

(a) Establishment of office. The Officeof Director of Practice is established inthe Office of the Secretary of theTreasury. The Director of Practice isappointed by the Secretary of theTreasury, or his or her designate.

(b) Duties. The Director of Practiceacts on applications for enrollment topractice before the Internal RevenueService; makes inquiries with respect tomatters under his or her jurisdiction;institutes and provides for the conduct ofdisciplinary proceedings relating toattorneys, certified public accountants,enrolled agents, enrolled actuaries andappraisers; and performs other duties asare necessary or appropriate to carry outhis or her functions under this part or asare prescribed by the Secretary of theTreasury, or his or her delegate.

(c) Acting Director of Practice. TheSecretary of the Treasury, or his or herdelegate, will designate an officer oremployee of the Treasury Department toact as Director of Practice in the absence


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of the Director or a vacancy in thatoffice.

10.2 Definitions.

As used in this part, except where thetext clearly provides otherwise:(a) Attorney means any person who is

a member in good standing of the bar ofthe highest court of any State, territory,or possession of the United States,including a Commonwealth, or theDistrict of Columbia.

(b) Certified public accountantmeansany person who is duly qualified topractice as a certified public accountant

in any State, territory, or possession ofthe United States, including aCommonwealth, or the District ofColumbia.

(c) Commissionerrefers to theCommissioner of Internal Revenue.

(d) Practice before the Internal

Revenue Service comprehends allmatters connected with a presentation tothe Internal Revenue Service or any ofits officers or employees relating to ataxpayers rights, privileges, or liabilitiesunder laws or regulations administeredby the Internal Revenue Service. Suchpresentations include, but are not limitedto, preparing and filing documents,corresponding and communicating withthe Internal Revenue Service, andrepresenting a client at conferences,hearings, and meetings.

(e) Practitionermeans any individualdescribed in paragraphs (a), (b), (c), or(d) of 10.3.

(f) A tax return includes an amendedtax return and a claim for refund.

(g) Service means the InternalRevenue Service.

10.3 Who may practice.

(a) Attorney. Any attorney who is notcurrently under suspension ordisbarment from practice before theInternal Revenue Service may practicebefore the Internal Revenue Service by

filing with the Internal Revenue Servicea written declaration that he or she iscurrently qualified as an attorney and isauthorized to represent the party orparties on whose behalf he or she acts.

(b) Certified public accountants. Anycertified public accountant who is notcurrently under suspension ordisbarment from practice before theInternal Revenue Service may practicebefore the Internal Revenue Service by

filing with the Internal Revenue Servicea written declaration that he or she iscurrently qualified as a certifiedpublic accountant and is authorized torepresent the party or parties on whosebehalf he or she acts.

(c) Enrolled agents. Any individualenrolled as an agent pursuant to this partwho is not currently under suspension ordisbarment from practice before theInternal Revenue Service may practicebefore the Internal Revenue Service.

(d) Enrolled actuaries. (1) Anyindividual who is enrolled as an actuaryby the Joint Board for the Enrollment ofActuaries pursuant to 29 U.S.C. 1242who is not currently under suspension ordisbarment from practice before theInternal Revenue Service may practicebefore the Internal Revenue Service byfiling with the Internal Revenue Servicea written declaration stating that he orshe is currently qualified as anenrolled actuary and is authorized torepresent the party or parties on whosebehalf he or she acts.

(2) Practice as an enrolled actuary islimited to representation with respect toissues involving the following statutoryprovisions in title 26 of the United States


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Code: sections 401 (relating toqualification of employee plans), 403(a)(relating to whether an annuity planmeets the requirements of section 404(a)(2)), 404 (relating to deductibility

of employer contributions), 405 (relatingto qualification of bond purchase plans),412 (relating to funding requirements forcertain employee plans), 413 (relating toapplication of qualification requirementsto collectively bargained plans and toplans maintained by more than oneemployer), 414 (relating to definitionsand special rules with respect to theemployee plan area), 419 (relating totreatment of funded welfare

benefits), 419A (relating to qualifiedasset accounts), 420 (relating to transfersof excess pension assets to retiree healthaccounts), 4971 (relating to excise taxespayable as a result of an accumulatedfunding deficiency under section 412),4972 (relating to tax on nondeductiblecontributions to qualified employerplans), 4976 (relating to taxes withrespect to funded welfare benefit plans),4980 (relating to tax on reversion ofqualified plan assets to employer), 6057(relating to annual registration ofplans), 6058 (relating to informationrequired in connection with certain plansof deferred compensation), 6059(relating to periodic report of actuary),6652(e) (relating to the failure to fileannual registration and othernotifications by pension plan), 6652(f)(relating to the failure to file informationrequired in connection with certain plansof deferred compensation), 6692(relating to the failure to file actuarialreport), 7805(b) (relating to the extent towhich an Internal Revenue Serviceruling or determination letter comingunder the statutory provisions listed herewill be applied without retroactive

effect); and 29 U.S.C. 1083 (relating tothe waiver of funding for nonqualifiedplans).

(3) An individual who practicesbefore the Internal Revenue Service

pursuant toparagraph (d) (1) of this section issubject to the provisions of this part inthe same manner as attorneys, certifiedpublic accountants and enrolled agents.

(e) Others. Any individual qualifyingunder paragraph (d) of 10.5 or 10.7 iseligible to practice before the InternalRevenue Service to the extent providedin those sections.

(f) Government officers and

employees, and others. An individual,who is an officer or employee of theexecutive, legislative, or judicial branchof the United States Government; anofficer or employee of the District ofColumbia; a Member of Congress;or a Resident Commissioner may notpractice before the Internal RevenueService if such practice violates 18U.S.C. 203 or 205.

(g) State officers and employees. Noofficer or employee of any State, orsubdivision of any State, whose dutiesrequire him or her to pass upon,investigate, or deal with tax matters forsuch State or subdivision, may practicebefore the Internal Revenue Service, ifsuch employment may disclose facts orinformation applicable to Federal taxmatters.

10.4 Eligibility for enrollment.

(a) Enrollment upon examination.

The Director of Practice may grantenrollment to an applicant whodemonstrates special competence in taxmatters by written examinationadministered by, or administered underthe oversight of, the Director of


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Practice and who has not engaged in anyconduct that would justify the censure,suspension or disbarment of anypractitioner under the provisions of thispart.

(b) Enrollment of former InternalRevenue Service employees. TheDirector of Practice may grantenrollment to an applicant who, byvirtue of his or her past service andtechnical experience in the InternalRevenue Service, has qualified for suchenrollment and who has not engaged inany conduct that would justify thecensure, suspension, or disbarment ofany practitioner under the provisions of

this part, under the followingcircumstances--(1) The former employee applies for

enrollment to the Director of Practice ona form supplied by the Director ofPractice and supplies the informationrequested on the form and such otherinformation regarding the experienceand training of the applicantas may be relevant.

(2) An appropriate office of theInternal Revenue Service, at the requestof the Director of Practice, will providethe Director of Practice with a detailedreport of the nature and rating of theapplicant's work while employed by theInternal Revenue Service and arecommendation whether suchemployment qualifies the applicanttechnically or otherwise for the desiredauthorization.

(3) Enrollment based on anapplicants former employment with theInternal Revenue Service may be ofunlimited scope or it may be limited topermit the presentation of matters onlyof the particular class or only before theparticular unit or division of the InternalRevenue Service for which theapplicants former employment

has qualified the applicant.(4) Application for enrollment based

on an applicants former employmentwith the Internal Revenue Service mustbe made within 3 years from the date of

separation from such employment.(5) An applicant for enrollment who isrequesting such enrollment based on hisor her former employment with theInternal Revenue Service must have hada minimum of 5 years continuousemployment with the Internal RevenueService during which he or she musthave been regularly engaged in applyingand interpreting the provisions of theInternal Revenue Code and the

regulations thereunder relating toincome, estate, gift, employment, orexcise taxes.

(6) For the purposes of paragraph(b)(5) of this section, an aggregate of 10or more years of employment inpositions involving the application andinterpretation of the provisions of theInternal Revenue Code, at least 3 ofwhich occurred within the 5 yearspreceding the date of application, is theequivalent of 5 years continuousemployment.

(c) Natural persons. Enrollment topractice may be granted only to naturalpersons.

10.5Application for enrollment.

(a) Form; address. An applicant forenrollment must file an application onForm 23, Application for Enrollment toPractice Before the Internal RevenueService, properly executed under oathor affirmation, with the Director ofPractice. The address of the applicantentered on Form 23 will be the addressunder which a successful applicant isenrolled and is the address to which theDirector of Practice will send


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correspondence concerning enrollment.An enrolled agent must send notificationof any change to his or her enrollmentaddress to the Director of Practice,Internal Revenue Service, 1111

Constitution Avenue, NW, Washington,DC 20224, or at such other addressspecified by the Director of Practice.This notification must include theenrolled agents name, old address, newaddress, social security number or taxidentification number, signature, and thedate.

(b) Fee. The application forenrollment must be accompanied by acheck or money order in the amount set

forth on Form 23, payable to the InternalRevenue Service, which amountconstitutes a fee charged to eachapplicant for enrollment. Thisfee will be retained by the United Stateswhether or not the applicant is grantedenrollment.

(c) Additional information;

examination. The Director of Practice, asa condition to consideration of anapplication for enrollment, may requirethe applicant to file additionalinformation and to submit to any writtenor oral examination under oath orotherwise. The Director of Practice will,on written request filed by an applicant,afford such applicant the opportunity tobe heard with respect to his or herapplication for enrollment.

(d) Temporary recognition. On receiptof a properly executed application, theDirector of Practice may grant theapplicant temporary recognition topractice pending a determination as towhether enrollment to practice should begranted. Temporary recognition will begranted only in unusual circumstancesand it will not be granted, in anycircumstance, if the application is notregular on its face, if the information

stated in the application, if true, is notsufficient to warrant enrollment topractice, or if there is any informationbefore the Director of Practice indicatingthat the statements in the application are

untrue or that the applicant would nototherwise qualify for enrollment.Issuance of temporary recognition doesnot constitute enrollment to practice or afinding of eligibility for enrollment, andthe temporary recognition may bewithdrawn at any time by the Director ofPractice.

(e) Appeal from denial of application.The Director of Practice must inform theapplicant as to the reason(s) for any

denial of an application for enrollment.The applicant may, within 30 days afterreceipt of the notice of denial ofenrollment, file a written appeal of thedenial of enrollment with the Secretaryof the Treasury or his or her delegate. Adecision on the appeal will be renderedby the Secretary of the Treasury, or hisor her delegate, as soon as practicable.

10.6 Enrollment.

(a) Roster. The Director of Practicewill maintain rosters of all individuals--

(1) Who have been granted activeenrollment to practice before the InternalRevenue Service;

(2) Whose enrollment has been placedin inactive status for failure to meet therequirements for renewal of enrollment;

(3) Whose enrollment has been placedin inactive retirement status;

(4) Who have been censured,suspended, or disbarred from practicebefore the Internal Revenue Service;

(5) Whose offer of consent to resignfrom enrollment to practice before theInternal Revenue Service has beenaccepted by the Director of Practiceunder 10.61; and


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(6) Whose application for enrollmenthas been denied.

(b) Enrollment card. The Director ofPractice will issue an enrollment cardto each individual whose application for

enrollment to practice before the InternalRevenue Service is approved afterJuly 26, 2002. Each enrollment card willbe valid for the period stated on theenrollment card. An individual is noteligible to practice before the InternalRevenue Service if his or her enrollmentcard is not valid.

(c) Term of enrollment. Eachindividual enrolled to practice before theInternal Revenue Service will be

accorded active enrollment status subjectto his or her renewal of enrollment asprovided in this part.

(d) Renewal of enrollment. Tomaintain active enrollment to practicebefore the Internal Revenue Service,each individual enrolled is required tohave his or her enrollment renewed.Failure by an individual to receivenotification from the Director ofPractice of the renewal requirement willnot be justification for the failure tosatisfy this requirement.

(1) All individuals licensed to practicebefore the Internal Revenue Service whohave a social security number or taxidentification number that ends with thenumbers 0, 1, 2, or 3, except for thoseindividuals who received their initialenrollment after November 1, 2003,must apply for renewal betweenNovember 1, 2003, and January 31,2004. The renewal will be effectiveApril 1, 2004.

(2) All individuals licensed to practicebefore the Internal Revenue Service whohave a social security number or taxidentification number that ends with thenumbers 4, 5, or 6, except for thoseindividuals who received their initial

enrollment after November 1, 2004,must apply for renewal betweenNovember 1, 2004, and January31, 2005. The renewal will be effectiveApril 1, 2005.

(3) All individuals licensed to practicebefore the Internal Revenue Service whohave a social security number or taxidentification number that ends with thenumbers 7, 8, or 9, except for thoseindividuals who received their initialenrollment after November 1, 2005,must apply for renewal betweenNovember 1, 2005, and January 31,2006. The renewal will be effectiveApril 1, 2006.

(4) Thereafter, applications forrenewal will be required betweenNovember 1 and January 31 of everysubsequent third year as specified inparagraphs (d)(1),(2) or (3) of thissection according to the last number ofthe individuals social security numberor tax identification number. Thoseindividuals who receive initialenrollment after November 1 and beforeApril 2 of the applicable renewal periodwill not be required to renew theirenrollment before the first full renewalperiod following the receipt of theirinitial enrollment.

(5) The Director of Practice willnotify the individual of his or herrenewal of enrollment and will issue theindividual a card evidencing enrollment.

(6) A reasonable nonrefundable feemay be charged for each application forrenewal of enrollment filed with theDirector of Practice.

(7) Forms required for renewal maybe obtained from the Director ofPractice, Internal Revenue Service, 1111Constitution Avenue, NW., Washington,DC 20224.

(e) Condition for renewal:Continuingprofessional education. In order to


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qualify for renewal of enrollment, anindividual enrolled to practice before theInternal Revenue Service must certify,on the application for renewal formprescribed by the Director of Practice,

that he or she has satisfied the followingcontinuing professional educationrequirements.

(1) For renewed enrollment effectiveafter March 31, 2004. (i) A minimum of16 hours of continuing education creditmust be completed during each calendaryear in the enrollment term.

(2) For renewed enrollment effectiveafter April 1, 2007.

(i) A minimum of 72 hours of

continuing education credit must becompleted during each three year perioddescribed in paragraph (d)(4) of thissection. Each such three year period isknown as an enrollment cycle.

(ii) A minimum of 16 hours ofcontinuing education credit, including 2hours of ethics or professional conduct,must be completed in each year of anenrollment cycle.

(iii) An individual who receives initialenrollment during an enrollment cyclemust complete two (2) hours ofqualifying continuing education creditfor each month enrolled during theenrollment cycle. Enrollment for anypart of a month is consideredenrollment for the entire month.

(f) Qualifying continuing education--

(1) General. To qualify for continuingeducation credit, a course of learningmust --

(i) Be a qualifying program designedto enhance professional knowledgein Federal taxation or Federal tax relatedmatters, i.e., programs comprised ofcurrent subject matter in Federal taxationor Federal tax related matters, includingaccounting, tax preparation software andtaxation or ethics; and

(ii) Be conducted by a qualifyingsponsor.

(2) Qualifying programs--(i) Formal programs. A formal

program qualifies as continuing

education programs if it--(A) Requires attendance. Additionally,the program sponsor must provide eachattendee with a certificate of attendance;and

(B) Requires that the program beconducted by a qualified instructor,discussion leader, or speaker, i.e., aperson whose background, training,education and experience is appropriatefor instructing or leading a discussion on

the subject matter of the particularprogram; and(C) Provides or requires a written

outline, textbook, or suitable electroniceducational materials.

(ii) Correspondence or individualstudy programs (including tapedprograms). Qualifying continuingeducation programs includecorrespondence or individual studyprograms that are conducted byqualifying sponsors and completed on anindividual basis by the enrolledindividual. The allowable credit hoursfor such programs will be measured on abasis comparable to the measurement ofa seminar or course for credit in anaccredited educational institution. Suchprograms qualify as continuingeducation programs if they--

(A) Require registration of theparticipants by the sponsor;

(B) Provide a means for measuringcompletion by the participants (e.g., awritten examination), including theissuance of a certificate of completion bythe sponsor; and

(C) Provide a written outline,textbook, or suitable electroniceducational materials.


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(iii) Serving as an instructor,discussion leader or speaker.

(A) One hour of continuing educationcredit will be awarded for each contacthour completed as an instructor,

discussion leader, or speaker at aneducational program that meets thecontinuing education requirements ofparagraph (f) of this section.

(B) Two hours of continuingeducation credit will be awarded foractual subject preparation time for eachcontact hour completed as an instructor,discussion leader, or speaker at suchprograms. It is the responsibility of theindividual claiming such credit to

maintain records to verify preparationtime.(C) The maximum credit for

instruction and preparation may notexceed 50 percent of the continuingeducation requirement for an enrollmentcycle.

(D) An instructor, discussion leader,or speaker who makes more than onepresentation on the same subject matterduring an enrollment cycle, will receivecontinuing education credit for only onesuch presentation for the enrollmentcycle.

(iv) Credit for published articles,books, etc.

(A) Continuing education credit willbe awarded for publications on Federaltaxation or Federal tax related matters,including accounting, financialmanagement, tax preparation software,and taxation, provided the content ofsuch publications is current and designedfor the enhancement of the professionalknowledge of an individual enrolled topractice before the Internal RevenueService.

(B) The credit allowed will be on thebasis of one hour credit for each hour of

preparation time for the material. It is theresponsibility of the person claiming thecredit to maintain records to verifypreparation time.

(C) The maximum credit for

publications may not exceed 25 percentof the continuing education requirementof any enrollment cycle.

(3) Periodic examination.(i) Individuals may establish

eligibility for renewal of enrollment forany enrollment cycle by--

(A) Achieving a passing score on eachpart of the Special EnrollmentExamination administered under thispart during the three year period prior to

renewal; and(B) Completing a minimum of 16hours of qualifying continuing educationduring the last year of an enrollmentcycle.

(ii) Courses designed to help anapplicant prepare for the examinationspecified in paragraph (a) of 10.4 areconsidered basic in nature and are notqualifying continuing education.

(g) Sponsors.

(1) Sponsors are those responsible forpresenting programs.

(2) To qualify as a sponsor, a programpresenter must--

(i) Be an accredited educationalinstitution;

(ii) Be recognized for continuingeducation purposes by the licensingbody of any State, territory, orpossession of the United States,including a Commonwealth, or theDistrict of Columbia.

(iii) Be recognized by the Director ofPractice as a professional organization orsociety whose programs include offeringcontinuing professional educationopportunities in subject matters withinthe scope of paragraph (f)(1)(i) of thissection; or


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(iv) File a sponsor agreement with theDirector of Practice and obtain approvalof the program as a qualified continuingeducation program.

(3) A qualifying sponsor must ensure

the program complies with the followingrequirements--(i) Programs must be developed by

individual(s) qualified in the subjectmatter;

(ii) Program subject matter must becurrent;

(iii) Instructors, discussion leaders,and speakers must be qualified withrespect to program content;

(iv) Programs must include some

means for evaluation of technicalcontent and presentation;(v) Certificates of completion must be

provided to the participants whosuccessfully complete the program; and

(vi) Records must be maintained bythe sponsor to verify the participantswho attended and completed theprogram for a period of three yearsfollowing completion of the program. Inthe case of continuous conferences,conventions, and the like, recordsmust be maintained to verify completionof the program and attendance by eachparticipant at each segment of theprogram.

(4) Professional organizations orsocieties wishing to be considered asqualified sponsors must request thisstatus from the Director of Practice andfurnish information in support of therequest together with any furtherinformation deemed necessary by theDirector of Practice.

(5) A professional organization orsociety recognized as a qualified sponsorby the Director of Practice will retain itsstatus for one enrollment cycle. TheDirector of Practice will publish the

names of such sponsors on a periodicbasis.

(h) Measurement of continuing

education coursework.

(1) All continuing education programs

will be measured in terms of contacthours. The shortest recognized programwill be one contact hour.

(2) A contact hour is 50 minutes ofcontinuous participation in a program.Credit is granted only for a full contacthour, i.e., 50 minutes or multiplesthereof. For example, a program lastingmore than 50 minutes but less than 100minutes will count as one contact hour.

(3) Individual segments at continuous

conferences, conventions and the likewill be considered one total program.For example, two 90-minute segments(180 minutes) at a continuousconference will count as three contacthours.

(4) For university or college courses,each semester hour credit will equal 15contact hours and a quarter hour creditwill equal 10 contact hours.

(i) Recordkeeping requirements.

(1) Each individual applying forrenewal must retain for a period of threeyears following the date of renewal ofenrollment the information required withregard to qualifying continuingprofessional education credithours. Such information includes--

(i) The name of the sponsoringorganization;

(ii) The location of the program;(iii) The title of the program and

description of its content;(iv) Written outlines, course syllabi,

textbook, and/or electronic materialsprovided or required for the course;

(v) The dates attended;(vi) The credit hours claimed;(vii) The name(s) of the instructor(s),

discussion leader(s), or speaker(s), if


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appropriate; and(viii) The certificate of completion

and/or signed statement of the hours ofattendance obtained from the sponsor.

(2) To receive continuing education

credit for service completed as aninstructor, discussion leader, or speaker,the following information must bemaintained for a period of three yearsfollowing the date of renewal ofenrollment--

(i) The name of the sponsoringorganization;

(ii) The location of the program;(iii) The title of the program and

description of its content;

(iv) The dates of the program; and(v) The credit hours claimed.(3) To receive continuing education

credit for publications, the followinginformation must be maintained for aperiod of three years following the dateof renewal of enrollment--

(i) The publisher;(ii) The title of the publication;(iii) A copy of the publication;(iv) The date of publication; and(v) Records that substantiate the hours

worked on the publication.(j) Waivers. (1) Waiver from the

continuing education requirements for agiven period may be granted by theDirector of Practice for the followingreasons--

(i) Health, which preventedcompliance with the continuingeducation requirements;

(ii) Extended active military duty;(iii) Absence from the United States

for an extended period of time due toemployment or other reasons, providedthe individual does not practice beforethe Internal Revenue Service duringsuch absence; and

(iv) Other compelling reasons, whichwill be considered on a case-by-case

basis.(2) A request for waiver must be

accompanied by appropriatedocumentation. The individual isrequired to furnish any additional

documentation or explanationdeemed necessary by the Director ofPractice. Examples of appropriatedocumentation could be a medicalcertificate or military orders.

(3) A request for waiver must be filedno later than the last day of the renewalapplication period.

(4) If a request for waiver is notapproved, the individual will be placedin inactive status, so notified by the

Director of Practice, and placed on aroster of inactive enrolled individuals.(5) If a request for waiver is approved,

the individual will be notified and issueda card evidencing renewal.

(6) Those who are granted waivers arerequired to file timely applications forrenewal of enrollment.

(k) Failure to comply. (1) Complianceby an individual with the requirementsof this part is determined by the Directorof Practice. An individual who fails tomeet the requirements of eligibility forrenewal of enrollment will be notified bythe Director of Practice at his or herenrollment address by first class mail.The notice will state the basis for thedetermination of noncompliance and willprovide the individual an opportunity tofurnish information in writing relating tothe matter within 60 days of thedate of the notice. Such information willbe considered by the Director of Practicein making a final determination as toeligibility for renewal of enrollment.

(2) The Director of Practice mayrequire any individual, by notice sent byfirst class mail to his or her enrollmentaddress, to provide copies of any recordsrequired to be maintained under this


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part. The Director of Practice maydisallow any continuing professionaleducation hours claimed if the individualfails to comply with this requirement.

(3) An individual who has not filed a

timely application for renewal ofenrollment, who has not made a timelyresponse to the notice of noncompliancewith the renewal requirements, or whohas not satisfied the requirements ofeligibility for renewal will beplaced on a roster of inactive enrolledindividuals. During this time, theindividual will be ineligible to practicebefore the Internal Revenue Service.

(4) Individuals placed in inactive

enrollment status and individualsineligible to practice before the InternalRevenue Service may not state or implythat they are enrolled to practice beforethe Internal Revenue Service, or use theterm enrolled agent, the designation"E. A." or other form of reference toeligibility to practice before the InternalRevenue Service.

5) An individual placed in an inactivestatus may be reinstated to an activeenrollment status by filing an applicationfor renewal of enrollment and providingevidence of the completion of allrequired continuing professionaleducation hours for the enrollment cycle.Continuing education credit under thisparagraph (k)(5) may not be used tosatisfy the requirements of theenrollment cycle in which the individualhas been placed back on the activeroster.

(6) An individual placed in an inactivestatus must file an application forrenewal of enrollment and satisfy therequirements for renewal as set forth inthis section within three years of beingplaced in an inactive status. The name ofsuch individual otherwise will beremoved from the inactive enrollment

roster and his or her enrollment willterminate. Eligibility for enrollmentmust then be reestablished by theindividual as provided in this section.

(7) Inactive enrollment status is not

available to an individual who is thesubject of a disciplinary matter in theOffice of Director of Practice.

(l) Inactive retirement status. Anindividual who no longer practicesbefore the Internal Revenue Service mayrequest being placed in an inactive statusat any time and such individual will beplaced in an inactive retirement status.The individual will be ineligible topractice before the Internal Revenue

Service. Such individual must file atimely application for renewal ofenrollment at each applicable renewal orenrollment period as provided in thissection. An individual who is placed inan inactive retirement status may bereinstated to an active enrollment statusby filing an application for renewal ofenrollment and providing evidence ofthe completion of the requiredcontinuing professional education hoursfor the enrollment cycle. Inactiveretirement status is not available to anindividual who is subject of adisciplinary matter in the Office ofDirector of Practice.

(m) Renewal while under suspension

or disbarment. An individual who isineligible to practice before the InternalRevenue Service by virtue ofdisciplinary action is required to be inconformance with the requirements forrenewal of enrollment before his or hereligibility is restored.

(n) Verification. The Director ofPractice may review the continuingeducation records of an enrolledindividual and/or qualified sponsor in amanner deemed appropriate to determinecompliance with the requirements and


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standards for renewal of enrollment asprovided in paragraph (f) of this section.

(o) Enrolled Actuaries. Theenrollment and the renewal ofenrollment of actuaries authorized to

practice under paragraph (d) of 10.3 aregoverned by the regulations of the JointBoard for the Enrollment of Actuaries at20 CFR 901.1 through 901.71.

(Approved by the Office of Managementand Budget under Control No. 1545-0946 and 1545-1726)

10.7Representing oneself;

participating in rulemaking; limited

practice; special appearances; andreturn preparation.

(a) Representing oneself. Individualsmay appear on their own behalf beforethe Internal Revenue Service providedthey present satisfactory identification.

(b) Participating in rulemaking.Individuals may participate inrulemaking as provided by theAdministrative Procedure Act. See 5U.S.C. 553.

(c) Limited practice--(1) In general.Subject to the limitations in paragraph(c)(2) of this section, an individual whois not a practitioner may represent ataxpayer before the Internal RevenueService in the circumstances describedin this paragraph (c)(1), even if thetaxpayer is not present, provided theindividual presents satisfactoryidentification and proof of his or herauthority to represent the taxpayer. Thecircumstances described in thisparagraph (c)(1) are as follows:

(i) An individual may represent amember of his or her immediate family.

(ii) A regular full-time employee of anindividual employer may representthe employer.

(iii) A general partner or a regularfull-time employee of a partnership mayrepresent the partnership.

(iv) A bona fide officer or a regularfull-time employee of a corporation

(including a parent, subsidiary, or otheraffiliated corporation), association, ororganized group may represent thecorporation, association, or organizedgroup.

(v) A regular full-time employee of atrust, receivership, guardianship, orestate may represent the trust,receivership, guardianship, or estate.

(vi) An officer or a regular employeeof a governmental unit, agency, or

authority may represent thegovernmental unit, agency, or authorityin the course of his or her official duties.

(vii) An individual may represent anyindividual or entity, who is outside theUnited States, before personnel of theInternal Revenue Service when suchrepresentation takes place outside theUnited States.

(viii) An individual who prepares andsigns a taxpayer's tax return as thepreparer, or who prepares a tax returnbut is not required (by the instructions tothe tax return or regulations) to sign thetax return, may represent the taxpayerbefore revenue agents, customer servicerepresentatives or similar officers andemployees of the Internal RevenueService during an examination of thetaxable year or period coveredby that tax return, but, unless otherwiseprescribed by regulation or notice, thisright does not permit such individual torepresent the taxpayer, regardless of thecircumstances requiring representation,before appeals officers, revenue officers,Counsel or similar officers or employeesof the Internal Revenue Service or theDepartment of Treasury.


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(2) Limitations. (i) An individual whois under suspension or disbarment frompractice before the Internal RevenueService may not engage in limitedpractice before the Internal Revenue

Service under paragraph (c)(1) of thissection.(ii) The Director, after notice and

opportunity for a conference, may denyeligibility to engage in limited practicebefore the Internal Revenue Serviceunder paragraph (c)(1) of this section toany individual who has engaged inconduct that would justify censuring,suspending, or disbarring a practitionerfrom practice before the Internal

Revenue Service.(iii) An individual who represents ataxpayer under the authority ofparagraph (c)(1) of this section issubject, to the extent of his or herauthority, to such rules of generalapplicability regarding standards ofconduct and other matters as the Directorof Practice prescribes.

(d) Special appearances. The Directorof Practice may, subject to suchconditions as he or she deemsappropriate, authorize an individual whois not otherwise eligible to practicebefore the Internal Revenue Service torepresent another person in aparticular matter.

(e) Preparing tax returns and

furnishing information.Any individualmay prepare a tax return, appear as awitness for the taxpayer before theInternal Revenue Service, or furnishinformation at the request of the InternalRevenue Service or any of its officers oremployees.

(f) Fiduciaries. For purposes of thispart, a fiduciary (i.e., a trustee, receiver,guardian, personal representative,administrator, or executor) is considered

to be the taxpayer and not arepresentative of the taxpayer.

10.8Customhouse brokers.

Nothing contained in the regulations inthis part will affect or limit the right of acustomhouse broker, licensed as such bythe Commissioner of Customs inaccordance with the regulationsprescribed therefore, in any customsdistrict in which he or she is solicensed, at a relevant local office of theInternal Revenue Service or before theNational Office of the Internal RevenueService, to act as a representative in

respect to any matters relatingspecifically to the importation orexportation of merchandise underthe customs or internal revenue laws, forany person for whom he or she has actedas a customhouse broker.

- Par. 3. In part 10, subpart B is amendedby revising 10.20 through 10.32 andrevising 10.34.

Subpart B -- Duties and Restrictions

Relating to Practice Before the

Internal Revenue Service

10.20Information to be furnished

(a) To the Internal Revenue Service

(1) A practitioner must, on a properand lawful request by a duly authorizedofficer or employee of the InternalRevenue Service, promptly submitrecords or information in any matterbefore the Internal Revenue Serviceunless the practitioner believes in goodfaith and on reasonable grounds thatthe records or information are privileged.

(2) Where the requested records orinformation are not in the possession of,or subject to the control of, the


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practitioner or the practitioners client,the practitioner must promptly notify therequesting Internal Revenue Serviceofficer or employee and thepractitioner must provide any

information that the practitioner hasregarding the identity of any person whothe practitioner believes may havepossession or control of the requestedrecords or information. The practitionermust make reasonable inquiry of hisor her client regarding the identity of anyperson who may have possession orcontrol of the requested records orinformation, but the practitioner is notrequired to make inquiry of any other

person or independently verify anyinformation provided by thepractitioners client regarding theidentity of such persons.

(b) To the Director of Practice. Whena proper and lawful request is made bythe Director of Practice, a practitionermust provide the Director of Practicewith any information the practitioner hasconcerning an inquiry by the Director ofPractice into an alleged violation of theregulations in this part by any person,and to testify regarding this informationin any proceeding instituted under thispart, unless the practitioner believes ingood faith and on reasonable groundsthat the information is privileged.

(c) Interference with a proper and

lawful request for records or

information. A practitioner may notinterfere, or attempt to interfere, withany proper and lawful effort by theInternal Revenue Service, its officers oremployees, or the Director of Practice,or his or her employees, to obtain anyrecord or information unless thepractitioner believes in good faith and onreasonable grounds that the record orinformation is privileged.

10.21 Knowledge of client's

omission.

A practitioner who, having beenretained by a client with respect to a

matter administered by the InternalRevenue Service, knows that the clienthas not complied with the revenue lawsof the United States or has made an errorin or omission from any return,document, affidavit, or other paperwhich the client submitted or executedunder the revenue laws of the UnitedStates, must advise the client promptlyof the fact of such noncompliance, error,or omission. The practitioner must

advise the client of the consequences asprovided under the Code and regulationsof such noncompliance, error, oromission.

10.22 Diligence as to accuracy.

(a) In general. A practitioner mustexercise due diligence--

(1) In preparing or assisting in thepreparation of, approving, and filing taxreturns, documents, affidavits, and otherpapers relating to Internal RevenueService matters;

(2) In determining the correctness oforal or written representations made bythe practitioner to the Department of theTreasury; and

(3) In determining the correctness oforal or written representations made bythe practitioner to clients with referenceto any matter administered by theInternal Revenue Service.

(b) Reliance on others. Except asprovided in 10.33 and 10.34, apractitioner will be presumed to haveexercised due diligence for purposes ofthis section if the practitioner relies onthe work product of another person andthe practitioner used reasonable care in


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engaging, supervising, training, andevaluating the person, takingproper account of the nature of therelationship between the practitioner andthe person.

10.23 Prompt disposition of pending

matters.

A practitioner may not unreasonablydelay the prompt disposition of anymatter before the Internal RevenueService.

10.24 Assistance from or to

disbarred or suspended persons and

former Internal Revenue Serviceemployees.

A practitioner may not, knowinglyand directly or indirectly:

(a) Accept assistance from or assistany person who is under disbarment orsuspension from practice before theInternal Revenue Service if theassistance relates to a matter or mattersconstituting practice before the InternalRevenue Service.

(b) Accept assistance from any formergovernment employee where theprovisions of 10.25 or any Federal lawwould be violated.

10.25 Practice by former

Government employees, their partners

and their associates.

(a) Definitions. For purposes of thissection--

(1) Assist means to act in such a wayas to advise, furnish information to, orotherwise aid another person, directly orindirectly.

(2) Government employee is anofficer or employee of the United Statesor any agency of the United States,

including a special governmentemployee as defined in 18 U.S.C.202(a), or of the District of Columbia, orof any State, or a member of Congress orof any State legislature.

(3) Member of a firm is a solepractitioner or an employee or associatethereof, or a partner, stockholder,associate, affiliate or employee of apartnership, joint venture, corporation,professional association or otheraffiliation of two or more practitionerswho represent nongovernmental parties.

(4) Practitioner includes anyindividual described in paragraph (f) of 10.2.

(5) Official responsibility means thedirect administrative or operatingauthority, whether intermediate or final,and either exercisable alone or withothers, and either personally or throughsubordinates, to approve, disapprove, orotherwise direct Government action,with or without knowledge of the action.

(6) Participate or participation meanssubstantial involvement as aGovernment employee by makingdecisions, or preparing or reviewingdocuments with or without theright to exercise a judgment of approvalor disapproval, or participating inconferences or investigations, orrendering advice of a substantial nature.

(7) Rule includes TreasuryRegulations, whether issued or underpreparation for issuance as Notices ofProposed Rule Making or as TreasuryDecisions; revenue rulings; and revenueprocedures published in the InternalRevenue Bulletin. Rule does not includea transaction as defined in paragraph(a)(8) of this section.

(8) Transaction means any decision,determination, finding, letter ruling,technical advice, Chief Counsel advice,or contract or the approval or


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disapproval thereof, relating to aparticular factual situation or situationsinvolving a specific party or partieswhose rights, privileges, or liabilitiesunder laws or regulations administered

by the Internal Revenue Service, or otherlegal rights, are determined orimmediately affected therein and towhich the United States is a party or inwhich it has a direct and substantialinterest, whether or not the same taxableperiods are involved. Transactiondoes not include rule as defined inparagraph (a)(7) of this section.

(b) General rules.

(1) No former Government employee

may, subsequent to his or herGovernment employment, representanyone in any matter administered bythe Internal Revenue Service if therepresentation would violate 18 U.S.C.207 or any other laws of the UnitedStates.

(2) No former Government employeewho participated in a transaction may,subsequent to his or her Governmentemployment, represent or knowinglyassist, in that transaction, any personwho is or was a specific party to thattransaction.

(3) A former Government employeewho within a period of one year prior tothe termination of Governmentemployment had official responsibilityfor a transaction may not, within twoyears after his or her Governmentemployment is ended, represent orknowingly assist in that transaction anyperson who is or was a specific party tothat transaction.

(4) No former Government employeemay, within one year after his or herGovernment employment is ended,appear before any employee of theTreasury Department in connection withthe publication, withdrawal, amendment,

modification, or interpretation of a rulein the development of which the formerGovernment employee participated orfor which, within a period of one yearprior to the termination of his or her

Government employment, he or she hadofficial responsibility. This paragraph(b)(4) does not, however, preclude suchformer employee from appearing on hisor her own behalf or from representing ataxpayer before the Internal RevenueService in connection with a transactioninvolving the application orinterpretation of such a rule with respectto that transaction, provided that suchformer employee does not utilize or

disclose any confidential informationacquired by the former employee in thedevelopment of the rule.

(c) Firm representation.

(1) No member of a firm of which aformer Government employee is amember may represent or knowinglyassist a person who was or is aspecific party in any transaction withrespect to which the restrictions ofparagraph (b)(2) or (3) of this sectionapply to the former Governmentemployee, in that transaction, unless thefirm isolates the former Governmentemployee in such a way to ensure thatthe former Government employee cannotassist in the representation.

(2) When isolation of a formerGovernment employee is required underparagraph (c)(1) of this section, astatement affirming the fact of suchisolation must be executed under oath bythe former Government employee andby another member of the firm acting onbehalf of the firm. The statement mustclearly identify the firm, the formerGovernment employee, and thetransaction(s) requiring isolation and itmust be filed with the Director ofPractice (and at such other place(s)


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directed by the Director of Practice) andin such other place and in the mannerprescribed by rule or regulation.

(d) Pending representation. Practiceby former Government employees, their

partners and associates with respect torepresentation in specific matters whereactual representation commenced beforeJuly 26, 2002, is governed by theregulations set forth at 31 CFR Part 10revised as of July 1, 2002. The burden ofshowing that representation commencedbefore July 26, 2002, lies with theformer Government employees, andtheir partners and associates.

10.26 Notaries.

A practitioner may not takeacknowledgments, administer oaths,certify papers, or perform any officialact as a notary public with respect to anymatter administered by the InternalRevenue Service and for which he or sheis employed as counsel, attorney,or agent, or in which he or she may be inany way interested.

10.27 Fees.

(a) Generally. A practitioner may notcharge an unconscionable fee forrepresenting a client in a matter beforethe Internal Revenue Service.

(b) Contingent fees.

(1) For purposes of this section, acontingent fee is any fee that is based, inwhole or in part, on whether or not aposition taken on a tax return or otherfiling avoids challenge by the InternalRevenue Service or is sustained either bythe Internal Revenue Service or inlitigation. A contingent fee includes anyfee arrangement in which thepractitioner will reimburse the client forall or a portion of the clients fee in the

event that a position taken on a taxreturn or other filing is challengedby the Internal Revenue Service or is notsustained, whether pursuant to anindemnity agreement, a guarantee,

rescission rights, or any otherarrangement with a similar effect.(2) A practitioner may not charge a

contingent fee for preparing an originaltax return or for any advice rendered inconnection with a position taken or to betaken on an original tax return.

(3) A contingent fee may be chargedfor preparation of or advice inconnection with an amended tax returnor a claim for refund (other than a claim

for refund made on an original taxreturn), but only if the practitionerreasonably anticipates at the time the feearrangement is entered into that theamended tax return or refund claim willreceive substantive review by theInternal Revenue Service.

10.28 Return of clients records.

(a) In general, a practitioner must, atthe request of a client, promptly returnany and all records of the client that arenecessary for the client to comply withhis or her Federal tax obligations. Thepractitioner may retain copies of therecords returned to a client. Theexistence of a dispute over fees generallydoes not relieve the practitioner of his orher responsibility under this section.Nevertheless, if applicable state lawallows or permits the retention of aclients records by a practitioner in thecase of a dispute over fees for servicesrendered, the practitioner need onlyreturn those records that must beattached to the taxpayers return. Thepractitioner, however, must providethe client with reasonable access toreview and copy any additional records


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of the client retained by the practitionerunder state law that are necessary for theclient to comply with his or her Federaltax obligations.

(b) For purposes of this section--

Records of the client include alldocuments or written or electronicmaterials provided to the practitioner, orobtained by the practitioner in the courseof the practitioners representation of theclient, that preexisted the retention of thepractitioner by the client. The term alsoincludes materials that were prepared bythe client or a third party (not includingan employee or agent of the practitioner)at any time and provided to the

practitioner with respect to the subjectmatter of the representation. The termalso includes any return, claim forrefund, schedule, affidavit, appraisal orany other document prepared by thepractitioner, or his or her employee oragent, that was presented to the clientwith respect to a prior representation ifsuch document is necessary for thetaxpayer to comply with his or hercurrent Federal tax obligations. The termdoes not include any return, claim forrefund, schedule, affidavit, appraisal orany other document prepared by thepractitioner or the practitioners firm,employees or agents if the practitioner iswithholding such document pending theclients performance of its contractualobligation to pay fees with respect tosuch document.

10.29 Conflicting interests.

(a) Except as provided by paragraph(b) of this section, a practitioner shall notrepresent a client in his or her practicebefore the Internal Revenue Service ifthe representation involves a conflict ofinterest. A conflict of interest exists if:

(1) The representation of one clientwill be directly adverse to another client;or

(2) There is a significant risk that therepresentation of one or more clients will

be materially limited by thepractitioners responsibilities to anotherclient, a former client or a third personor by a personal interest of thepractitioner.

(b) Notwithstanding the existence of aconflict of interest under paragraph (a)of this section, the practitioner mayrepresent a client if:

(1) The practitioner reasonablybelieves that the practitioner will be able

to provide competent and diligentrepresentation to each affected client;(2) The representation is not

prohibited by law;(3) Each affected client gives

informed consent, confirmed in writing.(c) Copies of the written consents

must be retained by the practitioner forat least 36 months from the date of theconclusion of the representation of theaffected clients and the written consentsmust be provided to any officer oremployee of the Internal RevenueService on request.

(Approved by the Office of Managementand Budget under Control No. 1545-1726)

10.30 Solicitation.

(a) Advertising and solicitation

restrictions.

(1) A practitioner may not, withrespect to any Internal Revenue Servicematter, in any way use or participate inthe use of any form of publiccommunication or private solicitationcontaining a false, fraudulent, orcoercive statement or claim; or a


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misleading or deceptive statement orclaim. Enrolled agents, in describingtheir professional designation, may notutilize the term of art "certified" orimply an employer/employee

relationship with the Internal RevenueService. Examples of acceptabledescriptions are "enrolled to representtaxpayers before the Internal RevenueService," "enrolled to practice before theInternal Revenue Service, and"admitted to practice before the InternalRevenue Service."

(2) A practitioner may not make,directly or indirectly, an uninvitedwritten or oral solicitation of

employment in matters related to theInternal Revenue Service if thesolicitation violates Federal or State lawor other applicable rule, e.g., attorneysare precluded from making a solicitationthat is prohibited by conduct rulesapplicable to all attorneys in theirState(s) of licensure. Any lawfulsolicitation made by or on behalf of apractitioner eligible to practice beforethe Internal Revenue Service must,nevertheless, clearly identify thesolicitation as such and, if applicable,identify the source of theinformation used in choosing therecipient.

(b) Fee information.

(1)(i) A practitioner may publish theavailability of a written schedule of feesand disseminate the following feeinformation--

(A) Fixed fees for specific routineservices.

(B) Hourly rates.(C) Range of fees for particular

services.(D) Fee charged for an initial

consultation.(ii) Any statement of fee information

concerning matters in which costs may

be incurred must include a statementdisclosing whether clients will beresponsible for such costs.

(2) A practitioner may charge no morethan the rate(s) published under

paragraph (b)(1) of this section for atleast 30 calendar days after the last dateon which the schedule of fees waspublished.

(c) Communication of fee information.Fee information may be communicatedin professional lists, telephonedirectories, print media, mailings, andelectronic mail, facsimile, handdelivered flyers, radio, television, andany other method. The method chosen,

however, must not cause thecommunication to become untruthful,deceptive, or otherwise in violation ofthis part. A practitioner may not persistin attempting to contact a prospectiveclient if the prospective client has madeit known to the practitioner that he or shedoes not desire to be solicited. In thecase of radio and televisionbroadcasting, the broadcast must berecorded and the practitioner must retaina recording of the actual transmission. Inthe case of direct mail and e-commercecommunications, the practitioner mustretain a copy of the actualcommunication, along with a list orother description of persons to whom thecommunication was mailed or otherwisedistributed. The copy must be retainedby the practitioner for a period of at least36 months from the date of the lasttransmission or use.

(d) Improper associations. Apractitioner may not, in matters relatedto the Internal Revenue Service, assist,or accept assistance from, any person orentity who, to the knowledge of thepractitioner, obtains clients or otherwisepractices in a manner forbidden underthis section.


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(Approved by the Office of Managementand Budget under Control No. 1545-1726)

10.31 Negotiation of taxpayer

checks.

A practitioner who prepares taxreturns may not endorse or otherwisenegotiate any check issued to a client bythe government in respect of a Federaltax liability.

10.32 Practice of law.

Nothing in the regulations in this part

may be construed as authorizing personsnot members of the bar to practice law.

-Par.2 Section 10.33 is revised to read asfollows:

10.33 Best practices for tax advisors.

(a) Best practices. Tax advisorsshould provide clients with the highestquality representation concerningFederal tax issues by adhering to bestpractices in providing advice and inpreparing or assisting in the preparationof a submission to the Internal RevenueService. In addition to compliance withthe standards of practice providedelsewhere in this part, best practicesinclude the following:

(1) Communicating clearly with theclient regarding the terms of theengagement. For example, the advisorshould determine the clients expectedpurpose for and use of the advice andshould have a clear understanding withthe client regarding the form and scopeof the advice or assistance to berendered.

(2) Establishing the facts,determining which facts are relevant,

evaluating the reasonableness of anyassumptions or representations, relatingthe applicable law (including potentiallyapplicable judicial doctrines) to therelevant facts, and arriving at a

conclusion supported by the law and thefacts.(3) Advising the client regarding the

import of the conclusions reached,including, for example, whether ataxpayer may avoid accuracy-relatedpenalties under the Internal RevenueCode if a taxpayer acts in reliance on theadvice.

(4) Acting fairly and with integrity inpractice before the Internal Revenue

Service.(b) Procedures to ensure bestpractices for tax advisors. Tax advisorswith responsibility for overseeing afirms practice of providing adviceconcerning Federal tax issues or ofpreparing or assisting in the preparationof submissions to the Internal RevenueService should take reasonable steps toensure that the firms procedures for allmembers, associates, and employees areconsistent with the best practices setforth in paragraph (a) of this section.

(c) Applicability date. This sectionis effective after June 20, 2005.

10.34 Standards for advising with

respect to tax return positions and for

preparing or signing returns.

(a) Realistic possibility standard. Apractitioner may not sign a tax return asa preparer if the practitioner determinesthat the tax return contains a positionthat does not have a realistic possibilityof being sustained on its merits (therealistic possibility standard) unless theposition is not frivolous and isadequately disclosed to the Internal


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Revenue Service. A practitioner may notadvise a client to take a position on a taxreturn, or prepare the portion of a taxreturn on which a position is taken,unless--

(1) The practitioner determines thatthe position satisfies the realisticpossibility standard; or

(2) The position is not frivolous andthe practitioner advises the client of anyopportunity to avoid the accuracy-relatedpenalty in section 6662 of the InternalRevenue Code by adequately disclosingthe position and of the requirements foradequate disclosure.

(b) Advising clients on potential

penalties. A practitioner advising a clientto take a position on a tax return, orpreparing or signing a tax return as apreparer, must inform the client of thepenalties reasonably likely to apply tothe client with respect to the positionadvised, prepared, or reported. Thepractitioner also must inform the clientof any opportunity to avoid any suchpenalty by disclosure, if relevant, and ofthe requirements for adequate disclosure.This paragraph (b) applies even if thepractitioner is not subject to a penaltywith respect to the position.

(c) Relying on information furnished

by clients. A practitioner advising aclient to take a position on a tax return,or preparing or signing a tax return as apreparer, generally may rely in goodfaith without verification uponinformation furnished by theclient. The practitioner may not,however, ignore the implications ofinformation furnished to, or actuallyknown by, the practitioner, and mustmake reasonable inquiries if theinformation as furnished appears to beincorrect, inconsistent with an importantfact or another factual assumption, orincomplete.

(d) Definitions. For purposes of thissection--

(1) Realistic possibility. A position isconsidered to have a realistic possibilityof being sustained on its merits if a

reasonable and well informed analysis ofthe law and the facts by a personknowledgeable in the tax law would leadsuch a person to conclude that theposition has approximately a one inthree, or greater, likelihood ofbeing sustained on its merits. Theauthorities described in 26 CFR 1.6662-4(d)(3)(iii), or any successor provision,of the substantial understatement penaltyregulations may be taken into account

for purposes of this analysis. Thepossibility that a tax return will notbe audited, that an issue will not beraised on audit, or that an issue will besettled may not be taken into account.

(2) Frivolous. A position is frivolousif it is patently improper.

-Par. 3. Sections 10.35, 10.36, 10.37and 10.38 are added to subpart B to readas follows:

10.35 Requirements for covered

opinions.

(a)A practitioner who provides acovered opinion shall comply with thestandards of practice in this section.

(b)Definitions. For purposes of thissubpart--

(1)A practitionerincludes anyindividual described in 10.2(e).

(2) Covered opinion -- (i)Ingeneral. A covered opinion is writtenadvice (including electroniccommunications) by a practitionerconcerning one or more Federal taxissues arising from --

(A) A transaction that is the sameas or substantially similar to a


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transaction that, at the time the advice isrendered, the Internal Revenue Servicehas determined to be a tax avoidancetransaction and identified by publishedguidance as a listed transaction under 26

CFR 1.6011-4(b)(2);(B) Any partnership or other entity,any investment plan or arrangement, orany other plan or arrangement, theprincipal purpose of which is theavoidance or evasion of any tax imposedby the Internal Revenue Code; or

(C) Any partnership or other entity,any investment plan or arrangement, orany other plan or arrangement, asignificant purpose of which is the

avoidance or evasion of any tax imposedby the Internal Revenue Code if thewritten advice--

(1) Is a reliance opinion;(2) Is a marketed opinion;(3) Is subject to conditions of

confidentiality; or(4) Is subject to contractual

protection.

(ii) Excluded advice. A coveredopinion does not include--

(A) Written advice provided to aclient during the course of anengagement if a practitioner isreasonably expected to providesubsequent written advice to the clientthat satisfies the requirements of thissection;

(B) Written advice, other thanadvice described in paragraph (b) (2) (i)(A) of this section (concerning listedtransactions) or paragraph (b) (2) (i) (B)of this section (concerning the principalpurpose of avoidance or evasion) that--

(1) Concerns the qualification of aqualified plan;

(2) Is a State or local bond opinion;or

(3) Is included in documentsrequired to be filed with the Securitiesand Exchange Commission.

(C) Written advice prepared for andprovided to a taxpayer, solely for use by

that taxpayer, after the taxpayer has fileda tax return with the Internal RevenueService reflecting the tax benefits of thetransaction. The preceding sentencedoes not apply if the practitioner knowsor has reason to know that the writtenadvice will be relied upon by thetaxpayer to take a position on a taxreturn (including for these purposes anamended return that claims tax benefitsnot reported on a previously filed return)

filed after the date on which the advice isprovided to the taxpayer;(D) Written advice provided to an

employer by a practitioner in thatpractitioners capacity as an employee ofthat employer solely for purposes ofdetermining the tax liability of theemployer; or

(E) Written advice that does notresolve a Federal tax issue in thetaxpayers favor, unless the advicereaches a conclusion favorable to thetaxpayer at any confidence level (e.g.,not frivolous, realistic possibility ofsuccess, reasonable basis or substantialauthority) with respect to that issue. Ifwritten advice concerns more than oneFederal tax issue, the advice mustcomply with the requirements ofparagraph (c) of this section with respectto any Federal tax issue not described inthe preceding sentence.

(3) A Federal tax issueis a questionconcerning the Federal tax treatment ofan item of income, gain, loss, deduction,or credit, the existence or absence of ataxable transfer of property, or the valueof property for Federal tax purposes.For purposes of this subpart, a Federaltax issue is significant if the Internal


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Revenue Service has a reasonable basisfor a successful challenge and itsresolution could have a significantimpact, whether beneficial or adverseand under any reasonably foreseeable

circumstance, on the overall Federal taxtreatment of the transaction(s) ormatter(s) addressed in the opinion.

(4) Reliance opinion--(i) Writtenadvice is a reliance opinion if the adviceconcludes at a confidence level of atleast more likely than not a greater than50 percent likelihood) that one or moresignificant Federal tax issues would beresolved in the taxpayers favor.

(ii) For purposes of this section,

written advice, other than advicedescribed in paragraph (b)(2)(i)(A) ofthis section (concerning listedtransactions) or paragraph (b)(2)(i)(B) ofthis section (concerning the principalpurpose of avoidance or evasion), is nottreated as a reliance opinion if thepractitioner prominently discloses in thewritten advice that it was not intended orwritten by the practitioner to be used,and that it cannot be used by thetaxpayer, for the purpose of avoidingpenalties that may be imposed on thetaxpayer.

(5)Marketed opinion--(i)Writtenadvice isa marketed opinion if thepractitioner knows or has reason to knowthat the written advice will be used orreferred to by a person other than thepractitioner (or a person who is amember of, associated with, oremployed by the practitioners firm) inpromoting, marketing or recommendinga partnership or other entity, investmentplan or arrangement to one or moretaxpayer(s).

(ii) For purposes of this section,written advice, other than advicedescribed in paragraph (b)(2)(i)(A) ofthis section (concerning listed

transactions) or paragraph (b)(2)(i)(B) ofthis section (concerning the principalpurpose of avoidance or evasion), is nottreated as a marketed opinion if thepractitioner prominently discloses in the

written advice that--(A) The advice was not intended orwritten by the practitioner to be used,and that it cannot be used by anytaxpayer, for the purpose of avoidingpenalties that may be imposed on thetaxpayer;

(B) The advice was written tosupport the promotion or marketing ofthe transaction(s) or matter(s) addressedby the written advice; and

(C) The taxpayer should seek advicebased on the taxpayers particularcircumstances from an independent taxadvisor.

(6) Conditions of confidentiality.Written advice is subject to conditions ofconfidentiality if the practitioner imposeson one or more recipients of the writtenadvice a limitation on disclosure of thetax treatment or tax structure of thetransaction and the limitation ondisclosure protects the confidentiality ofthat practitioners tax strategies,regardless of whether the limitation ondisclosure is legally binding. A claimthat a transaction is proprietary orexclusive is not a limitation ondisclosure if the practitioner confirms toall recipients of the written advice thatthere is no limitation on disclosure of thetax treatment or tax structure of thetransaction that is the subject of thewritten advice.

(7) Contractualprotection.Written advice is subject to contractualprotection if the taxpayer has the right toa full or partial refund of fees paid to thepractitioner (or a person who is amember of, associated with, oremployed by the practitioners firm) if


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all or a part of the intended taxconsequences from the mattersaddressed in the written advice are notsustained, or if the fees paid to thepractitioner (or a person who is a

member of, associated with, oremployed by the practitioners firm) arecontingent on the taxpayers realizationof tax benefits from the transaction. Allthe facts and circumstances relating tothe matters addressed in the writtenadvice will be considered whendetermining whether a fee is refundableor contingent, including the right toreimbursements of amounts that theparties to a transaction have not

designated as fees or any agreement toprovide services without reasonablecompensation.

(8) Prominently disclosed. An itemisprominently disclosedif it is readilyapparent to a reader of the writtenadvice. Whether an item is readilyapparent will depend on the facts andcircumstances surrounding the writtenadvice including, but not limited to, thesophistication of the taxpayer and thelength of the written advice. At aminimum, to be prominently disclosedan item must be set forth in a separatesection (and not in a footnote) in atypeface that is the same size or largerthan the typeface of any discussion ofthe facts or law in the written advice.

(9) State or local bond opinion. AState or local bond opinion is writtenadvice with respect to a Federal taxissue included in any materials deliveredto a purchaser of a State or local bond inconnection with the issuance of the bondin a public or private offering, includingan official statement (if one is prepared),that concerns only the excludability ofinterest on a State or local bond fromgross income under section 103 of theInternal Revenue Code, the application

of section 55 of the Internal RevenueCode to a State or local bond, the statusof a State or local bond as a qualifiedtax-exempt obligation under section 265(b)(3) of the Internal Revenue Code, the

status of a State or local bond as aqualified zone academy bond undersection 1397E of the Internal RevenueCode, or any combination of the above.

(10) The principal purpose. Forpurposes of this section, the principalpurpose of a partnership or other entity,investment plan or arrangement, or otherplan or arrangement is the avoidance orevasion of any tax imposed by theInternal Revenue Code if that purpose

exceeds any other purpose. Theprincipal purpose of a partnership orother entity, investment plan orarrangement, or other plan orarrangement is not to avoid or evadeFederal tax if that partnership, entity,plan or arrangement has as its purposethe claiming of tax benefits in a mannerconsistent with the statute andCongressional purpose. A partnership,entity, plan or arrangement may have asignificant purpose of avoidance orevasion even though it does not have theprincipal purpose of avoidance orevasion under this paragraph (b)(10).

(c) Requirements for coveredopinions. A practitioner providing acovered opinion must comply with eachof the following requirements.

(1) Factual matters. (i) Thepractitioner must use reasonable effortsto identify and ascertain the facts, whichmay relate to future events if atransaction is prospective or proposed,and to determine which facts arerelevant. The opinion must identify andconsider all facts that the practitionerdetermines to be relevant.

(ii) The practitioner must not basethe opinion on any unreasonable factual


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assumptions (including assumptions asto future events). An unreasonablefactual assumption includes a factualassumption that the practitioner knowsor should know is incorrect or

incomplete. For example, it isunreasonable to assume that atransaction has a business purpose orthat a transaction is potentially profitableapart from tax benefits. A factualassumption includes reliance on aprojection, financial forecast orappraisal. It is unreasonable for apractitioner to rely on a projection,financial forecast or appraisal if thepractitioner knows or should know that

the projection, financial forecast orappraisal is incorrect or incomplete orwas prepared by a person lacking theskills or qualifications necessary toprepare such projection, financialforecast or appraisal. The opinion mustidentify in a separate section all factualassumptions relied upon by thepractitioner.

(iii) The practitioner must not basethe opinion on any unreasonable factualrepresentations, statements or findings ofthe taxpayer or any other person. Anunreasonable factual representationincludes a factual representation that thepractitioner knows or should know isincorrect or incomplete. For example, apractitioner may not rely on a factualrepresentation that a transaction has abusiness purpose if the representationdoes not include a specific description ofthe business purpose or the practitionerknows or should know that therepresentation is incorrect or incomplete.The opinion must identify in a separatesection all factual representations,statements or finds of the taxpayer reliedupon by the practitioner.

(2)Relate law to facts. (i)Theopinion must relate the applicable law

(including potentially applicable judicialdoctrines) to the relevant facts.

(ii) The practitioner must not assumethe favorable resolution of anysignificant Federal tax issue except as

provided in paragraphs (c)(3)(v) and (d)of this section, or otherwise base anopinion on any unreasonable legalassumptions, representations, orconclusions.

(iii) The opinion must not containinternally inconsistent legal analyses orconclusions.

(3) Evaluation of significant Federaltax issues--(i)In general. The opinionmust consider all significant Federal tax

issues except as provided in paragraphs(c)(3)(v) and (d) of this section.(ii) Conclusion as to each significant

Federal tax issues. The opinion mustprovide the practitioners conclusion asto the likelihood that the taxpayer willprevail on the merits with respect to eachsignificant Federal tax issue consideredin the opinion. If the practitioner isunable to reach a conclusion with respectto one or more of those issues, theopinion must state that the practitioner isunable to reach a conclusion with respectto those issues. The opinion mustdescribe the reasons for the conclusions,including the facts and analysissupporting the conclusions, or describethe reasons that the practitioner is unableto reach a conclusion as to one or moreissues. If the practitioner fails to reach aconclusion at the confidence level of atleast more likely than not with respect toone or more significant Federal taxissues considered, the opinion mustinclude the appropriate disclosure(s)required under paragraph (e) of thissection.

(iii)Evaluation based on chances ofsuccess on the merits. In evaluating thesignificant Federal tax issues addressed


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in the opinion, the practitioner must nottake into account the possibility that atax return will not be audited, that anissue will not be raised on audit, or thatan issue will be resolved through

settlement if raised.(iv) Marketed opinions. In the caseof a marketed opinion, the opinion mustprovide the practitioners conclusion thatthe taxpayer will prevail on the merits ata confidence level of at least more likelythan not with respect to each significantFederal tax issue. If the practitioner isunable to reach a more likely than notconclusion with respect to eachsignificant Federal tax issue, the

practitioner must not provide themarketed opinion, but may providewritten advice that satisfies therequirements in paragraph (b)(5)(ii) ofthis section.

(v) Limited scope opinions. (A) Thepractitioner may provide an opinion thatconsiders less than all of the significantFederal tax issues if--

(1) The practitioner and the taxpayeragree that the scope of the opinion andthe taxpayers potential reliance on theopinion for purposes of avoidingpenalties that may be imposed on thetaxpayer are limited to the Federal taxissue(s) addressed in the opinion;

(2) The opinion is not advicedescribed in paragraph (b)(2)(i)(A) ofthis section (concerning listedtransactions), paragraph (b)(2)(i)(B) ofthis section (concerning the principalpurpose of avoidance or evasion) orparagraph (b)(5) of this section (amarketed opinion); and

(3) The opinion includes theappropriate disclosure(s) required underparagraph (e) of this section.

(B) A practitioner may makereasonable assumptions regarding thefavorable resolution of a Federal tax

issue (as assumed issue) for purposes ofproviding an opinion on less than all ofthe significant Federal tax issues asprovided in this paragraph (c)(3)(v).The opinion must identify in a separate

section all issues for which thepractitioner assumed a favorableresolution.

(4) Overall conclusion. (i) Theopinion must provide the practitionersoverall conclusion as to the likelihoodthat the Federal tax treatment of thetransaction or matter that is the subjectof the opinion is the proper treatmentand the reasons for that conclusion. Ifthe practitioner is unable to reach an

overall conclusion, the opinion muststate that the practitioner is unable toreach and overall conclusion anddescribe the reasons for thepractitioners inability to reach aconclusion.

(ii) In the case of a marketedopinion, the opinion must provide thepractitioners overall conclusion that theFederal tax treatment of the transactionor matter that is the subject of theopinion is the proper treatment at aconfidence level of at least more likelythan not.

(d) Competence to provide opinion;reliance on opinions of others. (1) Thepractitioner must be knowledgeable inall of the aspects of Federal tax lawrelevant to the opinion being rendered,except that the practitioner may rely onthe opinion of another practitioner withrespect to one or more significantFederal tax issues, unless the practitionerknows or should know that the opinionof the other practitioner should not berelied on. If a practitioner relies on theopinion of another practitioner, therelying practitioners opinion mustidentify the other opinion and set forth


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the conclusions reached in the otheropinion.

(2) The practitioner must be satisfiedthat the combined analysis of theopinions, taken as a whole, and the

overall conclusion, if any, satisfy therequirements of this section.(e) Required disclosures. A covered

opinion must contain all of the followingdisclosures that apply--

(1) Relationship between promoterand practitioner. An opinion mustprominently disclose the existence of--

(i) Any compensation arrangement,such as a referral fee or a fee-sharingarrangement, between the practitioner

(or the practitioners firm or any personwho is a member of, associated with, oremployed by the practitioners firm) andany person (other than the client forwhom the opinion is prepared) withrespect to promoting, marketing orrecommending the entity, plan, orarrangement (or a substantially similararrangement) that is the subject of theopinio

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