User Fees Relating to Enrolled Agents and Enrolled Retirement Plan Agents
| Published date | 01 March 2022 |
| Citation | 87 FR 11366 |
| Record Number | 2022-04303 |
| Section | Proposed rules |
| Court | Internal Revenue Service |
Federal Register, Volume 87 Issue 40 (Tuesday, March 1, 2022)
[Federal Register Volume 87, Number 40 (Tuesday, March 1, 2022)]
[Proposed Rules]
[Pages 11366-11371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04303]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[REG-114209-21]
RIN 1545-BQ17
User Fees Relating to Enrolled Agents and Enrolled Retirement
Plan Agents
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document contains proposed amendments to the regulations
relating to user fees for enrolled agents and enrolled retirement plan
agents. This document also contains a notice of public hearing on the
proposed regulations. The proposed regulations increase the renewal
user fee for enrolled retirement plan agents from $67 to $140. In
addition, the proposed regulations increase both the enrollment and
renewal user fee for enrolled agents from $67 to $140. The proposed
regulations affect individuals who are or apply to become enrolled
agents and individuals who are enrolled retirement plan agents. The
Independent Offices
[[Page 11367]]
Appropriation Act of 1952 authorizes charging user fees.
DATES: Electronic or written comments must be received by May 11, 2022.
The public hearing is being held by teleconference on May 9, 2022 at 10
a.m. EST. Requests to speak and outlines of topics to be discussed at
the public hearing must be received by May 2, 2022. If no outlines are
received by May 2, 2022, the public hearing will be cancelled. Requests
to attend the public hearing must be received by 5 p.m. EST on May 9,
2022. The telephonic hearing will be made accessible to people with
disabilities. Requests for special assistance during the telephonic
hearing must be received by May 6, 2022.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at www.regulations.gov (indicate IRS and REG-114209-
21). Once submitted to the Federal eRulemaking Portal, comments cannot
be edited or withdrawn. The IRS expects to have limited personnel
available to process comments that are submitted on paper or through
the mail. Any comments submitted on paper will be considered to the
extent practicable. The IRS will publish any comments submitted
electronically, and to the extent practicable comments submitted on
paper, to the public docket. Send submissions to: CC:PA:LPD:PR (REG-
114209-21), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
For those requesting to speak during the hearing, send an outline
of topic submissions electronically via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and REG-114209-21).
Individuals who want to testify (by telephone) at the public
hearing must send an email to [email protected] to receive the
telephone number and access code for the hearing. The subject line of
the email must contain the regulation number REG-114209-21 and the word
TESTIFY. For example, the subject line may say: Request to TESTIFY at
Hearing for REG-114209-21. The email should include a copy of the
speaker's public comments and outline of topics. Individuals who want
to attend (by telephone) the public hearing must also send an email to
[email protected] to receive the telephone number and access code
for the hearing. The subject line of the email must contain the
regulation number REG-114209-21 and the word ATTEND. For example, the
subject line may say: Request to ATTEND Hearing for REG-114209-21. To
request special assistance during the telephonic hearing, contact the
Publications and Regulations Branch of the Office of Associate Chief
Counsel (Procedure and Administration) by sending an email to
[email protected] (preferred) or by telephone at (202) 317-5177
(not a toll-free number).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Mark Shurtliff at (202) 317-6845; concerning cost methodology, Michael
A. Weber at (202) 803-9738; concerning submission of comments, the
public hearing, and the access code to attend the hearing by telephone,
Regina Johnson at (202) 317-5177 (not toll-free numbers) or
[email protected]
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document contains proposed amendments to 26 CFR part 300
regarding user fees.
A. Enrolled Agents and Enrolled Retirement Plan Agents
Section 330 of Title 31 of the United States Code authorizes the
Secretary of the Treasury to regulate the practice of representatives
before the Department of the Treasury (Treasury Department) and
requires that an individual seeking to practice demonstrate the
necessary qualifications, competency, and good character, and
reputation. The rules governing practice before the IRS are published
in 31 CFR, Subtitle A, part 10, and reprinted as Treasury Department
Circular No. 230 (Circular 230).
Section 10.4(a) of Circular 230 authorizes the IRS to grant
enrollment as enrolled agents to individuals who demonstrate special
competence in tax matters by passing a written examination, the
Enrolled Agent Special Enrollment Examination (EA SEE), and who have
not engaged in any conduct that would justify suspension or disbarment
under Circular 230.
Section 10.4(b) of Circular 230 authorizes the IRS to grant status
as enrolled retirement plan agents to individuals who demonstrate
special competence in qualified retirement plan matters by passing a
written examination, the Enrolled Retirement Plan Agent Special
Enrollment Examination (ERPA SEE), and who have not engaged in any
conduct that would justify suspension or disbarment under Circular 230.
The IRS stopped offering the ERPA SEE as of February 12, 2016, and no
longer accepts applications for new enrollment as an enrolled
retirement plan agent. Individuals who were already enrolled as
enrolled retirement plan agents may continue to apply for renewal of
their status.
Section 10.4(d) also authorizes the IRS to grant enrollment as an
enrolled agent or an enrolled retirement plan agent to a qualifying
former IRS employee by virtue of past IRS service and technical
experience if the former employee has not engaged in any conduct that
would justify suspension or disbarment under the provisions of Circular
230 and meets certain other requirements. Application for enrollment as
an enrolled agent based on former employment with the IRS must be made
within three years from the date of separation from that employment and
does not require passing the EA-SEE. When the IRS discontinued offering
the ERPA-SEE necessary for enrollment as an enrolled retirement plan
agent for individuals without IRS work experience, effective February
12, 2016, the IRS stopped granting individuals enrollment as enrolled
retirement plan agents by virtue of past service and technical
experience in the IRS.
Once eligible for enrollment as an enrolled agent, whether by
examination or former employment with the IRS, an individual must file
an application for enrollment with the IRS and currently pay a $67
nonrefundable user fee. To maintain active enrollment and practice
before the IRS, an individual who has been enrolled as an enrolled
agent or enrolled retirement plan agent must file an application to
renew enrollment every three years and currently pay a $67
nonrefundable user fee. 31 CFR 10.6(d).
The IRS Return Preparer Office (RPO) is responsible for certain
matters related to authority to practice before the IRS, including
acting on applications for enrollment and renewal of enrolled agents
and for renewal of enrolled retirement plan agents. 31 CFR 10.1. As a
condition for enrollment as an enrolled agent, the RPO may conduct a
federal tax-compliance check to determine whether an applicant has
filed all required tax returns and has no outstanding federal tax debts
and a suitability check to determine whether an applicant has engaged
in any conduct that would justify suspending or disbarring any
practitioner under Circular 230. 31 CFR 10.5(d). As a condition for
renewal, enrolled agents and enrolled retirement plan agents must
certify completion of the continuing education requirements. 31 CFR
10.6(e).
[[Page 11368]]
As part of its responsibility for administering the enrollment and
renewal program, RPO determines whether applicants have met the above
requirements. 31 CFR 10.6(j)(1). An applicant who is denied enrollment
as an enrolled agent for failure to pass a tax-compliance check may
reapply if the applicant becomes current with respect to the
applicant's tax liabilities. 31 CFR 10.5(d)(2). Applicants who fail to
meet the continuing education and fee payment requirements for renewal
receive from RPO a notice that states the basis for RPO's determination
of noncompliance and provides an opportunity to cure the failure. 31
CFR 10.6(j)(1).
B. User Fee Authority
The Independent Offices Appropriation Act of 1952 (IOAA) (31 U.S.C.
9701) authorizes each agency to promulgate regulations establishing the
charge for services provided by the agency. The IOAA states that the
services provided by an agency should be self-sustaining to the extent
possible. 31 U.S.C. 9701(a). The IOAA provides that user fee
regulations are subject to policies prescribed by the President, which
are currently set forth in the Office of Management and Budget (OMB)
Circular A-25 (OMB Circular), 58 FR 38142 (July 15, 1993).
Section 6a(1) of OMB Circular A-25 states that when a service
offered by an agency provides special benefits to identifiable
recipients beyond those accruing to the general public, the agency is
to charge a user fee to recover the full cost of providing the service.
Section 8e of OMB Circular A-25 requires agencies to review user fees
biennially and update the fees as necessary to reflect changes in the
cost of providing the underlying services. During the biennial review,
an agency must calculate the full cost of providing each service,
taking into account all direct and indirect costs to any part of the
U.S. government. Under section 6d(1) of OMB Circular A-25, the full
cost of providing a service includes, but is not limited to, an
appropriate share of salaries, medical insurance and retirement
benefits, management costs, and physical overhead and other indirect
costs, including rents, utilities, and travel, associated with
providing the service.
An agency should set the user fee at an amount that recovers the
full cost of providing the service unless the agency requests, and the
OMB grants, an exception to the full-cost requirement. Under section
6c(2) of OMB Circular A-25, the OMB may grant exceptions when the cost
of collecting the fees would represent an unduly large part of the fee
for the activity or when any other condition exists that, in the
opinion of the agency head, justifies an exception. When the OMB grants
an exception, the agency does not collect the full cost of providing
the service and must fund the remaining cost of providing the service
from other available funding sources. Consequently, the agency
subsidizes the cost of the service to the recipients of reduced-fee
services even though the service confers a special benefit on those
recipients who would otherwise be required to pay the full cost of
receiving the benefit as provided for by the IOAA and OMB Circular A-
25.
C. Enrollment and Renewal User Fees for the Enrolled Agent and Renewal
User Fee for the Enrolled Retirement Plan Agent
As discussed in section A of this preamble, an individual who has
been granted enrollment as an enrolled agent or an enrolled retirement
plan agent may practice before the IRS. The IRS confers benefits on
individuals who are enrolled agents or enrolled retirement plan agents
beyond those that accrue to the general public by allowing them to
practice before the IRS. Because the ability to practice before the IRS
is a special benefit, the IRS charges a user fee to recover the full
cost associated with administering the program for enrollment and
renewal of enrolled agents and renewal of enrolled retirement plan
agents. Final regulations (TD 9858) published in the Federal Register
(84 FR 20801-01) on May 13, 2019, established the current $67 fee per
enrollment or renewal of enrollment. At that time the Treasury
Department and the IRS determined that a $67 user fee would recover the
full direct and indirect costs the government would incur to administer
the enrollment and renewal program.
As required by the IOAA and the OMB Circular, the RPO completed its
2021 biennial review of the enrollment and renewal user fees associated
with enrolled agents and enrolled retirement plan agents. As discussed
in section D of this preamble, during its review the RPO took into
account the increase in labor, benefits, and overhead costs incurred in
connection with providing services to individuals who enroll or renew
enrollment as enrolled agents and enrolled retirement plan agents since
the user fee was last changed in 2019. The increase took into account
additional staffing that allows RPO to provide a higher quality of
service to individuals seeking to enroll or renew enrollment. The RPO
also took into account a re-allocation of certain labor costs in their
methodology. The RPO determined that the full cost of administering the
program for enrolled agents and enrolled retirement plan agents has
increased from $67 to $140 per application for enrollment or renewal.
The proposed fee complies with the directive in the OMB Circular to
recover the full cost of providing a service that confers special
benefits on identifiable recipients beyond those accruing to the
general public.
D. Calculation of User Fees Generally
The IRS follows generally accepted accounting principles (GAAP) in
calculating the full cost of processing an application for enrollment
or renewal. The Federal Accounting Standards Advisory Board (FASAB) is
the body that establishes GAAP that apply for federal reporting
entities, such as the IRS. FASAB publishes the FASAB Handbook of
Accounting Standards and Other Pronouncements, as Amended (Current
Handbook), which is available at http://files.fasab.gov/pdffiles/2017_fasab_handbook.pdf. The Current Handbook includes the Statement of
Federal Financial Accounting Standards (SFFAS) No. 4: Managerial Cost
Accounting Concepts and Standards for the Federal Government. SFFAS No.
4 establishes internal costing standards under GAAP to accurately
measure and manage the full cost of federal programs, and the
methodology below is in accordance with SFFAS No. 4.
1. Cost Center Allocation
The IRS determines the cost of its services and the activities
involved in producing them through a cost-accounting system that tracks
costs to organizational units. The lowest organizational unit in the
IRS's cost-accounting system is called a cost center. Cost centers are
usually separate offices that are distinguished by subject-matter area
of responsibility or geographic region. All costs of operating a cost
center are recorded in the IRS's cost-accounting system and allocated
to that cost center. The costs allocated to a cost center are the
direct costs for the cost center's activities in addition to allocated
overhead. Some cost centers work on different services across the IRS
and are not fully devoted to the services for which the IRS charges
user fees.
2. Cost Estimation of Direct Costs
The IRS uses various cost-measurement techniques to estimate the
cost attributable to administering the program for enrollment and
renewal of enrolled agents and renewal of enrolled retirement plan
agents. These
[[Page 11369]]
techniques include using various timekeeping systems to measure the
time required to accomplish activities, or using information provided
by subject-matter experts on the time devoted to a service or activity.
To determine the labor and benefits costs incurred to administer the
enrollment and renewal program, the IRS estimated the number of full-
time employees required to conduct activities related to administering
the program. The number of full-time employees is based on both current
employment numbers and future hiring estimates. Direct costs are
incurred by the RPO and include direct costs for enrollment and renewal
submission processing; tax compliance and background checks; continuing
education and testing-related activities; communications, which include
a toll-free helpline; and other oversight and support costs. Other
direct costs associated with administering the program include travel,
training and supplies.
3. Overhead
When the indirect cost of a service or activity is not specifically
identified from the cost accounting system, an overhead rate is added
to the identifiable direct cost to arrive at full cost. Overhead is an
indirect cost of operating an organization that cannot be immediately
associated with an activity. Overhead includes costs of resources that
are jointly or commonly consumed by one or more organizational unit's
activities but are not specifically identifiable to a single activity.
These costs can include:
General management and administrative services of
sustaining and supporting organizations.
Facilities management and ground maintenance services
(security, rent, utilities, and building maintenance).
Procurement and contracting services.
Financial management and accounting services.
Information technology services.
Services to acquire and operate property, plants and
equipment.
Publication, reproduction, and graphics and video
services.
Research, analytical, and statistical services.
Human resources/personnel services.
Library and legal services.
To calculate the overhead allocable to a service, the IRS
multiplies an overhead rate by the labor and benefits costs. The IRS
calculates the overhead rate annually based on cost elements underlying
the Statement of Net Cost included in the IRS annual financial
statements. The financial statements are audited by the Government
Accountability Office. The overhead rate is the ratio of the IRS's
indirect costs divided by the direct costs of its organizational units.
Indirect costs are labor, benefits, and non-labor costs (excluding IT
related to taxpayer services, enforcement, and business system
modernization) from the supporting and sustaining organizational units.
Direct costs are the labor, benefits, and non-labor costs for the IRS's
organizational units that interact directly with taxpayers.
For this program user fee review, the Fiscal Year (FY) 2021 rate of
58.83 percent was used. The rate was calculated based on the FY 2020
Statement of Net Cost as follows:
Total Indirect Costs...................... ... $4,274,512,375
Total Direct Costs........................ / $7,265,460,800
Overhead Rate............................. ... 58.83%
E. Calculation of User Fee for Enrolled Agent Enrollment and Renewal
and Enrolled Retirement Plan Agent Renewal
1. Cost Estimate
The IRS projected the estimated costs of direct labor and benefits
based on the actual salary and benefits of employees who administer the
enrollment and renewal program, reduced to reflect the percentage of
time each individual spends administering the program. RPO's managers
estimated the percentage of time these employees devote to
administering the program based on their knowledge of actual program
assignments. Fourteen employees work full-time on administering
enrollment and renewal program-related activities. Additional staffing
costs include oversight and support associated with these functions.
The baseline for the labor and benefits was the actual salary and
benefits for FY 2021. From this baseline, the IRS estimated the direct
labor and benefits costs over the next three years using an inflation
factor for FYs 2022, 2023, and 2024. The IRS used a three-year
projection because the increase in future labor and benefits costs are
reliably predictable representations of the actual costs that will be
incurred by the RPO. These estimated labor and benefits costs were then
reduced to reflect the percentage of time each individual devoted to
the program and are set out in the following table:
------------------------------------------------------------------------
Estimated
direct labor
Year and benefit
costs
------------------------------------------------------------------------
2022.................................................... $2,115,293.00
2023.................................................... 2,173,464.00
2024.................................................... 2,233,234.00
---------------
Total............................................... 6,521,991.00
------------------------------------------------------------------------
The IRS estimated $15,000 in additional direct costs for each year
for travel, training, and supplies.
The total estimated direct costs for the three years is $6,566,991.
After estimating the total direct costs, the IRS applied the FY 2021
overhead rate of 58.83 percent to the estimated direct costs to
calculate indirect costs of $3,863,360, for a total cost for the three-
year period of $10,430,351.
The calculation of the total costs of the program for 2022 through
2024 is below:
Direct Costs....................................... ... $6,566,991
Overhead at 58.83%................................. + 3,863,360
Total Program Costs.............................. ... 10,430,351
2. Volume of Applications
The number of enrollments and renewals processed during FYs 2018,
2019, and 2020 were 22,703; 29,350; and 22,367, respectively. The total
number for the three years was 74,420. The IRS used this historical
three-year volume to estimate the number of applications it expects to
process in FYs 2022, 2023, and 2024.
3. Unit Cost Per Application
To arrive at the total cost per application, the IRS divided the
estimated three-year total of program costs by the total volume of
applications expected over the same three-year period to determine a
unit cost per application of $140, as shown below:
Total Program Cost................................. ... $10,430,351
Volume............................................. / 74,420
Unit Cost.......................................... ... 140
Special Analyses
Regulatory Planning and Review
This regulation is not significant and is not subject to review
under section 6(b) of Executive Order 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between the Treasury Department and the
Office of Management and Budget regarding review of tax regulations.
Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that this regulation will not have a significant
economic impact on a substantial number of small entities.
[[Page 11370]]
Only individuals, not businesses, can be enrolled agents or enrolled
retirement plan agents. Accordingly, the user fee primarily affects
individuals who are enrolled agents, apply to become enrolled agents,
or are enrolled retirement plan agents. The Treasury Department and the
IRS estimate that approximately 24,807 individuals will apply annually
for enrollment as an enrolled agent, renewal as an enrolled agent, or
renewal as an enrolled retirement plan agent.
Since individuals are not ``small entities'' for purposes of the
Regulatory Flexibility Act, any economic impact of the user fee on
small entities generally will occur only when an enrolled agent or
enrolled retirement plan agent owns a small business or when a small
business employs enrolled agents or enrolled retirement plan agents and
reimburses them for their renewal fees. Therefore, a substantial number
of small entities is not likely to be affected. Further, the economic
impact on any small entities affected would be limited to paying the
$73 difference in cost between the $140 user fee and the previous $67
user fee (for each enrolled agent or enrolled retirement plan agent
that a small entity employs and pays for), which is unlikely to present
a significant economic impact. The total economic impact of this
regulation is thus approximately $1,810,911 annually, which is the
product of the approximately 24,807 individuals and the $73 increase in
the fee. Accordingly, the rule is not expected to have a significant
economic impact on a substantial number of small entities, and a
regulatory flexibility analysis is not required.
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. This rule does not include any Federal mandate that may
result in expenditures by state, local, or tribal governments, or by
the private sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. These proposed regulations do not
have federalism implications and do not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive Order.
Comments and Public Hearing
Before these proposed amendments to the regulations are adopted as
final regulations, consideration will be given to any comments that are
submitted timely to the IRS as prescribed in the preamble under the
ADDRESSES section. The Treasury Department and the IRS request comments
on all aspects of the proposed regulations. Any electronic comments
submitted, and to the extent practicable, any paper comments submitted,
will be made available at www.regulations.gov or upon request.
A public hearing is being held by teleconference on May 11, 2022,
beginning at 10 a.m. EST unless no outlines are received by May 2,
2022.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to comment by telephone at the hearing must submit written or
electronic comments and an outline of the topics to be discussed and
the time to be devoted to each topic by May 2, 2022 as prescribed in
the preamble under the ADDRESSES section.
A period of 10 minutes will be allocated to each person for making
comments. After the deadline for receiving outlines has passed, the IRS
will prepare an agenda containing the schedule of speakers. Copies of
the agenda will be made available at www.regulations.gov, search IRS
and REG-114209-21. Copies of the agenda will also be available by
emailing a request to [email protected]. Please put ``REG-114209-
21 Agenda Request'' in the subject line of the email.
Announcement 2020-4, 2020-17 I.R.B. 667 (April 20, 2020), provides
that until further notice, public hearings conducted by the IRS will be
held telephonically. Any telephonic hearing will be made accessible to
people with disabilities.
Drafting Information
The principal author of these regulations is Mark Shurtliff, Office
of the Associate Chief Counsel (Procedure and Administration). Other
personnel from the Treasury Department and the IRS participated in the
development of the regulations.
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping requirements, User fees.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 300 is proposed to be amended as follows:
PART 300--USER FEES
0
Paragraph. 1. The authority citation for part 300 continues to read as
follows:
Authority: 31 U.S.C. 9701.
0
Par. 2. Section 300.5 is amended by revising paragraphs (b) and (d) to
read as follows:
Sec. 300.5 Enrollment of enrolled agent fee.
* * * * *
(b) Fee. The fee for initially enrolling as an enrolled agent with
the IRS is $140.
* * * * *
(d) Applicability date. This section is applicable beginning [the
date that is 30 days after these regulations are published as final
regulations in the Federal Register].
0
Par. 3. Section 300.6 is amended by revising paragraphs (b) and (d) to
read as follows:
Sec. 300.6 Renewal of enrollment of enrolled agent fee.
* * * * *
(b) Fee. The fee for renewal of enrollment as an enrolled agent
with the IRS is $140.
* * * * *
(d) Applicability date. This section is applicable beginning [the
date that is 30 days after these regulations are published as final
regulations in the Federal Register].
0
Par. 4. Section 300.10 is amended by revising paragraphs (b) and (d) to
read as follows:
Sec. 300.10 Renewal of enrollment of enrolled retirement plan agent
fee.
* * * * *
(b) Fee. The fee for renewal of enrollment as an enrolled
retirement plan agent with the IRS is $140.
* * * * *
(d) Applicability date. This section is applicable beginning [the
date that is 30 days after these regulations are
[[Page 11371]]
published as final regulations in the Federal Register].
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2022-04303 Filed 2-25-22; 11:15 am]
BILLING CODE 4830-01-P
