Section 1.179C-1T(b)(4) and §1.179C-1T(b)(7)(i)(A) of the temporary regulations required that qualified refinery property be placed in service by the taxpayer after August 8, 2005, and before January 1, 2012. Section 1.179C-1(b)(4) and §1.179C-1(b)(7)(i)(A) of the final regulations provide that the property must be placed in service after August 8, 2005, and before January 1, 2014.

Section 1.179C-1T(b)(7)(iii) of the temporary regulations provided that the manufacture, construction, or production of self-constructed property must begin before January 1, 2008. Under §1.179C-1(b)(7)(iii) of the final regulations, the manufacture, construction, or production of self-constructed property must begin before January 1, 2010.

Under §1.179C-1T(b)(7)(iii)(C) of the temporary regulations, a component of self-constructed property had to be acquired or self-constructed before January 1, 2008, in order to qualify as qualified refinery property. Section 1.179C-1(b)(7)(iii)(C) of the final regulations provides that the component must be acquired or self-constructed before January 1, 2010.

Section 1.179C-1T(b)(2)(i) of the temporary regulations provided that a qualified refinery is any refinery located in the United States that is designed to serve the primary purpose of processing crude oil or qualified fuels. The final regulations add new §1.179C-1(b)(2)(i)(A) and new §1.179C-1(b)(2)(i)(B). Section 1.179C-1(b)(2)(i)(A) of the final regulations provides that in the case of property placed in service after August 8, 2005, and on or before October 3, 2008, a qualified refinery is any refinery located in the United States that is designed to serve the primary purpose of processing liquid fuel from crude oil or qualified fuels. Section 1.179C-1(b)(2)(i)(B) of the final regulations provides that, in the case of property placed in service after October 3, 2008, and before January 1, 2014, a qualified refinery is any refinery located in the United States that is designed to serve the primary purpose of processing liquid fuel from crude oil, qualified fuels, or directly from shale or tar sands.

Section 1.179C-1T(b)(5)(i) of the temporary regulations generally provided that refinery property is considered to be qualified refinery property if (A) it enables the existing qualified refinery to increase the total volume output by at least 5 percent on an average daily basis; or (B) it enables the existing qualified refinery to increase the percentage of total throughput attributable to processing qualified fuels to a rate that is at least 25 percent of the total throughput on an average daily basis. The final regulations, in §1.179C-1(b)(5)(i), modify this definition to provide generally that refinery property is considered to be qualified refinery property if (A) it enables the existing qualified refinery to increase the total volume output by at least 5 percent on an average daily basis; (B) in the case of property placed in service after August 8, 2005, and on or before October 3, 2008, it enables the existing qualified refinery to increase the percentage of total throughput attributable to processing qualified fuels to a rate that is at least 25 percent of the total throughput on an average daily basis; or (C) in the case of property placed in service after October 3, 2008, and before January 1, 2014, it enables the existing qualified refinery to increase the percentage of total throughput attributable to processing shale, tar sands, or qualified fuels to a rate that is at least 25 percent of total throughput on an average daily basis.

This section is applicable for taxable years ending on or after August 22, 2011. For taxable years ending before August 22, 2011, taxpayers may apply the proposed regulations published on July 9, 2008, or, in the alternative, may apply these final regulations.

(a) Scope and definitions—(1) Scope. This section provides the rules for determining the deduction allowable under section 179C(a) for the cost of any qualified refinery property. The provisions of this section apply only to a taxpayer that elects to apply section 179C in the manner prescribed under paragraph (d) of this section.

(2) Definitions. For purposes of section 179C and this section, the following definitions apply:

(i) Applicable environmental laws are any applicable federal, state, or local environmental laws.

(ii) Qualified fuels has the meaning set forth in section 45K(c).

(iii) Cost is the unadjusted depreciable basis (as defined in §1.168(b)-1(a)(3), but without regard to the reduction in basis for any portion of the basis the taxpayer properly elects to treat as an expense under section 179C and this section) of the property.

(iv) Throughput is a volumetric rate measuring the flow of crude oil, qualified fuels, or, in the case of property placed in service after October 3, 2008, and before January 1, 2014, shale or tar sands, processed over a given period of time, typically referenced on the basis of barrels per calendar day.

(v) Barrels per calendar day is the amount of fuels that a facility can process under usual operating conditions, expressed in terms of capacity during a 24-hour period and reduced to account for down time and other limitations.

(vi) United States has the same meaning as that term is defined in section 7701(a)(9).

(b) Qualified refinery property—(1) In general. Qualified refinery property is any property that meets the requirements set forth in paragraphs (b)(2) through (b)(7) of this section.

(2) Description of qualified refinery property—(i) In general. Property that comprises any portion of a qualified refinery may be qualified refinery property. For purposes of section 179C and this section, a qualified refinery is any refinery located in the United States that —

(A) In the case of property placed in service after August 8, 2005, and on or before October 3, 2008, is designed to serve the primary purpose of processing liquid fuel from crude oil or qualified fuels; or

(B) In the case of property placed in service after October 3, 2008, and before January 1, 2014, is designed to serve the primary purpose of processing liquid fuel from crude oil, qualified fuels, or directly from shale or tar sands.

(ii) Nonqualified refinery property. Refinery property is not qualified refinery property for purposes of this paragraph (b)(2) if—

(A) The primary purpose of the refinery property is for use as a topping plant, asphalt plant, lube oil facility, crude or product terminal, or blending facility; or

(B) The refinery property is built solely to comply with consent decrees or projects mandated by Federal, State, or local governments.

(3) Original use—(i) In general. For purposes of the deduction allowable under section 179C(a), refinery property will meet the requirements of this paragraph (b)(3) if the original use of the property commences with the taxpayer. Except as provided in paragraph (b)(3)(ii) of this section, original use means the first use to which the property is put, whether or not that use corresponds to the use of the property by the taxpayer. Thus, if a taxpayer incurs capital expenditures to recondition or rebuild property acquired or owned by the taxpayer, only the capital expenditures incurred by the taxpayer to recondition or rebuild the property acquired or owned by the taxpayer satisfy the original use requirement. However, the cost of reconditioned or rebuilt property acquired by a taxpayer does not satisfy the original use requirement. Whether property is reconditioned or rebuilt property is a question of fact. For purposes of this paragraph (b)(3)(i), acquired or self-constructed property that contains used parts will be treated as reconditioned or rebuilt only if the cost of the used parts is more than 20 percent of the total cost of the property.

(ii) Sale-leaseback. If any new portion of a qualified refinery is originally placed in service by a person after August 8, 2005, and is sold to a taxpayer and leased back to the person by the taxpayer within three months after the date the property was originally placed in service by the person, the taxpayer-lessor is considered the original user of the property.

(4) Placed-in-service date—(i) In general. Refinery property will meet the requirements of this paragraph (b)(4) if the property is placed in service by the taxpayer after August 8, 2005, and before January 1, 2014.

(ii) Sale-leaseback. If a new portion of refinery property is originally placed in service by a person after August 8, 2005, and is sold to a taxpayer and leased back to the person by the taxpayer within three months after the date the property was originally placed in service by the person, the property is treated as originally placed in service by the taxpayer-lessor not earlier than the date on which the property is used by the lessee under the leaseback.

(5) Production capacity—(i) In general. Refinery property is considered qualified refinery property if—

(A) It enables the existing qualified refinery to increase the total volume output, determined without regard to asphalt or lube oil, by at least 5 percent on an average daily basis;

(B) In the case of property placed in service after August 8, 2005, and on or before October 3, 2008, it enables the existing qualified refinery to increase the percentage of total throughput attributable to processing qualified fuels to a rate that is at least 25 percent of total throughput on an average daily basis; or

(C) In the case of property placed in service after October 3, 2008, and before January 1, 2014, it enables the existing qualified refinery to increase the percentage of total throughput attributable to processing qualified fuels, shale, or tar sands to a rate that is at least 25 percent of total throughput on an average daily basis.

(ii) When production capacity is tested. The production capacity requirement of this paragraph (b)(5) is determined as of the date the property is placed in service by the taxpayer. Any reasonable method may be used to determine the appropriate baseline for measuring capacity increases and to demonstrate and substantiate that the capacity of the existing qualified refinery has been sufficiently increased.

(iii) Multi-stage projects. In the case of multi-stage projects, a taxpayer must satisfy the reporting requirements of paragraph (f)(2) of this section, sufficient to establish that the production capacity requirements of this paragraph (b)(5) will be met as a result of the taxpayer’s overall plan.

(6) Applicable environmental laws—(i) In general. The environmental compliance requirement applies only with respect to refinery property, or any portion of refinery property, that is placed in service after August 8, 2005. A refinery’s failure to meet applicable environmental laws with respect to a portion of the refinery that was in service prior to August 8, 2005 will not disqualify a taxpayer from making the election under section 179C(a) with respect to otherwise qualifying refinery property.

(ii) Waiver under the Clean Air Act. Refinery property must comply with the Clean Air Act, notwithstanding any waiver received by the taxpayer under that Act.

(7) Construction of property—(i) In general. Qualified property will meet the requirements of this paragraph (b)(7) if no written binding contract for the construction of the property was in effect before June 14, 2005, and if—

(A) The construction of the property is subject to a written binding contract entered into before January 1, 2010;

(B) The property is placed in service before January 1, 2010; or

(C) In the case of self-constructed property, the construction of the property began after June 14, 2005, and before January 1, 2010.

(ii) Definition of binding contract—(A) In general. A contract is binding only if it is enforceable under state law against the taxpayer or a predecessor, and does not limit damages to a specified amount (for example, by use of a liquidated damages provision). For this purpose, a contractual provision that limits damages to an amount equal to at least 5 percent of the total contract price will not be treated as limiting damages to a specified amount. In determining whether a contract limits damages, the fact that there may be little or no damages because the contract price does not significantly differ from fair market value will not be taken into account.

(B) Conditions. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party or the predecessor of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions, or if any term is to be determined by a standard beyond the control of either party. A contract that imposes significant obligations on the taxpayer or a predecessor will be treated as binding, notwithstanding the fact that insubstantial terms remain to be negotiated by the parties to the contract.

(C) Options. An option to either acquire or sell property is not a binding contract.

(D) Supply agreements. A binding contract does not include a supply or similar agreement if the payment amount and design specification of the property to be purchased have not been specified.

(E) Components. A binding contract to acquire one or more components of a larger property will not be treated as a binding contract to acquire the larger property. If a binding contract to acquire a component does not satisfy the requirements of this paragraph (b)(7), the component is not qualified refinery property.

(iii) Self-constructed property—(A) In general. Except as provided in paragraph (b)(7)(iii)(B) of this section, if a taxpayer manufactures, constructs, or produces property for use by the taxpayer in its trade or business (or for the production of income by the taxpayer), the construction of property rules in this paragraph (b)(7) are treated as met for qualified refinery property if the taxpayer begins manufacturing, constructing, or producing the property after June 14, 2005, and before January 1, 2010. Property that is manufactured, constructed, or produced for the taxpayer by another person under a written binding contract (as defined in paragraph (b)(7)(ii) of this section) that is entered into prior to the manufacture, construction, or production of the property for use by the taxpayer in its trade or business (or for the production of income) is considered to be manufactured, constructed, or produced by the taxpayer.

(B) When construction begins. For purposes of this paragraph (b)(7)(iii), construction of property generally begins when physical work of a significant nature begins. Physical work does not include preliminary activities such as planning or designing, securing financing, exploring, or researching. The determination of when physical work of a significant nature begins depends on the facts and circumstances.

(C) Components of self-constructed property—(1) Acquired components. If a binding contract (as defined in paragraph (b)(7)(ii) of this section) to acquire a component of self-constructed property is in effect on or before June 14, 2005, the component does not satisfy the requirements of paragraph (b)(7)(i) of this section, and is not qualified refinery property. However, if construction of the self-constructed property begins after June 14, 2005, the self-constructed property may be qualified refinery property if it meets all other requirements of section 179C and this section (including paragraph (b)(7)(i) of this section), even though the component is not qualified refinery property. If the construction of self-constructed property begins before June 14, 2005, neither the self-constructed property nor any component related to the self-constructed property is qualified refinery property. If the component is acquired before January 1, 2010, but the construction of the self-constructed property begins after December 31, 2009, the component may qualify as qualified refinery property even if the self-constructed property is not qualified refinery property.

(2) Self-constructed components. If the manufacture, construction, or production of a component fails to meet any of the requirements of paragraph (b)(7)(iii) of this section, the component is not qualified refinery property. However, if the manufacture, construction, or production of a component fails to meet any of the requirements provided in paragraph (b)(7)(iii) of this section, but the construction of the self-constructed property begins after June 14, 2005, the self constructed property may qualify as qualified refinery property if it meets all other requirements of section 179C and this section (including paragraph (b)(7)(i) of this section). If the construction of the self-constructed property begins before June 14, 2005, neither the self-constructed property nor any components related to the self-constructed property are qualified refinery property. If the component was self-constructed before January 1, 2010, but the construction of the self-constructed property begins after December 31, 2009, the component may qualify as qualified refinery property, although the self-constructed property is not qualified refinery property.

(c) Computation of expense deduction for qualified refinery property. In general, the allowable deduction under paragraph (d) of this section for qualified refinery property is determined by multiplying by 50 percent the cost of the qualified refinery property paid or incurred by the taxpayer.

(d) Election—(1) In general. A taxpayer may make an election to deduct as an expense 50 percent of the cost of any qualified refinery property. A taxpayer making this election takes the 50 percent deduction for the taxable year in which the qualified refinery property is placed in service.

(2) Time and Manner for making election—(i) Time for making election. An election specified in this paragraph (d) generally must be made not later than the due date (including extensions) for filing the original Federal income tax return for the taxable year in which the qualified refinery property is placed in service by the taxpayer.

(ii) Manner of making election. The taxpayer makes an election under section 179C(a) and this paragraph (d) by entering the amount of the deduction at the appropriate place on the taxpayer’s timely filed original Federal income tax return for the taxable year in which the qualified refinery property is placed in service, and attaching a report as specified in paragraph (f) of this section to the taxpayer’s timely filed original federal income tax return for the taxable year in which the qualified refinery property is placed in service.

(3) Revocation of Election—(i) In general. An election made under section 179C(a) and this paragraph (d), and any specification contained in such election, may not be revoked except with the consent of the Commissioner of Internal Revenue.

(ii) Revocation prior to the revocation deadline. A taxpayer is deemed to have requested, and to have been granted, the consent of the Commissioner to revoke an election under section 179C(a) and this paragraph (d) if the taxpayer revokes the election before the revocation deadline. The revocation deadline is 24 months after the due date (including extensions) for filing the taxpayer’s Federal income return for the taxable year for which the election applies. An election under section 179C(a) and this paragraph (d) is revoked by attaching a statement to an amended return for the taxable year for which the election applies. The statement must specify the name and address of the refinery for which the election applies and the amount deducted on the taxpayer’s original Federal income tax return for the taxable year for which the election applies.

(iii) Revocation after the revocation deadline. An election under section 179C(a) and this paragraph (d) may not be revoked after the revocation deadline. The revocation deadline may not be extended under §301.9100-1.

(iv) Revocation by cooperative taxpayer. A taxpayer that has made an election to allocate the section 179C deduction to cooperative owners under section 179C(g) and paragraph (e) of this section may not revoke its election under section 179C(a).

(e) Election to allocate section 179C deduction to cooperative owners—(1) In general. If a cooperative taxpayer makes an election under section 179C(g) and this paragraph (e), the cooperative taxpayer may elect to allocate all, some, or none of the deduction allowable under section 179C(a) for that taxable year to the cooperative owner(s). This allocation is equal to the cooperative owner(s)’ ratable share of the total amount allocated, determined on the basis of each cooperative owner’s ownership interest in the cooperative taxpayer. For purposes of this section, a cooperative taxpayer is an organization to which part I of subchapter T applies, and in which another organization to which part I of subchapter T applies (cooperative owner) directly holds an ownership interest. No deduction shall be allowed under section 1382 for any amount allocated under this paragraph (e).

(2) Time and Manner for making election—(i) Time for making election. A cooperative taxpayer must make the election under section 179C(g) and this paragraph (e) by the due date (including extensions) for filing the cooperative taxpayer’s original Federal income tax return for the taxable year to which the cooperative taxpayer’s election under section 179C(a) and paragraph (d) of this section applies.

(ii) Manner of making election. An election under this paragraph (e) is made by attaching to the cooperative taxpayer’s timely filed Federal income tax return for the taxable year (including extensions) to which the cooperative taxpayer’s election under section 179C(a) and paragraph (d) of this section applies a statement providing the following information:

(A) The name and taxpayer identification number of the cooperative taxpayer.

(B) The amount of the deduction allowable to the cooperative taxpayer for the taxable year to which the election under section 179C(a) and paragraph (d) of this section applies.

(C) The name and taxpayer identification number of each cooperative owner to which the cooperative taxpayer is allocating all or some of the deduction allowable.

(D) The amount of the allowable deduction that is allocated to each cooperative owner listed in paragraph (e)(2)(ii)(C) of this section.

(3) Written notice to owners. If any portion of the deduction allowable under section 179C(a) is allocated to a cooperative owner, the cooperative taxpayer must notify the cooperative owner of the amount of the deduction allocated to the cooperative owner in a written notice, and on Form 1099-PATR, “Taxable Distributions Received from Cooperatives.” This notice must be provided on or before the due date (including extensions) of the cooperative taxpayer’s original federal income tax return for the taxable year for which the cooperative taxpayer’s election under section 179C(a) and paragraph (d) of this section applies.

(4) Irrevocable Election. A section 179C(g) election, once made, is irrevocable.

(f) Reporting requirement—(1) In general. A taxpayer may not claim a deduction under section 179C(a) for any taxable year unless the taxpayer files a report with the Secretary containing information with respect to the operation of the taxpayer’s refineries.

(2) Information to be included in the report. The taxpayer must specify—

(i) The name and address of the refinery;

(ii) Under which production capacity requirement under section 179C(e) and paragraph (b)(5)(i)(A), (B), and (C) of this section the taxpayer’s qualified refinery qualifies;

(iii) Whether the refinery is qualified refinery property under section 179C(d) and paragraph (b)(2) of this section, sufficient to establish that the primary purpose of the refinery is to process liquid fuel from crude oil, qualified fuels, or directly from shale or tar sands.

(iv) The total cost basis of the qualified refinery property at issue for the taxpayer’s current taxable year; and

(v) The depreciation treatment of the capitalized portion of the qualified refinery property.

(3) Time and Manner for submitting report—(i) Time for submitting report. The taxpayer is required to submit the report specified in this paragraph (f) not later than the due date (including extensions) of the taxpayer’s Federal income tax return for the taxable year in which the qualified refinery property is placed in service.

(ii) Manner of submitting report. The taxpayer must attach the report specified in this paragraph (f) to the taxpayer’s timely filed original Federal income tax return for the taxable year in which the qualified refinery property is placed in service.

(g) Effective/applicability date. This section is applicable for taxable years ending on or after August 22, 2011. For taxable years ending before August 22, 2011, taxpayers may apply the proposed regulations published on July 9, 2008, or, in the alternative, may apply these final regulations.

* * * * *

(b) * * *

Approved August 9, 2011.

To become a registered tax return preparer, applicants will be required to pass a competency examination. Proposed §300.12 establishes a $27 user fee to take the registered tax return preparer competency examination. This user fee must be paid each time the applicant takes the competency examination and is in addition to any reasonable fee charged by the third-party vendor that is approved by the IRS. Applicants who pass the competency examination generally will not, however, be required to re-take the examination in the future years.

There are costs to the IRS for administering the registered tax return preparer competency examination. The user fee to take the registered tax return preparer competency examination will recover these costs. These costs include the personnel, administrative, management, and information technology costs to the IRS for developing and reviewing the competency examination, overseeing the competency examination, validating the competency examination results, and establishing a review procedure for applicants who contest any portion of the competency examination. The user fee also recovers the cost to conduct background checks on employees of the third-party vendor who are involved in the administration of the examination.

Individuals who pay the competency examination user fee and become registered tax return preparers will receive a special benefit from the IRS that is not received by the general public. Passing the competency examination enables registered tax return preparers to prepare and sign Form 1040 series returns (and accompanying schedules) for compensation. Registered tax return preparers also are able to represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during examination if the registered tax return preparer signed the tax return for the period under examination. That representation does not include practice before appeals officers, revenue officers, Counsel, or similar officers or employees of the IRS or the Department of the Treasury. Because the competency examination initially will cover only the Form 1040 series returns, only attorneys, certified public accountants, enrolled agents, or registered tax return preparers will be able to sign a Form 1040 series return. While tax return preparers who are supervised will be able to prepare all or substantially all of a Form 1040 series tax return or claim for refund, they will not be able to sign the return or claim for refund and are not able to represent the taxpayers before the IRS. Any individual with a PTIN, however, can prepare and sign a tax return or claim for refund that is not part of the Form 1040 series.

The IRS intends to collect fingerprints as part of the PTIN, acceptance agent, and authorized e-file provider programs to assist in evaluating the suitability of applicants and participants in these programs. Individuals who have been or are fingerprinted in conjunction with their participation in any one of these programs after June 8, 2009, however, will not have to be re-fingerprinted to participate in these programs.

Proposed §300.13 establishes a $33 user fee on individuals who will be fingerprinted in conjunction with their application to participate or participation in these programs. This user fee is in addition to any reasonable fee charged by a third-party vendor that is approved by the IRS. The third-party vendor fee will cover the costs for obtaining the fingerprints and transmitting the fingerprints to the Federal Bureau of Investigation (FBI), where the fingerprints will be run through the FBI identification records database. The IRS fingerprinting user fee recovers the costs to the IRS to transfer the fingerprints and the results of the FBI search to the IRS; perform background checks on third-party vendor employees; modify the database used to receive, record, and store the search results; evaluate the results received from the search of the FBI database; provide internal review of circumstances when an individual is determined not to be suitable to participate in a program; and process appeals by individuals who are denied the ability to participate in a program because the individual failed this suitability check.

Additionally, under the current proposed regulations any participant in the PTIN, acceptance agent, or authorized e-file provider programs who resides and is employed outside of the United States will not have to be fingerprinted to participate in these programs. Such persons, however, must comply with all other elements of the suitability check. In addition, the Treasury Department and the IRS continue to study what additional requirements should apply to such persons. Any additional requirements would be set forth in future guidance.

Individuals who are fingerprinted as part of their application or participation in the PTIN, acceptance agent, or authorized e-file provider programs receive a special benefit that is not received by the general public. Individuals who participate in the PTIN program receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Individuals with a PTIN can charge for their tax preparation services. The regulations under section 6109 require tax return preparers to have a PTIN if they prepare all or substantially all of a tax return or claim for refund for compensation. Passing a suitability check is a prerequisite for receiving a PTIN. For most PTIN applicants, the suitability check includes, but is not limited to, fingerprinting and processing the fingerprints through the FBI identification records database. The IRS, however, does not intend to fingerprint attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries who apply for a PTIN at this time. The Treasury Department and the IRS specifically request comments on whether these individuals should be exempt from the fingerprinting process.

Participants in the acceptance agent program, which includes certifying acceptance agents, also receive a special benefit from participation in the program. As provided in Revenue Procedure 2006-10, 2006-1 C.B. 293, acceptance agents facilitate and expedite the issuance of individual taxpayer identification numbers (ITINs) and employer identification number (EINs) by verifying the identity and foreign status of applicants. An individual who wants to obtain an ITIN must submit a Form W-7, “Application for IRS Individual Taxpayer Identification Number,” and documentation that evidences the individual’s identity and status as an alien. An EIN applicant must submit a Form SS-4, “Application for Employer Identification Number,” and any required supplementary statements. Section 301.6109-1(d)(3)(iv) provides that ITIN and EIN applicants may submit the application and accompanying information directly to the IRS or may use an acceptance agent. When a certifying acceptance agent is used to apply for an ITIN, the ITIN applicant is not required to submit documentation proving the applicant’s identity or status as an alien because the certifying acceptance agent certifies to these facts. This certification procedure is not available to EIN applicants. The certification is submitted to the IRS as part of the ITIN application.

To become an acceptance agent, applicants must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification records database. Successful applicants receive the special benefit of being able to facilitate and expedite ITIN and EIN applications and verify the applicants’ identity and status as an alien. Certifying acceptance agents receive the additional benefit of being able to certify ITIN applicants’ identity and status as an alien, which enables ITIN applicants to retain their identification and foreign status documentation. Acceptance agents can charge a fee for their services.

All individuals who apply to become an acceptance agent and who are required to be fingerprinted must pay the fingerprinting user fee. As of June 8, 2009, the IRS began storing the fingerprints of all acceptance agent applicants electronically. Prior to that time, the fingerprints of acceptance agent applicants generally were not stored electronically. Fingerprints that are not stored electronically deteriorate over time. The IRS, therefore, may require acceptance agents who were fingerprinted prior to June 8, 2009, and who are currently required to be fingerprinted, to be re-fingerprinted and pay the associated user fee.

All individuals who apply to become authorized e-file providers also must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification records database. The guidelines for participation in this program are in Revenue Procedure 2007-40, 2007-1 C.B. 1488, and numerous publications that are tailored to specific tax or information returns. Successful applicants receive an electronic filing identification number (EFIN). Multiple persons associated with an applicant may use the same EFIN to electronically file tax and information returns. Authorized e-file providers receive the special benefit of being able to electronically file specified tax and information returns with the IRS. Some e-file providers charge a fee for performing this service.

All individuals who apply to become an authorized e-file provider and who are required to be fingerprinted must pay the fingerprinting user fee. Additionally, similar to the process for acceptance agents described earlier in this preamble, authorized e-file providers who were fingerprinted before June 8, 2009, the date the IRS began digitally storing all fingerprints, and are required to be fingerprinted, may be re-fingerprinted and required to pay the associated user fee.

If the IRS has an individual’s fingerprints digitally stored due to the individual’s application to participate or participation in the PTIN, acceptance agent, or authorized e-file provider programs, the individual will not have to be fingerprinted again to participate in one of the other programs.

The IRS did not charge a user fee for acceptance agents or authorized e-file providers to be fingerprinted previously because an unduly large part of the user fee would have been the cost of collecting a user fee. With the addition of many PTIN applicants as individuals who also must be fingerprinted (the number of persons being fingerprinted will increase to approximately 460,000), the cost of collecting the user fee has decreased relative to the costs associated with fingerprinting. Because the cost of collecting a user fee is no longer an unduly large part of the user fee, the IRS has determined that a user fee is now appropriate and will charge a user fee to recover the cost of fingerprinting the applicants and certain participants in the PTIN, acceptance agent, and authorized e-file provider programs.

The proposed regulations also would redesignate §300.12, Fee for obtaining a preparer tax identification number, as §300.13.

The charging of user fees is authorized by the Independent Offices Appropriations Act (IOAA) of 1952, which is codified at 31 U.S.C. 9701. The IOAA authorizes agencies to prescribe regulations that establish charges for services provided by the agency. The charges must be fair and must be based on the costs to the government, the value of the service to the recipient, the public policy or interest served, and other relevant facts. The IOAA provides that regulations implementing user fees are subject to policies prescribed by the President; these policies are currently set forth in the Office of Management and Budget Circular A-25, 58 FR 38142 (July 15, 1993) (the OMB Circular).

The OMB Circular encourages user fees for government-provided services that confer benefits on identifiable recipients over and above those benefits received by the general public. Under the OMB Circular, an agency that seeks to impose a user fee for government-provided services must calculate the full cost of providing those services. In general, a user fee should be set at an amount that allows the agency to recover the full cost of providing the special service, unless the Office of Management and Budget grants an exception.

Pursuant to the guidelines in the OMB Circular, the IRS has calculated its cost of providing services for the registered tax return preparer competency examination and for fingerprinting applicants and certain participants in the PTIN, acceptance agent, and authorized e-file provider programs. The government will charge the full cost of administering these services and will implement the proposed user fees under the authority of the IOAA and the OMB Circular.

Based upon the finding in the Report, the IRS and the Treasury Department are implementing regulatory changes that increase the oversight of the tax return preparer industry. These regulatory changes include requiring persons who prepare all or substantially all of a tax return or claim for refund for compensation to obtain a PTIN and creating a new category of Circular 230 practitioner called registered tax return preparers. Individuals who wish to become a registered tax return preparer must pass a competency examination. Individuals who pass the competency examination and become a registered tax return preparer will receive a special benefit that the general public does not receive because a registered tax return preparer is allowed to prepare and sign Form 1040 series returns (and accompanying schedules) for compensation. Under the new PTIN and Circular 230 guidance (including Notice 2011-6), only attorneys, certified public accountants, enrolled agents, or registered tax return preparers can prepare and sign all or substantially all of a Form 1040 series return for compensation. There are costs to the IRS associated with overseeing the registered tax return preparer competency examination and providing the special benefits associated with being a registered tax return preparer. These proposed regulations implement a user fee for taking the registered tax return preparer competency examination to recover these costs.

PTIN holders, acceptance agents, and e-file providers also receive a special benefit from participation in the PTIN, acceptance agent, and authorized e-file provider programs. PTIN holders receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Acceptance agents receive the special benefit of being able to facilitate and expedite ITIN and EIN applications by validating the applicant’s identity and status as a foreign person. Certifying acceptance agents also receive the special benefit of being able to certify an ITIN applicant’s identity and status as an alien. Authorized e-file providers receive the benefit of being able to electronically file tax and information returns with the IRS. As a prerequisite for participation in these programs, applicants and certain participants must pass a suitability check. As part of the suitability check, most applicants will be fingerprinted for processing through the FBI identification record database. There are costs to the IRS to administer and review the processing of applicant’s and certain participant’s fingerprints as part of the suitability check. These proposed regulations implement a user fee for certain individuals to be fingerprinted as part of the PTIN, acceptance agent, or authorized e-file provider programs to recover these costs.

Regarding the registered tax return preparer program, the objective of the proposed regulations is to recover the costs to the government associated with the registered tax return preparer competency examination. This user fee will be in addition to any reasonable fee charged by the third-party vendor that is approved by the IRS for administering the competency examination. The costs to the government include the personnel, administrative, management, and information technology costs to develop and review the competency examination, oversee the competency examination, validate the competency examination results, and establish review procedures for persons who contest the competency examination. All individuals who are not attorneys, certified public accountants, or enrolled agents and want to prepare and sign Form 1040 series tax returns (and accompanying schedules) for compensation will be required to become a registered tax return preparer and pass the competency examination. Individuals who pass the competency examination and become a registered tax return preparer will receive the special benefit of being able to prepare and sign Form 1040 series returns for compensation. Registered tax return preparers also will receive the benefit of being able to represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during examination if the registered tax return preparer signed the tax return for the period under examination. These regulations recover the costs to the government that are associated with providing this special benefit.

Regarding the fingerprinting user fee to participate in the PTIN, acceptance agent, or authorized e-file provider programs, the purpose of the user fee is to recover the costs to the government for providing the special benefits associated with these programs. This user fee will be in addition to any user fee charged by the third-party vendor, which will be approved by the IRS, and covers the costs for obtaining the fingerprints and transmitting the fingerprints to the FBI. The fingerprinting user fee recovers the costs to the IRS to transfer the fingerprints and the results of the FBI database search to the IRS; perform background checks on third-party vendor employees; modify the database used to receive, record, and store the search results; evaluate the results received from the search of the FBI database; provide internal review of circumstances where an individual is found not suitable to participate in the respective program; and process appeals by individuals who are denied the ability to participate in their respective program because the individuals failed the suitability check. Individuals who participate in the PTIN program receive the special benefit of being able to prepare all or substantially all of a tax return or claim for refund for compensation. Individuals who participate in the acceptance agent program receive the special benefit of being able to facilitate and expedite the issuance of ITINs and EINs by verifying the applicant’s identity and status as an alien; certifying acceptance agents receive the additional benefit of being able to certify an ITIN applicant’s identity and status as an alien. Persons who participate in the authorized e-file provider program receive the special benefit of being able to electronically file tax and information returns.

The legal basis for establishing a user fee is contained in section 9701 of title 31.

The proposed regulations affect all individuals who want to become registered tax return preparers under the new oversight rules in Circular 230. Only individuals, not businesses, can practice before the IRS or become a registered tax return preparer. Thus, the economic impact of these regulations on any small entity generally will be a result of applicants owning a small business or a small entity employing applicants. The NAICS code that relates to tax preparation services (NAICS code 541213) is the appropriate code for the registered tax return preparer program. Entities identified as tax preparation services are considered small under the Small Business Administration size standards (13 CFR 121.201) if their annual revenue is less than $7 million. The IRS estimates that approximately 350,000 individuals will become registered tax return preparers. The IRS estimates that approximately 70 to 80 percent of the individuals who apply to become registered tax return preparers are operating as or employed by small entities.

The proposed regulations affect certain individuals who have or want to obtain a PTIN. Only individuals, not businesses, can obtain a PTIN. Thus, the economic impact of these regulations on any small entity generally will be a result of an individual tax return preparer who is required to obtain a PTIN owning a small business or a small business otherwise employing an individual tax return preparer who is required to apply for or renew a PTIN to prepare all or substantially all of a tax return or claim for refund. The appropriate NAICS codes for applicants or participants in the PTIN program who will have to be fingerprinted relates to tax preparation services (NAICS code 541213). The IRS estimates that approximately 450,000 individuals who receive a PTIN will be required to pay the fingerprinting user fee. Entities identified as tax preparation services and offices of lawyers are considered small under the Small Business Administration size standards if their annual revenue is less than $7 million. The IRS estimates that approximately 70 to 80 percent of the individuals required to be fingerprinted are operating as or employed by small entities.

The proposed regulations also affect individuals who are or want to become an acceptance agent. Only an individual can become an acceptance agent; thus, the regulations will economically impact any small entity that is owned by or employs an acceptance agent. The NAICS code that relates to tax preparation services (NAICS code 541213) is the appropriate code for the acceptance agent program. Entities identified as tax preparation services are considered small under the Small Business Administration size standards if their annual revenue is less than $7 million. The IRS estimates that 3,500 individuals who are not required to obtain a PTIN will be fingerprinted as part of the acceptance agent program. The IRS estimates that 80 to 90 percent of acceptance agents are operating as or employed by small entities.

Finally, the proposed regulations will affect any person that is an authorized e-file provider or applies to become an authorized e-file provider. Small businesses can be authorized e-file providers. The NAICS code that relates to authorized e-file providers is data processing, hosting, and related services (NAICS code 518210). Entities identified as data processing, hosting, and related services are considered small under the Small Business Administration size standards if their annual revenue is less than $25 million. The IRS projects that 6,500 persons who are not required to obtain a PTIN will be fingerprinted as part of the authorized e-file provider program. The IRS estimates that 99 percent of authorized e-file providers are operating as small businesses.

No reporting or recordkeeping requirements are projected to be associated with this proposed regulation.

The IRS is not aware of any federal rules that duplicate, overlap, or conflict with the proposed rule.

The IOAA authorizes the charging of user fees for agency services, subject to policies designated by the President. The OMB Circular implements presidential policies regarding user fees and encourages user fees when a government agency provides a special benefit to a member of the public. As Congress has not appropriated funds to the registered tax return preparer, PTIN, acceptance agent, or authorized e-file provider programs, there are no viable alternatives to the imposition of user fees.

While the IRS previously did not charge a user fee to recover its costs in conjunction with the fingerprinting of applicants to the acceptance agent and authorized e-file programs, the number of applicants in these programs was small enough that the cost of collecting a user fee to fingerprint applicants in these programs would represent an unduly large portion of the user fee. The addition of the PTIN applicants as a group of individuals who also are required to be fingerprinted increased the number of persons required to be fingerprinted to approximately 460,000. Because the population of individuals to be fingerprinted substantially increased, the cost of collecting a user fee for fingerprinting acceptance agents and authorized e-file providers is no longer an unduly large portion of the user fee.

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(b) * * *

(12) Taking the registered tax return preparer examination.

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(14) Fingerprinting to apply for, or participate, in the preparer tax identification number, authorized e-file provider, or acceptance agent programs.

Par. 3. Redesignate §300.12 as §300.13.

Par. 4. Adding new §300.12 to read as follows:

(a) Applicability. This section applies to the competency examination to become a registered tax return preparer pursuant to 31 CFR 10.4(c).

(b) Fee. The fee for taking the registered tax return preparer competency examination is $27, which is the government cost for overseeing the examination and does not include any fees charged by the administrator of the examination.

(c) Person liable for the fee. The person liable for the competency examination fee is the applicant taking the examination.

(d) Effective/applicability date. This section is applicable on the date the final regulations are published in the Federal Register.

Par. 5. Section 300.14 is added to read as follows:

(a) Applicability. This section applies to applicants and participants in the preparer tax identification number, acceptance agent, and authorized e-file provider programs who are required to be fingerprinted as prescribed by forms, instructions, or other appropriate guidance. This section does not apply, however, to individuals who reside and are employed outside of the United States.

(b) Fee. The fee to be fingerprinted is $33, which is the cost to the government for processing the fingerprints and does not include any fees charged by the vendor.

(c) Person liable for the fee. The person liable for the fingerprinting fee is the person being fingerprinted.

(d) Effective/applicability date. This section is applicable on the date the final regulations are published in the Federal Register.