[Federal Register Volume 77, Number 249 (Friday, December 28, 2012)]
[Rules and Regulations]
[Pages 76400-76406]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31185]
-----------------------------------------------------------------------
DEPARTMENT OF TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9608]
RIN 1545-BI85
Disclosure or Use of Information by Preparers of Returns
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that provide rules
relating to the disclosure or use of tax return information by tax
return preparers. These regulations provide updated guidance affecting
tax return preparers regarding the use of information related to lists
for solicitation of tax return
[[Page 76401]]
business; the disclosure or use of statistical compilations of data
under section 7216 of the Internal Revenue Code (Code) by a tax return
preparer in connection with, or in support of, a tax return preparer's
tax return preparation business; and the disclosure or use of
information for the purpose of performing conflict reviews.
DATES: Effective date:
These regulations are effective on December 28, 2012.
Applicability date: For date of applicability see Sec. 301.7216-
2(s).
FOR FURTHER INFORMATION CONTACT: Emily M. Lesniak, (202) 622-4910 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations amending the Regulations
on Procedure and Administration (26 CFR part 301). On January 4, 2010,
the IRS and the Treasury Department published a notice of proposed
rulemaking (REG-131028-09) in the Federal Register (75 FR 94), cross-
referencing temporary regulations (TD 9478, 75 FR 48), providing rules
relating to the ability of a tax return preparer to use tax return
information for the purposes of compiling, maintaining, and using lists
for solicitation of tax return business under Sec. 301.7216-2T(n); to
disclose or use statistical compilations of data described in Sec.
301.7216-1(b)(3)(i)(B) under Sec. 301.7216-2T(o); and to disclose or
use tax return information for the purpose of performing conflict
reviews under Sec. 301.7216-2T(p) without taxpayer consent. The
modifications to Sec. 301.7216-2(o) in the temporary and proposed
regulations were made following the issuance of Notice 2009-13 (2009-6
IRB 447 (February 9, 2009)), and the receipt of comments submitted in
response to that Notice. These comments were summarized in the preamble
to TD 9478. No public hearing on the notice of proposed rulemaking was
requested or held. Written and electronic comments responding to the
notice of proposed rulemaking were received. All comments were
considered and are available for public inspection at
www.regulations.gov or upon request. After consideration of all the
comments, the proposed regulations, with minor clarifications and
revisions to ensure the language of the regulations is internally
consistent and technically correct, are adopted by this Treasury
decision. This preamble summarizes the significant comments received by
the IRS and Treasury.
Summary of Comments
The IRS and Treasury received seven (7) comments in response to the
proposed regulations. Some of the discussion contained in the comments
did not relate to the rules in the proposed regulations but instead was
directed towards other unrelated content contained in the section 7216
regulations or other published guidance pertaining to section 7216.
This Summary of Comments focuses solely on comments relating to the
proposed regulations and does not address comments relating to other
published guidance pertaining to section 7216, which are outside the
scope of this rule.
1. Comments Relating to Sec. 301.7216-2(n) of the Proposed Regulations
A. Use of the List
As proposed, Sec. 301.7216-2(n) allows tax return preparers to
maintain a list of limited tax return information that may be used by
the compiler to contact taxpayers to provide tax information and
general business or economic information or analysis for educational
purposes or to solicit tax return preparation services.
One commentator asked to expand the acceptable list maintenance
purposes to include solicitation of ``accounting services''
``consistent with legal and ethical responsibilities.'' The commentator
explained that these accounting services include, for example,
assistance with bookkeeping, the preparation of payroll returns, and
the preparation of regulatory returns. The commentator also included
the preparation of state and local income tax returns as an accounting
service. The preparation of state and local income tax returns is,
however, tax return preparation expressly authorized by the statute,
and use of the list is permissible to solicit this service.
The language of section 7216(a)(2) prohibits the use of ``any such
information for any purposes other than to prepare, or assist in the
preparing, of any such return * * *'' except as specifically excepted
by section 7216(b). The IRS and Treasury have determined that it is
inconsistent with the purpose of section 7216 to exercise regulatory
authority to provide an exception under section 7216 for the use of tax
return information to solicit accounting services. Taxpayers may
consent in writing to allow tax return preparers to use their tax
return information to solicit non-tax return preparation services, such
as the accounting services listed by the commentator. Accordingly, to
the extent the commentator requested the inclusion of accounting
services as a list maintenance purpose, this comment was not adopted.
The proposed regulations provide: ``This list may be used by the
compiler solely to contact the taxpayers on the list for the purpose of
providing tax information and general business or economic information
or analysis for educational purposes, or soliciting additional tax
return preparation services. The list may not be used to solicit any
service or product other than tax return preparation services.'' A
commentator asked that the final regulations clarify this statement.
The commentator specifically asked whether, under the rule set forth in
the proposed regulations, articles could be included in a newsletter
that address several topics that do not constitute tax return
preparation services.
Under the final regulations, a tax return preparer may, without
taxpayer consent, compile a list of certain taxpayer specific
information that may be used to contact the taxpayers on the list for
two purposes: (1) Providing tax information and general business or
economic information or analysis for educational purposes, and (2)
soliciting additional tax return preparation services. A tax return
preparer may not use the list to solicit non-tax return preparation
services. The final regulations do not attempt to describe every
scenario that may constitute either a permissible or prohibited use of
the list. Rather, a tax return preparer seeking to use tax return
information in the manner proposed by the commentator must carefully
consider, on a case-by-case basis, the specific content of a particular
newsletter article to ensure that the content meets the requirements of
Sec. 301.7216-2(n). For example, a newsletter that summarizes recent
case law or describes current legal developments would be considered to
be for educational or informational purposes and a permissible use of
the list. If a tax return preparer wishes to solicit non-tax return
preparation services in the preparer's newsletter, a consent must be
obtained from clients that authorizes the use of specified tax return
information to solicit those non-tax return preparation services in the
preparer's newsletter.
The final regulations retain the provisions in the proposed
regulations that require written consent for all other purposes not
expressly allowed by the regulations. This is consistent with the
congressional discussion regarding section 7216, which provides that
``[section 7216] simply preserves the confidentiality of information
provided by the taxpayer to the one who prepares the returns as a
professional act.'' Senate
[[Page 76402]]
Discussion on Conference Report, 117 Cong. Record S. 18,627 (daily ed.
November 15, 1971) (statement of Sen. Mathias). This floor discussion
further provides that ``[p]resumably, where appropriate, the Treasury
Department will permit the use of the information within the business
organization of the preparer of the return if the taxpayers [sic] has
indicated in writing that he desires the information to be used by the
organization for some purpose specifically benefitting the taxpayer.''
(Emphasis added). House Discussion on Conference Report, 117 Cong. Rec.
H12,118 (daily ed. Dec. 9, 1971) (statement of Rep. Mills).
B. Authorized Delivery Methods
One commentator recommended that the proposed regulations be
clarified to state that Sec. 301.7216-2(n)(1) permits a tax return
preparer to use any delivery method that employs or is based on the
list information sanctioned by that regulation provision. The
commentator expressed a concern that the two examples provided in the
temporary regulations limited the method of delivery to only email or
U.S. mail. The examples were not intended to limit the scope of the
rule. The final regulations authorize any delivery method that will
facilitate direct contact with the taxpayers on the list through the
use of only the information authorized for compilation of a list under
Sec. 301.7216-2(n). The examples were modified to clarify this point.
C. Limits on Tax Return Information Contained in Lists
One commentator suggested removing any limits on the tax return
information a tax return preparer may include in compiling and
maintaining lists for the solicitation of tax return business under
Sec. 301.7216-2(n). This comment appears to be based upon an
interpretation that the policy of section 7216 was intended to protect
only privacy concerns. Section 7216(b)(3) provides the Secretary with
broad authority to issue regulations authorizing specific disclosures
or uses of tax return information. When publishing regulations allowing
for these disclosures or uses, the IRS and Treasury must balance
congressional intent and concerns for the protection of sensitive
taxpayer data with the benefits taxpayers may receive from the proposed
disclosures or uses. Removal of all restrictions on the allowable types
of tax return information that may be included in the compilation and
maintenance of lists is inconsistent with section 7216's underlying
purpose. The proposed regulations expanded the types of tax return
information a tax return preparer may use to compile a list for the
purpose of soliciting tax return preparation business in a manner
consistent with the purpose of section 7216 and the regulations.
Accordingly, this comment was not adopted.
The commentator also stated that the temporary regulations
contained ambiguous and vague language that required clarification
regarding the entities and form numbers that may be maintained, such as
whether an S corporation can be distinguished from a C corporation or
whether a Form 1120 can be distinguished from a Form 1120-S. The rule
and examples in the regulations already address whether entity
classifications maintained in a list pursuant to Sec. 301.7216-2(n)
include individuals and the types of businesses that would file
different types of returns. The regulations provide that the ``specific
type of business entity'' may be maintained in the list. Further,
Example 1 in Sec. 301.7216-2(n)(2) illustrates that tax return
preparers may limit the provision of information based upon filer type.
In addition, the income tax return form number refers to the form
number that appears on the first page of the particular tax return form
that the tax return preparer prepares (for example, Form 1120-S). To
clarify this point, a parenthetical has been added to Sec. 301.7216-
2(n).
One commentator stated that the proposed regulations should be
clarified regarding whether nontax return information may be included
in a list maintained pursuant to Sec. 301.7216-2(n) and that the
regulations should be modified to state that nontax return information
can be included in the list with the allowed items of tax return
information. This comment was not adopted. The inclusion of nontax
return information in the list could facilitate circumvention of the
restrictions of section 7216 as to items of tax return information that
may not be kept on the list by permitting tax return preparers to
obtain the tax return information from other sources. In any event, if
tax return preparers wish to include additional information in a list,
they may obtain consent to do so from their clients. The language in
Sec. 301.7216-2(n), however, has been clarified to eliminate any
potential confusion arising from the wording of the provision.
One commentator recommended that the IRS and Treasury issue
guidance, pursuant to the terms of Sec. 301.7216-2T(n), to further
expand the types of tax return information that may be included in a
list compiled for solicitation of tax return business. This comment was
not adopted. This comment requested that the tax return information
that may be included in a list compiled for solicitation purposes be
expanded to include tax schedules filed, certain information regarding
tax preparation software, the date taxpayers file their returns, the
employer identification number of taxpayers' employers, the number and
age of taxpayers' dependents, and whether taxpayers file with a tax
balance due. The IRS and Treasury considered adding each item to the
information that may be included in a list compiled for solicitation of
tax return business. Including these items, however, would be
inconsistent with the taxpayer protection purpose of section 7216, as
demonstrated by the congressional discussion. Moreover, certain items
present a risk of abuse by tax return preparers that would exceed any
potential benefit to the taxpayer.
2. Comments Relating to Sec. 301.7216-2(o) of the Proposed Regulations
A. Clarify meaning of ``Bona Fide Research'' and ``Public Policy
Discussions''
One commentator recommended that the final regulations clarify the
meaning of ``bona fide research'' and ``public policy discussions'' by
explicitly including examples of individuals or entities that engage in
these activities, including lawmakers, academics, nonprofit
organizations, and other agencies that facilitate tax policy. While
these individuals and entities may, at times, conduct bona fide
research or engage in public policy discussions, tax return preparers
must determine, on a case-by-case basis, whether a disclosure or use is
in support of bona fide research or public policy discussions. For
example, public policy discussions would include discussion of the
implications of legislative amendments and tax reform proposals.
B. Limitations on the Use and Purpose of Statistical Compilations of
Data
One commentator recommended limiting the discretion afforded to tax
return preparers to determine appropriate disclosures of statistical
compilations. The commentator expressed concern that tax return
preparers will disclose more information than is lawfully permissible
or even sell data to third parties. This comment was not adopted. The
availability of anonymous statistical compilations can assist lawmakers
and others in the private and public sectors in discussing,
formulating, and implementing sound tax policy. The final regulations
sufficiently limit the construction of the statistical
[[Page 76403]]
compilations to prevent the disclosure of any individual's tax return
information. In addition, Sec. 301.7216-2(o)(1) specifically prohibits
the sale of a statistical compilation of data except in conjunction
with the transfer of assets made pursuant to the sale or other
disposition of the tax return preparer's tax return preparation
business. Finally, there are penalties imposed by sections 7216 and
6713 for the improper disclosure or use of tax return information.
One commentator recommended removing all restrictions on the
disclosure or use of anonymous statistical compilations. This comment
was not adopted. The purpose of section 7216 and its accompanying
regulations is to preserve taxpayer confidentiality by protecting
taxpayers from the unauthorized disclosures or uses of sensitive tax
return information by tax return preparers. Eliminating all
restrictions on the use of statistical compilations would contravene
this purpose and could increase opportunities for taxpayer's personal
information to be improperly disclosed or misused. In particular, it is
possible to craft statistical compilations in a way that allows for the
data to be associated with a particular taxpayer.
One commentator recommended that the restriction on the disclosure
or use of anonymous statistical information be eliminated to allow for
the compilation of statistically anonymous information relating to the
dollar amounts of refunds, credits, or deductions. This comment was not
adopted. Section 7216 authorizes the IRS and Treasury to promulgate
rules regulating how tax return preparers may disclose or use tax
return information while ensuring that the taxpayer protection purpose
of section 7216 is fulfilled. Eliminating all restrictions on the use
of statistical compilations regarding the dollar amounts of refunds,
credits, or deductions would provide tax return preparers the
unfettered ability to use tax return information. This would undermine
the purpose and basic protections of preventing inappropriate
disclosure or use of tax return information by tax return preparers
afforded by section 7216.
One commentator requested that volunteer income tax assistance
programs be exempted from the restrictions on the disclosure or use of
statistical compilations for marketing or advertising purposes. This
comment was not adopted. Taxpayers who receive volunteer income
assistance and taxpayers who receive tax preparation assistance from
compensated preparers deserve the same protection of their tax return
information. Section 301.7216-2(o) already makes appropriate allowances
for a preparer's status as a participant in a volunteer income tax
assistance program by allowing for use of statistical compilations in
fundraising activities conducted by volunteer return preparation
programs and other entities described in section 501(c). As a result,
IRS and Treasury believe that the regulations already address the
concerns expressed by this commentator.
3. Comments Relating to Sec. 301.7216-2(p) of the Proposed Regulations
No comments were received in response to Sec. 301.7216-2(p) of the
proposed regulations, and Sec. 301.7216-2(p) is being finalized
without change.
4. Effective Date of TD 9478
One commentator questioned the appropriateness of applying Sec.
301.7216-2(o) of the temporary regulations contained in TD 9478 with an
immediate effective date, stating that one provision of this section is
more restrictive than prior guidance (Notice 2009-13) indicated. The
commentator requested that the effective date of this particular
proposal be made fully prospective and only after regulations are
finalized. This comment was not adopted for the following reasons.
By its specific terms, Notice 2009-13 expired on December 31, 2009,
while TD 9478 is applicable to disclosures or uses of tax return
information occurring on or after January 4, 2010. Because there is no
conflicting or overlapping period of application of this related
guidance, tax return preparers could not have relied upon Notice 2009-
13 beyond December 31, 2009. As TD 9478 was not applicable until
January 4, 2010, there is no retroactive application of the rule
contained in that Treasury decision.
Further, Notice 2009-13 requested comments, and comments in
response to the notice were taken into account in the drafting and
publication of TD 9478. As explained in the preamble to TD 9478,
concerns were expressed regarding the scope of the language used in
Notice 2009-13 on this specific issue. The amendments provided in TD
9478 are responsive to public comments on and a logical outgrowth of
the language in Notice 2009-13.
Finally, the general rule under section 7216 prohibits the
disclosure or use of tax return information unless a written consent is
obtained or an exception applies. With the expiration of Notice 2009-13
on December 31, 2009, the uses of statistical compilations allowed for
in the notice were no longer permissible. If Sec. 301.7216-2(o) was
made effective only upon publication of the final regulations, as the
commentator seems to suggest, neither the exceptions provided for
Notice 2009-13 nor those provided for in Sec. 301.7216-2T(o) would be
applicable after December 2009. The permissible use of statistical
compilations without taxpayer consent would be more, not less,
restrictive than if Sec. 301.7216-2(o) had not been published as a
temporary regulation.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866, as
supplemented by Executive Order 13563. Therefore, a regulatory
assessment is not required. It also has been determined that section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because the regulations do not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(e) of the Code, the temporary regulations and the proposed
regulations preceding these final regulations were published in the
Federal Register to provide notice and the opportunity to comment.
Pursuant to section 7805(f) of the Code, the proposed regulations
preceding these regulations were submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small business, and no comments were received.
Drafting Information
The principal authors of these regulations are Skyler K. Bradbury
and Emily M. Lesniak, Office of the Associate Chief Counsel (Procedure
and Administration).
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.7216-0 is amended by revising the entries for
[[Page 76404]]
Sec. 301.7216-2, paragraphs (n), (o), and (p) to read as follows:
Sec. 301.7216-0 Table of contents.
* * * * *
Sec. 301.7216-2 Permissible disclosures or uses without consent of
the taxpayer.
* * * * *
(n) Lists for solicitation of tax return preparation business.
(o) Producing statistical information in connection with tax
return preparation business.
(p) Disclosure or use of information for quality, peer, or
conflict reviews.
* * * * *
Sec. 301.7216-0T [Removed]
0
Par. 3. Section 301.7216-0T is removed.
0
Par. 4. Section 301.7216-2 is amended by revising paragraphs (n), (o),
(p), and (s) to read as follows:
Sec. 301.7216-2 Permissible disclosures or uses without consent of
the taxpayer.
* * * * *
(n) Lists for solicitation of tax return preparation business. (1)
A tax return preparer, other than a person who is a tax return preparer
solely because the person provides auxiliary services as defined in
Sec. 301.7216-1(b)(2)(iii), may compile and maintain a separate list
containing solely items of tax return information. The following items
of tax return information are permissible: The names, mailing
addresses, email addresses, phone numbers, taxpayer entity
classification (including ``individual'' or the specific type of
business entity), and income tax return form number (for example, Form
1040-EZ) of taxpayers whose tax returns the tax return preparer has
prepared or processed. The Internal Revenue Service may issue guidance,
by publication in the Internal Revenue Bulletin (see Sec.
601.601(d)(2)(ii)(b) of this chapter), describing other types of
information that may be included in a list compiled and maintained
pursuant to this paragraph. This list may be used by the compiler
solely to contact the taxpayers on the list for the purpose of
providing tax information and general business or economic information
or analysis for educational purposes, or soliciting additional tax
return preparation services. The list may not be used to solicit any
service or product other than tax return preparation services. The
compiler of the list may not transfer the taxpayer list, or any part
thereof, to any other person unless the transfer takes place in
conjunction with the sale or other disposition of the compiler's tax
return preparation business. Due diligence conducted prior to a
proposed sale of a compiler's tax return preparation business is in
conjunction with the sale or other disposition of a compiler's tax
return preparation business and will not constitute a transfer of the
list if conducted pursuant to a written agreement that requires
confidentiality of the tax return information disclosed and expressly
prohibits the further disclosure or use of the tax return information
for any purpose other than that related to the purchase of the tax
return preparation business. A person who acquires a taxpayer list, or
a part thereof, in conjunction with a sale or other disposition of a
tax return preparation business falls under the provisions of this
paragraph with respect to the list. The term list, as used in this
paragraph (n), includes any record or system whereby the types of
information expressly authorized for inclusion in a taxpayer list
pursuant to the terms of this paragraph (n) are retained. The
provisions of this paragraph (n) also apply to the transfer of any
records and related papers to which this paragraph (n) applies.
(2) Examples. The following examples illustrate this paragraph (n):
Example 1. Preparer A is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A). Preparer A's office is located in
southeast Pennsylvania, and Preparer A prepares federal and state
income tax returns for taxpayers who live in Pennsylvania, New
Jersey, Maryland, and Delaware. Preparer A maintains a list of
taxpayer clients containing the information allowed by this
paragraph (n). Preparer A provides quarterly state income tax
information updates to his individual taxpayer clients by email or
U.S. mail. To ensure that his clients only receive the information
updates that are relevant to them, Preparer A uses his list to
direct his outreach efforts towards the relevant clients by
searching his list to filter it by zip code and income tax return
form number (Form 1040 and corresponding state income tax return
form number). Preparer A may use the list information in this manner
without taxpayer consent because he is providing tax information for
educational or informational purposes and is targeting clients based
solely upon tax return information that is authorized by this
paragraph (n) (by zip code, which is part of a taxpayer's address,
and by income tax return form number). Without taxpayer consent,
Preparer A also may deliver this information to his clients by
email, U.S. mail, or other method of delivery that uses only
information authorized by this paragraph (n).
Example 2. Preparer B is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A). Preparer B maintains a list of
taxpayer clients containing the information allowed by this
paragraph (n). Preparer B provides monthly federal income tax
information updates in the form of a newsletter to all of her
taxpayer clients by email or U.S. mail. When Preparer B hires a new
employee who participates or assists in tax return preparation, she
announces that hire in the newsletter for the month that follows the
hiring. Each announcement includes a photograph of the new employee,
the employee's name, the employee's telephone number, a brief
listing of the employee's qualifications, and a brief listing of the
employee's employment responsibilities. Preparer B may use the tax
return information described in this paragraph (n) in this manner
without taxpayer consent because she is providing tax information
for educational or informational purposes to provide general federal
income tax information updates. Preparer B may include the new
employee announcements in the form described because this is
considered tax information for informational purposes, provided the
announcements do not contain solicitations for non-tax return
preparation services. Without taxpayer consent, Preparer B also may
deliver this information to her clients by email, U.S. mail, or
other method of delivery that uses only information authorized by
this paragraph (n).
(o) Producing statistical information in connection with tax return
preparation business. (1) A tax return preparer may use tax return
information, subject to the limitations specified in this paragraph
(o), to produce a statistical compilation of data described in Sec.
301.7216-1(b)(3)(i)(B). The purpose for and disclosure or use of the
statistical compilation requiring data acquired during the tax return
preparation process must relate directly to the internal management or
support of the tax return preparer's tax return preparation business,
or to bona fide research or public policy discussions concerning state
or federal taxation. A tax return preparer may not disclose the
statistical compilation, or any part thereof, to any other person
unless disclosure of the statistical compilation is anonymous as to
taxpayer identity, does not disclose an aggregate figure containing
data from fewer than ten tax returns, and is in direct support of the
tax return preparer's tax return preparation business or of bona fide
research or public policy discussions concerning state or federal
taxation. A statistical compilation is anonymous as to taxpayer
identity if it is in a form which cannot be associated with, or
otherwise identify, directly or indirectly, a particular taxpayer. For
purposes of this paragraph, marketing and advertising is in direct
support of the tax return preparer's tax return preparation business
provided the marketing and advertising is not false, misleading, or
unduly influential. This paragraph, however, does not authorize the
disclosure or use in marketing or advertising of any statistical
compilations, or part thereof, that
[[Page 76405]]
identify dollar amounts of refunds, credits, or deductions associated
with tax returns, or percentages relating thereto, whether or not the
data are statistical, averaged, aggregated, or anonymous. Disclosures
made in support of fundraising activities conducted by volunteer return
preparation programs and other organizations described in section
501(c) of the Internal Revenue Code (Code) in direct support of their
tax return preparation businesses are not marketing and advertising
under this paragraph. A tax return preparer who produces a statistical
compilation of data described in Sec. 301.7216-1(b)(3)(i)(B) may
disclose the compilation to comply with financial accounting or
regulatory reporting requirements whether or not the statistical
compilation is anonymous as to taxpayer identity or discloses an
aggregate figure containing data from fewer than ten tax returns.
(2) A tax return preparer may not sell or exchange for value a
statistical compilation of data described in Sec. 301.7216-
1(b)(3)(i)(B), in whole or in part, except in conjunction with the
transfer of assets made pursuant to the sale or other disposition of
the tax return preparer's tax return preparation business. The
provisions of paragraph (n) of this section regarding the transfer of a
taxpayer list also apply to the transfer of any statistical
compilations of data to which this paragraph applies. A person who
acquires a statistical compilation, or a part thereof, pursuant to the
operation of this paragraph (o) or in conjunction with a sale or other
disposition of a tax return preparation business is subject to the
provisions of this paragraph with respect to the compilation.
(3) Examples. The following examples illustrate this paragraph (o):
Example 1. Preparer A is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A). In 2009, A used tax return information
to produce a statistical compilation of data for both internal
management purposes and to support A's tax return preparation
business. The statistical compilation included an aggregate figure
containing the information that A prepared 32 S corporation tax
returns in 2009. In 2010, A decided to embark upon a new marketing
campaign emphasizing its experience preparing small business tax
returns. In the campaign, A discloses the aggregate figure
containing the number of S corporation tax returns prepared in 2009.
A's disclosure does not include any information that can be
associated with or identify any specific taxpayers. A may disclose
the anonymous statistical compilation without taxpayer consent.
Example 2. Preparer B is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A). In 2010, in support of B's tax return
preparation business, B wants to advertise that the average tax
refund obtained for its clients in 2009 was $2,800. B may not
disclose this information because it contains a statistical
compilation reflecting average refund amounts.
Example 3. Preparer C is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A) and is a volunteer income tax
assistance program. In 2010, in support of C's tax return
preparation business, C submits a grant application to a charitable
foundation to fund C's operations providing free tax return
preparation services to low- and moderate-income families. In
support of C's request, C includes anonymous statistical data
consisting of aggregated figures containing data from ten or more
tax returns showing that, in 2009, C provided services to 500
taxpayers, that 95 percent of the taxpayer population served by C
received the Earned Income Tax Credit (EITC), and that the average
amount of the EITC received was $3,300. Despite the fact that this
information constitutes an average credit amount, C may disclose the
information to the charitable foundation because disclosures made in
support of fundraising activities conducted by volunteer income tax
assistance programs and other organizations described in section
501(c) of the Code in direct support of their tax return preparation
business are not considered marketing and advertising for purposes
of Sec. 301.7216-2(o)(1).
Example 4. Preparer D is a tax return preparer as defined by
Sec. 301.7216-1(b)(2)(i)(A). In December 2009, D produced an
anonymous statistical compilation of tax return information obtained
during the 2009 filing season. In 2010, D wants to disclose portions
of the anonymous statistical compilation from aggregated figures
containing data from ten or more tax returns in connection with the
marketing of its financial advisory and asset planning services. D
is required to receive taxpayer consent under Sec. 301.7216-3
before disclosing the tax return information contained in the
anonymous statistical compilation because the disclosure is not
being made in support of D's tax return preparation business.
(p) Disclosure or use of information for quality, peer, or conflict
reviews. (1) The provisions of section 7216(a) and Sec. 301.7216-1
shall not apply to any disclosure for the purpose of a quality or peer
review to the extent necessary to accomplish the review. A quality or
peer review is a review that is undertaken to evaluate, monitor, and
improve the quality and accuracy of a tax return preparer's tax
preparation, accounting, or auditing services. A quality or peer review
may be conducted only by attorneys, certified public accountants,
enrolled agents, and enrolled actuaries who are eligible to practice
before the Internal Revenue Service. See Department of the Treasury
Circular 230, 31 CFR part 10. Tax return information may also be
disclosed to persons who provide administrative or support services to
an individual who is conducting a quality or peer review under this
paragraph (p), but only to the extent necessary for the reviewer to
conduct the review. Tax return information gathered in conducting a
review may be used only for purposes of a review. No tax return
information identifying a taxpayer may be disclosed in any evaluative
reports or recommendations that may be accessible to any person other
than the reviewer or the tax return preparer being reviewed. The tax
return preparer being reviewed will maintain a record of the review,
including the information reviewed and the identity of the persons
conducting the review. After completion of the review, no documents
containing information that may identify any taxpayer by name or
identification number may be retained by a reviewer or by the
reviewer's administrative or support personnel.
(2) The provisions of section 7216(a) and Sec. 301.7216-1 shall
not apply to any disclosure necessary to accomplish a conflict review.
A conflict review is a review undertaken to comply with requirements
established by any federal, state, or local law, agency, board or
commission, or by a professional association ethics committee or board,
to either identify, evaluate, or monitor actual or potential legal and
ethical conflicts of interest that may arise when a tax return preparer
is employed or acquired by another tax return preparer, or to identify,
evaluate, or monitor actual or potential legal and ethical conflicts of
interest that may arise when a tax return preparer is considering
engaging a new client. Tax return information gathered in conducting a
conflict review may be used only for purposes of a conflict review. No
tax return information identifying a taxpayer may be disclosed in any
evaluative reports or recommendations that may be accessible to any
person other than those responsible for identifying, evaluating, or
monitoring legal and ethical conflicts of interest. No tax return
information identifying a taxpayer may be disclosed outside of the
United States or a territory or possession of the United States unless
the disclosing and receiving tax return preparers have procedures in
place that are consistent with good business practices and designed to
maintain the confidentiality of the disclosed tax return information.
(3) Any person (including administrative and support personnel)
receiving tax return information in connection with a quality, peer, or
conflict review is a tax return preparer for purposes of sections
7216(a) and
[[Page 76406]]
6713(a). Tax return information disclosed and used for purposes of a
quality, peer, or conflict review shall not be disclosed or used for
any other purpose.
* * * * *
(s) Effective/applicability date. Paragraphs (n), (o), and (p) of
this section apply to disclosures or uses of tax return information
occurring on or after December 28, 2012. All other paragraphs of this
section apply to disclosures or uses of tax return information
occurring on or after January 1, 2009.
Sec. 301.7216-2T [Removed]
0
Par. 5. Section 301.7216-2T is removed.
Stephen T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: December 20, 2012.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-31185 Filed 12-26-12; 11:15 am]
BILLING CODE 4830-01-P