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Federal Register / Vol. 86, No. 170 / Tuesday, September 7, 2021 / Rules and Regulations DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 301
TD 9952
RIN 1545B012

Certain Non-Government Persons Not Authorized To Participate in Examinations of Books and Witnesses as a Section 6103n Contractor Internal Revenue Service IRS, Treasury.
ACTION: Final regulations.
AGENCY:

This document contains final regulations modifying regulations relating to IRS administrative proceedings to reflect limitations that are required by the enactment of the Taxpayer First Act of 2019. These final regulations implement new rules regarding the persons who may be provided books, papers, records, or other data obtained pursuant to section 7602 of the Internal Revenue Code Code for the sole purpose of providing expert evaluation and assistance to the IRS, and adopt further limitations on the types of non-governmental attorneys to whom, under the authority of section 6103n of the Code, any books, papers, records, or other data obtained pursuant to section 7602 may be provided. These final regulations also prohibit any IRS
contractors from asking substantive questions of a summoned witness under oath or asking a summoned persons representative to clarify an objection or assertion of privilege. The regulations affect persons who are examined by the IRS and any persons who are questioned by the IRS under oath pursuant to section 7602.
DATES:
Effective date: These regulations are effective on September 7, 2021.
Applicability date: For date of applicability, see 301.76021d, which provides that the regulations promulgated by this Treasury decision are applicable to examinations begun or administrative summonses served by the IRS on or after August 6, 2020.
FOR FURTHER INFORMATION CONTACT:
William V. Spatz at 202 3175461 not a toll-free number.
SUPPLEMENTARY INFORMATION:
lotter on DSK11XQN23PROD with RULES1

SUMMARY:

Background These final regulations amend Procedure and Administration Regulations 26 CFR part 301 under section 7602a of the Code relating to participation by persons described in section 6103n of the Code and 26 CFR

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301.6103n1a of the Procedure and Administration Regulations in receiving and reviewing summoned books, papers, records, or other data and in interviewing a summoned witness under oath. These final regulations narrow the scope of the final regulations TD 9778 published in the Federal Register 81 FR 45409 on July 14, 2016
Summons Interview Regulations by providing that certain non-government attorneys whom the IRS could previously have hired are no longer authorized to participate in an examination and by interpreting the requirements of section 7602f, which was added to the Code by the Taxpayer First Act of 2019. A notice of proposed rulemaking REG13243417 proposing these changes was published in the Federal Register 85 FR 47931 on August 7, 2020 proposed regulations.
Summary of Comments No public hearing was requested or held regarding the proposed regulations.
Two responsive comments were received, both of which concerned only one portion of the proposed regulationsproposed 301.7602
1b3C, titled Hiring of certain nongovernment attorneys.
The first commenter recommended modifying the proposed rules to allow any outside contractors working for the IRS to examine, interview, and determine whether a taxpayer was a tax cheat. The Department of the Treasury Treasury Department and the IRS decline to adopt this comment.
While the IRS may hire a contractor to assist the IRS in these processes, examining a taxpayer and determining whether that taxpayer is in compliance with Federal tax laws are core IRS
functions that the IRS has never allowed a contractor to perform. In addition, section 7602f now prohibits the IRS
from allowing an IRS contractor to ask substantive questions of a witness whose testimony is being taken under oath pursuant to section 7602.
The second commenter noted that the non-exclusive nature of the proposed regulations left open the possibility that the IRS could hire as a contractor in an IRS examination a certified public accountant CPA, enrolled agent, or another non-attorney to provide the IRS
with assistance in the application of Federal tax laws. This commenter asserted that the proposed regulations should be revised so as to prohibit the IRS from hiring as a contractor in an examination any person, whether or not an attorney, for that persons expertise with the Federal tax laws. The Treasury Department and the IRS decline to adopt this comment. The limitation on
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hiring attorneys as contactors in examinations for their expertise in applying the Federal tax laws is a measure that goes beyond what is required by section 7602f. This hiring limitation was introduced as a matter of sound tax administration to address concerns expressed by a range of professional and business associations over the IRSs prior use of attorneys as contractors. While the previous commenters addressing the Summons Interview Regulations and Notice 2017
38, 201730 I.R.B. 147, noted the potential hazards that could arise from the IRS hiring attorney contractors for their expertise with Federal tax laws, the hiring of a CPA or other accountant by the IRS as a contractor has not been established as a widely held concern.
Accordingly, the Treasury Department and the IRS have determined 1 that hiring outside CPAs and accountants as contractors in an examination does not pose the same potential risk to tax administration that prior commenters had identified for the IRS hiring of outside attorneys, who are trained at developing facts and taking testimony, and 2 that the IRS is justified in contracting for the resources and expertise of CPAs and accountants from outside of the IRS in certain large or complex cases.
Explanation of the Final Regulations The preamble to proposed regulations explained the various provisions of the proposed regulations in detail. Because these final regulations adopt the proposed regulations without any modifications, any persons interested in understanding the provisions of these final regulations should consult the preamble discussion of these provisions in the proposed regulations.
Special Analyses These regulations are not subject to review under section 6b 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. Therefore, a regulatory impact assessment is not required.
Pursuant to the Regulatory Flexibility Act 5 U.S.C. chapter 6, it is hereby certified that these regulations do not impose a significant economic impact on a substantial number of small entities. The final regulations mainly affect the IRS and do not impose requirements on small entities. Thus, no economic impact will result from these regulations on any small entity.
Accordingly, the Secretary of the Treasurys delegate certifies that the rule
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