By e-mail to

December 27, 2016

Internal Revenue Service
CC:PA:LPD:PR (REG-134122-15), Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC  20044

Re:      Special Enrollment Examination (SEE) User Fee (REG-134122-15)

The National Association of Enrolled Agents (NAEA) appreciates the opportunity to comment on the agency’s re-proposed regulations, which include a reduced, yet still significant increase in the fees it charges those who wish to hold themselves to the IRS’ highest tax professional standards as set forth in Treasury Department Circular 230. As the organization representing the interests of 50,000 enrolled agents (EAs), NAEA is uniquely positioned to offer an informed and practical perspective on increased user fees.

Before we share our concerns, however, we thank the agency for once again publishing proposed regulations, which allow for comment before the agency changes fees, rather than temporary regulations, which would have increased the fees and then asked for comment. We also thank the agency for:

  • reducing the proposed user fee increase from $99 per part to $81 per part in response to concerns we raised in our February 24th response to the now-withdrawn regs; and
  •  including the user fee calculations within the re-proposed regs.

The re-proposed user fee regulations focus on recovering estimated costs to the government of providing oversight for the SEE. We are on well-trodden ground here and return to concerns we have already voiced, namely:

      I.        how the agency applies the Office of Management and Budget’s (OMB’s) Circular A-25 (hereinafter “Circular A-25”); and

   II.        how the agency calculated the increase and the efforts, if any, IRS has taken to minimize costs.

I. We question how IRS is applying Circular A-25. User fees are authorized by the Independent Offices Appropriations Act of 1952 (IOAA), codified at 31 U.S.C. 9701, and set forth in Circular A-25. Circular A-25 establishes federal policy regarding fees assessed for government services and includes a general policy statement:

A user charge…will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.

Further, Circular A-25 requires agencies to determine when special benefits exist and clarifies:

No charge should be made for a service when the identification of the specific beneficiary is obscure, and the service can be considered primarily as benefiting broadly the general public.

The initial proposed regulation and the re-proposed regulation identically assert:

The IRS confers a benefit on individuals who take the…SEE beyond those that accrue to the general public by providing…an opportunity to demonstrate special competence in tax matters by passing a written examination and therefore satisfying one of the requirements for becoming an enrolled agent under Circular 230 §10.4(a).

With all due respect, this is rather facile, particularly given that we questioned in February how the agency determined the “special benefit” with respect to SEE oversight. The assertion above does not seriously consider the much broader question of who benefits.

We don’t deny that enrolled agents benefit from a license to practice before the agency. Enrolled agents are not the only ones to benefit, however. Taxpayers clearly benefit (and IRS itself has cited studies that show 94 percent of taxpayers who use tax return preparers generally follow their advice[i]). Commissioner Koskinen has said to NAEA leadership directly that the tax administration system benefits from enrolled agents.

Finally, Circular A-25 allows for exceptions to the user fee requirement[ii]. During a time in which the agency and so many others are interested in minimum standards for those in the return preparer space[iii], is it good public policy to increase so significantly the barriers to entry to Circular 230? One of the best things about the profession is that it is an egalitarian one: those who want to hold themselves to the high standards of Circular 230 and therefore provide a broad suite of services to the taxpaying public merely need to demonstrate they are broadly proficient. We suggest the agency give significant weight to public policy when making this—or any—decision on assessing user fees.


And once again we must press the agency on its lack of consistency in assessing user fees. We return to Circular A-25, which states:

The provisions of this Circular cover all Federal activities that convey special benefits to recipients beyond those accruing to the general public. [emphasis added]

How has IRS determined it provides only 18 special benefits?[iv] IRS has suggested the hurdle is providing specific services to specific individuals[v]. If that is the case broadly, rather than a specific support for installment agreements, we note once again the Service doesn’t charge taxpayers for toll-free telephone service. It doesn’t charge for continuing education webinars. It doesn’t charge for walk-in service. It doesn’t charge for the annual filing season program record of completion. It doesn’t charge to place a taxpayer account into CNC (currently not collectible) status. It doesn’t charge for any of the examination services it provides (e.g., CP 2000 notices).

We deserve much more clarity than the Service has provided to date.

II. We question the size of the proposed user fee. Were we to concede that IRS should charge a user fee for oversight of a private sector testing vendor, we maintain a sevenfold increase is excessive.

The present $11 per part oversight fee is 11.2 percent of the $98 per part fee assessed by the private sector contractor who designs, ensures psychometric validity, and administers the test worldwide. As far as oversight fees are concerned, that doesn’t seem outrageous (even if one could argue it unnecessary). In contrast, the proposed $81 per part oversight fee is 82.7 percent of the $98 per part fee the private sector testing expert charges.

The sevenfold increase will raise the total cost of taking the SEE by 64 percent. If a candidate passes each of three parts on her first attempt—and that is far from assured—she will spend nearly $550, 55 percent of that going to the organization that develops and administers the test at a network of thousands of secure test centers in more than 160 countries[vi] and 45 percent of that going to IRS for services we cannot easily determine.

For context, IRS salaries have increased by 19.1 percent since 2006, which was the last time IRS reviewed the fee it assesses for SEE oversight. Increasing the $11 user fee by 19.1 percent would produce a new user fee of $13. Meanwhile, IRS’ overall budget in real dollars is at best unchanged from 2006[vii].

IRS claims three increased costs in the proposed regulations:

1)     “The cost for background checks…for individuals working at the contractor’s testing centers increased by $289,000 per year”;

2)    A significant reduction in the number of parts of the SEE that will be administered annually (from 34,000 to 22,000); and

3)    “IRS’ costs of verifying the contractor’s compliance with [IT] security requirements.”

IRS further suggests tasks it didn’t include in its original cost estimate:

a)   Review/approval of materials the developer uses to develop the SEE;

b)   Review of surveys of existing enrolled agents;

c)   Composition of potential SEE questions in coordination with the contractor’s external law experts;

d)   Office of Chief Counsel review and revision of potential questions;

e)   Analysis of the answers/raw scores…to determine…a passing score.

We can make the following calculations: The increase in cost is $70 per part ($81 proposed fee - $11 current fee). IRS calculated the cost of its oversight based on 67,275 parts administered over a three-year period. The total increase in revenue to the agency is $1,569,750 annually.

Assuming the background check increase of $289,000 is simply passed through fees, we’re left with an additional $1,280,750 in revenue, or an additional 10 full-time equivalent GS-12 employees (with their $77,500 salaries fully loaded for overhead[viii]). As my predecessor wrote in February, we cannot imagine IRS requires an office the size of NAEA’s entire staff to accomplish the items listed above. For instance, how much staff time could possibly be involved in reviewing surveys of existing EAs (item (c) above) or in setting the annual cut score (item (e) above)?

As we replied in February, we have no idea how IRS is managing these costs, what it is doing to drive down the costs, and whether the costs IRS is incurring are necessary. The agency has been under extraordinary pressure to increase efficiency and yet the re-proposed regs merely state:

  • “The RPO, however, has a staff of only ten people who devote time to oversee the administration of the…SEE.” [emphasis added]    
  • “…only a few individuals …directly handle oversight of the…SEE”
  • RPO’s managers…estimate the percentage of time these employees devote to overseeing the..SEE 
  • “Of the ten people, eight devote 75 percent or more of their time to…SEE activities, and two devote approximately 10 percent of their time…”

As far as we can tell, IRS is simply estimating how much staff time is spent on SEE oversight. While we’ve asked what the agency is doing to lower costs, increase efficiency, and streamline processes, the cost estimate is silent on these issues. Potential enrolled agents are being told that SEE oversight costs what it costs, even if the results strain credulity.

The agency is attempting to tally annual oversight costs and divide by the number of SEE parts administered annually. Given that math, the other half of the equation deserves attention as well. If IRS increased the number of SEE parts administered in any given year, then, all things being equal, the agency’s user fee per part would decrease. To that end, we wonder what IRS has done—or plans to do—to grow the number of aspiring tax professionals taking the SEE. Again, we wonder how IRS is trying to drive down the costs of program administration.

We understand IRS is pressed for resources and that providing excellent customer service and reasonable, focused, enforcement is increasingly challenging. We write as your partners in tax administration and as a profession that cares deeply about taxpayer rights—including the right to representation—and effective tax administration.

We urge the agency to withdraw the proposed regulations until the agency is better able to articulate how it applies IOAA and Circular A-25 enterprise wide and why it requires a dozen or so staff years to oversee the SEE, and until the public policy questions this significant price increase raises are addressed. Enrolled agents deserve better. Taxpayers deserve better. Tax administration deserves better.

NAEA appreciates the opportunity to submit comments on behalf of enrolled agents on REG-134122-15.  Should you seek further clarification or explanation of our positions, please contact NAEA’s Senior Director, Government Relations, Robert Kerr at (202) 822-6232.


Richard Reedman, EA, USTCP

cc:   John A. Koskinen, Commissioner, Internal Revenue Service
John Dalrymple, Deputy Commissioner, Service and Support
Carol Campbell, Director, Return Preparer Office
Stephen Whitlock, Director, Office of Professional Responsibility
Nina Olson, National Taxpayer Advocate

[i] Publication 4832 (Return Preparer Review), page 12.

[ii] OMB Circular A-15, Section 6(c)(2)(b) states “Agency heads…may recommend to the Office of Management and Budget that exceptions to the general policy be made when…any other condition exists that, in the opinion of the agency head…justifies an exception.”

[iii] The Service is no stranger to establishing and promoting standards in this space. IRS demonstrated its commitment to minimum standards when it launched its registered tax return preparer program. Even at the onset, then-Commissioner Douglas Shulman wrote: “The role of various forms of third party assistance in tax return preparation in the United States has become increasingly important.” He went on to acknowledge the Service’s interest in ensuring “tax practitioners, tax return preparers, and other third parties in the tax system adhere to professional standards and follow the law.” See Publication 4832 (Return Preparer Review).

[iv] IRM (Types of User Fees).

[v] IRS in TD 9798 (User Fees for Installment Agreements) asserted “Even if it is argued that the government derives some general benefit from collecting outstanding tax liabilities to which it is inarguably entitled, it is still appropriate under the OMB Circular to charge a user fee…because installment agreements provide “specific services to specific individuals. Seafarers Int’l Union of N. Am. V. U.S. Coast Guard, 81 F. 3d 179, 183 (D.C. Cir. 1996).”

[viii] 2016 Salary for a GS-12/1 employee with Washington DC locality pay is $77,490, multiplied by 1.6565 for overhead and multiplied by 10 equals $1,283,622.


December 27, 2016

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