Part IV. Items — Internal Revenue Bulletin 2000-22

Regulations Governing Practice Before the Internal Revenue Service

Announcement 2000–51

AGENCY: Office of the Secretary, Treasury.

ACTION: Advance notice of proposed rulemaking.

SUMMARY: This document provides advance notice of proposed rulemaking to amend the regulations governing practice before the Internal Revenue Service (IRS), which appear in the Code of Federal Regulations and in pamphlet form as Treasury Department Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the IRS. This document also invites individuals and organizations to submit comments on revising Circular No. 230 to address general standards of practice and standards of practice relating to tax shelters.

DATES: Submit comments on or before July 5, 2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–111835–99), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–111835–99), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Submit comments and data via electronic mail (email) to http://www.irs.gov/tax_regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Concerning issues for comment, Richard Goldstein at (202) 622-7880; concerning submissions of comments and delivering comments, Guy Traynor, (202) 622-7180; (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

I. Background

Section 330 of title 31 of the United States Code authorizes the Secretary of the

Treasury to regulate the practice of representatives before the Department and, after notice and an opportunity for a proceeding, to suspend or disbar from practice before the Department those representatives who are incompetent, disreputable, or who violate regulations prescribed under section 330. Pursuant to section 330, the Secretary has published the regulations in Circular No. 230 (31 CFR part 10). These regulations authorize the Director of Practice to act upon applications for enrollment to practice before the IRS, to institute proceedings for suspension or disbarment from practice before the IRS, to make inquiries with respect to matters under the Director’s jurisdiction, and to perform such other duties as are necessary to carry out these functions.

The regulations have been amended from time to time to address various specific issues in need of resolution. For example, on February 23, 1984, the regulations were amended to provide standards for providing opinions used in tax shelter offerings (Notice 84–4, 1984–1 C.B. 331

[49 F.R. 6719]). On October 17, 1985, the regulations were amended to conform to legislative changes requiring the disqualification of an appraiser who is assessed a penalty under section 6701 for aiding and abetting the understatement of a tax liability (Notice 85–18, 1985–2 C.B. 409 [50 F.R. 42014]). The regulations were most recently amended on June 20, 1994 (T.D. 8545, 1994–2 C.B. 415 [59 F.R. 31523]) to provide standards for tax return preparation, to limit the use of contingent fees in return or refund claim preparation, to provide expedited rules for suspension, and to clarify or amend certain other items.

On June 15, 1999, the Director of Practice published an advance notice of proposed rulemaking (64 F.R. 31994) requesting comments on amendments to the regulations that would take into account legal developments, professional integrity and fairness to practitioners, taxpayer service, and sound tax administration. The Treasury Department received several comments and is currently reviewing them. The 1999 advance notice of proposed rulemaking contemplated a notice of proposed rulemaking that would make general revisions to Circular No. 230.

II. Tax Shelters

Following the release of the advance notice of proposed rulemaking, the Treasury Department issued a report on the proliferation of corporate tax shelters. See “The Problem of Corporate Tax Shelters: Discussion, Analysis and Legislative Proposals,” Department of the Treasury, July 1999. In February of this year, the Treasury Department and the IRS took steps to deter abusive shelters by publishing temporary regulations requiring disclosure of certain transactions by corporate taxpayers (T.D. 8877, 2000–11 I.R.B. 747 [65 F.R. 11205]), registration of confidential corporate tax shelters (T.D. 8876, 2000–11 I.R.B. 753 [65 F.R. 11215]), and maintenance of lists of investors in certain tax shelters (T.D. 8875, 2000–11 I.R.B. 761 [65 F.R. 11211]). In addition, practitioners and organizations, such as the Section of Taxation of the ABA, have recommended that the Treasury Department revise Circular No. 230 to raise the standards for providing advice with respect to corporate tax shelters. The Treasury Department and the IRS agree that it is appropriate to review the standards that should be followed by practitioners who provide advice with respect to such transactions.

III. Request for Comments

The Treasury Department and the IRS invite comments relating to standards of practice governing tax shelters and other general matters. The Treasury Department and the IRS are particularly interested in receiving comments on the following matters.

A. Opinion standards of Circular No. 230

Whether the opinion standards in §10.33 (relating to tax opinions provided for the marketing of tax shelters) should be revised.
Whether Circular No. 230 should establish standards for tax opinions other than those provided for in §10.33 or §10.51 (relating to false opinions). Particularly, whether Circular No. 230 should establish standards for opinions intended to provide legal justification for the treat

2000–22 I.R.B. 1141 May 30, 2000

ment of an item for purposes of §1.6664–4(e) of the Regulations on Procedure and Administration (relating to the reasonable cause exception).

Whether an opinion provided for legal justification for purposes of §1.6664–4(e) of the regulations should specifically state that it is provided for this purpose.
For purposes of the foregoing: a. Whether the factual due diligence standards set forth in §10.33(a)(1) should be applied to tax shelter opinions other than those provided for the marketing of tax shelters.

b. Whether the factual due diligence standards should be modified to further limit the circumstances under which a practitioner may rely on factual assertions of other persons and to require a practitioner to specify the measures taken to confirm the facts.

c. Under what circumstances, if any, Circular No. 230 should permit a practitioner to base an opinion upon hypothetical facts or factual assumptions and conclusions, including assumptions regarding the existence of a business purpose and the significance of such purpose relative to the intended tax benefits.

d. Whether Circular No. 230 should require that the opinion state that the transaction in question was analyzed under all applicable judicial doctrines (including the step transaction, business purpose, economic substance, substance over form, and sham transaction doctrines).

e. Whether Circular No. 230 should require that an opinion state unambiguously that there is a greater than 50 percent likelihood that the taxpayer will prevail with respect to each material tax issue and with respect to the material tax benefits in the aggregate.

B. Contingent fees

Whether §10.28 should prohibit a practitioner from charging a fee for an opinion or advice relating to a position taken or to be taken by a taxpayer in an original return where such fee is contingent upon whether the tax treatment of the transaction is sustained, and whether §10.28 should prohibit a practitioner from providing an indemnity to a taxpayer with respect to a position taken or to be taken in an original return.
Whether §10.28 should continue to permit a practitioner to charge a contingent fee for assisting a client in filing an amended return or claim for refund when the practitioner reasonably anticipates at the time the fee arrangement is entered into that the amended return or claim will receive substantive review from the Service.

C. Conditions of confidentiality

Whether there are circumstances in which Circular No. 230 should prohibit a practitioner from agreeing to conditions of confidentiality other than conditions of confidentiality imposed by reasons of privilege. If so, how should confidentiality be defined?
Whether Circular No. 230 should prohibit a practitioner from asking a client to agree to conditions of confidentiality.

D. Sanctions

Whether §10.24 should be modified to clarify what types of relationships with suspended persons are prohibited.
Whether there are circumstances in which a practitioner’s failure to comply with the rules under Circular No. 230 should be attributed to the firm with which the practitioner is associated so that the practitioner and the firm (or all practitioners in the firm) may be subject to discipline under Circular No. 230.
Whether Circular No. 230 can or should provide a broader array of sanctions, such as censure, for violation of its provisions.
Whether the identities of those who are disciplined under Circular No. 230 should be exposed to greater publicity. If so, how should greater publicity be achieved?

E. General Issues

Whether §10.7(c)(1) should be modified to permit, under limited circumstances, an individual who is not authorized to practice before the IRS to represent a taxpayer without obtaining authorization for a special appearance from the Director of Practice under §10.7(d).
Whether and to what extent §10.21 should be modified regarding the actions a practitioner must take when he or she discovers that there is an error or omission on a return or other document.
Whether §10.22 should be modified to define what constitutes due diligence.
Whether §10.29 should be expanded to define conflicting interests and to delineate what constitutes informed consent permitting a practitioner to represent clients with conflicting interests.
How the provisions of §10.30(a)(2), regarding uninvited solicitations, should be modified in light of Edenfield v. Fane, 507 U.S. 761 (1993).
Whether the definition of communication in §10.30(c) should be expanded specifically to include certain forms of electronic communications and whether there are any special considerations that should be addressed regarding these forms of communication for purposes of §10.30.
Whether the §10.51 definition of disreputable conduct should be expanded to include conviction of any felony. In addition to the foregoing issues, the Treasury Department and the IRS invite comments on any other changes that are necessary or appropriate to carry out the purposes of Circular No. 230.

Neal Wolin, General Counsel.

(Filed by the Office of the Federal Register on May 5, 2000, 3:35 p.m., and published in the issue of the Federal Register for May 11, 2000, 65 F.R. 30375)

Foundations Status of Certain Organizations

Announcement 2000–52

The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices under section 508(b) of the Code. This listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following organizations (which have been treated as organizations that are not private foundations described in section 509(a) of the Code) are now classified as private foundations:

May 30, 2000 1142 2000–22 I.R.B.

AESC Research and Education Institute,

Inc., New York, NY Agape Foundation, Inc., Plainfield, NJ AL Hajj Incorporated, Montgomery, AL Allie L. Thomas Memorial, Inc.,

Excel Performance Institute, Inc.,

Greenville, OH For Chicopee, Inc., Chicopee, MA Foundation For Airborne Relief,

Manassas, VA FC Hawaii, Honolulu, HI Faith Foundation of Darke County, Inc.,

Lincoln, NH Low Income Housing Foundation of New

Mexico, Inc., Albuquerque, NM Lyndon Baines Johnson Health Complex,

Brooklyn, NY Making the Difference Incorporated,

San Angelo, TX American Friends of Ballet Rambert,

Inc., Lingfield, England American-International Childrens

Milwaukie, OR Marshall Opportunity Enterprises

Alliance, Inc., Marblehead, MA Anthony Hyde PTA, Washington, DC The Archibald Memorial Home,

Indianapolis, IN Baptist Village Residents Association,

Anaheim, CA Foundation For Interactive Learning,

Inc., Katona, NY The Fred and Ruth Hawkins Family

Resource Center, Inc., Oakpark, IL Freedom Chapel - Help The Children,

Corportation, Marshall, TX Marvelous Clark, Saint Louis, MO Multi Cultural Visions, Phoenix, AZ Nashville Coalition Against Domestic

Violence, Nashville, TN National Center for Minority Health, Inc.,

Phoenix, AZ Bay Area Children First, San Francisco,

Inc., Torrance, CA Friends of Francis W. Gregory, JR. High

School Foundation, New Orleans, LA Frost Parent Teacher Organization, Mesa,

Potomac, MD National Consumer Debt Counseling,

Ontario, CA National Foundation for Imaging

CA Black History Preservation Society,

Excellence, Inc., New York, NY Neighborhood Development Foundation,

Philadelphia, PA Bojuka Parent-Student Association, Inc.,

AZ Genesis Association of Richmond, Inc.,

Richmond, IN Global Education Partnership, Inc.,

Marina, CA Camera Arts Foundation, San Luis

Staten Island, NY North Council Tenant Council, Inc.

Lowell, MA Oak Cliff Christian Housing, Dallas, TX Oasis Youth Center, Ormond Beach, FL Olney Crime Stoppers, Olney, TX Opportunities For Technological &

Obispo, CA Camphill Fellowship, Glenmoore, PA Carey Cox Wyatt Charitable Foundation,

Oakland, CA Good Samaritan, Inc., New London, CT Grand Boulevard Renaissance Society,

Chicago, IL Griffin-Spalding Cleam Community

Inc., Atlanta, GA Caring Approach to Life Management,

Commission, Inc., Griffin, GA Guilford Community Aids Partnership,

Inc., Greensboro, NC Harrah Senior Housing Corporation II,

Inc., Willingboro, NJ Change for Planet Earth, Inc.,

Phoenix, AZ Childrens Health Coalition, Inc.,

Summit, NJ Church-Inmate Connection, Inc.,

Checotah, OK Coalition for the Advancement of

Harrah, OK Healthcare For All, Inc., Washington, DC Hobart Community Land Trust, Hobart,

WA Hope & Charity Incorporated, Pittsburgh,

PA Houston Gunners Football Association,

Educational Achievement, Inc., Florence, TX Orchid Association, Middletown, OH Orthodox Christian Prison Ministry,

Lompoc, CA Paladin Associates, Inc., Casper, WY Parks Education Foundation, Aloha, OR Path to Peace, Carthage, MO Paul Gage Ministries, Euless, TX Pearson & Associates, Inc., Lawton, OK Pollock Pines Camino Community

Regional Transportation, Inc., Louisville, KY Comites of San Francisco,

San Francisco, CA Concrete Volunteer Fire Department,

Center Association, Pollock Pines, CA Predator Athletic Club, Inc., Papillion,

Langdon, ND Desert Orthopedic Center Medical

Research Foundation, Rancho Mirage, CA Development Alternatives Corporation,

Inc., Houston, TX Humanitarian Resource Institute, Carson

City, NV Imperial Homes, Inc., Los Angeles, CA Jian Hua Foundation, El Cajon, CA Johnny Mercer Foundation, New York,

NY Kelly Home of Iredell County, Raleigh,

NC Ken-Crest Housing Del II, Inc., Plymouth

Boston, MA The D.O.M.E. Foundation, Inc., New

York, NY Durham Regional Health Foundation,

Inc., Durham, NC Eagle Wing Estates, Inc., Hattiesburg,

MS Educare, Deerton, MI Empowerment Project, Charlotte, NC Environment Celebration Foundation,

Charities, Inc., Lake Forest, IL Lemoyne-Owen College Community

NE Project Agape, Memphis, TN Pro Organo Pleno, XXI, Fort Collins, CO Public-Private Ventures, Inc., Irwindale,

CA The Public Radio Service, Inc.,

Columbia, MD Recipes for Living, Greensboro, NC Reunification Behavioral Health Care

Meeting, PA Kids Konnection, Dayton, OH King Gandhi Foundation, Inc., Silver

RBHC, Inc., Gary, IN River Heights Apartments, Inc.,

Spring, MD Labette County Humane Society,

Parsons, KS Lake Forest Knights of Columbus

Starkville, MS Roslyn Nadel Scholars for Disabled

Las Vegas, NV Essex Housing Opportunities, Inc.,

Development Corp., Memphis, TN Linwood Educational Trust Fund, Inc.,

Persons, Inc., Trenton, NJ Rural Housing Development, Inc.,

Darlington, WI Salem First Corporation, Salem, NH

Lawrence, MA

2000–22 I.R.B. 1143 May 30, 2000

San Mateo High School Alumni

Correction of Publication

Accordingly, 26 CFR Part 48 is corrected by making the following correcting amendments:

PART 48–MANUFACTURERS AND RETAILERS EXCISE TAXES

Paragraph 1. The authority citation for part 48 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 48.4101–1 is amended by:

Redesignating paragraphs (c)(1)(v) and (c)(1)(vi) as paragraphs (c)(1)(vi) and (c)(1)(vii), respectively;
Adding paragraph (c)(1)(v);
Removing the language “(c)(1)(vi)” from paragraph (l)(2) and adding the language “(c)(1)(vii)” in its place.

The addition reads as follows: §48.4101–1 Taxable fuel; registration.

* * * * * (c) * * * (1) * * * (v) A refiner;

§48.4101–2T [Removed]

Par. 3. Section 48.4101–2T is removed.

Par. 4. Section 48.6427–11(e)(2)(iii) is revised to read as follows: §48.6427–11 Kerosene; claims by regis- tered ultimate vendors (blending).

(e) * * * (2) * * * (iii) Model certificate.

CERTIFICATE OF BUYER FOR PRODUCTION OF A COLD WEATHER BLEND

(To support vendor’s claim for a credit or payment under section 6427 of the Internal Revenue Code.)

(Buyer) certifies the fol- lowing under penalties of perjury:

Name of buyer The kerosene to which this certificate applies will be used by Buyer to produce a blend of kerosene and diesel fuel in an area described in a declaration of extreme cold and the blend will be sold for use or used for heating purposes.

This certificate applies to percent of Buyer’s purchase from (name, address, and employer identification number

Association, San Mateo, CA Second Chapel Hill Housing

Development Corporation, Detroit, MI Self Help for Hard of Hearing People Greater

Boston Chapter, Inc. Brookline, MA Senior Transport, Omaha, NE Solar Electric Education Network, Inc.,

Oregon, IL Special Socials for Seniors Services, Inc.,

Euclid, OH Spokane County Medical Society

Auxiliary, Spokane, WA Sport Science Research Foundation, Inc.,

Lilburn, GA St. Elizabeth’s Children Home,

Lexington, MS St. Petersburg-Leningrad Salvation Fund,

Studio City, CA Success Motivation Healing Institute,

Sherman Oaks, CA Success Sisters, Dickenson, TX Suncoast Compensation and Benefits

Foundation, Inc., Tampa, FL Texas Enterprises for the Disabled, Inc.,

Austin, TX Texas Institute for an Informed Public,

Houston, TX Texas Newpaper Foundation, Inc.,

Austin, TX Touch the Earth Foundation, Solana

Beach, CA The Training Place, Cypress, CA Trillium ACharitable Corporation, Edina, MN Tulsa Memorial High School Foundation,

Inc., Tulsa, OK Tuolumne County Business Incubators,

Inc., Sonora, CA Under the Oaks Foundation, Jackson, MI United Christian Charities Georgia, Inc.,

Roswell, GA Uvalde Housing Development

Corporation, Uvalde, TX WASP Museum, Inc., Quartzite, AZ Westland Community Services, Inc.,

Albuquerque, NM Westside Track Club, Inc., Louisville,

KY Women Representing Women

Incorporated, Charlotte, NC Words of Assurance Ministry, Inc., Silver

If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a private operating foundation, the Internal Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

Kerosene Tax; Aviation Fuel Tax; Taxable Fuel Measurement and Reporting; Tax on Heavy Trucks and Trailers; Highway Vehicle Use Tax; Correction

Announcement 2000–53

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

SUMMARY: This document contains corrections to Treasury Decision 8879, which was published in the Federal Register on Friday, March 31, 2000 (T.D. 8879, 2000–16 I.R.B. 882 [65 F.R. 17149]). The corrections relate to the kerosene excise tax.

DATES: These corrections are effective March 31, 2000.

FOR FURTHER INFORMATION CONTACT: Frank Boland, (202) 622-3130 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subject of these corrections are under sections 4101 and 6427 of the Internal Revenue Code.

Need for Correction

As published, TD 8879 contains errors that may prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 48

Excise taxes, Reporting and recordkeeping requirements.

Spring, MD World City Pictures, New York, NY World Model Soldier Federation, Inc.,

Chicago, IL Yad Latorah, Inc., Patchogue, NY Youth Baseball and Softball Booster

Club, West Plains, MO

May 30, 2000 1144 2000–22 I.R.B.

of seller) on invoice or delivery ticket number . If Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer’s right to provide a certificate.

Buyer has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.

Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

Printed or typed name of person signing

Title of person signing

Employer identification number

Address of Buyer

Signature and date signed

Cynthia E. Grigsby, Chief, Regulations Unit, Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on May 3, 2000, 8:45 a.m., and published in the issue of the Federal Register for May 8, 2000, 65 F.R. 26488)