Part III. Administrative, Procedural, and Miscellaneous

Standards of Conduct for the Tax Return Preparer Community and Increased Taxpayer Compliance

Notice 2009–60

PURPOSE

This notice invites public comments regarding the Internal Revenue Service’s review of issues concerning tax return preparers. In June 2009, the Service announced plans to propose a comprehensive set of recommendations by the end of 2009 regarding how the tax return preparer community can help increase taxpayer compliance and how to ensure that tax return preparers meet both uniform and high ethical standards of conduct. See IR–2009–57 (June 4, 2009). The Service is seeking the input of tax preparers, the associated industry, consumer groups, and taxpayers before any recommendations are made.

To assist in developing its proposals and to ensure that input is received from a broad range of stakeholders, the Service has scheduled a number of meetings in Washington, D.C., and around the country with constituent groups. See IR–2009–66 (July 14, 2009). In this notice, the Service is requesting written comments from all affected persons and entities. The information collected will assist the Service in drafting recommendations.

REQUESTS FOR PUBLIC COMMENT

The Service requests comments on 1) how the tax return preparer community can assist in increasing taxpayer compliance and 2) how to ensure that tax return preparers meet both uniform and high ethical standards of conduct. The Service is particularly interested in any comments regarding:

and professionals currently work as tax return preparers? How are their tax return preparation services currently monitored or regulated by professional organizations or the government? How could this monitoring and regulation be improved?

oversight affect how the various groups of tax return preparers interact with the Service and taxpayers?

and training necessary to provide tax return preparation services? If so, who should be responsible for ensuring that a tax return preparer meets this minimum level and how should that be done?

should be provided to tax return preparers and taxpayers? Who should provide (and bear the costs for) these needed services?

to a code of ethics, and, if so, what specific behavior should that code promote or prohibit? How would that code of ethics interact with existing ethical standards that may already be applicable?

firms or businesses that employ tax return preparers have for the conduct of the individuals they employ?

return preparer professional organizations have for the education, training, and conduct of their members?

should be regulated, what, if any, special regulatory provisions should be made for individuals who are already tax return preparers, licensed attorneys, certified public accountants, enrolled agents, or software providers?

regulatory, or administrative rules should the Service consider recommending as part of its proposals with respect to the tax return preparer community?

Written comments should be sent to: CCPA:LPD:PR (Notice 2009–60), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Alternatively, comments may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2009–60), Courier’s Desk, Internal Revenue Service, 1111 Constitution

Avenue, NW, Washington, D.C. Comments may also be transmitted electronically via the following e-mail address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2009–60” in the subject line of any electronic communications.

All comments will be available for public inspection and copying. Because the Service intends to make recommendations by December 31, 2009, comments, if any, must be received by August 31, 2009.

DRAFTING INFORMATION

The principal author of this notice is Richard S. Goldstein of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, contact Richard S. Goldstein at (202) 622–3400 (not a toll-free call).

Treatment of Fails Charges for Purposes of Sections 871, 881, 1441 and 1442

Notice 2009–61

In response to persistent delivery failures in the pay-for-delivery market for U.S. Treasury securities (U.S. Treasuries) during the fall of 2008, a new trading practice governing failed deliveries of U.S. Treasuries has been voluntarily adopted by many market participants (including the Federal Reserve Bank of New York and most dealers, custodians, and asset managers of U.S. Treasuries).

Under the new practice, if one party (the “Failing Party”) fails to deliver U.S. Treasuries to another party (the “Non-Failing Party”) by the date previously agreed to by the parties, the Failing Party will pay an amount (called a “Fails Charge”) to the Non-Failing Party. The Fails Charge accrues daily and, if properly claimed by the Non-Failing Party, is due and payable in the month following the month in which the Failing Party actually delivers the

2009–32 I.R.B. 181 August 10, 2009

promised U.S. Treasury. ¹ The new Fails Charge practice was adopted by market participants to preserve and enhance the efficiency of the secondary market for U.S. Treasuries by reducing the incidence of delivery failures, especially in low interest rate environments, where the economic incentive to deliver timely is reduced.

Many market participants have indicated that there is a lack of clarity regarding the treatment of these Fails Charges for purposes of sections 871, 881, 1441, and 1442 of the Internal Revenue Code (the “Code”), which relate to gross-basis taxation of foreign persons not otherwise subject to U.S. net-basis taxation. As a result, these market participants suggest that unless guidance is provided, there may be

disruptions in the secondary market for U.S. Treasuries as various withholding agents take various positions with respect to the proper characterization of Fails Charges for those purposes.

This notice announces that the Treasury Department and the Internal Revenue Service (Service) are considering issuing guidance regarding the circumstances, if any, in which Fails Charges are subject to U.S. gross-basis taxation. Any such guidance regarding the treatment of a Fails Charge under sections 871, 881, 1441, and 1442 of the Code will be prospective in effect. In light of the complexity of the issues raised by the proper treatment of Fails Charges for U.S. federal tax purposes and the need for guidance, the Service will not

challenge a position taken by a taxpayer or a withholding agent that a Fails Charge that is paid on or before December 31, 2010, is not subject to U.S. gross-basis taxation unless contrary guidance has been issued effective before that date.

DRAFTING INFORMATION

The principal author of this notice is Anthony J. Marra of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and Treasury participated in its development. For further information regarding this notice, contact Anthony J. Marra at (202) 622–3870 (not a toll-free call).

1 More information about this new Fails Charge trading practice can be found at http://www.newyorkfed.org/tmpg/ or http://www.ny.frb.org/tmpg/newsandevents.html

August 10, 2009 182 2009–32 I.R.B.