SECTION 1. BACKGROUND — Internal Revenue Bulletin 2023-13

DEFINITIONS

The Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014, enacted on December 19, 2014, as part of the Tax Increase Prevention Act of 2014 (Pub. L. 113-295), added sections 3511 and 7705 to the Internal Revenue Code (Code) relating to the certification requirements for, and the federal employment tax consequences of being, a certified professional employer organization (CPEO). The ABLE Act requires the establishment of a voluntary program for persons to apply to the Internal Revenue Service (IRS) to become certified as a CPEO. On May 6, 2016, the Department of the Treasury (Treasury Department) and the IRS published final and temporary regulations under section 7705 (TD 9768) in the Federal Register (81 FR 27315, as corrected July 12, 2016, at 81 FR 45012) that describe the application process and certification requirements necessary for a person to become and remain a CPEO. On the same date, the Treasury Department and the IRS published a notice of proposed rulemak

ing (REG-127561-15) in the Federal Register (81 FR 27360) cross-referencing the temporary regulations and proposing additional regulations under section 3511 that describe the federal employment tax consequences of becoming a CPEO for CPEOs and their customers.

On June 3, 2016, Revenue Procedure 2016-33 (2016-25 I.R.B. 1034) was issued, providing procedures for applying to be certified as a CPEO. To address several comments received in response to the temporary and proposed regulations and Revenue Procedure 2016-33 that required prompt attention, the Treasury Department and the IRS issued Notice 2016-49 (201634 I.R.B. 265) on August 5, 2016. The Treasury Department and the IRS also issued Revenue Procedure 2017-14 (2017-3 I.R.B. 426) on December 29, 2016, which addressed the requirements for a CPEO to remain certified and the procedures relating to suspension and revocation of CPEO certification. Final regulations under sections 3511 and 7705 (TD 9860) describing the certification requirements necessary for a person to become and remain a CPEO, and the federal employment tax

consequences of being a CPEO, which incorporated changes from Notice 2016-49, were published in the Federal Register (84 FR 24367) on May 28, 2019.

This revenue procedure modifies and supersedes both Rev. Proc. 2016-33 and Rev. Proc. 2017-14. It addresses the procedures for applying to be certified as a CPEO, the requirements for a CPEO to remain certified, and the procedures relating to suspension and revocation of CPEO certification. This revenue procedure consolidates the ongoing requirements articulated in Rev. Proc. 2016-33, as modified by Notice 2016-49, Rev. Proc. 2017-14, and the regulations under sections 3511 and 7705. In addition, it reflects changes in the ongoing operations of the CPEO program, including updates to the IRS Online Registration System, since Rev. Proc. 2016-33 and Rev. Proc. 2017-14 were issued, and changes in response to comments and questions received from CPEOs and CPEO applicants.

The IRS received several written comments in response to the proposed and temporary regulations, Rev. Proc. 201633, Rev. Proc. 2017-14, and Notice 2016

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While all relevant comments were considered and addressed in the final regulations, some comments were beyond the scope of the regulations. When appropriate, comments not addressed in the final regulations because they were beyond the scope of the regulations were considered in the drafting of this revenue procedure.

.01 Nature of Changes . This revenue procedure provides clarifications and substantive changes to the procedures outlined in Rev. Proc. 2016-33 and Rev. Proc. 2017-14. Specifically, this revenue procedure:

(1) Expands and defines the role of the application submitter in order to make application processing, document and information submission, and other communications with respect to the CPEO applicant or CPEO more efficient. Because of this expanded role, this revenue procedure also further clarifies who can be an application submitter. Rev. Proc 2016-33, section 2.01, provided that the individual submitting the online application for CPEO certification on behalf of the CPEO applicant must be authorized by section 6103(e) to inspect the return of the CPEO applicant. Furthermore, Rev. Prov. 2017-14, section 2.01, provided that the individual submitting information and documents on behalf of the CPEO through the CPEO’s online account must be authorized by section 6103(e) to inspect the returns and return information of the CPEO. Under this revenue procedure, an application submitter must either hold a position specified in section 1.02(1) ¹ or have a valid Form 2848, Power of Attorney and Declaration of Representative, for the CPEO applicant or CPEO on file with the IRS.

(2) Provides updates to the procedures for a denial of CPEO certification and for the suspension and proposed revocation of a certification—specifically, procedures concerning what information the IRS CPEO program office will consider when reviewing a CPEO applicant’s or CPEO’s request for review and when this information should be submitted. Further, additional detail is provided concerning review by the IRS Office of Professional Responsibility (OPR), including rules

prohibiting most communications between OPR and the IRS CPEO Program Office and between OPR and the CPEO applicant or CPEO during OPR’s review.

(3) Provides information on how CPEOs should submit Form 8973, Certified Professional Employer Organization/ Customer Reporting Agreement, unsigned by a client, for CPEOs that occasionally experience difficulty in obtaining a signature on Form 8973 from a client subject to a service agreement described in § 31.3504-2(b)(2).

(4) Provides additional details concerning the CPEO applicant’s and CPEO’s use of the IRS Online Registration System account, including a requirement that CPEO applicants and CPEOs that are members of a controlled group in which more than one member of the controlled group is a CPEO applicant or CPEO must create a controlled group license within the IRS Online Registration System.

(5) Clarifies that as part of an examination level attestation indicating that the CPEO or CPEO applicant failed to withhold or make deposits in certain immaterial aspects, the CPEO or CPEO applicant may include an explanation not only as to why the failures were immaterial, but also how the failures were addressed, if applicable.

(6) Provides updates to the fingerprint procedures for responsible individuals. Specifically, all responsible individuals are now required to submit fingerprints electronically using Fieldprint. Fingerprint submissions on Form FD-258 will no longer be processed. All current responsible individuals will have until June 1, 2023, to submit new fingerprints electronically.

.02 Definitions . For purposes of this revenue procedure—

(1) Application Submitter . The term “application submitter” means the individual who is submitting an application on behalf of a CPEO applicant and any other individual submitting information and documents to the IRS on behalf of a CPEO. Except as provided in this section 1.02(1), the application submitter must be a partner or limited partner if the CPEO applicant or CPEO is a partner

ship; the president, vice president, secretary, treasurer, chief accounting officer, any tax officer (including Controller), 1% shareholder (corporation), or shareholder (S-corporation) if the CPEO applicant or CPEO is a corporation or S-corporation; or owner or sole proprietor if the CPEO applicant or CPEO is a sole proprietorship. An individual who does not occupy one of these positions must have a valid Form 2848, Power of Attorney and Declaration of Representative, for the CPEO applicant or CPEO on file with the IRS in order to be the application submitter.

(2) Controlled Group . The term “controlled group” means any group of corporations or trades or businesses under common control within the meaning of section 414(b) and (c), and §§ 1.414(b)-1 and 1.414(c)-1 through 1.414(c)-6 of the Treasury Regulations.

(3) Certified Public Accountant . The term “certified public accountant” (CPA) means a certified public accountant who- (a) With respect to a CPEO or CPEO applicant, is independent of the CPEO or CPEO applicant (as prescribed by the American Institute of Certified Public Accountants’ Professional Standards, Code of Professional Conduct, and its interpretations and rulings);

(b) Is not currently under suspension or disbarment from practice before the IRS;

(d) Files with the IRS a written declaration that the CPA is currently qualified as a CPA.

(4) Covered Employee . The term “covered employee” means, with respect to a customer, any individual (other than a self-employed individual, as defined in section 1.02(18)) who performs services for the customer and who is covered by a CPEO contract between the CPEO and the customer.

(5) CPEO . The term “CPEO” means a person that has been certified by the Commissioner as meeting the requirements of § 301.7705-2, this revenue procedure, instructions in the online application, and any applicable subsequent guidance, and whose certification has not been revoked or voluntarily terminated.

1 Unless otherwise indicated, all references to sections in this document refer to sections of this revenue procedure.

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thereunder) derived from providing services covered by a CPEO contract, whether the net earnings from self-employment are derived from providing services as a non-employee to a customer of the CPEO, from the individual’s own trade or business as a sole proprietor customer of the CPEO, or as an individual who is a partner in a partnership that is a customer of the CPEO, but in each case only with regard to those net earnings.

(19) Work Site . The term “work site” means a physical location at which an individual regularly performs services for a customer of a CPEO or, if there is no physical location at which an individual regularly performs services for a customer of a CPEO, the location from which the customer assigns work to the individual. A work site may not be the individual’s residence or a telework site unless the customer requires the individual to work at that site. For purposes of this section 1.02(19), work sites that are contiguous locations will be treated as a single physical location and thus a single work site, and noncontiguous locations will be treated as separate physical locations and thus separate work sites, except as provided in the next sentence. A CPEO customer may treat noncontiguous locations as a single physical location and thus a single work site if each of the locations is separated by less than 35 miles from every other location in the single work site, and all locations in the single work site operate in the same industry. For purposes of the preceding sentence, the determination of the industry of a work site is based on the nature of the CPEO customer’s work at that work site, irrespective of work performed by other entities at the same site. When treating noncontiguous locations as a single physical location and thus a single work site, a noncontiguous location cannot be included in more than one work site.

(20) Work Site Employee . The term “work site employee” means, with respect to a customer, a covered employee who performs services for the customer at a work site where, at any time during a calendar quarter, at least eighty-five percent of the individuals performing services for the customer are covered employees of the customer. To be a work site employee, a covered employee regularly performing services for a customer at a work site

(6) CPEO Applicant . The term “CPEO applicant” means a person that submits or has submitted an application to be certified as a CPEO in accordance with § 301.7705-2, this revenue procedure, the instructions in the online application, and any applicable subsequent guidance. A CPEO applicant remains a CPEO applicant until the CPEO applicant is certified (meaning the CPEO applicant receives a notice of certification described in section 6.01 and timely and correctly submits a proof of bond, as described in section 6.02); withdraws its application; or receives a notice of final denial, as described in section 7.04.

(7) CPEO Contract . The term “CPEO contract” means a service contract between a CPEO and a customer that satisfies the requirements in section 7705(e)(2) and § 301.7705-1(b)(3).

(8) Customer . The term “customer” means any person who enters into a CPEO contract with a CPEO, except that a provider of employment-related services that uses its own employer identification number (EIN) for filing federal employment tax returns on behalf of its clients (or that used its own EIN for filing its clients’ returns immediately prior to entering into a CPEO contract with the CPEO) is not a customer, even if it has entered into a CPEO contract with the CPEO.

(9) Federal Employment Taxes . The term “federal employment taxes” means the taxes imposed by subtitle C of the Code.

(10) Guidance . The term “guidance” includes guidance published in the Federal Register or Internal Revenue Bulletin, as well as administrative guidance such as forms, instructions, publications, or other guidance on IRS.gov.

(11) IRS Online Registration System . The term “IRS Online Registration System” means the system made available by the IRS on IRS.gov and used by CPEO applicants and CPEOs to apply for and maintain certification, and by responsible individuals of CPEO applicants and CPEOs to create a Responsible Individual Personal Attestation. To apply for certification, CPEO applicants must create an account on the IRS Online Registration System, and CPEO applicants must use this account to provide the IRS with the information and supporting documenta

tion necessary to obtain certification. A CPEO must use its IRS Online Registration System account to annually verify information previously submitted, to provide updates that reflect material changes to previously submitted information, and to comply with annual and quarterly program requirements. Responsible individuals of CPEO applicants and CPEOs must use the IRS Online Registration System to create a Responsible Individual Personal Attestation (RIPA), through which they provide the information necessary for their CPEO applicants and CPEOs to obtain and maintain certification. See section 2.02 for a discussion of controlled group licenses and their use on the IRS Online Registration System.

(12) Online Application . The term “online application” means the electronic submission by a CPEO applicant and its responsible individuals of all information required by the CPEO application for certification on the IRS Online Registration System, as well as the accompanying forms and documentation required by § 301.7705-2, this revenue procedure, and any applicable subsequent guidance.

(13) Precursor Entity . The term “precursor entity” means an entity described in § 301.7705-1(b)(10).

(14) Qualified Surety . The term “qualified surety” means a surety that meets the requirements of § 301.7705-2(g)(6).

(15) Related Entity . The term “related entity” means an entity described in § 301.7705-1(b)(12).

(16) Responsible Individual . The term “responsible individual” means an individual described in § 301.7705-1(b)(13).

(17) Responsible Individual Person- al Attestation . The term “Responsible Individual Personal Attestation” (RIPA) means the attestation a responsible individual must submit through the IRS Online Registration System as a prerequisite to the organization submitting a CPEO application via the IRS Online Registration System. The RIPA contains information that will allow the IRS to perform a suitability check on the responsible individual.

(18) Self-Employed Individual . The term “self-employed individual” means an individual with net earnings from self-employment (as defined in section 1402(a) and without regard to the exceptions

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during a calendar quarter is not required to be performing services for the customer at the time the work site coverage requirement is met at that work site.

(a) Solely for purposes of determining whether the eighty-five percent threshold described in this section 1.02(20) is met, a self-employed individual described in section 1.02(18) is treated as a covered employee if the individual is performing services at the work site and would be a covered employee but for the exclusion of self-employed individuals from the definition of a covered employee in section 1.02(4). (b) In determining whether the eightyfive percent threshold is met, an individual who is an excluded employee described in section 414(q)(5) is not treated as either an individual providing services or covered employee.

(c) A covered employee will be considered a work site employee for the entirety of a calendar quarter with respect to all services performed for a customer at one or more work sites if the employee qualifies as a work site employee with respect to the customer at any work site during that calendar quarter.

(d) The determination of whether a work site meets the eighty-five percent threshold is made separately with respect to each customer of a CPEO and with respect to each work site of a customer. However, a covered employee may be determined to be a work site employee of more than one work site during a calendar quarter.

(e) A CPEO’s determination that a covered employee is a work site employee will be respected if the CPEO has made a good faith determination that the covered employee meets the requirements of section 7705(e), § 301.7705-1(b)(17), this section 1.02(20), and any applicable subsequent guidance related to work site employee determinations.

.03 Changes and request for comments . This revenue procedure may be updated periodically to improve CPEO program procedures. The IRS solicits comments on this revenue procedure and the administration of the CPEO program. Comments

on whether additional guidance is needed due to ongoing changes in workforce practices that have in part resulted from the COVID-19 pandemic as those changes relate to the definition of work site or work site employee are specifically requested and should be submitted by June 9, 2023. All comments will be available for public inspection and copying. Comments may be submitted in one of two ways:

(1) Mail . Send paper submissions to: CC:PA:LPD:PR (RP-2023-18), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

(2) Electronically . Submit electronic submissions via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and RP-2023-18) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. Commenters are strongly encouraged to submit public comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, and to the extent practicable on paper, to its public docket.