SECTION 7. DENIAL OF

CERTIFICATION

.01 Notice of proposed denial . If the IRS decides that an application for certification should be denied based on the CPEO applicant’s failure to satisfy one or more of the requirements of § 301.77052, this revenue procedure, the instructions accompanying the online application, and any applicable subsequent guidance, the IRS will issue a notice of proposed denial (unless the circumstances in section 7.02 apply) to the CPEO applicant’s IRS Online Registration System account, which will (i) include the reason(s) for the denial of certification; and (ii) inform the CPEO applicant of its opportunity to request review of the proposed denial.

.02 Circumstances in which denial is final, with no opportunity for review . In situations in which the denial of an application is based on the CPEO applicant’s failure to comply with a requirement in § 301.7705-2, this revenue procedure, the instructions in the online application,

Bulletin No. 2023–13 613 March 27, 2023

or any applicable subsequent guidance, and such failure is not subject to reasonable factual or legal dispute, the IRS will not issue a notice of proposed denial, but will instead issue a notice of final denial, which will include the reason(s) for the denial of certification, but will not provide for an opportunity for review. Denials based on failures that are not subject to reasonable factual or legal dispute include, but are not limited to, denial based on the following:

(1) Incomplete application . The CPEO applicant submits an incomplete application as described in section 4.02 or fails to respond to a request from the IRS for additional information needed for a complete application (as described in section 4.02) by the date required. (2) Modified opinion . The CPA opinion of annual audited financial statements submitted by the CPEO applicant is a modified opinion (which includes a qualified opinion, an adverse opinion, or a disclaimer of opinion).

(3) Negative working capital . The annual audited financial statements submitted by the CPEO applicant or the quarterly statements submitted by a responsible individual of the CPEO applicant reflect negative working capital, and the CPEO applicant fails to meet the exceptions described in section 2.05(4) or 2.06(3), respectively.

(4) Failure to provide proof of bond . The CPEO applicant fails to provide proof of the bond required in section 6.02 within 30 days after the date of the notice of certification.

.03 Request for review of a notice of proposed denial . A notice of proposed denial, in accordance with section 7.01, will inform the CPEO applicant of its opportunity to request a review by OPR.

(1) How to request a review of a notice of proposed denial . To request a review, the CPEO applicant, using its IRS Online Registration System account, must submit a written statement of the facts, law, and arguments in support of its position within 30 days from the date of the notice of proposed denial. The arguments in support of the CPEO applicant’s position should focus on the factual information provided by the CPEO applicant and its responsible individuals, including whether any information provided as part of the

application has changed or was incorrect. Arguments concerning the materiality of information provided or whether certain facts present a material risk to the IRS’s collection of federal employment taxes are outside the scope of review and will not be considered.

(2) Additional materials . Subject to the exceptions in section 7.05(1) and (3), after a CPEO applicant has submitted a written request for review, the CPEO applicant may not submit any additional or new information as part of its request for review or any additional arguments in support of the CPEO applicant’s position. The IRS CPEO program office will not consider any additional or new information or arguments as part of its handling of the request for review under section 7.05, unless new information is provided pursuant to section 7.05(1) or (3). The IRS CPEO program office also will not forward any additional or new information or arguments to OPR under section 7.05(5), unless new information was provided pursuant to section 7.05(1) or (3).

(3) Extension of time to request review . The IRS CPEO program office may extend the deadline for submitting a request for review by an additional 30 days. To request this 30-day extension, a CPEO applicant must submit a written request through its IRS Online Registration System account explaining the need for the extension. A CPEO applicant must submit its request not later than 20 days after the date of the notice of proposed denial. A CPEO applicant may request only one extension.

(a) The IRS CPEO program office will grant the extension if, in its sole discretion and based on a review of the relevant facts and circumstances, it determines that the extension is in the interest of tax administration.

(b) A request for an extension, a denial of an extension, or any other matter related to this section 7.03(3) is not subject to the review described in section 7, including section 7.06.

.04 Notice of final denial where no re- quest for review of the proposed denial is submitted . If the CPEO applicant does not submit a timely request for review of a notice of proposed denial in accordance with section 7.03, including any extension of time under section 7.03(3), a notice of

final denial will be issued to the CPEO applicant.

.05 How the IRS handles a request for review . If a CPEO applicant submits a timely request for review, the IRS CPEO program office will first review the request and accompanying written statement of the facts, law, and arguments in support of the CPEO applicant’s position.

(1) Request for additional information . In reviewing a CPEO applicant’s request for review, the IRS CPEO program office may request additional information from the CPEO applicant, if it determines that further information is required to sufficiently evaluate the initial request for review.

(a) The CPEO applicant must provide the requested information or materials by the date specified in the request. The IRS CPEO program office will consider any request by the CPEO applicant for an extension of the time by which the requested information or materials must be provided on a case-by-case basis.

(b) In accordance with section 7.03(2), a CPEO applicant should not send any additional information or documentary materials to the IRS CPEO program office unless the information or materials are requested, and the IRS CPEO program office will not consider any unrequested information or materials received from the CPEO applicant.

(c) Similarly, if the IRS CPEO program office requests additional information or materials, the IRS CPEO program office will not consider any additional information or materials not timely provided by the CPEO applicant (by the date specified in the request or any extended date) or that is not responsive to or is outside the scope of the request.

(2) Additional failures . Before referring a proposed denial to OPR for review, the IRS CPEO program office will provide written notice to the CPEO applicant of any additional failures to satisfy one or more of the requirements of § 301.77052, this revenue procedure, and any applicable subsequent guidance, that arose or that were discovered after the issuance of the notice of proposed denial and give the CPEO applicant additional time to respond to the notice regarding the failures. The CPEO applicant must provide any response regarding the additional

March 27, 2023 614 Bulletin No. 2023–13

failures by the date specified by the IRS CPEO program office. The IRS CPEO program office will consider any request by the CPEO applicant for an extension of the time by which the response must be provided on a case-by-case basis. The IRS CPEO program office will not consider any additional information or materials not timely provided by the CPEO applicant by the date specified in the notice of additional failures, or any extended date, or that is not factually responsive to or is outside the scope of, the notice.

(3) IRS CPEO program office review . In conducting its review, the IRS CPEO program office will consider the initial request for review, any additional information provided by the CPEO applicant in response to a request made in accordance with section 7.05(1), any additional failures, as defined in section 7.05(2), that arise or that are discovered after the issuance of the notice of proposed denial, and any timely responses by the CPEO applicant to the notice of additional failures.

(4) Notice of certification . After reviewing the request for review, if the IRS CPEO program office determines that the CPEO applicant qualifies for certification, it will issue the CPEO applicant a notice of certification in accordance with section 6. (5) Forwarding to OPR . If, upon review, the IRS CPEO program office affirms the proposed denial, it will forward the administrative record to OPR for review. The administrative record will consist of the notice of proposed denial, the CPEO applicant’s request for review, the IRS CPEO program office’s written analysis of the CPEO applicant’s request for review, any other information timely provided by the CPEO applicant in response to a request by the IRS CPEO program office, including information with regard to any additional failures, and all supporting documentation. The administrative record will include only information that was either: (i) stated in the notice of proposed denial or in a notice described in this section 7.05 and all supporting documentation; or (ii) related to the IRS CPEO program office’s determination, upon review of all information subject to consideration under sections 7.03(1) and 7.05(1)-(3), that the CPEO does not qualify for certification. The IRS CPEO program office will notify

the CPEO applicant after it forwards the administrative record to OPR for review.

.06 Consideration by OPR . (1) OPR consideration . OPR will consider only the information provided in the administrative record.

(2) Conducting the review . (a) During OPR’s review, subject to the exception described in section 7.06(2) (b), neither the IRS CPEO program office nor the CPEO applicant may contact OPR with respect to the pending review, and OPR will not contact the IRS CPEO program office or the CPEO applicant or its authorized representative with respect to the pending review. Further, except as provided in section 7.06(2)(b), during OPR’s review, a CPEO applicant and its authorized representative may not:

(i) Submit any information or documentation to OPR;

(ii) Request or offer to have a telephone conference with OPR;

(iii) Request the name or contact information of any OPR employee who has been assigned to conduct the review; or

(iv) Attempt to contact the employee, such as by telephone or email.

(b) Notwithstanding section 7.06(2) (a), the IRS CPEO program office and the CPEO applicant may contact OPR to request the status of a pending review and an estimate of when OPR expects to complete its review. Either OPR or the CPEO program office will provide the CPEO applicant with contact information for these purposes.

(c) All communications between OPR and either the CPEO applicant or the IRS CPEO program office will conform to current IRS security and authentication policies and procedures, as applicable.

(3) OPR will establish procedures to ensure that no additional information is considered . To facilitate an independent review, OPR will establish procedures to ensure that any information from a CPEO applicant or authorized representative that is sent to OPR outside of the administrative record will not be considered.

(4) Standard of review . OPR will apply an abuse of discretion standard to its review, and if OPR concludes that the IRS CPEO program office erred in denying certification, it will issue a letter notifying the CPEO applicant that a notice of certification will be issued by the IRS CPEO

program office. Under an abuse of discretion standard, the Director, OPR will not change the decision of the IRS CPEO program office unless the IRS CPEO program office’s determination is arbitrary, capricious, clearly unlawful, or without a sound basis in fact or law. See Ewing v. Commissioner, 122 T.C. 32, 39 (2004), vacated on other grounds, 439 F.3d 1009 (9th Cir. 2006); see also Woodral v. Com- missioner, 112 T.C. 19, 23 (1999). If OPR finds no abuse of discretion, it will issue a letter of final denial.

.07 A request for review may be with- drawn . A CPEO applicant may withdraw its request for review of the notice of proposed denial before OPR issues its final determination. A request for review may be withdrawn only upon the written request of an application submitter, submitted through the CPEO applicant’s IRS Online Registration System account. Upon receipt of the CPEO applicant’s withdrawal request, the IRS will complete the processing of the application in the same manner as if the CPEO applicant was issued a final denial.