Comments Regarding Proposed Amendments to the Regulations
Governing Practice Before the Internal Revenue Service
(Title 31, Code of Federal Regulations, Subtitle A, Part 10)
April 23, 2001

The Section supports the re-write of what is now subsection (a) because it eliminates a redundancy in the current version of subsection (a) by requiring simply that any officer or employee of the Service who has reason to believe a violation has occurred must make a written report of such violation to the Director.

The proposed amendments to subsection (b) could be re-written to enhance the clarity of the provision. As currently drafted, amended subsection (b) permits people other than officers or employees of the Service to report an alleged violation and then requires any officer or employee who receives such a report to make a written report to the Director. There does not seem to be any need for the provision to contain a permissive phrase simply allowing other people to report violations to Service employees or officers. Further, the requirement that an employee or officer who receives such a report must make a written report to the Director is redundant because subsection (a) already requires any officer or employee who has reason to believe of a violation to make a written report. If an officer or employee receives a credible report of an alleged violation from another person, it seems logical that the report would provide the officer or employee with reason to believe, within the meaning of subsection (a), that such a violation has occurred, thereby creating an obligation to make a written report. If it is necessary to emphasize that information received from another person can constitute reason to believe that a violation has occurred, then the provision could be re-written as follows:

(b) Information from other persons. An officer or employee of the Internal Revenue Service who receives credible information from another person indicating that the provision of this part may have been violated has reason to believe that such a violation has occurred and must make a written report to the Director.

Further, the Section believes that practitioners should be notified when they are reported for possible violations of Circular 230. Even in cases in which the Director of Practice determines that no further action is warranted, but decides to retain the report in case additional reports are received regarding the same practitioner, due process considerations entitle the practitioner to notice and an opportunity to respond contemporaneously, before memories dim or relevant documents are lost or discarded. Indeed, in appropriate circumstances, the Director of Practice might even request the practitioner to submit a response in a "no action" case for just these reasons. However, the Section also recognizes that the resources available to the Director of Practice are limited. For these reasons, the Section believes that notification of a practitioner of reported violation is not warranted if the Director of Practice concludes that no further action should be taken.

Consistent with these considerations, the Section recommends that a sentence be added to the end of section 10.53 which provides as follows:

In any case in which the Director of Practice receives any such report, the Director shall either (1) determine that the report warrants no further action and immediately destroy the report and all documentation or records relating thereto or (2) notify the practitioner of the nature of the claimed violation and, if appropriate, request the practitioner to submit a preliminary response.