BY U.S. MAIL and e-mail to http://www.irs.gov/regs

September 28, 2006

Internal Revenue Service
Attn: CC:PA:LPD:RP (REG-145154-05), Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC  20044

Re:  User Fees Relating to Enrollment  (REG 145154-05)

The National Association of Enrolled Agents (“NAEA”) appreciates the opportunity to comment on the Proposed Rule that would implement user fee increases for the application for enrollment and for the renewal of enrollment as well as user fee adjustments for the special enrollment examination (SEE). 

As the organization representing the interests of 46,000 enrolled agents (EAs), the only practitioners for whom IRS directly attests their competency and ethical behavior, NAEA is committed to increasing the professionalism of our industry, increasing the integrity of the nation’s tax administration system, and protecting the representation rights of taxpayers.  Because our membership is comprised solely of enrolled agents, we believe that NAEA is well positioned to offer an informed perspective about the practical impact of the Proposed Rule on enrolled agents. 

In sum, we would like a) a better explanation of how the user fees were derived; b) an understanding of IRS’ schedule for reevaluating EA user fees; and, c) the reason for statements made in the Special Analyses section of the Proposed Rule.

Without access to the costing models or methodology used to derive the user fees, we can neither speak knowledgably to the magnitude of the adjustments (i.e., are they reasonable, too high, or too low) nor face the challenge of helping our members understand and support the fee changes.  Ultimately, though, we do not plan to formally oppose any of the proposed user fee changes.

We respectfully offer these comments on the Proposed Rule: 

• User Fees for Initial Enrollment and Enrollment Renewal.  According to senior staff in IRS’ Office of Professional Responsibility, the fees for enrollment and renewal were last increased in 1995.  IRS is proposing an increase from $80 to $125 for each of these fees.
  
  Using Bureau of Labor Statistics information, $80 in 1995 equates to $106.82 in 2006 dollars.  The proposed increase outpaces inflation and indicates, conceivably, that OPR is becoming less efficient at processing initial enrollment applications and enrollment renewal applications. When NAEA informally requested the fee recalculation methodology, we were told we would need to file a Freedom of Information Act (FOIA) request.  On the surface, it does not seem that such a calculation should be considered in any way sensitive.  More importantly, FOIA request responses are typically measured in months and, as a result, we refrained from filing a request.
  
  As an aside, this decision to readjust user fees appears to be an ad-hoc one. We are not disputing the agency’s right to charge a user fee for special services provided to EAs, but we do question whether IRS has a formal review process in place (e.g., every 6 years, which would correspond to two renewal cycles).  If so, revealing it to the public would foster understanding and help rebut the inevitable speculation that the Service is using the fee increase to raise funds.   If not, we suggest establishing a systemic approach and sharing it with stakeholders.
  
  To fully understand the increased fees, NAEA needs more information on the calculations OPR used to reach the new processing costs (and thus, the new fees).  While NAEA believes a more systemic approach to reconsidering initial enrollment and enrollment renewal fees is in order, we do not formally oppose the new $125 user fees.
  
• User Fees for the Special Enrollment Examination.  According to senior staff in IRS’ Office of Professional Responsibility (OPR), the fees for the SEE were last increased sometime prior to 1995.  IRS is proposing instituting an $11 per SEE section user fee.
  
  OPR recently contracted with Thomson Prometric (TP) to “furnish the resources, facilities, and services necessary to administer the entire SEE program, which includes examination development, administration of the SEE, notification to IRS of candidates who took the examination, and the results of the examination” [emphasis added].  With the assistance of enrolled agent subject matter experts, TP redesigned the existing four-part pencil-and-paper examination.  The examination, which was administered by IRS employees once annually, will be a three-part electronic exam that will be available ten months per year, starting in May, 2007.  During that 10-month window, potential EAs will be able to take each part of the exam up to four times.  Also beginning May, 2007, test takers will receive their test results immediately, in contrast to the approximately two-month waiting period for the previous exam, which was run completely by IRS.
  
  TP will be charging $86 for administering each of the three parts of the examination, or a total of $258 for administering the entire examination.  IRS is proposing an $11 fee per section, or a $33 fee for the entire examination to recover “the government costs for overseeing the SEE.”  It is difficult to understand how the Service can still require payment of $33 (60% of its former fee) merely to provide oversight to Thomson Prometric, in light of the fact that the agency (i) created the entire SEE in-house, (ii) administered it at scores of sites nationwide, (iii) processed exam fees, (iv) scored the examinations, and (iv) administered a process permitting test takers to protest specific questions, all for a total of $55.
  
  As with the user fee changes for initial enrollment and renewal, the user fee change for the SEE appears rather ad hoc.  The challenges OPR faced in successfully contracting the SEE to a private sector vendor probably caused a delay in adjusting the SEE user fees.  Notwithstanding the outsourcing, we would like to know whether OPR has in place a schedule (i.e., every 5 years) for reviewing its SEE oversight user fees. 
  
  NAEA would certainly be interested in seeing OPR’s costing models or methodology.  Without an understanding of what drives OPR costs, NAEA believes the proposed SEE user fees, which are simply to cover OPR’s oversight costs, appear to be high.  We also believe a more systemic approach to reconsidering SEE user fees is in order. We will not, however, formally oppose the proposed fee adjustment.
  
• Special Analyses.  NAEA questions why the agency makes a point of stating “payment of the fee is voluntary” and, further, that those “who elect to take the exam will have determined that it is in their economic interest to do so.” The special analyses for the Proposed Rule for installment agreement user fee changes (REG-148576-05) are identical to the one in this notice, save those sentences.  Is there a reason behind this distinction?

NAEA appreciates the opportunity to respond in writing to the EA user fee Notice of Proposed Rulemaking and respectfully declines appearing at the scheduled September 28th hearings on this matter.

Sincerely,
 
Lois Manning, EA
President