B. PTIN User Fee

Final regulations (TD 9503) published in the Federal Register (75 FR 60316) on September 30, 2010, established a $50 user fee to apply for or renew a PTIN, based on a 2010 Cost Model. In addition, a $14.25 fee for a new application and a $13 fee for an application for renewal was payable directly to a third-party contractor.

In 2013, the IRS conducted a biennial review of the PTIN user fee and issued a new Cost Model that estimated an increase of the PTIN user fee, to $54. However, the IRS determined to keep the fee at $50 for the next two years.

In 2015, the IRS conducted a biennial review of the PTIN user fee and issued a new Cost Model, which determined that the full cost of administering the PTIN program going forward was reduced from $50 to $33 per application or application for renewal, plus a $17 fee per application or application for renewal payable directly to a third-party contractor. Final regulations (TD 9781) published in the Federal Register (81 FR 52766) on August 10, 2016, superseded and adopted temporary regulations (TD 9742) published in the Federal Register (80 FR 66792) on October 30, 2015, and established the $33 annual user fee to apply for or renew a PTIN, plus $17 per application or application for renewal payable directly to a third-party contractor.

In 2017, the IRS again conducted a biennial review of the PTIN user fee and issued a new Cost Model, which determined that the amount of the fee going forward should be reduced to $31 per application or application for renewal, plus an amount payable directly to a third-party contractor. However, on June 1, 2017, before a notice of proposed rulemaking proposing to reduce the amount of the PTIN user fee was issued, the IRS was enjoined from charging a PTIN user fee. In Steele v. United States , 260 F. Supp. 3d 52 (D.D.C. 2017), the United States District Court for the District of Columbia concluded that the Treasury Department and the IRS lacked the statutory authority to charge a PTIN user fee and enjoined the IRS from charging a PTIN user fee. See Steele, 2017 WL 3621747 (D.D.C. July 10, 2017) (final judgment and permanent injunction). The government filed an appeal and on March 1, 2019, the United States Court of Appeals for the District of Columbia Circuit reversed the district court’s decision and lifted the injunction against charging the PTIN user fee. See Montrois v. United States , 916 F.3d 1056 (D.C. Cir. 2019) (holding that a PTIN provides tax return preparers a specific benefit by allowing them to provide an identifying number that is not a social security number on returns they prepare and stating that the permissible amount of the fee would be the same regardless of whether the specific benefit was instead the ability to prepare tax returns for compensation). The case was remanded to the United States District Court for the District of Columbia to determine whether the fee amounts were excessive. Id. at 1068.

In 2019, the IRS again conducted a biennial review of the PTIN user fee and issued a new Cost Model, which determined that the amount of the fee going forward should be reduced to $21 per application or application for renewal, plus a $14.95 fee per application or application for renewal payable directly to a third-party contractor. Final regulations (TD 9903) published in the Federal Register (85 FR 43433) on July 17, 2020, adopted the proposed regulations (REG-117138-17) published in the Federal Register (85 FR 21126) on April 16, 2020, and established the $21 annual user fee to apply for or renew a PTIN, plus $14.95 per application or application for renewal payable directly to a third-party contractor.

In Steele v. United States , 657 F. Supp. 3d 23 (D.D.C. 2023), the United States District Court for the District of Columbia on remand considered whether the fee amounts were excessive under the IOAA ( Steele opinion). Explaining that while an agency may charge only the reasonable cost incurred to provide a service, or the value of the service to the recipient, whichever is less, the district court allowed that the activities charged for need only be “reasonably related” to the cost to the agency and the value to the recipient, and the amount may include both “direct and indirect costs” associated with the service provided. Id. at 37. The court further noted that where an activity produces an independent public benefit, the fee that would otherwise be charged must be reduced by that portion of the costs attributable to the public benefit. Id. at 37-38.

The district court concluded that the PTIN fees for fiscal years (FYs) 2011 through 2017 were excessive to the extent they were based on: (1) the activities already conceded by the government in the case; 1 (2) any compliance activities other than direct and indirect costs of investigating ghost preparers who do not list their PTINs on returns they prepared for compensation as required by law, handling complaints regarding improper use of a PTIN, use of a compromised PTIN, or use of a PTIN obtained through identity theft, and composing the data to refer those specific types of complaints to other IRS business units; (3) any suitability activities; (4) any support activities, other than those for the provision of PTINs and maintenance of the PTIN database, that facilitated provision of an independent benefit to the agency and the public; and (5) any activities of the third-party contractor, other than those related to the issuance, renewal, and maintenance of PTINs, that facilitated provision of an independent benefit to the agency and the public. Id. at 48. The plaintiffs in Steele filed a notice of appeal on March 26, 2025, and the government filed a notice of cross-appeal on May 22, 2025, to the Court of Appeals for the District of Columbia Circuit. The appeal is pending as of the publication of these interim final regulations.

In its 2023 biennial review, the IRS, taking into account the Steele opinion, determined the amount of the user fee as $11 per application or application for renewal, plus an $8.75 fee per application or application for renewal payable directly to a third-party contractor. The amount payable directly to the third-party contractor also took into account certain costs that were addressed in the Steele opinion. Subsequently, the IRS entered into a modified contract that allows the government to pay those costs rather than the individuals who apply for or renew a PTIN. Final regulations (TD 9997) published in the Federal Register (89 FR 42362) on May 15, 2024, adopted the interim final rule and cross-referencing notice of proposed regulations (REG-106203-23) published in the Federal Register (88 FR 68456) on October 4, 2023, and established the $11 annual user fee to apply for or renew a PTIN, plus $8.75 per application or application for renewal payable directly to a third-party contractor.

In accordance with the biennial review requirement in OMB Circular A-25 and taking into account the Steele opinion, the IRS has issued a new Cost Model that re-determines costs that the government continues to incur for providing PTINs and administering the PTIN program, and re-calculates the amount of the user fee as $10 per application or application for renewal, plus an $8.75 fee per application or application for renewal payable directly to a third-party contractor. The amount payable directly to the third-party contractor also takes into account certain costs that were addressed in the Steele opinion.

The government is authorized to charge a PTIN user fee under the IOAA because, in exchange for the fee, it provides a service by issuing and maintaining PTINs, which provide tax return preparers a specific benefit by allowing them to provide an identifying number that is not a social security number on returns and claims for refund and to prepare returns and claims for refund for compensation. OMB Circular A-25 states that user fees should be collected in advance of or simultaneously with the provision of a service. The PTIN user fee is collected when tax return preparers apply for or renew their PTINs during the application season, which begins annually in October.