United States: Fee rules | Research Credit Integrity Alliance

This page sets out the federal statute and regulations that deal with how tax advisers are paid, as they apply to research credit work under Section 41. Professional body rules are covered separately on United States: Professional body rules, and the Treasury rule itself in more detail on United States: Circular 230 section 10.27.

The statutory basis

The main federal rules on adviser fees are made under 31 U.S.C. 330. That section allows the Secretary of the Treasury to regulate the practice of representatives of persons before the Treasury Department, and to require that a representative show good character, good reputation, necessary qualifications and competency before being admitted to practice.1 After notice and an opportunity for a proceeding, the Secretary may suspend, disbar or censure a representative who is incompetent, is disreputable, violates the regulations, or with intent to defraud willfully and knowingly misleads or threatens a client. The Secretary may also impose a monetary penalty of up to the gross income derived from the conduct, and may impose it on the employer or firm if it knew, or reasonably should have known, of the conduct.1

The regulations made under this authority are published as Treasury Department Circular No. 230, at 31 CFR part 10.2

Some provisions of the Internal Revenue Code also refer to what a preparer earns. The penalty for a preparer whose return or refund claim contains an understatement due to an unreasonable position is the greater of $1,000 or 50 percent of the income the preparer derived, or will derive, from that return or claim.3 A court may enjoin a tax return preparer who has, among other things, guaranteed the payment of any tax refund or the allowance of any tax credit, where it finds an injunction appropriate to prevent the conduct recurring.4

The regulation: Circular 230

Who it covers

Circular 230 applies to practitioners: attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents and registered tax return preparers who are not under suspension or disbarment.5 Its text also says that any individual who for compensation prepares, or assists in preparing, all or a substantial portion of a document about a taxpayer's tax liability for submission to the IRS is subject to its duties and sanctions.6 For a tax return, Circular 230 treats an amended return and a claim for refund as returns.7 The 2024 proposal described below would remove provisions that impose standards on return preparation unrelated to representation before the IRS.8

Unconscionable fees

A practitioner may not charge an unconscionable fee in connection with any matter before the IRS.9 The rule does not set a figure.

Contingent fees

Section 10.27 generally prohibits a practitioner from charging a contingent fee for services in connection with any matter before the IRS.9 "Matter before the Internal Revenue Service" includes tax planning and advice and preparing or filing returns or claims for refund or credit.9 A contingent fee is any fee based in whole or in part on whether a position on a return avoids challenge by the IRS or is sustained. The definition expressly includes a fee based on a percentage of the refund or of the taxes saved, and an arrangement to reimburse the client's fee if the position is challenged or not sustained.9

A practitioner may charge a contingent fee for services connected with:9

the IRS's examination of, or challenge to, an original return, or an amended return or refund claim filed within 120 days of the taxpayer receiving written notice of the examination or a written challenge;
a claim for credit or refund filed solely about statutory interest or penalties assessed by the IRS; and
any judicial proceeding arising under the Internal Revenue Code.

The rule applies to fee arrangements entered into after 26 March 2008.9 Treasury has described Notice 2008-43 as clarifying that the examination exception also covers an amended return or refund claim filed before the taxpayer received written notice of examination, and as adding an exception for whistleblower claims.8

The court decisions

In Loving v. IRS the federal courts in the District of Columbia held that Treasury and the IRS lacked authority under 31 U.S.C. 330 to regulate tax return preparation as practice before the IRS, and the regulations of 2011 that required paid preparers to register were enjoined. The Court of Appeals explained that tax return preparers assist taxpayers but do not represent them before the IRS.8

In Ridgely v. Lew (2014) a practicing CPA challenged section 10.27 as applied to "Ordinary Refund Claims", which the court described as refund claims filed after the original return but before the IRS has begun an audit.10 The court concluded that the IRS lacks statutory authority to regulate the preparation and filing of those claims, granted summary judgment and granted the plaintiff's request for a permanent injunction against enforcement of the regulation.10 The court noted that, on the IRS's reading, it "would impose no contingent fee restrictions on the preparation and filing of Ordinary Refund Claims by non-CPAs and those who never 'practice' before the IRS".10 Treasury later summarized the result: the IRS cannot prohibit contingent fees for ordinary refund claims under its authority to regulate practice in 31 U.S.C. 330(a), and the court did not otherwise address the propriety of contingent fees.8

The 2024 proposal

On 26 December 2024 Treasury and the IRS published proposed regulations that would remove section 10.27. In its place, proposed section 10.51 would treat as disreputable conduct both charging an unconscionable fee and charging a contingent fee in connection with preparing an original or amended return or claim for refund or credit prepared before the examination of the return.8 Preparation would include advice directly relevant to an item or entry on the return or claim. The proposal relies on the sanction power in 31 U.S.C. 330(c), which Treasury said applies whether or not the conduct is representation of a client.8 Comments were due by 24 February 2025.8

As at 11 October 2026 the eCFR still showed section 10.27 in its 2007 form.9

Summary table

Arrangement	Circular 230 text (31 CFR 10.27)	Effect of Ridgely v. Lew	2024 proposal
Contingent fee for preparing an original return	Prohibited for practitioners	Not addressed by the court	Disreputable conduct
Contingent fee for an amended return or refund claim filed before an audit	Prohibited for practitioners	IRS may not enforce under its authority over practice	Disreputable conduct
Contingent fee for work on an IRS examination or challenge	Permitted	Not affected	Not covered by proposed 10.51(b)
Contingent fee in a judicial proceeding	Permitted	Not affected	Not covered by proposed 10.51(b)
Unconscionable fee	Prohibited	Not affected	Disreputable conduct

Sources for the table: Circular 230 section 10.27,9 the Ridgely opinion,10 and the 2024 notice.8

Sources

Office of the Law Revision Counsel, 31 U.S.C. 330, Practice before the Department, subsections (a) and (c), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title31/html/USCODE-2024-title31-subtitleI-chap3-subchapII-sec330.htm (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.0, Scope of part, paragraph (a). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-A/section-10.0 (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6694, Understatement of taxpayer's liability by tax return preparer, subsection (a)(1), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap68-subchapB-partI-sec6694.htm (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7407, Action to enjoin tax return preparers, subsection (b)(1)(C) and (b)(2), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap76-subchapA-sec7407.htm (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.3, Who may practice, paragraphs (a) to (f), read with 31 CFR 10.2(a)(5). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-A/section-10.3 (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.8, Return preparation and application of rules to other individuals, paragraph (c). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-A/section-10.8 (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.2, Definitions, paragraph (a)(6). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-A/section-10.2 (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, Regulations Governing Practice Before the Internal Revenue Service, notice of proposed rulemaking, 89 FR 104915 (26 December 2024), Dates, Background parts A and B, Explanation of Provisions part B and proposed section 10.51. https://www.federalregister.gov/documents/2024/12/26/2024-29371/regulations-governing-practice-before-the-internal-revenue-service (accessed 11 October 2026). Back
Treasury Department, Circular No. 230, 31 CFR 10.27, Fees, paragraphs (a) to (d), with source note T.D. 9359 (eCFR text up to date as of 8 October 2026). https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.27 (accessed 11 October 2026). Back
US District Court for the District of Columbia, Ridgely v. Lew, Civil Action No. 1:12-cv-00565 (CRC), Memorandum Opinion, 16 July 2014, pages 1, 12 to 13 and 14 to 15. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_12-cv-00565/pdf/USCOURTS-dcd-1_12-cv-00565-1.pdf (accessed 11 October 2026). Back