Rev. Rul. 78-318, 1978-2 CB 345


Section 7701.--Definitions

26 CFR 301.7701-15: Income tax return preparer.

(Also Sections 6060, 6107, 6694, 6695, 7216; 1.6060-1, 1.6107-1, 1.6694-1, 1.6695-1, 301.7216-1.)

Income tax return preparer; finance corporation.--

A finance corporation leases facilities and furnishes limited services for an agreed fee to an unrelated independent income tax return preparer at several of its branches, but does not engage in the preparation of returns, have access to the returns, provide computer services to the preparer, compensate the preparer, or control the preparation of the returns. The finance corporation is not an income tax preparer or the employer of an income tax return preparer for purposes of sections 6060, 6107, 6694, 6695, 7216, and 7701(a)(36) of the Code.


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Advice has been requested whether, under the circumstances described below, a finance corporation is the income tax return preparer or the employer of an income tax return preparer for purposes of sections 6060, 6107, 6694, 6695, 7216, and 7701(a) (36) of the Internal Revenue Code of 1954.


X, a finance corporation, operates branches in several states. Some of the branches provide income tax return preparation services.


Y, an independent income tax return preparer, under an agreement with X, provides income tax return services on the premises of the branches of X that do not offer such services.


X and Y are unrelated entities.


The agreement provides that, for a stated fee, X will furnish Y with office space, appointment services, and on-premise and general advertising of Y's tax return preparation services.


All advertising and other representations concerning the branches where Y performs such services specifically and unqualifiedly indicate that tax return preparation service at these branches are performed only by Y. Further, the tax return preparation services at these branches is not represented as services performed or supervised by X or its personnel. No employees of X engage, directly or indirectly, in the actual preparation or review of returns or work papers, or otherwise have access to any returns prepared by Y. X does not control, or have any right to control, the preparation of tax returns by Y, and does not provide any computer or other service to Y other than those mentioned above. Y is compensated for its services solely by the persons for whom it prepares tax returns.


Sections 6060, 6017, 6694, 6695 and 7216 of the Code pertain to certain disclosure and reporting requirements and to certain penalties applicable to an income tax return preparer. For purposes of these sections an income tax return preparer is defined under section 7701(a)(36) as any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by subtitle A or any claim for refund of tax imposed by subtitle A.


Section 301.7216(b)(2)(v) of the Regulations on Procedure and Administration provides that for purposes of section 7216 and sections 301.7216-1 through 301.7216-3 of the regulations a person is not a tax return preparer merely because that person leases office space to a tax return preparer, furnishes credit to a taxpayer whose tax return is prepared by a tax return preparer, or otherwise performs some service which only incidentally relates to the preparation of tax returns.


Section 7701(a)(36)(B)(i) and section 301.7701-15(d)(1) of the regulations provides that a person shall not be considered to be a preparer of a return if the person performs only typing, reproductions, or other mechanical assistance in the preparation of a return.


In the instant case, X does not prepare or assist in the preparation of income tax returns prepared by Y. Further, X does not employ or engage Y to prepare tax returns under a contractual arrangement, but merely provides facilities and services for which it is compensated by Y.


Accordingly, with respect to tax returns prepared by Y, X is not an income tax return preparer, and does not employ or engage Y to prepare income tax returns for purposes of sections 6060, 6107, 6694, 6695, 7216 and 7701(a)(36) of the Code.