Disclosure of Returns and Return Information in Connection With Written Contracts or Agreements for the Acquisition of Property or Services for Tax Administration Purposes, 30974-30977 [E7-10798]
Download as PDF
<![CDATA[
30974
Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations
(e) Public dissemination of
declassified information.
Declassification of information is not
authorization for its public disclosure.
Previously classified information that is
declassified may be subject to
withholding from public disclosure
under the FOIA, the Privacy Act, and
various statutory confidentiality
provisions.
DEPARTMENT OF THE TREASURY
instead of being disabled, Employee C is
receiving a hardship distribution. * * *
Internal Revenue Service
*
§ 9.10
AGENCY:
Mandatory declassification review.
All requests to the Department by a
member of the public, a government
employee, or an agency to declassify
and release information shall result in a
prompt declassification review of the
information in accordance with
procedures set forth in 22 CFR 171.20–
25. Mandatory declassification review
requests should be directed to the
Information and Privacy Coordinator,
U.S. Department of State, SA–2, 515
22nd St., NW., Washington, DC 20522–
6001.
§ 9.11
Systematic declassification review.
The Information and Privacy
Coordinator shall be responsible for
conducting a program for systematic
declassification review of historically
valuable records that were exempted
from the automatic declassification
provisions of section 3.3 of the
Executive Order. The Information and
Privacy Coordinator shall prioritize
such review on the basis of researcher
interest and the likelihood of
declassification upon review.
§ 9.12 Access to classified information by
historical researchers and certain former
government personnel.
For Department procedures regarding
the access to classified information by
historical researchers and certain former
government personnel, see Sec. 171.24
of this Title.
§ 9.13
Safeguarding.
cprice-sewell on PROD1PC71 with RULES
Specific controls on the use,
processing, storage, reproduction, and
transmittal of classified information
within the Department to provide
protection for such information and to
prevent access by unauthorized persons
are contained in Volume 12 of the
Department’s Foreign Affairs Manual.
Dated: May 25, 2007.
Lee Lohman,
Deputy Assistant Secretary, Department of
State.
[FR Doc. E7–10778 Filed 6–4–07; 8:45 am]
15:27 Jun 04, 2007
26 CFR Part 1
[TD 9324]
RIN 1545–BF04
Designated Roth Accounts Under
Section 402A; Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Correcting amendments.
SUMMARY: This document contains
corrections to final regulations (TD
9324) that were published in the
Federal Register on Monday, April 30,
2007 (72 FR 21103) providing guidance
concerning the taxation of distributions
from designated Roth accounts under
qualified cash or deferred arrangments
under section 401(k).
DATES: The correction is effective June
5, 2007.
FOR FURTHER INFORMATION CONTACT: R.
Lisa Mojiri-Azad or William D. Gibbs at
202–622–6060, or Cathy A. Vohs, 202–
622–6090 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are the
subject of this correction are under
sections 401(k), 402(g), 402A, and 408A
of the Internal Revenue Code.
Need for Correction
As published, final regulations (TD
9324) contain errors that may prove to
be misleading and are in need of
clarification.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Correction of Publication
Accordingly, 26 CFR part 1 is
corrected by making the following
correcting amendments:
I
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 1.402A–1 is amended
by revising the first sentence of
Example. of A–8.(b) to read as follows:
§ 1.402A–1
*
Designated Roth Accounts.
*
*
A–8. * * *
(b) * * *
*
*
Example. The facts are the same as in the
Example in A–7 of this section, except that
BILLING CODE 4710–24–P
VerDate Aug<31>2005
*
*
*
*
Par. 3. Section 1.402A–2 is amended
by revising paragraph (2) of A–2.(a) to
read as follows:
I
Jkt 211001
PO 00000
Frm 00020
Fmt 4700
Sfmt 4700
§ 1.402A–2 Reporting and recordkeeping
requirements with respect to designated
Roth accounts.
*
*
*
*
*
A–2. * * *
(a) * * *
(2) If the distribution is not a direct
rollover to a designated Roth account
under another plan, the plan
administrator or responsible party must
provide to the employee, upon request,
the same information described in
paragraph (a)(1) of this A–2, except the
statement need not indicate the first
year of the 5-taxable-year period
described in A–1 of this section.
*
*
*
*
*
LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel (Procedure and Administration).
[FR Doc. E7–10802 Filed 6–4–07; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9327]
RIN 1545–BC92
Disclosure of Returns and Return
Information in Connection With Written
Contracts or Agreements for the
Acquisition of Property or Services for
Tax Administration Purposes
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
SUMMARY: This document contains final
regulations relating to the disclosure of
returns and return information pursuant
to section 6103(n) of the Internal
Revenue Code (Code). The final
regulations describe the circumstances
under which officers or employees of
the Treasury Department, a State tax
agency, the Social Security
Administration, or the Department of
Justice, may disclose returns and return
information to obtain property or
services for tax administration purposes,
pursuant to a written contract or
agreement. The final regulations also set
forth safeguard requirements that are
designed to protect the confidentiality
of returns and return information in the
E:\FR\FM\05JNR1.SGM
05JNR1
Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations
cprice-sewell on PROD1PC71 with RULES
hands of contractors, agents, and
subcontractors, and their officers and
employees, and notification
requirements that must be provided, in
writing, to officers and employees of the
contractors, agents, and subcontractors
to inform them that any returns or
return information they receive
pursuant to these regulations may only
be used for the purpose for which it is
disclosed to them and that they are
subject to the civil and criminal
provisions of sections 7431, 7213, and
7213A for the unauthorized inspection
or disclosure of the returns or return
information.
The final regulations will affect
officers and employees of the Treasury
Department, a State tax agency, the
Social Security Administration, or the
Department of Justice, who disclose
returns or return information in
connection with a written contract or
agreement for the acquisition of
property or services for tax
administration purposes. The final
regulations also will affect any person,
or officer, employee, agent, or
subcontractor of the person, or officer or
employee of the agent or subcontractor,
who receives returns or return
information in connection with a
written contract or agreement for the
acquisition of property or services.
DATES: Effective Date: These regulations
are applicable June 5, 2007.
Applicability Date: For dates of
applicability, see § 301.6103(n)–1(g).
FOR FURTHER INFORMATION CONTACT:
Helene R. Newsome, 202–622–4570 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545–
1821.
The collection of information in these
final regulations is in §§ 301.6103(n)–
1(d) and 301.6103(n)–1(e)(3). This
information is required and will be used
to ensure compliance with the internal
revenue laws and regulations, and to
protect the privacy of taxpayers.
Estimated total annual reporting
burden: 250 hours. Estimated average
annual burden per respondent: 6
minutes.
Estimated number of respondents:
2500.
Estimated annual frequency of
responses: Annually.
Comments concerning the accuracy of
this burden estimate and suggestions for
VerDate Aug<31>2005
15:27 Jun 04, 2007
Jkt 211001
reducing this burden should be sent to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224 and to the Office of Management
and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and return information are
confidential, as required by 26 U.S.C.
6103.
Background
Under section 6103(a), returns and
return information are confidential
unless the Code authorizes disclosure.
Section 6103(n) authorizes, pursuant to
regulations prescribed by the Secretary,
returns and return information to be
disclosed to any person, including any
person described in section 7513(a), for
purposes of tax administration, to the
extent necessary in connection with: (1)
The processing, storage, transmission,
and reproduction of returns and return
information; (2) the programming,
maintenance, repair, testing, and
procurement of equipment; and (3) the
providing of other services.
On January 12, 2005, a notice of
proposed rulemaking (REG–148867–03)
was published in the Federal Register
(70 FR 2076). The proposed regulations
clarified that redisclosures of returns or
return information by contractors to
their agents or subcontractors are
permissible provided that the IRS, in
writing, authorizes the redisclosures.
The proposed regulations also clarified
that agents and subcontractors are
persons described in section 6103(n)
and, accordingly, are subject to the civil
and criminal penalty provisions of
sections 7431, 7213, and 7213A for the
unauthorized inspection or disclosure of
returns or return information. The
proposed regulations further clarified
that agents and subcontractors are
required to comply with any written
notification requirements and safeguard
restrictions that may be imposed by the
IRS.
Finally, the proposed regulations
clarified that section 6103(n) applies to
written contracts or agreements that are
entered into to obtain property or
services for tax administration purposes,
PO 00000
Frm 00021
Fmt 4700
Sfmt 4700
30975
including contracts that are not awarded
under the Federal Acquisition
Regulations, 48 CFR parts 1 through 53.
One written comment responding to
the notice of proposed rulemaking was
received. No public hearing was
requested or held. After consideration of
the comment, the regulations are
adopted as proposed.
Summary of Comment
The commentator recommended that
the final regulations provide that any
contractor and its agent or
subcontractor, who has access to returns
or return information under section
6103(n), be required to designate a
natural person in the employ of each
contractor, agent, or subcontractor who
shall have: (1) Cognizance and control
over all disclosures by such contractor,
agent, or subcontractor; (2) the authority
to flow down the sanctions set forth in
§ 301.6103(n)–1(e)(4) to lower-tiered
agents or subcontractors in the event of
their breach of or noncompliance with
§ 301.6103(n)–1; and (3) the authority to
apprise promptly the IRS and/or highertiered contractors, agents, or
subcontractors of such breaches or
noncompliance. The commentator
explained that imposition of the above
requirement would be helpful in
discouraging and preventing
unauthorized disclosures of returns and
return information in the context of
contracting and subcontracting. Because
the comment was more in the nature of
a contractual (case-by-case) rather than
a regulatory recommendation, the final
regulations do not adopt this
recommendation.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations. It is hereby
certified that the collection of
information in these regulations will not
have a significant economic impact on
a substantial number of small entities.
This certification is based on the fact
that any burden on taxpayers is minimal
in that the estimated average burden per
respondent for complying with the
collection of information imposed by
these regulations is 6 minutes.
Therefore, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f)
of the Code, the proposed regulations
preceding these regulations were
E:\FR\FM\05JNR1.SGM
05JNR1
30976
Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small businesses.
Drafting Information
The principal author of these
regulations is Helene R. Newsome,
Office of the Associate Chief Counsel
(Procedure & Administration),
Disclosure & Privacy Law Division.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
I
PART 301—PROCEDURE AND
ADMINSTRATION
Paragraph 1. The authority citation
for part 301 continues to read, in part,
as follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 301.6103(n)–1 is
revised to read as follows:
cprice-sewell on PROD1PC71 with RULES
§ 301.6103(n)–1 Disclosure of returns and
return information in connection with
written contracts or agreements for the
acquisition of property or services for tax
administration purposes.
(a) General rule. (1) Pursuant to the
provisions of section 6103(n) of the
Internal Revenue Code and subject to
the conditions of this section, officers
and employees of the Treasury
Department, a State tax agency, the
Social Security Administration, or the
Department of Justice, are authorized to
disclose returns and return information
(as defined in section 6103(b)) to any
person (including, in the case of the
Treasury Department, any person
described in section 7513(a)), or to an
officer or employee of the person, for
purposes of tax administration (as
defined in section 6103(b)(4)), to the
extent necessary in connection with a
written contract or agreement for the
acquisition of—
(i) Equipment or other property; or
(ii) Services relating to the processing,
storage, transmission, or reproduction of
returns or return information, the
programming, maintenance, repair, or
testing of equipment or other property,
or the providing of other services.
(2) Any person, or officer or employee
of the person, who receives returns or
return information under paragraph
(a)(1) of this section, may—
VerDate Aug<31>2005
15:27 Jun 04, 2007
Jkt 211001
(i) Further disclose the returns or
return information to another officer or
employee of the person whose duties or
responsibilities require the returns or
return information for a purpose
described in this paragraph (a); or
(ii) Further disclose the returns or
return information, when authorized in
writing by the Internal Revenue Service
(IRS), to the extent necessary to carry
out the purposes described in this
paragraph (a). Disclosures may include
disclosures to an agent or subcontractor
of the person, or officer or employee of
the agent or subcontractor.
(3) An agent or subcontractor, or
officer or employee of the agent or
subcontractor, who receives returns or
return information under paragraph
(a)(2)(ii) of this section, may further
disclose the returns or return
information to another officer or
employee of the agent or subcontractor
whose duties or responsibilities require
the returns or return information for a
purpose described in this paragraph (a).
(4) Any person, or officer, employee,
agent or subcontractor of the person, or
officer or employee of the agent or
subcontractor, who receives returns or
return information under this paragraph
(a), may, subject to the provisions of
§ 301.6103(p)(2)(B)–1 (concerning
disclosures by a Federal, State, or local
agency, or its agents or contractors),
further disclose the returns or return
information for a purpose authorized,
and subject to all applicable conditions
imposed, by section 6103.
(b) Limitations. (1) Disclosure of
returns or return information in
connection with a written contract or
agreement for the acquisition of
property or services described in
paragraph (a) of this section will be
treated as necessary only if the
performance of the contract or
agreement cannot otherwise be
reasonably, properly, or economically
carried out without the disclosure.
(2) Disclosure of returns or return
information in connection with a
written contract or agreement for the
acquisition of property or services
described in paragraph (a) of this
section shall be made only to the extent
necessary to reasonably, properly, or
economically perform the contract. For
example, disclosure of returns or return
information to employees of a contractor
for purposes of programming,
maintaining, repairing, or testing
computer equipment used by the IRS or
a State tax agency shall be made only if
the services cannot be reasonably,
properly, or economically performed
without the disclosure. If it is
determined that disclosure of returns or
return information is necessary, and if
PO 00000
Frm 00022
Fmt 4700
Sfmt 4700
the services can be reasonably, properly,
or economically performed by
disclosure of only parts or portions of a
return or if deletion of taxpayer identity
information (as defined in section
6103(b)(6)) reflected on a return would
not seriously impair the ability of the
employees to perform the services, then
only the parts or portions of the return,
or only the return with taxpayer identity
information deleted, may be disclosed.
(c) Penalties. Any person, or officer,
employee, agent or subcontractor of the
person, or officer or employee of the
agent or subcontractor, who receives
returns or return information under
paragraph (a) of this section, is subject
to the civil and criminal penalty
provisions of sections 7431, 7213, and
7213A for the unauthorized inspection
or disclosure of the returns or return
information.
(d) Notification requirements. Any
person, or agent or subcontractor of the
person, who receives returns or return
information under paragraph (a) of this
section shall provide written notice to
his, her, or its officers and employees
receiving the returns or return
information that—
(1) Returns or return information
disclosed to the officer or employee may
be used only for a purpose and to the
extent authorized by paragraph (a) of
this section and that the officer or
employee is subject to the civil and
criminal penalty provisions of sections
7431, 7213, and 7213A for the
unauthorized inspection or disclosure of
the returns or return information;
(2) Further inspection of any returns
or return information for a purpose or to
an extent not authorized by paragraph
(a) of this section constitutes a
misdemeanor, punishable upon
conviction by a fine of as much as
$1,000, or imprisonment for as long as
1 year, or both, together with costs of
prosecution;
(3) Further disclosure of any returns
or return information for a purpose or to
an extent not authorized by paragraph
(a) of this section constitutes a felony,
punishable upon conviction by a fine of
as much as $5,000, or imprisonment for
as long as 5 years, or both, together with
the costs of prosecution;
(4) Further inspection or disclosure of
returns or return information by any
person who is not an officer or
employee of the United States for a
purpose or to an extent not authorized
by paragraph (a) of this section may
result also in an award of civil damages
against that person in an amount not
less than $1,000 for each act of
unauthorized inspection or disclosure;
or the sum of actual damages sustained
by the plaintiff as a result of the
E:\FR\FM\05JNR1.SGM
05JNR1
cprice-sewell on PROD1PC71 with RULES
Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Rules and Regulations
unauthorized inspection or disclosure
plus, in the case of a willful inspection
or disclosure or an inspection or
disclosure that is the result of gross
negligence, punitive damages. In
addition, costs and reasonable attorneys
fees may be awarded; and
(5) A conviction for an offense
referenced in paragraph (d)(2) or (3) of
this section shall, in addition to any
other punishment, result in dismissal
from office or discharge from
employment if the person convicted is
an officer or employee of the United
States.
(e) Safeguards. (1) Any person, or
agent or subcontractor of the person,
who may receive returns or return
information under paragraph (a) of this
section, shall agree, before disclosure of
any returns or return information to the
person, agent, or subcontractor, to
permit an inspection by the IRS of his,
her, or its site or facilities.
(2) Any person, or officer, employee,
agent or subcontractor of the person, or
officer or employee of the agent or
subcontractor, who receives returns or
return information under paragraph (a)
of this section, shall comply with all
applicable conditions and requirements
as the IRS may prescribe from time to
time (prescribed requirements) for the
purposes of protecting the
confidentiality of returns and return
information and preventing any
disclosure or inspection of returns or
return information in a manner not
authorized by this section.
(3) The terms of any written contract
or agreement for the acquisition of
property or services as described in
paragraph (a) of this section shall
provide, or shall be amended to provide,
that any person, or officer, employee,
agent or subcontractor of the person, or
officer or employee of the agent or
subcontractor, who receives returns or
return information under paragraph (a)
of this section, shall comply with the
prescribed requirements. Any contract
or agreement shall be made available to
the IRS before execution of the contract
or agreement. For purposes of this
paragraph (e)(3), a written contract or
agreement shall include any contract or
agreement between a person and an
agent or subcontractor of the person to
provide the property or services
described in paragraph (a) of this
section.
(4) If the IRS determines that any
person, or officer, employee, agent or
subcontractor of the person, or officer or
employee of the agent or subcontractor,
who receives returns or return
information under paragraph (a) of this
section, has failed to, or does not, satisfy
the prescribed requirements, the IRS,
VerDate Aug<31>2005
15:27 Jun 04, 2007
Jkt 211001
consistent with the regulations under
section 6103(p)(7), may take any actions
it deems necessary to ensure that the
prescribed requirements are or will be
satisfied, including—
(i) Suspension of further disclosures
of returns or return information by the
IRS to the State tax agency, the Social
Security Administration, or the
Department of Justice, until the IRS
determines that the conditions and
requirements have been or will be
satisfied;
(ii) Suspension of further disclosures
by the Treasury Department otherwise
authorized by paragraph (a) of this
section; and
(iii) Suspension or termination of any
duty or obligation arising under a
contract or agreement with the Treasury
Department.
(f) Definitions. For purposes of this
section—
(1) The term Treasury Department
includes the IRS, the Office of the Chief
Counsel for the IRS, and the Office of
the Treasury Inspector General for Tax
Administration;
(2) The term State tax agency means
an agency, body, or commission
described in section 6103(d); and
(3) The term Department of Justice
includes offices of the United States
Attorneys.
(g) Effective date. This section is
applicable on June 5, 2007.
Kevin M. Brown,
Deputy Commissioner for Services and
Enforcement.
Approved: May 19, 2007.
Eric Solomon,
Assistant Secretary for Tax Policy.
[FR Doc. E7–10798 Filed 6–4–07; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 363
Regulations Governing Securities Held
in TreasuryDirect
Bureau of the Public Debt,
Fiscal Service, Treasury.
ACTION: Final rule.
AGENCY:
SUMMARY: TreasuryDirect is an accountbased, book-entry, online system for
purchasing, holding, and conducting
transactions in Treasury securities. An
account owner currently accesses his or
her account using a password to
authenticate the account owner’s
identity. Treasury is now introducing
additional customer-based
PO 00000
Frm 00023
Fmt 4700
Sfmt 4700
30977
authentication mechanisms for
accessing accounts. This final rule
provides Treasury the flexibility to
require additional methods of
authentication for the protection of
customer accounts. Treasury is also
strengthening its ability to respond to
attempted fraud and abuse of
TreasuryDirect. Currently, Treasury has
the authority to close any account. This
rule explicitly permits Treasury to
liquidate the securities held in the
account to be closed and pay the
proceeds to the person entitled.
DATES: Effective: June 5, 2007.
ADDRESSES: You can download this final
rule at the following Internet addresses:
https://www.publicdebt.treas.gov or
https://www.gpoaccess.gov/ecfr.
FOR FURTHER INFORMATION CONTACT:
Elisha Whipkey, Director, Division of
Program Administration, Office of
Securities Operations, Bureau of the
Public Debt, at (304) 480–6319 or
elisha.whipkey@bpd.treas.gov.
Susan Sharp, Attorney-Adviser, Dean
Adams, Assistant Chief Counsel,
Edward Gronseth, Deputy Chief
Counsel, Office of the Chief Counsel,
Bureau of the Public Debt, at (304)
480–8692 or
susan.sharp@bpd.treas.gov.
Treasury
is committed to protecting its
TreasuryDirect investors from potential
losses through authentication of the
investor at account access.
Authentication is the process of
ensuring that the person accessing his or
her account is the same as the person
whose identity was initially verified at
account establishment. Authentication
methods involve something that the
user knows (such as a password),
something that the user has (such as a
gridcard), or something that the user is
(such as a fingerprint). Multifactor
authentication consists of requiring two
or more methods of authentication to
access an account. To date, Treasury has
used single factor authentication,
requiring passwords and other
information that an account holder
knows to conduct transactions in
TreasuryDirect. Treasury now intends to
introduce technology that uses
multifactor authentication, which is
more reliable and difficult to
compromise than single factor
authentication. Through this final rule,
Treasury will have the flexibility to
introduce additional methods of
authentication for TreasuryDirect users
to ensure that their accounts remain
secure.
In addition, Treasury is strengthening
its ability to respond to attempted fraud
SUPPLEMENTARY INFORMATION:
E:\FR\FM\05JNR1.SGM
05JNR1
]]>Agencies
[Federal Register Volume 72, Number 107 (Tuesday, June 5, 2007)]
[Rules and Regulations]
[Pages 30974-30977]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10798]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9327]
RIN 1545-BC92
Disclosure of Returns and Return Information in Connection With
Written Contracts or Agreements for the Acquisition of Property or
Services for Tax Administration Purposes
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
disclosure of returns and return information pursuant to section
6103(n) of the Internal Revenue Code (Code). The final regulations
describe the circumstances under which officers or employees of the
Treasury Department, a State tax agency, the Social Security
Administration, or the Department of Justice, may disclose returns and
return information to obtain property or services for tax
administration purposes, pursuant to a written contract or agreement.
The final regulations also set forth safeguard requirements that are
designed to protect the confidentiality of returns and return
information in the
[[Page 30975]]
hands of contractors, agents, and subcontractors, and their officers
and employees, and notification requirements that must be provided, in
writing, to officers and employees of the contractors, agents, and
subcontractors to inform them that any returns or return information
they receive pursuant to these regulations may only be used for the
purpose for which it is disclosed to them and that they are subject to
the civil and criminal provisions of sections 7431, 7213, and 7213A for
the unauthorized inspection or disclosure of the returns or return
information.
The final regulations will affect officers and employees of the
Treasury Department, a State tax agency, the Social Security
Administration, or the Department of Justice, who disclose returns or
return information in connection with a written contract or agreement
for the acquisition of property or services for tax administration
purposes. The final regulations also will affect any person, or
officer, employee, agent, or subcontractor of the person, or officer or
employee of the agent or subcontractor, who receives returns or return
information in connection with a written contract or agreement for the
acquisition of property or services.
DATES: Effective Date: These regulations are applicable June 5, 2007.
Applicability Date: For dates of applicability, see Sec. 301.6103(n)-
1(g).
FOR FURTHER INFORMATION CONTACT: Helene R. Newsome, 202-622-4570 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545-1821.
The collection of information in these final regulations is in
Sec. Sec. 301.6103(n)-1(d) and 301.6103(n)-1(e)(3). This information
is required and will be used to ensure compliance with the internal
revenue laws and regulations, and to protect the privacy of taxpayers.
Estimated total annual reporting burden: 250 hours. Estimated
average annual burden per respondent: 6 minutes.
Estimated number of respondents: 2500.
Estimated annual frequency of responses: Annually.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC 20224 and to the Office of
Management and Budget, Attn: Desk Officer for the Department of the
Treasury, Office of Information and Regulatory Affairs, Washington, DC
20503.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
return information are confidential, as required by 26 U.S.C. 6103.
Background
Under section 6103(a), returns and return information are
confidential unless the Code authorizes disclosure. Section 6103(n)
authorizes, pursuant to regulations prescribed by the Secretary,
returns and return information to be disclosed to any person, including
any person described in section 7513(a), for purposes of tax
administration, to the extent necessary in connection with: (1) The
processing, storage, transmission, and reproduction of returns and
return information; (2) the programming, maintenance, repair, testing,
and procurement of equipment; and (3) the providing of other services.
On January 12, 2005, a notice of proposed rulemaking (REG-148867-
03) was published in the Federal Register (70 FR 2076). The proposed
regulations clarified that redisclosures of returns or return
information by contractors to their agents or subcontractors are
permissible provided that the IRS, in writing, authorizes the
redisclosures. The proposed regulations also clarified that agents and
subcontractors are persons described in section 6103(n) and,
accordingly, are subject to the civil and criminal penalty provisions
of sections 7431, 7213, and 7213A for the unauthorized inspection or
disclosure of returns or return information. The proposed regulations
further clarified that agents and subcontractors are required to comply
with any written notification requirements and safeguard restrictions
that may be imposed by the IRS.
Finally, the proposed regulations clarified that section 6103(n)
applies to written contracts or agreements that are entered into to
obtain property or services for tax administration purposes, including
contracts that are not awarded under the Federal Acquisition
Regulations, 48 CFR parts 1 through 53.
One written comment responding to the notice of proposed rulemaking
was received. No public hearing was requested or held. After
consideration of the comment, the regulations are adopted as proposed.
Summary of Comment
The commentator recommended that the final regulations provide that
any contractor and its agent or subcontractor, who has access to
returns or return information under section 6103(n), be required to
designate a natural person in the employ of each contractor, agent, or
subcontractor who shall have: (1) Cognizance and control over all
disclosures by such contractor, agent, or subcontractor; (2) the
authority to flow down the sanctions set forth in Sec. 301.6103(n)-
1(e)(4) to lower-tiered agents or subcontractors in the event of their
breach of or noncompliance with Sec. 301.6103(n)-1; and (3) the
authority to apprise promptly the IRS and/or higher-tiered contractors,
agents, or subcontractors of such breaches or noncompliance. The
commentator explained that imposition of the above requirement would be
helpful in discouraging and preventing unauthorized disclosures of
returns and return information in the context of contracting and
subcontracting. Because the comment was more in the nature of a
contractual (case-by-case) rather than a regulatory recommendation, the
final regulations do not adopt this recommendation.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. It is hereby
certified that the collection of information in these regulations will
not have a significant economic impact on a substantial number of small
entities. This certification is based on the fact that any burden on
taxpayers is minimal in that the estimated average burden per
respondent for complying with the collection of information imposed by
these regulations is 6 minutes. Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f) of the Code, the proposed
regulations preceding these regulations were
[[Page 30976]]
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small businesses.
Drafting Information
The principal author of these regulations is Helene R. Newsome,
Office of the Associate Chief Counsel (Procedure & Administration),
Disclosure & Privacy Law Division.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINSTRATION
0
Paragraph 1. The authority citation for part 301 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.6103(n)-1 is revised to read as follows:
Sec. 301.6103(n)-1 Disclosure of returns and return information in
connection with written contracts or agreements for the acquisition of
property or services for tax administration purposes.
(a) General rule. (1) Pursuant to the provisions of section 6103(n)
of the Internal Revenue Code and subject to the conditions of this
section, officers and employees of the Treasury Department, a State tax
agency, the Social Security Administration, or the Department of
Justice, are authorized to disclose returns and return information (as
defined in section 6103(b)) to any person (including, in the case of
the Treasury Department, any person described in section 7513(a)), or
to an officer or employee of the person, for purposes of tax
administration (as defined in section 6103(b)(4)), to the extent
necessary in connection with a written contract or agreement for the
acquisition of--
(i) Equipment or other property; or
(ii) Services relating to the processing, storage, transmission, or
reproduction of returns or return information, the programming,
maintenance, repair, or testing of equipment or other property, or the
providing of other services.
(2) Any person, or officer or employee of the person, who receives
returns or return information under paragraph (a)(1) of this section,
may--
(i) Further disclose the returns or return information to another
officer or employee of the person whose duties or responsibilities
require the returns or return information for a purpose described in
this paragraph (a); or
(ii) Further disclose the returns or return information, when
authorized in writing by the Internal Revenue Service (IRS), to the
extent necessary to carry out the purposes described in this paragraph
(a). Disclosures may include disclosures to an agent or subcontractor
of the person, or officer or employee of the agent or subcontractor.
(3) An agent or subcontractor, or officer or employee of the agent
or subcontractor, who receives returns or return information under
paragraph (a)(2)(ii) of this section, may further disclose the returns
or return information to another officer or employee of the agent or
subcontractor whose duties or responsibilities require the returns or
return information for a purpose described in this paragraph (a).
(4) Any person, or officer, employee, agent or subcontractor of the
person, or officer or employee of the agent or subcontractor, who
receives returns or return information under this paragraph (a), may,
subject to the provisions of Sec. 301.6103(p)(2)(B)-1 (concerning
disclosures by a Federal, State, or local agency, or its agents or
contractors), further disclose the returns or return information for a
purpose authorized, and subject to all applicable conditions imposed,
by section 6103.
(b) Limitations. (1) Disclosure of returns or return information in
connection with a written contract or agreement for the acquisition of
property or services described in paragraph (a) of this section will be
treated as necessary only if the performance of the contract or
agreement cannot otherwise be reasonably, properly, or economically
carried out without the disclosure.
(2) Disclosure of returns or return information in connection with
a written contract or agreement for the acquisition of property or
services described in paragraph (a) of this section shall be made only
to the extent necessary to reasonably, properly, or economically
perform the contract. For example, disclosure of returns or return
information to employees of a contractor for purposes of programming,
maintaining, repairing, or testing computer equipment used by the IRS
or a State tax agency shall be made only if the services cannot be
reasonably, properly, or economically performed without the disclosure.
If it is determined that disclosure of returns or return information is
necessary, and if the services can be reasonably, properly, or
economically performed by disclosure of only parts or portions of a
return or if deletion of taxpayer identity information (as defined in
section 6103(b)(6)) reflected on a return would not seriously impair
the ability of the employees to perform the services, then only the
parts or portions of the return, or only the return with taxpayer
identity information deleted, may be disclosed.
(c) Penalties. Any person, or officer, employee, agent or
subcontractor of the person, or officer or employee of the agent or
subcontractor, who receives returns or return information under
paragraph (a) of this section, is subject to the civil and criminal
penalty provisions of sections 7431, 7213, and 7213A for the
unauthorized inspection or disclosure of the returns or return
information.
(d) Notification requirements. Any person, or agent or
subcontractor of the person, who receives returns or return information
under paragraph (a) of this section shall provide written notice to
his, her, or its officers and employees receiving the returns or return
information that--
(1) Returns or return information disclosed to the officer or
employee may be used only for a purpose and to the extent authorized by
paragraph (a) of this section and that the officer or employee is
subject to the civil and criminal penalty provisions of sections 7431,
7213, and 7213A for the unauthorized inspection or disclosure of the
returns or return information;
(2) Further inspection of any returns or return information for a
purpose or to an extent not authorized by paragraph (a) of this section
constitutes a misdemeanor, punishable upon conviction by a fine of as
much as $1,000, or imprisonment for as long as 1 year, or both,
together with costs of prosecution;
(3) Further disclosure of any returns or return information for a
purpose or to an extent not authorized by paragraph (a) of this section
constitutes a felony, punishable upon conviction by a fine of as much
as $5,000, or imprisonment for as long as 5 years, or both, together
with the costs of prosecution;
(4) Further inspection or disclosure of returns or return
information by any person who is not an officer or employee of the
United States for a purpose or to an extent not authorized by paragraph
(a) of this section may result also in an award of civil damages
against that person in an amount not less than $1,000 for each act of
unauthorized inspection or disclosure; or the sum of actual damages
sustained by the plaintiff as a result of the
[[Page 30977]]
unauthorized inspection or disclosure plus, in the case of a willful
inspection or disclosure or an inspection or disclosure that is the
result of gross negligence, punitive damages. In addition, costs and
reasonable attorneys fees may be awarded; and
(5) A conviction for an offense referenced in paragraph (d)(2) or
(3) of this section shall, in addition to any other punishment, result
in dismissal from office or discharge from employment if the person
convicted is an officer or employee of the United States.
(e) Safeguards. (1) Any person, or agent or subcontractor of the
person, who may receive returns or return information under paragraph
(a) of this section, shall agree, before disclosure of any returns or
return information to the person, agent, or subcontractor, to permit an
inspection by the IRS of his, her, or its site or facilities.
(2) Any person, or officer, employee, agent or subcontractor of the
person, or officer or employee of the agent or subcontractor, who
receives returns or return information under paragraph (a) of this
section, shall comply with all applicable conditions and requirements
as the IRS may prescribe from time to time (prescribed requirements)
for the purposes of protecting the confidentiality of returns and
return information and preventing any disclosure or inspection of
returns or return information in a manner not authorized by this
section.
(3) The terms of any written contract or agreement for the
acquisition of property or services as described in paragraph (a) of
this section shall provide, or shall be amended to provide, that any
person, or officer, employee, agent or subcontractor of the person, or
officer or employee of the agent or subcontractor, who receives returns
or return information under paragraph (a) of this section, shall comply
with the prescribed requirements. Any contract or agreement shall be
made available to the IRS before execution of the contract or
agreement. For purposes of this paragraph (e)(3), a written contract or
agreement shall include any contract or agreement between a person and
an agent or subcontractor of the person to provide the property or
services described in paragraph (a) of this section.
(4) If the IRS determines that any person, or officer, employee,
agent or subcontractor of the person, or officer or employee of the
agent or subcontractor, who receives returns or return information
under paragraph (a) of this section, has failed to, or does not,
satisfy the prescribed requirements, the IRS, consistent with the
regulations under section 6103(p)(7), may take any actions it deems
necessary to ensure that the prescribed requirements are or will be
satisfied, including--
(i) Suspension of further disclosures of returns or return
information by the IRS to the State tax agency, the Social Security
Administration, or the Department of Justice, until the IRS determines
that the conditions and requirements have been or will be satisfied;
(ii) Suspension of further disclosures by the Treasury Department
otherwise authorized by paragraph (a) of this section; and
(iii) Suspension or termination of any duty or obligation arising
under a contract or agreement with the Treasury Department.
(f) Definitions. For purposes of this section--
(1) The term Treasury Department includes the IRS, the Office of
the Chief Counsel for the IRS, and the Office of the Treasury Inspector
General for Tax Administration;
(2) The term State tax agency means an agency, body, or commission
described in section 6103(d); and
(3) The term Department of Justice includes offices of the United
States Attorneys.
(g) Effective date. This section is applicable on June 5, 2007.
Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
Approved: May 19, 2007.
Eric Solomon,
Assistant Secretary for Tax Policy.
[FR Doc. E7-10798 Filed 6-4-07; 8:45 am]
BILLING CODE 4830-01-P
