Information Reporting and Backup Withholding for Payment Card Transactions, 38534-38538 [E7-13493]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 72, Number 134 (Friday, July 13, 2007)]
[Proposed Rules]
[Pages 38534-38538]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-13493]



[[Page 38534]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 31 and 301

[REG-163195-05]
RIN 1545-BG53


Information Reporting and Backup Withholding for Payment Card 
Transactions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to the 
information reporting requirements, information reporting penalties, 
and backup withholding requirements for payment card transactions. The 
proposed regulations in this document affect payors (and their 
authorized agents) and payees of certain reportable payments and 
provide guidance necessary to comply with the law. The proposed 
regulations are necessary to address implementation and notice 
furnishing issues that arose after publication of final regulations 
under section 3406(g) that were published in the Federal Register on 
July 13, 2004 in Treasury decision 9136 (69 FR 41928). This document 
also provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by October 9, 
2007. Outlines of topics to be discussed at the public hearing 
scheduled for November 7, 2007, must be received by October 9, 2007.
    Applicability Dates: See the Proposed Effective Dates section of 
the SUPPLEMENTARY INFORMATION.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-163195-05), Room 5203, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-163195-
05), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at www.regulations.gov (IRS-REG-163195-05).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Michael 
Hara (202) 622-4910; concerning submission of comments, Kelly Banks 
(202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these proposed 
regulations has been previously 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 1545-1819. Comments on 
the collection of information should be sent 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, with copies to the Internal Revenue Service, Attn: IRS Reports 
Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments 
on the collection of information should be received by September 11, 
2007. Comments are specifically requested concerning the accuracy of 
the estimated burden associated with the collection of information and 
suggestions on how the burden may be minimized.
    The collection of information is in Sec.  31.3406(g)-1(f)(3). This 
information is necessary to notify a cardholder/payor that a merchant/
payee is not a qualified payee for purposes of the regulations, and for 
cardholders/payors and merchant/payees to consent to receive notices 
electronically. This information will alert a cardholder/payor that 
backup withholding under section 3406 may apply for future reportable 
payments. The collection of information is voluntary to obtain a 
benefit. The likely respondents are business or other for-profit 
institutions.
    Estimated Total Annual Reporting Burden: 37,239,570 hours.
    Estimated Average Annual Burden Per Respondent: 1.19 hours.
    Estimated Number of Respondents: 31,256,000.
    Estimated Frequency of Responses: Monthly.
    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.

Background

    This document contains proposed amendments to 26 CFR part 31 
relating to backup withholding under section 3406 of the Internal 
Revenue Code (Code) and proposed amendments to 26 CFR part 301 relating 
to waivers under Code section 6724 of information reporting penalties 
under Code sections 6721 and 6722.
    Section 6041(a) of the Code requires persons engaged in a trade or 
business and making payment in the course of such trade or business to 
another person of rent, salaries, wages, premiums, annuities, 
compensations, remunerations, emoluments, or other fixed or 
determinable gains, profits, and income of $600 or more in any one 
taxable year to file information returns with the IRS. Section 6041(d) 
requires the payor to furnish information statements to payees. Among 
other items, the payor must include the payee's name and taxpayer 
identification number (TIN) on the information return and the 
information statement. Section 6041A of the Code imposes similar 
requirements with respect to payments of remuneration for services and 
direct sales.
    In general, section 6721(a)(1) imposes a $50 penalty for each 
failure to file an information return on or before the required filing 
date, for any failure to include all of the information required to be 
shown on the return, or for the inclusion of incorrect information. 
Section 6722(a)(1) imposes similar penalties with respect to the 
information statements required to be furnished to payees. Section 
6724(a) provides that no penalty will be imposed under section 6721 or 
section 6722 if it is shown that the failure is due to reasonable cause 
and not to willful neglect.
    Section 3406(a)(1) requires a payor to withhold on any reportable 
payment (as defined in section 3406(b)(1)) if (1) the payee fails to 
furnish the payee's TIN to the payor as required or (2) the Secretary 
notifies the payor that the TIN furnished by the payee is incorrect. 
Section 3406(a)(1) also requires withholding in certain other 
situations that are not addressed in these regulations. Section 3406(i) 
provides that the Secretary shall prescribe the regulations necessary 
or appropriate to carry out the purposes of section 3406.
    A payment card transaction is a transaction in which a cardholder/
payor uses a payment card to purchase goods or services and a merchant 
agrees to accept a payment card as a means of obtaining payment. A 
payment card is a card (or an account) that (1) is issued by a payment 
card organization or one of its members, affiliates, or licensees to a 
cardholder/payor and (2) represents, upon presentation to a merchant/
payee, an agreement of the cardholder to pay the merchant through the 
payment card organization. A payment card organization is an entity 
that sets the standards and provides the mechanism, acting directly or 
indirectly through its members, affiliates, or licensees, for

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effectuating payment between a purchaser and a merchant in a payment 
card transaction.
    Information reporting compliance is difficult in payment card 
transactions because an invoice may not be issued, and the employee 
representing the cardholder/payor in the transaction might not request 
and obtain the name/TIN combination of the merchant/payee at the time 
of the transaction. In addition, backup withholding may be difficult 
because a merchant receives payment from the payment card organization 
within a few days after the transaction, but the cardholder does not 
pay the payment card organization until after it receives a payment 
card monthly billing statement.

2004 Regulations

    On July 13, 2004, final regulations relating to the information 
reporting requirements, information reporting penalties, and backup 
withholding requirements for payment card transactions effectuated 
through a Qualified Payment Card Agent (QPCA) were published in the 
Federal Register (TD 9136; 69 FR 41938). These regulations (the 2004 
QPCA regulations) provide limited exceptions to the backup withholding 
requirements for payment card transactions. The principal exception in 
Sec.  31.3406(g)-1(f)(1)(i) of the regulations applies if the payment 
is made through a QPCA and the payee is a qualified payee.
    Section 31.3406(g)-1(f)(2)(vi) of the regulations provides that a 
payee is a qualified payee if, at the time of the payment, the QPCA has 
validated the payee's TIN through the IRS TIN Matching Program or if 
the payment is made during the six-month period following the date on 
which the QPCA first makes a payment to the payee (six-month grace 
period). Under the regulations, a QPCA must notify a cardholder/payor 
of any merchant/payees that are not qualified payees.
    Section 31.3406(g)-1(f)(1)(ii) of the regulations provides a second 
exception for payments to persons other than qualified payees. Under 
this exception, reportable payments made through a QPCA are exempt from 
backup withholding if the purchase to which the payment relates is made 
no later than two months after the date by which the QPCA is required 
to provide notification to the payor that the payee is not a qualified 
payee.
    In addition, the regulations provide in Sec.  301.6724-1(e) and (f) 
that cardholder/payors may establish, based on good faith reliance on a 
QPCA, that a failure subject to penalty under section 6721 or 6722 is 
due to reasonable cause.

Other Guidance

    On July 14, 2004, the IRS issued Rev. Proc. 2004-42 (2004-2 CB 121) 
which establishes procedures to implement the rules contained in the 
2004 QPCA regulations. The revenue procedure provides that a QPCA may 
act on behalf of a cardholder/payor for purposes of soliciting, 
collecting, and validating the names/TINs of the merchant/payees and on 
behalf of a merchant/payee for purposes of furnishing the payee's name 
and TIN to the cardholder/payor. The revenue procedure also sets forth 
the requirements that a payment card organization must satisfy to 
obtain an IRS determination that it is a QPCA. These requirements 
include requirements that the payment card organization provide certain 
notifications to cardholder/payors and merchant/payees and obtain the 
authorization of cardholder/payors and merchant/payees to act on their 
behalf for certain purposes. See Sec.  601.601.(d)(2)(ii)(b).

Requests for Changes

    Some taxpayers subject to the 2004 QPCA regulations and related 
procedures have requested that the regulations in Sec.  31.3406(g)-1(f) 
be amended, and the procedures in Rev. Proc. 2004-42 be modified, to 
allow a merchant to accept a QPCA's payment card even if the merchant 
opts out of the QPCA program. Taxpayers subject to the 2004 QPCA 
regulations and related procedures have also requested that the 
regulations be amended, and the procedures in Rev. Proc. 2004-42 be 
modified, to reflect the current electronic business operations of the 
payment card industry. Specifically, payment card organizations have 
asked that they be permitted to furnish required notifications 
electronically, including by posting on a secure website.

Explanation of Provisions

    The IRS and the Treasury Department agree that a merchant/payee 
should be allowed to accept a QPCA's payment card even if the merchant/
payee opts out of the QPCA program. The IRS is issuing a proposed 
revenue procedure providing that a merchant/payee may opt out of the 
QPCA program by completing and returning a written statement to the 
payment card organization and that a nonparticipating merchant/payee 
may continue to accept the organization's payment card. If a merchant/
payee opts out of the QPCA program, payments to the merchant/payee made 
after the six-month grace period are treated under Sec.  31.3406(g)-
1(f)(2)(vi) of the proposed regulations as payments to a person other 
than a qualified payee. In addition, the proposed regulations modify 
the rule permitting cardholders to rely on a QPCA to solicit, validate, 
and furnish a payee's TIN. Under proposed Sec.  301.6724-
1(e)(1)(vi)(H), such reliance generally would not be permitted after 
the cardholder is notified that the merchant is not a participating 
payee.
    These proposed regulations also modify the notification 
requirements in Sec.  31.3406(g)-1(f)(3) by adding notification 
requirements relating to payments to nonparticipating merchant/payees. 
Although QPCAs do not act on behalf of nonparticipating payees in 
furnishing payee data to cardholders, the proposed regulations provide 
that a QPCA is required to furnish certain information to cardholders 
that use the QPCA's card to make reportable payments to 
nonparticipating payees. Specifically, the QPCA would be required to 
inform the cardholder that the payee is not a participant in the QPCA 
program and is not a qualified payee. In addition, the QPCA must advise 
the cardholder/payor of the cardholder/payor's obligation to solicit 
the TIN of a nonparticipating merchant/payee to which it makes a 
reportable payment.
    In the preamble to the 2004 QPCA regulations, the IRS and the 
Treasury Department indicated they were considering whether a QPCA 
should be allowed to furnish information regarding payee status 
electronically on a secure website. The IRS and the Treasury Department 
have concluded that it is appropriate to propose modifications to the 
QPCA regulations and related procedures to reflect the current 
electronic business operations of the payment card industry.
    This is consistent with the precedent set in the electronic 
statement regulations issued under Code sections 6041, 6050S, and 6051 
on February 18, 2004 (TD 9114; 2004-1 CB 589). In the electronic 
statement regulations, the IRS and Treasury Department allowed 
electronic furnishing of statements on Form W-2, ``Wage and Tax 
Statement,'' Form 1098-T, ``Tuition Payments Statement,'' and Form 
1098-E, ``Student Loan Interest Statement,'' to individuals who consent 
to receive the statements electronically. The preamble to the 
electronic statement regulations explains that the regulations are 
consistent with the general goals of (1) Section 2001 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 (Pub. L.105-206) 
to eliminate barriers, provide incentives, and use competitive forces 
to increase electronic

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filings and (2) the Electronic Signatures in Global and National 
Commerce Act (Pub. L. 106-229) to facilitate voluntary use of 
electronic records. The electronic statement regulations aimed at 
striking a balance between furnishers' desires to reduce costs and 
modernize business processes by furnishing statements electronically 
and the tax administration concern that individuals have secure access 
to the information they need to fulfill their Federal tax obligations.
    The IRS and the Treasury Department have concluded that a similar 
balance is appropriate in this context and that payment card 
organizations should be allowed to furnish notifications of payee 
status and participation electronically, including by posting on a 
secure website, if certain requirements are met to assure consistency 
with the Electronic Signatures in Global and National Commerce Act. 
These proposed regulations provide that the notifications of payee 
status and participation may be furnished electronically if, among 
other things, the payment card organization (1) Obtains certain 
consents from cardholder/payors and merchant/payees and (2) provides 
certain disclosures to cardholder/payors and merchant/payees.

Proposed Effective Date

    Section 31.3406(g)-1(f)(3)(ii) (relating to electronic furnishing 
of notifications) is proposed to be effective on the date it is 
published as a final regulation, and the other amendments to Sec.  
31.3406(g)-1 are proposed to be applicable to payments made after 
December 31, 2007. The amendments to Sec.  301.6724-1 are proposed to 
be applicable to information returns and information statements 
relating to payments made after December 31, 2007.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations.
    When an Agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (RFA) (5 U.S.C. chapter 6) requires the agency to 
``prepare and make available for public comment an initial regulatory 
flexibility analysis'' which will ``describe the impact of the proposed 
rule on small entities.'' (5 U.S.C. 603(a)). Section 605 of the RFA 
provides an exception to this requirement if the agency certifies that 
the proposed rulemaking will not have a significant economic impact on 
a substantial number of small entities.
    The proposed rule affects merchant/payees and cardholder/payors. 
The IRS estimates there are 5,200,000 merchant/payees and 26,054,000 
cardholders/payors that qualify as small entities. Therefore, the IRS 
has determined that this proposed rule will have an impact on a 
substantial number of small entities.
    The IRS has determined, however, that the impact on entities 
affected by the proposed rule will not be significant. The burden on a 
merchant/payee that opts out of the QPCA program by completing and 
returning a written statement to the payment card organization is 
minimal. The burden on cardholders/payees and merchant/payors that 
consent to electronic furnishing of notices by returning a consent form 
and confirming the consent electronically is also insignificant.
    Although QPCAs have a reporting burden under the proposed rule to 
furnish certain notices to cardholder/payors, QPCAs are large 
businesses and do not fall under the definition of small entities.
    Based on these facts, the IRS hereby certifies that the collection 
of information contained in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, a Regulatory Flexibility Analysis is not required.
    Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
businesses. The IRS invites comments from members of the public who 
believe there will be a significant impact either on cardholder/payors 
or merchant/payees.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and Treasury Department request comments on the clarity of 
the proposed rules and how they may be made easier to understand. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for November 7, 2007 at 10:00 
a.m. in the auditorium, Internal Revenue Service Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 30 minutes before the 
hearing starts. For information about having your name placed on the 
building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments must submit electronic or written 
comments and an outline of the topics to be discussed and the time to 
be devoted to each topic (a signed original and eight (8) copies) by 
October 9, 2007. A period of 10 minutes will be allotted to each person 
for making comments. An agenda showing the scheduling of the speakers 
will be prepared after the deadline for receiving outlines has passed. 
Copies of the agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Michael Hara, Office 
of Associate Chief Counsel (Procedure and Administration), 
Administrative Provisions and Judicial Practice Division.

List of Subjects

26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Income taxes, Gift 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 31 and 301 are proposed to be amended as 
follows:

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE 
SOURCE

    Paragraph 1. The authority citation for part 31 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805. * * *

    Par. 2. Section 31.3406(g)-1(f) is amended by:
    1. Revising paragraphs (f)(2)(vi)(A) and (f)(3).

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    2. Adding paragraph (f)(2)(vii).
    The revisions and addition read as follows:


Sec.  31.3406(g)-1  Exceptions for payments to certain payees and 
certain other payments.

* * * * *
    (f) * * *
    (2) * * *
    (vi) * * *
    (A) The payee is a participating payee with respect to the payment 
and, at the time the QPCA makes the payment, the QPCA has obtained the 
payee's TIN and the payee's TIN has been validated through the IRS TIN 
Matching Program; or
* * * * *
    (vii) Participating payee. For purposes of this section, a payee is 
a participating payee with respect to a reportable payment if--
    (A) At the time the QPCA makes the payment, the payee has 
authorized the payment card organization to act on its behalf in 
furnishing its name, taxpayer identification number, and corporate 
status to cardholder/payors under applicable procedures issued under 
Sec.  601.601 of this chapter; or
    (B) The payment is made before January 1, 2008.
    (3) Notifications of payee status and participation--(i) In 
general--(A) Nonqualified payees. In the case of a payment to a payee 
other than a qualified payee (as defined in paragraph (f)(2)(vi) of 
this section) with respect to the payment, the QPCA acting directly or 
indirectly through its members, affiliates, or licensees must notify 
the payor that the payee is not a qualified payee. If the notification 
relates to a payment made after December 31, 2007, the notification 
must also inform the payor that IRS rules and regulations may require 
the payor to backup withhold on reportable payments that relate to 
purchases the payor makes from the payee after a specified date. The 
specified date to be provided in the notification is the last day of 
the two-month period described in paragraph (f)(1)(ii) of this section. 
A notification by the QPCA that a payee is not a qualified payee does 
not constitute notice by the IRS that the payee's TIN is incorrect for 
purposes of section 3406(a)(1)(B) and Sec.  31.3406(d)-5.
    (B) Nonparticipating payees. In the case of a payment made after 
December 31, 2007, to a payee other than a participating payee (as 
defined in paragraph (f)(2)(vii) of this section), the QPCA acting 
directly or indirectly through its members, affiliates, or licensees 
must notify the payor that the payee is not a participating payee. A 
notification that the payee of a payment is not a participating payee 
must also inform the payor that IRS rules and regulations require the 
payor to solicit the payee's TIN if the payor has made a reportable 
payment to the payee.
    (C) Due date and format. The notifications must be furnished during 
the four-month period beginning on the date on which the QPCA makes the 
payment. Notifications may be provided in a quarterly or other regular 
report of payee data to the cardholder/payor and may consist of an 
asterisk, footnote, or other mark next to the payee's name, with the 
text of the notifications at the bottom of the page or at the end of 
the list of payee data.
    (ii) Electronic furnishing of notifications of payee status and 
participation--(A) In general. The notifications required under 
paragraph (f)(3)(i) of this section may be furnished in an electronic 
format if the requirements of this paragraph (f)(3)(ii) are satisfied.
    (B) Consents--(1) Cardholder/Payor--(i) In general. The cardholder/
payor consent requirement must be satisfied. The cardholder/payor 
consent requirement is satisfied only if the QPCA has provided the 
disclosure statement required under paragraph (f)(3)(ii)(C) of this 
section to the cardholder/payor and, after receiving the disclosure 
statement, the cardholder/payor has affirmatively consented to receive 
the notifications in an electronic format. The consent may be provided 
electronically in any manner that reasonably demonstrates that the 
cardholder/payor can access the notifications in the electronic format 
in which they will be furnished. Alternatively, the consent may be 
provided in a paper document if it is confirmed electronically in a 
manner that reasonably demonstrates that the cardholder/payor can 
access the notifications in the electronic format in which they will be 
furnished.
    (ii) Withdrawal of consent. The cardholder/payor consent 
requirement is not satisfied with respect to a notification if the 
cardholder/payor withdraws the consent and the withdrawal takes effect 
before the notification is furnished. Only paper notifications may be 
furnished to the cardholder/payor after the withdrawal takes effect. 
The QPCA may provide that a withdrawal of consent takes effect at any 
time up to 30 days after receipt by the QPCA. The QPCA may also provide 
that a request for paper notifications will be treated as a withdrawal 
of consent.
    (iii) Change in hardware or software requirements. If a change in 
the hardware or software required to access the notifications creates a 
material risk that the cardholder/payor will not be able to access the 
notifications, the cardholder/payor consent requirement is not 
satisfied with respect to notifications furnished after the change 
unless the cardholder/payor has provided a new consent to receive the 
notifications in an electronic format. The new consent, whether 
electronic or by paper document, must be provided or confirmed in a 
manner that reasonably demonstrates that the cardholder/payor can 
access the notifications in the revised electronic format in which they 
will be furnished.
    (2) Merchant/payee--(i) In general. The merchant/payee consent 
requirement must be satisfied. The merchant/payee consent requirement 
is satisfied with respect to notifications regarding a merchant/payee 
only if the merchant/payee has affirmatively consented to the 
electronic furnishing of the notifications.
    (ii) Withdrawal of consent. The merchant/payee consent requirement 
is not satisfied with respect to a notification regarding a merchant/
payee if the merchant/payee withdraws its consent and the withdrawal 
takes effect before the notification is furnished. The QPCA may provide 
that a withdrawal of consent takes effect at any time up to 30 days 
after receipt by the QPCA.
    (C) Required disclosures--(1) In general. A QPCA requesting a 
cardholder/payor's consent to receive notifications in electronic 
format must provide to the cardholder/payor a clear and conspicuous 
disclosure statement containing each of the disclosures described in 
this paragraph (f)(3)(ii)(C).
    (2) Paper statement. The cardholder/payor must be informed that the 
notifications will be furnished on paper if the cardholder/payor does 
not consent to receive them electronically.
    (3) Scope and duration of consent. The cardholder/payor must be 
informed of the scope and duration of the consent. For example, the 
cardholder/payor must be informed whether the consent is for a 
specified term or will remain in effect until it is withdrawn in the 
manner described in paragraph (f)(3)(ii)(B)(1)(ii) of this section.
    (4) Post-consent request for paper notifications. The cardholder/
payor must be informed of any procedure for obtaining a paper copy of 
the notifications after giving the consent described in paragraph 
(f)(3)(ii)(B)(1)(i) of this section and whether a request for paper 
notifications will be treated as a withdrawal of consent.
    (5) Withdrawal of consent. The cardholder/payor must be informed 
that--

[[Page 38538]]

    (i) The cardholder/payor may withdraw a consent by writing 
(electronically or on paper) to the person or department whose name, 
mailing address, telephone number, and e-mail address is provided in 
the disclosure statement;
    (ii) The QPCA will confirm the withdrawal and the date on which it 
takes effect in writing (either electronically or on paper); and
    (iii) A withdrawal of consent will not apply to a notification that 
was furnished electronically before the date on which the withdrawal of 
consent takes effect.
    (6) Notice of termination. The cardholder/payor must be informed of 
the conditions under which the QPCA will cease furnishing notifications 
electronically.
    (7) Updating information. The cardholder/payor must be informed of 
the procedures for updating the information needed by the QPCA to 
contact the cardholder/payor. The QPCA must inform the cardholder/payor 
of any change in the QPCA's contact information.
    (8) Hardware and software requirements. The cardholder/payor must 
be provided with a description of the hardware and software required to 
access, print, and retain the notifications.
    (D) Notice of availability--(1) In general. If the notifications to 
a cardholder/payor are furnished on a website, the QPCA must also 
furnish a notice of availability to the cardholder/payor within 30 days 
after posting the notifications. The notice of availability must inform 
the cardholder/payor that the notifications are available on the 
website and must specify the date on which the notifications will no 
longer be available on the Web site. The notice of availability may be 
delivered by mail, electronic mail, or in person. The notice of 
availability must provide instructions on how to access and print the 
notifications and must include the following statement in capital 
letters, ``IMPORTANT TAX DOCUMENT AVAILABLE.'' If the notice of 
availability is provided by electronic mail, the foregoing statement 
must be on the subject line of the electronic mail.
    (2) Undeliverable electronic address. If an electronic notice of 
availability is returned as undeliverable, and the correct electronic 
address cannot be obtained from the furnisher's records or from the 
cardholder/payor, then the furnisher must furnish the notice by mail 
within 30 days after the electronic notice is returned.
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 3. The authority citation for part 301 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805. * * *

    Par. 4. Section 301.6724-1 is amended by revising paragraph 
(e)(1)(vi)(H) to read as follows:


Sec.  301.6724-1  Reasonable cause.

* * * * *
    (e) * * *
    (1) * * *
    (vi) * * *
    (H) In the case of information returns required to be filed, and 
information returns required to be furnished, after December 31, 2005, 
the filer--
    (1) Satisfies the solicitation requirement of paragraph (e)(1)(i) 
of this section with respect to a payment made through a QPCA if the 
filer relies in good faith on the QPCA to solicit, record, validate, 
and furnish the payee's TIN;
    (2) Satisfies the solicitation requirement of paragraph (e)(1)(ii) 
of this section with respect to a payment made through a QPCA if the 
filer relies in good faith on the QPCA to solicit, record, validate, 
and furnish the payee's TIN and does not receive notification that the 
payee is not a participating payee more than 30 days before the last 
day of the annual solicitation period; and
    (3) Satisfies the solicitation requirement of paragraph (e)(1)(iii) 
of this section with respect to a payment made through a QPCA if, on or 
before December 31 of the year immediately succeeding the year in which 
the payment is made, the filer undertakes a solicitation of the payee's 
TIN or receives from the QPCA a TIN that the filer believes in good 
faith to be the payee's correct TIN.
* * * * *

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E7-13493 Filed 7-12-07; 8:45 am]
BILLING CODE 4830-01-P