Disclosure of Information to State Officials Regarding Tax-Exempt Organizations, 13932-13937 [2011-6011]
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Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Proposed Rules
review its existing regulations and to
identify whether any of its existing
regulations should be modified or
repealed. Second, the Department has
created a link on the DOS Internet site
to an e-mail in-box at
RegulatoryReview@State.gov, which
interested parties can use to identify to
DOS—on a continuing basis—
regulations that may be in need of
review in the future. These steps will
help the Department ensure that its
regulations remain necessary, properly
tailored, and have up-to-date
requirements that effectively achieve
regulatory objectives without imposing
unwarranted costs.
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Request for Information
Pursuant to the Executive Order, the
Department is developing a preliminary
plan for the periodic review of its
existing regulations and reporting
obligations. The Department’s goal is to
create a systematic method for
identifying those significant rules that
are obsolete or simply no longer make
sense. While this review will focus on
the elimination of rules that are no
longer warranted, DOS will also
consider strengthening, complementing,
or modernizing rules where necessary or
appropriate—including, as relevant,
undertaking new rulemakings.
Consistent with the Department’s
commitment to public participation in
the rulemaking process, the Department
is beginning this process by soliciting
views from the public on how best to
conduct its analysis of existing DOS
rules and how best to identify those
rules that might be modified or
repealed. It is also seeking views from
the public on specific rules or
Department-imposed obligations that
should be altered or eliminated. In
short, engaging the public in an open,
transparent process is a crucial first step
in DOS’s review of its existing
regulations.
List of Questions for Commenters
The following list of questions is
intended solely to assist in the
formulation of comments and is not
intended to be exhaustive or restrict the
issues that the public might want to
address. The Department requests that
anyone submitting comments specify
the regulation or reporting requirement
at issue, providing legal citation when
known, and the reasons why the
regulation or reporting requirement
should be modified or repealed.
(1) How can the Department best
promote meaningful periodic reviews of
its existing rules and how can it best
identify those rules that might be
modified or repealed?
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(2) What factors should the agency
consider in selecting and prioritizing
rules and reporting requirements for
review?
(3) Are there regulations that simply
make no sense or have become
unnecessary, ineffective, or ill advised
and, if so, what are they?
(4) Are there rules that are still
necessary, but have not operated as well
as expected such that a stronger or
different approach is justified?
(5) Does the Department currently
collect information that it does not need
or use effectively to achieve regulatory
objectives?
(6) Are there regulations, reporting
requirements, or regulatory processes
that are unnecessarily complicated or
could be streamlined to achieve
regulatory objectives in more efficient
ways?
(7) Can new technologies be leveraged
to modify or do away with existing
regulatory or reporting requirements?
(8) How can the Department best
obtain and consider accurate, objective
information and data about the costs,
burdens, and benefits of existing
regulations? Are there existing sources
of data the Department can use to
evaluate the post-promulgation effects
of regulations over time?
(9) Are there regulations that are
working well that can be expanded or
used as a model to fill gaps in other
DOS regulatory programs?
(10) Are there other concerns that
DOS should consider consistent with
Executive Order 13563?
The Department notes that this RFI is
issued solely for information and
program-planning purposes. While
responses to this RFI do not bind DOS
to any further actions related to the
response, all submissions will be made
publicly available on https://
www.regulations.gov.
Dated: March 3, 2011.
Patrick F. Kennedy,
Under Secretary, Office of the Undersecretary
for Management, Department of State.
[FR Doc. 2011–5813 Filed 3–14–11; 8:45 am]
BILLING CODE 4710–24–P
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG–140108–08]
RIN 1545–BI29
Disclosure of Information to State
Officials Regarding Tax-Exempt
Organizations
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
This document contains
proposed regulations that amend
existing regulations to reflect changes to
section 6104(c) of the Internal Revenue
Code (Code) made by the Pension
Protection Act of 2006 (PPA). These
rules provide guidance to states
regarding the process by which they
may obtain or inspect certain returns
and return information (including
information about final and proposed
denials and revocations of tax-exempt
status) for the purpose of administering
state laws governing certain tax-exempt
organizations and their activities. These
regulations will affect such exempt
organizations, as well as those state
agencies choosing to obtain information
from the Internal Revenue Service (IRS)
under section 6104(c).
DATES: Written or electronic comments
and requests for a public hearing must
be received by June 13, 2011.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–140108–08), Room
5203, Internal Revenue Service, P.O.
Box 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–140108–
08), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC, or sent
electronically via the Federal
eRulemaking Portal at https://
www.regulations.gov (IRS REG–140108–
08).
FOR FURTHER INFORMATION CONTACT:
Concerning submission of comments,
Oluwafunmilayo Taylor, (202) 622–7180
(not a toll-free number); concerning the
proposed regulations, Casey Lothamer,
(202) 622–6070 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
I. In General
This document contains proposed
amendments to 26 CFR part 301 under
section 6104(c), which will replace
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Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Proposed Rules
current § 301.6104(c)-1 in its entirety.
Section 6104(c) governs when the IRS
may disclose to state officials certain
information about organizations
described in section 501(c)(3)
(‘‘charitable organizations’’),
organizations that have applied for
recognition as organizations described
in section 501(c)(3) (‘‘applicants’’), and
certain other exempt organizations.
Section 6104(c) was added to the Code
by section 101(e) of the Tax Reform Act
of 1969 (Pub. L. 91–172, 83 Stat. 523)
and significantly amended by section
1224(a) of the PPA (Pub. L. 109–280,
120 Stat. 1091).
Section 501(c)(3) organizations may
be affected by the expanded disclosures
to state officials authorized under the
statute and proposed regulations. First,
the IRS is now authorized (under new
section 6104(c)(2), as added by the PPA)
to disclose information about certain
proposed revocations and proposed
denials before an administrative appeal
has been made and a final revocation or
denial has been issued. For those
organizations that have received a
determination letter stating that they are
described in section 501(c)(3), the IRS
may disclose a proposed revocation
(before any administrative appeal) to an
appropriate state officer (ASO). This
broader authority applies both where
the organization was required under
section 508 to apply for the
determination letter and where the
organization elected to apply for a
determination letter even though it was
not required to do so. The IRS continues
to be authorized to disclose final
revocations and final denials issued
after any administrative appeal has been
concluded for any section 501(c)(3)
organization.
Second, under the authority of new
section 6104(c)(2)(D), as added by the
PPA, the IRS may disclose returns or
return information of any section
501(c)(3) organization to ASOs on its
own initiative, regardless of whether it
has initiated an examination, if it
determines that the information may be
evidence of noncompliance with state
laws under the jurisdiction of the ASO.
Thus, if the IRS believes these
conditions are met, it may, for example,
disclose to ASOs a proposed revocation
of exemption for a section 501(c)(3)
organization that does not have a
determination letter. All disclosures
authorized under section 6104(c) may
be made only if the state receiving the
information is following applicable
disclosure, recordkeeping and safeguard
procedures.
The statute and proposed regulations
also permit disclosure of information to
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state officials about all applicants for
section 501(c)(3) status.
Exempt organizations other than
section 501(c)(3) organizations also may
be affected by the disclosures to state
officials authorized under the statute
and proposed regulations. The IRS is
authorized to disclose returns and
return information of these
organizations to ASOs upon written
request, but only to the extent necessary
to administer state laws regulating the
solicitation or administration of
charitable funds or charitable assets.
Again, all such disclosures may be made
only if the state receiving the
information is following applicable
disclosure, recordkeeping and safeguard
procedures.
Section 6104(c)(1), which is
unchanged by the PPA, directs the IRS
to share certain information with ASOs
regarding charitable organizations and
applicants. Specifically, section
6104(c)(1) provides that the IRS is to
notify the ASO of the following final
determinations: (1) A refusal to
recognize an entity as an organization
described in section 501(c)(3); (2) the
operation of a section 501(c)(3)
organization in a manner not meeting,
or no longer meeting, the requirements
of its exemption; and (3) the mailing of
a notice of deficiency for any tax
imposed under section 507, chapter 41,
or chapter 42. See section 6104(c)(1)(A)
and (c)(1)(B). The directive under
section 6104(c)(1)(A) to notify ASOs of
an organization no longer meeting the
requirements for exemption under
section 501(c)(3) includes not only
notice of a revocation of exemption, but
also notice (when the IRS is so
informed) that a charitable organization
is terminating or has dissolved in
accordance with its governing
documents. Upon request, an ASO may
inspect and copy the returns, filed
statements, records, reports, and other
information relating to a final
determination as described in this
paragraph, as are relevant to any
determination under state law. See
section 6104(c)(1)(C).
II. PPA Changes to Section 6104(c)
The PPA amended section 6104(c) by
striking paragraph (2) and inserting new
paragraphs (2) through (6) as follows.
(1) The IRS may disclose to an ASO
proposed refusals to recognize
organizations as charitable
organizations, and proposed revocations
of such recognition. The PPA also
allows disclosure of notices of proposed
deficiencies of excise taxes imposed by
section 507 and chapters 41 and 42
relating to charitable organizations. See
section 6104(c)(2)(A)(i) and (c)(2)(A)(ii).
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Previously, only final determinations of
this kind (denials of recognition,
revocations, and notices of deficiency)
could be disclosed under section
6104(c).
(2) The IRS may disclose to an ASO
the names, addresses, and taxpayer
identification numbers of applicants.
See section 6104(c)(2)(A)(iii).
Previously, information on applicants,
other than information relating to a
denial of recognition, could not be
disclosed under section 6104(c).
(3) The IRS may disclose to an ASO
the returns and return information of
organizations with respect to which
information is disclosed as described in
paragraphs (1) and (2) of this section II
(proposed determinations and applicant
identifying information). See section
6104(c)(2)(B). Prior law allowed for
disclosure under section 6104(c) only of
returns and return information related
to final determinations.
(4) Proposed determinations,
identifying information, and the related
returns and return information with
respect to charitable organizations and
applicants may be disclosed to an ASO
only upon the ASO’s written request
and only as necessary to administer
state laws regulating charitable
organizations, such as laws governing
tax-exempt status, charitable trusts,
charitable solicitation, and fraud. See
section 6104(c)(2)(C). Prior law
provided for automatic disclosure
(without a request), but only of final
determinations and their related returns
and return information.
(5) The IRS may disclose to an ASO
on its own initiative (without a written
request) returns and return information
with respect to charitable organizations
and applicants if the IRS determines
that this information might constitute
evidence of noncompliance with the
laws under the jurisdiction of the ASO.
See section 6104(c)(2)(D). There was no
such provision under section 6104(c)
previously.
(6) The IRS may disclose returns and
return information of section 501(c)
organizations other than those described
in section 501(c)(1) or (c)(3) to an ASO
upon the ASO’s written request, but
only to the extent necessary in
administering state laws relating to the
solicitation or administration of
charitable funds or charitable assets of
such organizations. See section
6104(c)(3). Previously, only information
relating to charitable organizations or
applicants was disclosed under section
6104(c).
(7) Returns and return information of
organizations and taxable persons
disclosed under section 6104(c) may be
disclosed in civil administrative and
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civil judicial proceedings pertaining to
the enforcement of state laws regulating
such organizations, under procedures
prescribed by the IRS similar to those
under section 6103(h)(4). See section
6104(c)(4). There was no such provision
under section 6104(c) previously.
(8) No return or return information
may be disclosed under section 6104(c)
to the extent the IRS determines that
such disclosure would seriously impair
federal tax administration. See section
6104(c)(5). This disclosure prohibition,
though new in the PPA, was provided
previously by regulation. See current
§ 301.6104(c)–1(b)(3)(ii).
(9) The IRS may disclose returns and
return information under section
6104(c) to a state officer or employee
designated by the ASO to receive such
information on the ASO’s behalf. See
section 6104(c)(2)(C) (flush language)
and (c)(3). Prior law did not provide for
IRS disclosures to persons other than
ASOs.
(10) An ASO is defined as the state
attorney general, state tax officer, any
state official charged with overseeing
charitable organizations (in the case of
charitable organizations and applicants),
and the head of the state agency charged
with the primary responsibility for
overseeing the solicitation of funds for
charitable purposes (in the case of
section 501(c) organizations other than
those described in section 501(c)(1) or
(c)(3)). See section 6104(c)(6)(B). Before
its amendment by the PPA, section
6104(c)(2) defined ASO as the state
attorney general, state tax officer, or any
state official charged with overseeing
organizations of the type described in
section 501(c)(3).
III. Related PPA Provisions
The PPA amended section 6103(p) to
make the disclosure of returns and
return information under section
6104(c) subject to the disclosure,
recordkeeping, and safeguard provisions
of section 6103. These provisions
include—
(1) section 6103(a), which is the
general prohibition on the disclosure of
returns and return information, except
as authorized by Title 26 of the United
States Code;
(2) section 6103(p)(3), which requires
the IRS to maintain permanent
standardized records of all requests for
inspection or disclosure of returns or
return information under section
6104(c) and of all such information
inspected or disclosed pursuant to those
requests; and
(3) section 6103(p)(4), which requires
an ASO, as a condition for receiving
returns or return information under
section 6104(c), to establish and
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maintain certain safeguards, such as
keeping permanent standardized
records of all requests and disclosures,
maintaining a secure information
storage area, restricting access to the
information, and providing whatever
other safeguards the IRS deems
necessary to protect the confidentiality
of the information. See
§ 301.6103(p)(4)–1 and IRS Publication
1075, Tax Information Security
Guidelines for Federal, State and Local
Agencies and Entities. Publication 1075
can be found at https://www.irs.gov/
formspubs.
The PPA also included amendments
to sections 7213, 7213A, and 7431 to
impose civil and criminal penalties for
the unauthorized disclosure or
inspection of section 6104(c)
information.
IV. IRS Disclosure Procedures
In general, before any federal or state
agency may receive returns and return
information from the IRS under a
particular Code provision, it must file
with the IRS a report detailing the
physical, administrative, and technical
safeguards implemented by the agency
to protect this information from
unauthorized inspection or disclosure.
Only upon approval of these safeguards
by the IRS, as well as satisfaction of any
other statutory requirements (such as
submission of a written request), may an
agency receive the information to which
it is entitled under the Code, and then
only for the use specified by the
relevant statute. See section 6103(p)(4).
Under various disclosure programs,
the IRS and other federal and state
agencies often execute agreements
detailing the responsibilities of the
parties and the terms and parameters of
the disclosure arrangement. For
example, under section 6103(d), the IRS
executes a disclosure agreement (the
‘‘Basic Agreement’’) with each state tax
agency to which it discloses
information. The Basic Agreement,
which serves as the written request
required by section 6103(d), has been
the foundation of the state tax
disclosure program under this provision
of the Code for over 30 years. See
Internal Revenue Manual Exhibit
11.3.32–1 (sample Basic Agreement).
After the PPA, the IRS revised its
disclosure procedures under section
6104(c) to model them after the highly
successful section 6103(d) program. The
section 6104(c) program uses a
disclosure agreement patterned after the
Basic Agreement but tailored to the
specific requirements and restrictions of
section 6104(c).
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Explanation of Provisions
These proposed regulations provide
guidance regarding disclosures under
section 6104(c), as amended by the PPA.
The PPA amendments to sections
6104(c) and 6103 expand the scope of
information the IRS may disclose to an
ASO, but make such disclosures
contingent on the ASO adopting the
safeguard standards and procedures of
section 6103 that apply to federal and
state agencies that receive returns and
return information under other
provisions of the Code. Accordingly,
these proposed regulations provide that,
without prior safeguard approval, the
IRS will not give automatic notification
of any determinations or other
information that may be disclosed under
section 6104(c).
Under these proposed regulations, the
IRS may (and currently does) require an
ASO to enter into a disclosure
agreement with the IRS, which will
stipulate the procedures for disclosure
under section 6104(c), as well as the
restrictions on use and redisclosure.
These proposed regulations provide that
this agreement, or any similar
document, satisfies the requirement
under section 6104(c) for a written
request for disclosure.
An ASO who meets the safeguard and
other procedural requirements of
section 6103(p)(4) may receive
information from the IRS to be used in
the administration of state laws
governing charitable organizations, as
well as laws governing the solicitation
or administration of charitable funds or
charitable assets of certain
noncharitable exempt organizations.
The information available to ASOs
under these proposed regulations not
only is greater in scope than what was
available under section 6104(c) before
its amendment by the PPA, but comes
at an earlier stage in the IRS
administrative and enforcement
processes. Thus, the IRS may disclose
such information as whether an
organization has applied for recognition
as a charitable organization and, if so,
whether the IRS proposes to deny such
recognition, or the organization has
withdrawn its application; whether an
organization’s charitable status has
terminated; whether the IRS proposes to
assess any chapter 42 excise taxes (for
example, the tax on excess benefit
transactions under section 4958); and
whether the IRS has revoked an
organization’s exemption, or proposes to
revoke the recognition of its exemption.
Without a written request, but still
subject to the safeguard requirements of
section 6103(p)(4), the IRS has the
authority under section 6104(c)(2)(D) to
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disclose returns and return information
of charitable organizations and
applicants if it determines that such
information may constitute evidence of
noncompliance with the laws under the
ASO’s jurisdiction. The IRS may make
these disclosures on its own initiative.
These proposed regulations clarify that
the IRS’ authority under section
6104(c)(2)(D) is in addition to its
disclosure authority under other
provisions of section 6104(c)(1) and
(c)(2), to the effect that discretionary
disclosures may be made before the IRS
issues a proposed determination or
takes other action. The proposed
regulations also make clear that the
determination required by the statute
concerns possible noncompliance with
state laws regulating charitable
organizations and not just any state law
violation.
The disclosure provisions of section
6104(c), as amended by the PPA, offer
significant advantages to states in their
enforcement efforts. The ability of the
IRS to disclose returns and return
information early in its own
administrative and enforcement
processes, as well as the IRS’ authority
under section 6104(c)(2)(D) to disclose
information on its own initiative, greatly
enhance the administration and
enforcement of state laws, both tax and
nontax, governing charitable activities,
funds, and assets.
These proposed regulations define
certain key terms for purposes of section
6104(c), including ‘‘appropriate state
officer’’, ‘‘return’’, ‘‘return information’’,
and ‘‘taxable person.’’
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
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) and the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) do not apply to the proposed
regulations; therefore, a regulatory
flexibility analysis is not required.
Pursuant to section 7805(f) of the
Internal Revenue Code, the proposed
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comments
regarding their impact on small
businesses.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final, any written (signed
original and 8 copies) or electronic
comments timely submitted to the IRS
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will be considered. The IRS and
Treasury Department request comments
on the clarity of these proposed
regulations and how they might be
made easier to understand. Of particular
interest are comments on whether
paragraph (e) of these proposed
regulations, describing the organizations
to which disclosure applies, lists all the
organizations with respect to which
ASOs might legitimately need
information. All comments will be
available for public inspection and
copying. A public hearing will be
scheduled if requested in writing by any
person who timely submits written
comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be
published in the Federal Register.
Drafting Information
The principal author of these
regulations is Casey Lothamer of the
Office of Division Counsel/Associate
Chief Counsel (Tax Exempt and
Government Entities), though other
persons in the IRS and Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
proposed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 is amended by adding an
entry in numerical order to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6104(c)–1 also issued under 26
U.S.C. 6104(c). * * *
Par. 2. Section 301.6104(c)-1 is
revised to read as follows:
§ 301.6104(c)-1 Disclosure of certain
information to state officials.
(a) In general. (1) Subject to the
disclosure, recordkeeping, and
safeguard provisions of section 6103,
and upon written request by an
appropriate state officer (ASO, as
defined in paragraph (i)(1) of this
section), the IRS may disclose or make
available to the ASO the returns and
return information described in
paragraph (c) of this section with
respect to—
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(i) any organization described or
formerly described in section 501(c)(3)
and exempt or formerly exempt from
taxation under section 501(a) (a
charitable organization); or
(ii) any organization that has applied
for recognition as an organization
described in section 501(c)(3) (an
applicant).
Such information shall be disclosed
or made available only as necessary to
administer state laws regulating
charitable organizations.
(2) Subject to the disclosure,
recordkeeping, and safeguard provisions
of section 6103, and upon written
request by an ASO, the IRS may disclose
or make available to the ASO returns
and return information regarding any
organization described or formerly
described in section 501(c) other than
section 501(c)(1) or (c)(3). Such
information shall be disclosed or made
available only as necessary to
administer state laws regulating the
solicitation or administration of the
charitable funds or charitable assets of
these organizations.
(b) Disclosure agreement. The IRS
may require an ASO to execute a
disclosure agreement or similar
document specifying the procedures,
terms, and conditions for the disclosure
or inspection of information under
section 6104(c), including compliance
with the safeguards prescribed by
section 6103(p)(4), as well as specifying
the information to be disclosed. Such an
agreement or similar document shall
constitute the request for disclosure
required by section 6104(c)(1)(C), as
well as the written request required by
section 6104(c)(2)(C)(i) and (c)(3). For
security guidelines and other safeguards
for protecting returns and return
information, see guidance published by
the IRS. See, for example, IRS
Publication 1075, ‘‘Tax Information
Security Guidelines for Federal, State
and Local Agencies and Entities.’’
(c) Disclosures regarding charitable
organizations and applicants. (1) With
respect to any organization described in
paragraph (d) of this section, the IRS
may disclose or make available for
inspection under section 6104(c)(1) and
(c)(2) to an ASO the following returns
and return information with respect to
a charitable organization or applicant:
(i) A refusal or proposed refusal to
recognize an organization’s exemption
as a charitable organization (a final or
proposed denial letter).
(ii) Information regarding a grant of
exemption following a proposed denial.
(iii) A revocation of exemption as a
charitable organization (a final
revocation letter), including a notice of
termination or dissolution.
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(iv) A proposed revocation of
recognition of exemption as a charitable
organization (a proposed revocation
letter).
(v) Information regarding the final
disposition of a proposed revocation of
recognition other than by final
revocation.
(vi) A notice of deficiency or
proposed notice of deficiency of tax
imposed under section 507 or chapter
41 or 42 on the organization or a taxable
person (as described in paragraph (i)(4)
of this section).
(vii) Information regarding the final
disposition of a proposed notice of
deficiency of tax imposed under section
507 or chapter 41 or 42 on the
organization other than by issuance of a
final notice of deficiency.
(viii) The names, addresses, and
taxpayer identification numbers of
applicants for charitable status,
provided on an applicant-by-applicant
basis or by periodic lists of applicants.
Under this provision the IRS may
respond to inquiries from an ASO as to
whether a particular organization has
applied for recognition of exemption as
a charitable organization.
(ix) Information regarding the final
disposition of an application for
recognition of exemption where no
proposed denial letter is issued,
including whether the application was
withdrawn or whether the applicant
failed to establish its exemption.
(x) Returns and other return
information relating to the return
information described in this paragraph
(c)(1), except for returns and return
information relating to proposed notices
of deficiency described in paragraph
(c)(1)(vi) of this section with respect to
taxable persons.
(2) The IRS may disclose or make
available for inspection returns and
return information of a charitable
organization or applicant, if the IRS
determines that such information might
constitute evidence of noncompliance
with the laws under the jurisdiction of
the ASO regulating charitable
organizations and applicants. Such
information may be disclosed on the
IRS’ own initiative. Disclosures under
this paragraph (c)(2) may be made
before the IRS issues a proposed
determination (denial of recognition,
revocation, or notice of deficiency) or
any other action by the IRS described in
this section.
(d) Organizations to which disclosure
applies. Regarding the information
described in paragraphs (a)(2) and (c) of
this section, the IRS will disclose or
make available for inspection to an ASO
such information only with respect to—
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16:13 Mar 14, 2011
Jkt 223001
(1) an organization formed under the
laws of the ASO’s state;
(2) an organization, the principal
office of which is located in the ASO’s
state;
(3) an organization that, as
determined by the IRS, is or might be
subject to the laws of the ASO’s state
regulating charitable organizations or
the solicitation or administration of
charitable funds or charitable assets; or
(4) a private foundation required by
§ 1.6033–2(a)(iv) to list the ASO’s state
on any of the foundation’s returns filed
for its last five years.
(e) Disclosure limitations.
Notwithstanding any other provision of
this section, the IRS will not disclose or
make available for inspection under
section 6104(c) any information, the
disclosure of which it determines would
seriously impair federal tax
administration, including, but not
limited to—
(1) identification of a confidential
informant or interference with a civil or
criminal tax investigation; and
(2) information obtained pursuant to a
tax convention between the United
States and a foreign government (see
section 6105(c)(2) for the definition of
tax convention).
(f) Disclosure recipients—(1) In
general. The IRS may disclose returns
and return information under section
6104(c) to, or make it available for
inspection by—
(i) an ASO, as defined in paragraph
(i)(1) of this section, or
(ii) a person other than an ASO, but
only if that person is a state officer or
employee designated by the ASO to
receive information under section
6104(c) on behalf of the ASO, as
specified in paragraph (f)(2) of this
section.
(2) Designation by ASO. An ASO may
designate state officers or employees to
receive information under section
6104(c) on the ASO’s behalf by
specifying in writing each person’s
name and job title, and the name and
address of the person’s office. The ASO
must promptly notify the IRS in writing
of any additions, deletions, or other
changes to the list of designated
persons.
(g) Redisclosure. An ASO to whom a
return or return information has been
disclosed may thereafter disclose such
information—
(1) to another state officer or
employee only as necessary to
administer state laws governing
charitable organizations or state laws
regulating the solicitation or
administration of charitable funds or
charitable assets of noncharitable
exempt organizations; or
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Frm 00047
Fmt 4702
Sfmt 4702
(2) except as provided in paragraph
(h)(1) of this section, to another state
officer or employee who is personally
and directly preparing for a civil
proceeding before a state administrative
body or court in a matter involving the
enforcement of state laws regulating
organizations with respect to which
information can be disclosed under this
section, solely for use in such a
proceeding, but only if—
(i) the organization or a taxable person
is a party to the proceeding, or the
proceeding arose out of, or in
connection with, determining the civil
liability of the organization or a taxable
person, or collecting such civil liability,
under state laws governing
organizations with respect to which
information can be disclosed under this
section;
(ii) the treatment of an item reflected
on such a return is directly related to
the resolution of an issue in the
proceeding; or
(iii) the return or return information
directly relates to a transactional
relationship between the organization or
a taxable person and a person who is a
party to the proceeding that directly
affects the resolution of an issue in the
proceeding.
(h) Redisclosure limitations. (1) Before
disclosing in a state administrative or
judicial proceeding, or to any party as
provided by paragraph (g)(2) of this
section, any return or return information
received under section 6104(c), the ASO
shall notify the IRS of the intention to
make such a disclosure. No state officer
or employee shall make such a
disclosure except in accordance with
any conditions the IRS might impose in
response to the ASO’s notice of intent.
No such disclosure shall be made if the
IRS determines that the disclosure
would seriously impair Federal tax
administration.
(2) An ASO to whom a return or
return information has been disclosed
shall not disclose that information to an
agent or contractor.
(i) Definitions. (1) Appropriate state
officer means—
(i) the state attorney general;
(ii) the state tax officer;
(iii) with respect to a charitable
organization or applicant, any state
officer other than the attorney general or
tax officer charged with overseeing
charitable organizations; and
(iv) with respect to a section 501(c)
organization that is not described in
section 501(c)(1) or (c)(3), the head of
the agency designated by the state
attorney general as having primary
responsibility for overseeing the
solicitation of funds for charitable
purposes. A state officer described in
E:\FR\FM\15MRP1.SGM
15MRP1
Federal Register / Vol. 76, No. 50 / Tuesday, March 15, 2011 / Proposed Rules
paragraph (i)(1)(iii) or (i)(1)(iv) of this
section must show that the officer is an
ASO by presenting a letter from the state
attorney general describing the
functions and authority of the officer
under state law, with sufficient facts for
the IRS to determine that the officer is
an ASO.
(2) Return has the same meaning as in
section 6103(b)(1).
(3) Return information has the same
meaning as in section 6103(b)(2).
(4) Taxable person means any person
who is liable or potentially liable for
excise taxes under chapter 41 or 42.
Such a person includes—
(i) a disqualified person described in
section 4946(a)(1), 4951(e)(4), or 4958(f);
(ii) a foundation manager described in
section 4946(b);
(iii) an organization manager
described in section 4955(f)(2) or
4958(f)(2);
(iv) a person described in section
4958(c)(3)(B);
(v) an entity manager described in
section 4965(d); and
(vi) a fund manager described in
section 4966(d)(3).
(j) Failure to comply. Upon a
determination that an ASO has failed to
comply with the requirements of section
6103(p)(4), the IRS may take the actions
it deems necessary to ensure
compliance, including the refusal to
disclose any further returns or return
information to the ASO until the IRS
determines that the requirements have
been met. For procedures for the
administrative review of a
determination that an authorized
recipient has failed to safeguard returns
or return information, see
§ 301.6103(p)(7)-1.
(k) Effective/applicability date. The
rules of this section apply to taxable
years beginning on or after the date of
publication in the Federal Register of
the Treasury decision adopting these
rules as final regulations.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2011–6011 Filed 3–14–11; 8:45 am]
BILLING CODE 4830–01–P
mstockstill on DSKH9S0YB1PROD with PROPOSALS
POSTAL SERVICE
39 CFR Part 952
Rules of Practice in Proceedings
Relative to False Representation and
Lottery Orders
Postal Service.
ACTION: Proposed rule.
AGENCY:
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16:13 Mar 14, 2011
Jkt 223001
The Postal Service is
proposing to adopt revised rules for
proceedings relative to false
representation and lottery orders. The
primary purpose of this exercise is to
update and align the rules with current
practices.
DATES: Comments must be received on
or before April 14, 2011.
FOR FURTHER INFORMATION CONTACT:
Diane M. Mego, Esq., 703–812–1905.
SUPPLEMENTARY INFORMATION: The Postal
Service is proposing to adopt revised
rules for 39 CFR Part 952. These revised
rules of procedure have the same
general coverage as the existing rules.
However, the revised rules have been
updated, are more comprehensive than
the existing rules, and are intended to
reflect more precisely current practice.
These revised rules will completely
replace the existing rules of practice and
once adopted as a final rule, will be
effective immediately in accordance
with section 952.2. While the language
of the proposed rules may have changed
considerably for clarity, and to reflect
more precisely the practices in these
matters, we here identify the most
significant changes of substance.
Section 952.7 is renamed from ‘‘Notice
of answer and hearing’’ to ‘‘Notice of
docketing and answer.’’ Under the
previous rules, a hearing was
automatically scheduled for hearing
thirty days from receipt of the
complaint. Hearings are now scheduled
as needed by the presiding officer after
the pleadings have been received. The
notice from the Recorder will include
the notice that the matter has been
docketed and advise Respondent that an
answer is required within 30 days.
Section 952.8 is modified to simplify
service of the complaint and now
requires Complainant to complete
service of the notice of docketing and
answer due date along with a copy of
the complaint. Previously, the Recorder
was required to forward the complaint
and the notice of docketing and hearing
due date to the local postmaster, who in
turn served Respondent. The local
postmasters have been removed from
the procedure. The Recorder will now
forward a copy of the notice of
docketing and answer due date (see
revised section 952.7), a copy of these
rules and a docketed copy of the
complaint to Complainant. Complainant
is then responsible for obtaining service
through certified mail, return receipt
requested. Service is now complete
upon mailing. Complainant is required
to file either a receipt acknowledging
the delivery of the notice or an affidavit
of service if the mail is returned. Service
may also be accomplished by hand.
SUMMARY:
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Frm 00048
Fmt 4702
Sfmt 4702
13937
Section 952.9 is modified to require
the parties, after the filing of the initial
complaint, to serve all pleadings,
motions, proposed orders and other
documents for the record on the
opposing party and provide an
appropriate affidavit of service. The new
rule clarifies that discovery does not
need to be filed with the presiding
officer unless the parties are seeking to
include it in the record or the presiding
officer so orders. In addition, the rule is
changed to allow the filing of pleadings,
motions, proposed orders and other
documents by facsimile and electronic
mail at the discretion of the presiding
officer.
Section 952.11 is modified to
authorize the presiding officer to rule
that a party that fails to respond to or
comply with any order is in default.
Currently, only a Respondent can be
found in default and only for either
failing to file an answer or for failing to
appear at a hearing. The new rule will
allow the presiding officer to enter a
default against a non-responding party
even if the initial pleadings have been
received.
Section 952.16 requires an attorney
representing Respondent to file a notice
of appearance. An attorney for either
party who is seeking to withdraw from
representation must file a motion to
withdraw, which will be granted at the
discretion of the presiding officer. If a
successor attorney is not appointed at
the same time for Respondent, the
withdrawn attorney must provide
adequate contact information for
Respondent.
Section 952.17(b)(10) is added to
allow the presiding officer to resolve the
proceeding on the written record
without a hearing either at the request
of the parties or on the presiding
officer’s own initiative. The current
rules do not specifically allow for
proceeding on the written record
without a hearing.
Section 952.17(b)(11) is added to
allow for a hearing to be conducted by
telephone, video conference, or other
appropriate means.
Section 952.21 is modified to allow
the parties to participate in voluntary
discovery without the intervention of
the presiding officer and to clarify the
discovery rules.
Accordingly, the Postal Service
invites public comment on the
following proposed rules.
List of Subjects in 39 CFR Part 952
Administrative practice and
procedure, Fraud, False
Representations, Lotteries, Penalties,
Postal Service.
E:\FR\FM\15MRP1.SGM
15MRP1
]]>Agencies
[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13932-13937]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6011]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-140108-08]
RIN 1545-BI29
Disclosure of Information to State Officials Regarding Tax-Exempt
Organizations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations that amend
existing regulations to reflect changes to section 6104(c) of the
Internal Revenue Code (Code) made by the Pension Protection Act of 2006
(PPA). These rules provide guidance to states regarding the process by
which they may obtain or inspect certain returns and return information
(including information about final and proposed denials and revocations
of tax-exempt status) for the purpose of administering state laws
governing certain tax-exempt organizations and their activities. These
regulations will affect such exempt organizations, as well as those
state agencies choosing to obtain information from the Internal Revenue
Service (IRS) under section 6104(c).
DATES: Written or electronic comments and requests for a public hearing
must be received by June 13, 2011.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-140108-08), Room
5203, Internal Revenue Service, P.O. Box 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-
140108-08), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at https://www.regulations.gov (IRS REG-140108-08).
FOR FURTHER INFORMATION CONTACT: Concerning submission of comments,
Oluwafunmilayo Taylor, (202) 622-7180 (not a toll-free number);
concerning the proposed regulations, Casey Lothamer, (202) 622-6070
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
I. In General
This document contains proposed amendments to 26 CFR part 301 under
section 6104(c), which will replace
[[Page 13933]]
current Sec. 301.6104(c)-1 in its entirety. Section 6104(c) governs
when the IRS may disclose to state officials certain information about
organizations described in section 501(c)(3) (``charitable
organizations''), organizations that have applied for recognition as
organizations described in section 501(c)(3) (``applicants''), and
certain other exempt organizations. Section 6104(c) was added to the
Code by section 101(e) of the Tax Reform Act of 1969 (Pub. L. 91-172,
83 Stat. 523) and significantly amended by section 1224(a) of the PPA
(Pub. L. 109-280, 120 Stat. 1091).
Section 501(c)(3) organizations may be affected by the expanded
disclosures to state officials authorized under the statute and
proposed regulations. First, the IRS is now authorized (under new
section 6104(c)(2), as added by the PPA) to disclose information about
certain proposed revocations and proposed denials before an
administrative appeal has been made and a final revocation or denial
has been issued. For those organizations that have received a
determination letter stating that they are described in section
501(c)(3), the IRS may disclose a proposed revocation (before any
administrative appeal) to an appropriate state officer (ASO). This
broader authority applies both where the organization was required
under section 508 to apply for the determination letter and where the
organization elected to apply for a determination letter even though it
was not required to do so. The IRS continues to be authorized to
disclose final revocations and final denials issued after any
administrative appeal has been concluded for any section 501(c)(3)
organization.
Second, under the authority of new section 6104(c)(2)(D), as added
by the PPA, the IRS may disclose returns or return information of any
section 501(c)(3) organization to ASOs on its own initiative,
regardless of whether it has initiated an examination, if it determines
that the information may be evidence of noncompliance with state laws
under the jurisdiction of the ASO. Thus, if the IRS believes these
conditions are met, it may, for example, disclose to ASOs a proposed
revocation of exemption for a section 501(c)(3) organization that does
not have a determination letter. All disclosures authorized under
section 6104(c) may be made only if the state receiving the information
is following applicable disclosure, recordkeeping and safeguard
procedures.
The statute and proposed regulations also permit disclosure of
information to state officials about all applicants for section
501(c)(3) status.
Exempt organizations other than section 501(c)(3) organizations
also may be affected by the disclosures to state officials authorized
under the statute and proposed regulations. The IRS is authorized to
disclose returns and return information of these organizations to ASOs
upon written request, but only to the extent necessary to administer
state laws regulating the solicitation or administration of charitable
funds or charitable assets. Again, all such disclosures may be made
only if the state receiving the information is following applicable
disclosure, recordkeeping and safeguard procedures.
Section 6104(c)(1), which is unchanged by the PPA, directs the IRS
to share certain information with ASOs regarding charitable
organizations and applicants. Specifically, section 6104(c)(1) provides
that the IRS is to notify the ASO of the following final
determinations: (1) A refusal to recognize an entity as an organization
described in section 501(c)(3); (2) the operation of a section
501(c)(3) organization in a manner not meeting, or no longer meeting,
the requirements of its exemption; and (3) the mailing of a notice of
deficiency for any tax imposed under section 507, chapter 41, or
chapter 42. See section 6104(c)(1)(A) and (c)(1)(B). The directive
under section 6104(c)(1)(A) to notify ASOs of an organization no longer
meeting the requirements for exemption under section 501(c)(3) includes
not only notice of a revocation of exemption, but also notice (when the
IRS is so informed) that a charitable organization is terminating or
has dissolved in accordance with its governing documents. Upon request,
an ASO may inspect and copy the returns, filed statements, records,
reports, and other information relating to a final determination as
described in this paragraph, as are relevant to any determination under
state law. See section 6104(c)(1)(C).
II. PPA Changes to Section 6104(c)
The PPA amended section 6104(c) by striking paragraph (2) and
inserting new paragraphs (2) through (6) as follows.
(1) The IRS may disclose to an ASO proposed refusals to recognize
organizations as charitable organizations, and proposed revocations of
such recognition. The PPA also allows disclosure of notices of proposed
deficiencies of excise taxes imposed by section 507 and chapters 41 and
42 relating to charitable organizations. See section 6104(c)(2)(A)(i)
and (c)(2)(A)(ii). Previously, only final determinations of this kind
(denials of recognition, revocations, and notices of deficiency) could
be disclosed under section 6104(c).
(2) The IRS may disclose to an ASO the names, addresses, and
taxpayer identification numbers of applicants. See section
6104(c)(2)(A)(iii). Previously, information on applicants, other than
information relating to a denial of recognition, could not be disclosed
under section 6104(c).
(3) The IRS may disclose to an ASO the returns and return
information of organizations with respect to which information is
disclosed as described in paragraphs (1) and (2) of this section II
(proposed determinations and applicant identifying information). See
section 6104(c)(2)(B). Prior law allowed for disclosure under section
6104(c) only of returns and return information related to final
determinations.
(4) Proposed determinations, identifying information, and the
related returns and return information with respect to charitable
organizations and applicants may be disclosed to an ASO only upon the
ASO's written request and only as necessary to administer state laws
regulating charitable organizations, such as laws governing tax-exempt
status, charitable trusts, charitable solicitation, and fraud. See
section 6104(c)(2)(C). Prior law provided for automatic disclosure
(without a request), but only of final determinations and their related
returns and return information.
(5) The IRS may disclose to an ASO on its own initiative (without a
written request) returns and return information with respect to
charitable organizations and applicants if the IRS determines that this
information might constitute evidence of noncompliance with the laws
under the jurisdiction of the ASO. See section 6104(c)(2)(D). There was
no such provision under section 6104(c) previously.
(6) The IRS may disclose returns and return information of section
501(c) organizations other than those described in section 501(c)(1) or
(c)(3) to an ASO upon the ASO's written request, but only to the extent
necessary in administering state laws relating to the solicitation or
administration of charitable funds or charitable assets of such
organizations. See section 6104(c)(3). Previously, only information
relating to charitable organizations or applicants was disclosed under
section 6104(c).
(7) Returns and return information of organizations and taxable
persons disclosed under section 6104(c) may be disclosed in civil
administrative and
[[Page 13934]]
civil judicial proceedings pertaining to the enforcement of state laws
regulating such organizations, under procedures prescribed by the IRS
similar to those under section 6103(h)(4). See section 6104(c)(4).
There was no such provision under section 6104(c) previously.
(8) No return or return information may be disclosed under section
6104(c) to the extent the IRS determines that such disclosure would
seriously impair federal tax administration. See section 6104(c)(5).
This disclosure prohibition, though new in the PPA, was provided
previously by regulation. See current Sec. 301.6104(c)-1(b)(3)(ii).
(9) The IRS may disclose returns and return information under
section 6104(c) to a state officer or employee designated by the ASO to
receive such information on the ASO's behalf. See section 6104(c)(2)(C)
(flush language) and (c)(3). Prior law did not provide for IRS
disclosures to persons other than ASOs.
(10) An ASO is defined as the state attorney general, state tax
officer, any state official charged with overseeing charitable
organizations (in the case of charitable organizations and applicants),
and the head of the state agency charged with the primary
responsibility for overseeing the solicitation of funds for charitable
purposes (in the case of section 501(c) organizations other than those
described in section 501(c)(1) or (c)(3)). See section 6104(c)(6)(B).
Before its amendment by the PPA, section 6104(c)(2) defined ASO as the
state attorney general, state tax officer, or any state official
charged with overseeing organizations of the type described in section
501(c)(3).
III. Related PPA Provisions
The PPA amended section 6103(p) to make the disclosure of returns
and return information under section 6104(c) subject to the disclosure,
recordkeeping, and safeguard provisions of section 6103. These
provisions include--
(1) section 6103(a), which is the general prohibition on the
disclosure of returns and return information, except as authorized by
Title 26 of the United States Code;
(2) section 6103(p)(3), which requires the IRS to maintain
permanent standardized records of all requests for inspection or
disclosure of returns or return information under section 6104(c) and
of all such information inspected or disclosed pursuant to those
requests; and
(3) section 6103(p)(4), which requires an ASO, as a condition for
receiving returns or return information under section 6104(c), to
establish and maintain certain safeguards, such as keeping permanent
standardized records of all requests and disclosures, maintaining a
secure information storage area, restricting access to the information,
and providing whatever other safeguards the IRS deems necessary to
protect the confidentiality of the information. See Sec.
301.6103(p)(4)-1 and IRS Publication 1075, Tax Information Security
Guidelines for Federal, State and Local Agencies and Entities.
Publication 1075 can be found at https://www.irs.gov/formspubs.
The PPA also included amendments to sections 7213, 7213A, and 7431
to impose civil and criminal penalties for the unauthorized disclosure
or inspection of section 6104(c) information.
IV. IRS Disclosure Procedures
In general, before any federal or state agency may receive returns
and return information from the IRS under a particular Code provision,
it must file with the IRS a report detailing the physical,
administrative, and technical safeguards implemented by the agency to
protect this information from unauthorized inspection or disclosure.
Only upon approval of these safeguards by the IRS, as well as
satisfaction of any other statutory requirements (such as submission of
a written request), may an agency receive the information to which it
is entitled under the Code, and then only for the use specified by the
relevant statute. See section 6103(p)(4).
Under various disclosure programs, the IRS and other federal and
state agencies often execute agreements detailing the responsibilities
of the parties and the terms and parameters of the disclosure
arrangement. For example, under section 6103(d), the IRS executes a
disclosure agreement (the ``Basic Agreement'') with each state tax
agency to which it discloses information. The Basic Agreement, which
serves as the written request required by section 6103(d), has been the
foundation of the state tax disclosure program under this provision of
the Code for over 30 years. See Internal Revenue Manual Exhibit
11.3.32-1 (sample Basic Agreement).
After the PPA, the IRS revised its disclosure procedures under
section 6104(c) to model them after the highly successful section
6103(d) program. The section 6104(c) program uses a disclosure
agreement patterned after the Basic Agreement but tailored to the
specific requirements and restrictions of section 6104(c).
Explanation of Provisions
These proposed regulations provide guidance regarding disclosures
under section 6104(c), as amended by the PPA. The PPA amendments to
sections 6104(c) and 6103 expand the scope of information the IRS may
disclose to an ASO, but make such disclosures contingent on the ASO
adopting the safeguard standards and procedures of section 6103 that
apply to federal and state agencies that receive returns and return
information under other provisions of the Code. Accordingly, these
proposed regulations provide that, without prior safeguard approval,
the IRS will not give automatic notification of any determinations or
other information that may be disclosed under section 6104(c).
Under these proposed regulations, the IRS may (and currently does)
require an ASO to enter into a disclosure agreement with the IRS, which
will stipulate the procedures for disclosure under section 6104(c), as
well as the restrictions on use and redisclosure. These proposed
regulations provide that this agreement, or any similar document,
satisfies the requirement under section 6104(c) for a written request
for disclosure.
An ASO who meets the safeguard and other procedural requirements of
section 6103(p)(4) may receive information from the IRS to be used in
the administration of state laws governing charitable organizations, as
well as laws governing the solicitation or administration of charitable
funds or charitable assets of certain noncharitable exempt
organizations. The information available to ASOs under these proposed
regulations not only is greater in scope than what was available under
section 6104(c) before its amendment by the PPA, but comes at an
earlier stage in the IRS administrative and enforcement processes.
Thus, the IRS may disclose such information as whether an organization
has applied for recognition as a charitable organization and, if so,
whether the IRS proposes to deny such recognition, or the organization
has withdrawn its application; whether an organization's charitable
status has terminated; whether the IRS proposes to assess any chapter
42 excise taxes (for example, the tax on excess benefit transactions
under section 4958); and whether the IRS has revoked an organization's
exemption, or proposes to revoke the recognition of its exemption.
Without a written request, but still subject to the safeguard
requirements of section 6103(p)(4), the IRS has the authority under
section 6104(c)(2)(D) to
[[Page 13935]]
disclose returns and return information of charitable organizations and
applicants if it determines that such information may constitute
evidence of noncompliance with the laws under the ASO's jurisdiction.
The IRS may make these disclosures on its own initiative. These
proposed regulations clarify that the IRS' authority under section
6104(c)(2)(D) is in addition to its disclosure authority under other
provisions of section 6104(c)(1) and (c)(2), to the effect that
discretionary disclosures may be made before the IRS issues a proposed
determination or takes other action. The proposed regulations also make
clear that the determination required by the statute concerns possible
noncompliance with state laws regulating charitable organizations and
not just any state law violation.
The disclosure provisions of section 6104(c), as amended by the
PPA, offer significant advantages to states in their enforcement
efforts. The ability of the IRS to disclose returns and return
information early in its own administrative and enforcement processes,
as well as the IRS' authority under section 6104(c)(2)(D) to disclose
information on its own initiative, greatly enhance the administration
and enforcement of state laws, both tax and nontax, governing
charitable activities, funds, and assets.
These proposed regulations define certain key terms for purposes of
section 6104(c), including ``appropriate state officer'', ``return'',
``return information'', and ``taxable person.''
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 also has
been determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C.
chapter 6) do not apply to the proposed regulations; therefore, a
regulatory flexibility analysis is not required. Pursuant to section
7805(f) of the Internal Revenue Code, the proposed regulations have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comments regarding their impact on small businesses.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final, any written
(signed original and 8 copies) or electronic comments timely submitted
to the IRS will be considered. The IRS and Treasury Department request
comments on the clarity of these proposed regulations and how they
might be made easier to understand. Of particular interest are comments
on whether paragraph (e) of these proposed regulations, describing the
organizations to which disclosure applies, lists all the organizations
with respect to which ASOs might legitimately need information. All
comments will be available for public inspection and copying. A public
hearing will be scheduled if requested in writing by any person who
timely submits written comments. If a public hearing is scheduled,
notice of the date, time, and place for the public hearing will be
published in the Federal Register.
Drafting Information
The principal author of these regulations is Casey Lothamer of the
Office of Division Counsel/Associate Chief Counsel (Tax Exempt and
Government Entities), though other persons in the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 is amended by
adding an entry in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6104(c)-1 also issued under 26 U.S.C. 6104(c). * * *
Par. 2. Section 301.6104(c)-1 is revised to read as follows:
Sec. 301.6104(c)-1 Disclosure of certain information to state
officials.
(a) In general. (1) Subject to the disclosure, recordkeeping, and
safeguard provisions of section 6103, and upon written request by an
appropriate state officer (ASO, as defined in paragraph (i)(1) of this
section), the IRS may disclose or make available to the ASO the returns
and return information described in paragraph (c) of this section with
respect to--
(i) any organization described or formerly described in section
501(c)(3) and exempt or formerly exempt from taxation under section
501(a) (a charitable organization); or
(ii) any organization that has applied for recognition as an
organization described in section 501(c)(3) (an applicant).
Such information shall be disclosed or made available only as
necessary to administer state laws regulating charitable organizations.
(2) Subject to the disclosure, recordkeeping, and safeguard
provisions of section 6103, and upon written request by an ASO, the IRS
may disclose or make available to the ASO returns and return
information regarding any organization described or formerly described
in section 501(c) other than section 501(c)(1) or (c)(3). Such
information shall be disclosed or made available only as necessary to
administer state laws regulating the solicitation or administration of
the charitable funds or charitable assets of these organizations.
(b) Disclosure agreement. The IRS may require an ASO to execute a
disclosure agreement or similar document specifying the procedures,
terms, and conditions for the disclosure or inspection of information
under section 6104(c), including compliance with the safeguards
prescribed by section 6103(p)(4), as well as specifying the information
to be disclosed. Such an agreement or similar document shall constitute
the request for disclosure required by section 6104(c)(1)(C), as well
as the written request required by section 6104(c)(2)(C)(i) and (c)(3).
For security guidelines and other safeguards for protecting returns and
return information, see guidance published by the IRS. See, for
example, IRS Publication 1075, ``Tax Information Security Guidelines
for Federal, State and Local Agencies and Entities.''
(c) Disclosures regarding charitable organizations and applicants.
(1) With respect to any organization described in paragraph (d) of this
section, the IRS may disclose or make available for inspection under
section 6104(c)(1) and (c)(2) to an ASO the following returns and
return information with respect to a charitable organization or
applicant:
(i) A refusal or proposed refusal to recognize an organization's
exemption as a charitable organization (a final or proposed denial
letter).
(ii) Information regarding a grant of exemption following a
proposed denial.
(iii) A revocation of exemption as a charitable organization (a
final revocation letter), including a notice of termination or
dissolution.
[[Page 13936]]
(iv) A proposed revocation of recognition of exemption as a
charitable organization (a proposed revocation letter).
(v) Information regarding the final disposition of a proposed
revocation of recognition other than by final revocation.
(vi) A notice of deficiency or proposed notice of deficiency of tax
imposed under section 507 or chapter 41 or 42 on the organization or a
taxable person (as described in paragraph (i)(4) of this section).
(vii) Information regarding the final disposition of a proposed
notice of deficiency of tax imposed under section 507 or chapter 41 or
42 on the organization other than by issuance of a final notice of
deficiency.
(viii) The names, addresses, and taxpayer identification numbers of
applicants for charitable status, provided on an applicant-by-applicant
basis or by periodic lists of applicants. Under this provision the IRS
may respond to inquiries from an ASO as to whether a particular
organization has applied for recognition of exemption as a charitable
organization.
(ix) Information regarding the final disposition of an application
for recognition of exemption where no proposed denial letter is issued,
including whether the application was withdrawn or whether the
applicant failed to establish its exemption.
(x) Returns and other return information relating to the return
information described in this paragraph (c)(1), except for returns and
return information relating to proposed notices of deficiency described
in paragraph (c)(1)(vi) of this section with respect to taxable
persons.
(2) The IRS may disclose or make available for inspection returns
and return information of a charitable organization or applicant, if
the IRS determines that such information might constitute evidence of
noncompliance with the laws under the jurisdiction of the ASO
regulating charitable organizations and applicants. Such information
may be disclosed on the IRS' own initiative. Disclosures under this
paragraph (c)(2) may be made before the IRS issues a proposed
determination (denial of recognition, revocation, or notice of
deficiency) or any other action by the IRS described in this section.
(d) Organizations to which disclosure applies. Regarding the
information described in paragraphs (a)(2) and (c) of this section, the
IRS will disclose or make available for inspection to an ASO such
information only with respect to--
(1) an organization formed under the laws of the ASO's state;
(2) an organization, the principal office of which is located in
the ASO's state;
(3) an organization that, as determined by the IRS, is or might be
subject to the laws of the ASO's state regulating charitable
organizations or the solicitation or administration of charitable funds
or charitable assets; or
(4) a private foundation required by Sec. 1.6033-2(a)(iv) to list
the ASO's state on any of the foundation's returns filed for its last
five years.
(e) Disclosure limitations. Notwithstanding any other provision of
this section, the IRS will not disclose or make available for
inspection under section 6104(c) any information, the disclosure of
which it determines would seriously impair federal tax administration,
including, but not limited to--
(1) identification of a confidential informant or interference with
a civil or criminal tax investigation; and
(2) information obtained pursuant to a tax convention between the
United States and a foreign government (see section 6105(c)(2) for the
definition of tax convention).
(f) Disclosure recipients--(1) In general. The IRS may disclose
returns and return information under section 6104(c) to, or make it
available for inspection by--
(i) an ASO, as defined in paragraph (i)(1) of this section, or
(ii) a person other than an ASO, but only if that person is a state
officer or employee designated by the ASO to receive information under
section 6104(c) on behalf of the ASO, as specified in paragraph (f)(2)
of this section.
(2) Designation by ASO. An ASO may designate state officers or
employees to receive information under section 6104(c) on the ASO's
behalf by specifying in writing each person's name and job title, and
the name and address of the person's office. The ASO must promptly
notify the IRS in writing of any additions, deletions, or other changes
to the list of designated persons.
(g) Redisclosure. An ASO to whom a return or return information has
been disclosed may thereafter disclose such information--
(1) to another state officer or employee only as necessary to
administer state laws governing charitable organizations or state laws
regulating the solicitation or administration of charitable funds or
charitable assets of noncharitable exempt organizations; or
(2) except as provided in paragraph (h)(1) of this section, to
another state officer or employee who is personally and directly
preparing for a civil proceeding before a state administrative body or
court in a matter involving the enforcement of state laws regulating
organizations with respect to which information can be disclosed under
this section, solely for use in such a proceeding, but only if--
(i) the organization or a taxable person is a party to the
proceeding, or the proceeding arose out of, or in connection with,
determining the civil liability of the organization or a taxable
person, or collecting such civil liability, under state laws governing
organizations with respect to which information can be disclosed under
this section;
(ii) the treatment of an item reflected on such a return is
directly related to the resolution of an issue in the proceeding; or
(iii) the return or return information directly relates to a
transactional relationship between the organization or a taxable person
and a person who is a party to the proceeding that directly affects the
resolution of an issue in the proceeding.
(h) Redisclosure limitations. (1) Before disclosing in a state
administrative or judicial proceeding, or to any party as provided by
paragraph (g)(2) of this section, any return or return information
received under section 6104(c), the ASO shall notify the IRS of the
intention to make such a disclosure. No state officer or employee shall
make such a disclosure except in accordance with any conditions the IRS
might impose in response to the ASO's notice of intent. No such
disclosure shall be made if the IRS determines that the disclosure
would seriously impair Federal tax administration.
(2) An ASO to whom a return or return information has been
disclosed shall not disclose that information to an agent or
contractor.
(i) Definitions. (1) Appropriate state officer means--
(i) the state attorney general;
(ii) the state tax officer;
(iii) with respect to a charitable organization or applicant, any
state officer other than the attorney general or tax officer charged
with overseeing charitable organizations; and
(iv) with respect to a section 501(c) organization that is not
described in section 501(c)(1) or (c)(3), the head of the agency
designated by the state attorney general as having primary
responsibility for overseeing the solicitation of funds for charitable
purposes. A state officer described in
[[Page 13937]]
paragraph (i)(1)(iii) or (i)(1)(iv) of this section must show that the
officer is an ASO by presenting a letter from the state attorney
general describing the functions and authority of the officer under
state law, with sufficient facts for the IRS to determine that the
officer is an ASO.
(2) Return has the same meaning as in section 6103(b)(1).
(3) Return information has the same meaning as in section
6103(b)(2).
(4) Taxable person means any person who is liable or potentially
liable for excise taxes under chapter 41 or 42. Such a person
includes--
(i) a disqualified person described in section 4946(a)(1),
4951(e)(4), or 4958(f);
(ii) a foundation manager described in section 4946(b);
(iii) an organization manager described in section 4955(f)(2) or
4958(f)(2);
(iv) a person described in section 4958(c)(3)(B);
(v) an entity manager described in section 4965(d); and
(vi) a fund manager described in section 4966(d)(3).
(j) Failure to comply. Upon a determination that an ASO has failed
to comply with the requirements of section 6103(p)(4), the IRS may take
the actions it deems necessary to ensure compliance, including the
refusal to disclose any further returns or return information to the
ASO until the IRS determines that the requirements have been met. For
procedures for the administrative review of a determination that an
authorized recipient has failed to safeguard returns or return
information, see Sec. 301.6103(p)(7)-1.
(k) Effective/applicability date. The rules of this section apply
to taxable years beginning on or after the date of publication in the
Federal Register of the Treasury decision adopting these rules as final
regulations.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-6011 Filed 3-14-11; 8:45 am]
BILLING CODE 4830-01-P
