[Federal Register Volume 60, Number 85 (Wednesday, May 3, 1995)]
[Notices]
[Pages 21847-21848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10801]



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[[Page 21848]]

DEPARTMENT OF THE TREASURY

Internal Revenue Service


Privacy Act of 1974; System of Records

AGENCY: Internal Revenue Service, Treasury.

ACTION: Supplemental information about a proposed amendment to a system 
of records.

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SUMMARY: On December 20, 1994, the Internal Revenue Service published, 
at 59 FR 65573, notice of an amended Privacy Act system of records: 
``Compliance Programs and Projects File--Treasury, IRS 42.021.'' Based 
on the comments received, the notice may not have adequately 
distinguished among the various users and uses of the compliance 
system, as well as the data it is to contain.
    The system will not be used to support large scale data matching in 
order to identify specific individuals for contact by IRS personnel. 
The IRS has developed procedural safeguards to prevent data used in the 
compliance research programs and projects that engage in large scale 
data manipulation techniques to determine levels of compliance in 
particular ``market segments'' from being used for enforcement purposes 
as to specific taxpayers.
    In light of the comments received, the IRS will clarify the notice 
to better describe more precisely the types of activities covered. 
Until that clarification is issued, the supplementary information below 
fully describes the compliance programs and projects covered.

ADDRESSES: Comments may be sent to the Office of Disclosure, Internal 
Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224. 
Comments will be made available for inspection and copying in the 
Freedom of Information Reading Room, (202) 622-5164, upon request.

FOR FURTHER INFORMATION CONTACT: Wayne Thomas, National Director, 
Compliance Research, (202) 874-0100.

SUPPLEMENTARY INFORMATION: The compliance research system presently 
includes records to support information gathering to identify 
noncompliance with the Internal Revenue Code. The system is being 
redesigned to identify causes and trends of noncompliance and to 
generate and test new approaches to increasing voluntary compliance.
    This redesign will be accomplished by using an automated 
information system and secure networks to support compliance research 
on broadly shared characteristics and compliance trends of large 
groups. The enhancements themselves, the personnel who will access and 
use the enhanced system, and the purposes for which it will be used 
will be clearly distinguished from other uses by enforcement personnel 
who lawfully access similar records for individual enforcement actions.
    The enhancements will not include maintenance of records with 
individually identifying information since compliance research will 
focus on broadly shared characteristics and compliance trends of large 
groups, typically national in scope. The personnel who use and access 
the research system will not be enforcement personnel. The system will 
not be used to select individuals for enforcement actions.
    The enhanced system should provide the Internal Revenue Service 
with a wider range of options for improving voluntary compliance beyond 
the limited and costly current enforcement actions applied to 
individuals, one at a time. Information produced by analyzing enhanced 
data will be analogous to that used broadly in the private sector under 
the name ``market segment research.'' It will allow group-based 
measurements of noncompliance. Based solely upon an identified 
significant degree of group noncompliance, these enhancements will 
further allow the construction of group profiles or characteristics 
directly related to tax compliance behavior. Enhanced data will also 
permit researchers to use statistical and other research methods to 
determine the issues and causes of noncompliance. Against those issues 
and causes, new initiatives at improving group compliance will be 
vigorously tested on a small scale. Research personnel will oversee but 
not directly test or implement such initiatives.
    The enhanced system is intended to support compliance initiatives 
that rely more on group access and forums that on contacting 
individuals; and more on non-enforcement actions (e.g., legislative or 
regulatory revision, education, assistance) rather than on enforcement 
actions. Even in those instances where an enforcement remedy is 
appropriate, the enhanced system itself cannot be used by enforcement 
personnel nor can it select individuals to whom such remedies will be 
applied.
    This system of records has always on a limited basis and with legal 
authority contained information from various third-party sources. The 
enhancements to this system will add more information from more 
sources. It will also improve access to this information. However, use 
of these enhancements for the purposes of compliance research will 
adhere to the operating principles of such research: it will be group-
focused rather than individually focused and not directly used to 
select individuals for enforcement actions. The minimum data about 
group demographic and economic characteristics that bear directly upon 
measured group non-compliance will be used. Unlike the common practice 
of private-sector market research, these enhancements will not include 
``life-style'' or other highly personal information even in aggregate. 
Additionally, the Internal Revenue Service recognizes its 
responsibility to validate third-party data before they are used to 
support even research activities.

    Dated: April 16, 1995.
Alex Rodriguez,
Deputy Assistant Secretary (Administration).
[FR Doc. 95-10801 Filed 5-2-95; 8:45 am]
BILLING CODE 4830-01-M