[Federal Register Volume 63, Number 162 (Friday, August 21, 1998)]
[Rules and Regulations]
[Pages 44777-44779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22464]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

[TD 8780]
RIN 1545-AU85


Rewards for Information Relating to Violations of Internal 
Revenue Laws

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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[[Page 44778]]

SUMMARY: This document contains final regulations relating to rewards 
for information that relates to violations of the internal revenue 
laws. The regulations reflect changes to the law made by the Taxpayer 
Bill of Rights 2 and affect persons that are eligible to receive an 
informant reward.

DATES: Effective date: These regulations are effective August 21, 1998.
    Applicability date: For dates of applicability, see Sec. 301.7623-
1(g).

FOR FURTHER INFORMATION CONTACT: Judith A. Lintz (202) 622-4940 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these final regulations 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1534. Responses to these collections of information 
are voluntary with respect to the provision of information relating to 
violations of the internal revenue laws, but are required to obtain a 
benefit with respect to filing a claim for reward.
    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.
    The estimated annual burden per respondent varies from 2 to 4 
hours, depending on individual circumstances, with an estimated average 
of 3 hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, 
Washington, DC 20224, and to the Office of Management and Budget, Attn: 
Desk Officer for the Department of the Treasury, Office of Information 
and Regulatory Affairs, Washington, DC 20503.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains amendments to the Regulations on Procedure 
and Administration (26 CFR Part 301) under section 7623 relating to 
rewards for information that relates to violations of the internal 
revenue laws. This section was amended by section 1209 of the Taxpayer 
Bill of Rights 2 (TBOR 2) (Pub. L. 104-168, 110 Stat. 1452 (1996)).
    On October 14, 1997, final and temporary regulations (TD 8737) 
relating to informant rewards under section 7623 were published in the 
Federal Register (62 FR 53230). A notice of proposed rulemaking (REG-
252936-96) cross-referencing the temporary regulations was published in 
the Federal Register for the same day (62 FR 53274).
    No written comments responding to the notice were received. No 
public hearing was requested or held. The proposed regulations under 
section 7623 are adopted as revised by this Treasury decision, and the 
corresponding temporary regulations are removed. The revisions are 
discussed below.

Explanation of Provisions

    The amendments made by TBOR 2 to section 7623 provide that the 
Secretary may pay rewards for information that leads to the detection 
and bringing to trial and punishment persons guilty of violating the 
internal revenue laws or conniving at the same, and for information 
that leads to the detection of underpayments of tax. In addition, the 
amendments to section 7623 provide that rewards will be paid from the 
proceeds of amounts (other than interest) collected by reason of the 
information provided.
    Following the publication of the proposed regulations, it was 
determined that the regulations should clarify that rewards may also be 
paid in situations where information leads to the denial of a claim for 
refund. Therefore, the final regulations provide that proceeds of 
amounts (other than interest) collected by reason of the information 
provided include both additional amounts collected because of the 
information provided and amounts collected prior to receipt of the 
information if the information leads to the denial of a claim for 
refund that otherwise would have been paid.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 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.
    It is hereby certified that the regulations in this document will 
not have a significant economic impact on a substantial number of small 
entities. This certification is based on a determination that in the 
past approximately 10,000 persons have filed claims for reward on an 
annual basis. Of these persons, almost all have been individuals. 
Accordingly, a regulatory flexibility analysis under the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Small Business Administration for comment on its impact on small 
businesses.

Drafting Information

    The principal author of these regulations is Judith A. Lintz, 
Office of Assistant Chief Counsel (Income Tax and Accounting). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects

26 CFR Part 301

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

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 301 and 602 are amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
as follows:

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

    Par. 2. Section 301.7623-1 is revised to read as follows:


Sec. 301.7623-1  Rewards for information relating to violations of 
internal revenue laws.

    (a) In general. In cases where rewards are not otherwise provided 
for by law, a district or service center director may approve a reward, 
in a suitable amount, for information that leads to the detection of 
underpayments of tax, or the detection and bringing to trial and 
punishment of persons guilty of violating the internal revenue laws or 
conniving at the same. The rewards provided for by section 7623 and 
this section will be paid from the proceeds of amounts (other than 
interest) collected by reason of the information provided. For purposes 
of section 7623 and this section, proceeds of amounts

[[Page 44779]]

(other than interest) collected by reason of the information provided 
include both additional amounts collected because of the information 
provided and amounts collected prior to receipt of the information if 
the information leads to the denial of a claim for refund that 
otherwise would have been paid.
    (b) Eligibility to file claim for reward--(1) In general. Any 
person, other than certain present or former federal employees 
described in paragraph (b)(2) of this section, that submits, in the 
manner described in paragraph (d) of this section, information relating 
to the violation of an internal revenue law is eligible to file a claim 
for reward under section 7623 and this section.
    (2) Federal employees. No person who was an officer or employee of 
the Department of the Treasury at the time the individual came into 
possession of information relating to violations of the internal 
revenue laws, or at the time the individual divulged such information, 
is eligible for a reward under section 7623 and this section. Any other 
current or former federal employee is eligible to file a claim for 
reward if the information provided came to the individual's knowledge 
other than in the course of the individual's official duties.
    (3) Deceased informants. A claim for reward may be filed by an 
executor, administrator, or other legal representative on behalf of a 
deceased informant if, prior to the informant's death, the informant 
was eligible to file a claim for such reward under section 7623 and 
this section. Certified copies of the letters testamentary, letters of 
administration, or other similar evidence must be attached to the claim 
for reward on behalf of a deceased informant in order to show the 
authority of the legal representative to file the claim.
    (c) Amount and payment of reward. All relevant factors, including 
the value of the information furnished in relation to the facts 
developed by the investigation of the violation, will be taken into 
account by a district or service center director in determining whether 
a reward will be paid, and, if so, the amount of the reward. The amount 
of a reward will represent what the district or service center director 
deems to be adequate compensation in the particular case, generally not 
to exceed fifteen percent of the amounts (other than interest) 
collected by reason of the information. Payment of a reward will be 
made as promptly as the circumstances of the case permit, but not until 
the taxes, penalties, or fines involved have been collected. However, 
if the informant waives any claim for reward with respect to an 
uncollected portion of the taxes, penalties, or fines involved, the 
claim may be immediately processed. Partial reward payments, without 
waiver of the uncollected portion of the taxes, penalties, or fines 
involved, may be made when a criminal fine has been collected prior to 
completion of the civil aspects of a case, and also when there are 
multiple tax years involved and the deficiency for one or more of the 
years has been paid in full. No person is authorized under this section 
to make any offer, or promise, or otherwise to bind a district or 
service center director with respect to the payment of any reward or 
the amount of the reward.
    (d) Submission of information. A person that desires to claim a 
reward under section 7623 and this section may submit information 
relating to violations of the internal revenue laws, in person, to the 
office of a district director, preferably to a representative of the 
Criminal Investigation Division. Such information may also be submitted 
in writing to the Commissioner of Internal Revenue, Attention: 
Assistant Commissioner (Criminal Investigation), 1111 Constitution 
Avenue, NW., Washington, DC 20224, to any district director, Attention: 
Chief, Criminal Investigation Division, or to any service center 
director. If the information is submitted in person, either orally or 
in writing, the name and official title of the person to whom it is 
submitted and the date on which it is submitted must be included in the 
formal claim for reward.
    (e) Identification of informant. No unauthorized person will be 
advised of the identity of an informant.
    (f) Filing claim for reward. An informant that intends to claim a 
reward under section 7623 and this section should notify the person to 
whom the information is submitted of such intention, and must file a 
formal claim on Form 211, Application for Reward for Original 
Information, signed by the informant in the informant's true name, as 
soon as practicable after the submission of the information. If other 
than the informant's true name was used in furnishing the information, 
satisfactory proof of identity as that of the informant must be 
included with the claim for reward.
    (g) Effective date. This section is applicable with respect to 
rewards paid after January 29, 1997.


Sec. 301.7623-1T  [Removed]

    Par. 3. Section 301.7623-1T is removed.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 4. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 5. In Sec. 602.101, paragraph (c) is amended by removing the 
entry for 301.7623-1T from the table and by revising the entry for 
301.7623-1 to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

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                                                             Current OMB
     CFR part or section where identified and described      control No.
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                  *        *        *        *        *                 
301.7623-1.................................................    1545-0409
                                                               1545-1534
                  *        *        *        *        *                 
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Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
    Approved: July 20, 1998.

Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-22464 Filed 8-20-98; 8:45 am]
BILLING CODE 4830-01-P