[Federal Register Volume 63, Number 240 (Tuesday, December 15, 1998)]
[Rules and Regulations]
[Pages 68995-68998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32926]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 63, No. 240 / Tuesday, December 15, 1998 /
Rules and Regulations
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 8793]
RIN 1545-AW38
Payment by Credit Card and Debit Card
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations that authorize
the Secretary of the Treasury to accept payment of internal revenue
taxes by credit card or debit card. The temporary regulations reflect
changes to the law made by the Taxpayer Relief Act of 1997, and will
affect all persons who pay their tax liabilities by credit card or
debit card pursuant to guidance prescribed by the Secretary. The text
of the temporary regulations also serves as the text of the proposed
regulations set forth in the Proposed Rules section of this issue of
the Federal Register.
DATES: Effective Date: These temporary regulations are effective
January 1, 1999.
Applicability Date: For dates of applicability, see Sec. 301.6311-
2T(h) of these regulations.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Mitchel S.
Hyman, (202) 622-3620 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains temporary regulations amending the Procedure
and Administration Regulations (26 CFR part 301) under sections 6103
and 6311 of the Internal Revenue Code. The regulations reflect the
amendment of sections 6103 and 6311 by section 1205 of the Taxpayer
Relief Act of 1997 (Public Law 105-34, 111 Stat. 788, 995) (1997 Act)
and section 4003(k) of the Tax and Trade Relief Extension Act of 1998
(Public Law 105-277, 112 Stat. 2681).
As amended by the 1997 Act, section 6311(a) provides that it shall
be lawful for the Secretary to receive payment for internal revenue
taxes by any commercially acceptable means that the Secretary deems
appropriate to the extent and under the conditions provided in
regulations prescribed by the Secretary. The legislative history
accompanying the Act explains that commercially acceptable means
includes ``electronic funds transfers, including those arising from
credit cards, debit cards, and charge cards.'' H. Conf. Rep. 220, 105th
Cong., 1st Sess. 652 (1997). The current regulations under Treas. Reg.
Sec. 301.6311-1 permit payment of taxes by checks, drafts drawn on
financial institutions, or money orders. The temporary regulations add
payments by credit cards (which includes charge cards) and debit cards
to the acceptable methods of payment under section 6311.
Methods of payment by electronic funds transfer other than by
credit card or debit card are currently authorized by section 6302 of
the Internal Revenue Code and its implementing regulations. For
example, Treas. Reg. Sec. 1.6302-4 permits individuals to voluntarily
remit payments of income taxes by electronic funds transfer. Thus, the
temporary regulations only address payments by credit card and debit
card. Section 6302 and its regulations will remain the authority for
forms of payment by electronic funds transfer other than payments by
credit card and debit card.
Section 6103(a) of the Code prohibits disclosure of returns and
return information except as expressly provided in the Code. Section
1205(c)(1) of the 1997 Act (as amended by section 6012(b)(2) of the
Internal Revenue Service Restructuring and Reform Act of 1998, Public
Law 105-206) added section 6103(k)(9) to the Code. Section 6103(k)(9)
authorizes the IRS to disclose returns and return information to
financial institutions and others to the extent necessary for the
administration of section 6311. Section 6103(k)(9) further provides
that disclosures of information for purposes other than to accept
payments by check or money order (for example, by credit card, or debit
card) shall be made only to the extent authorized by written procedures
promulgated by the Secretary. Section 6311(e) provides that no person
shall use or disclose any information obtained pursuant to section
6103(k)(9) related to credit card or debit card transactions except to
the extent authorized by written procedures promulgated by the
Secretary.
Any person who uses or discloses information in violation of
section 6311(e) is subject to civil liability for damages. See I.R.C.
section 7431(h), added by section 1205(c)(2) of the 1997 Act (as
amended by Public Law 105-206, section 6012(b)(3)).
Explanation of Provisions
The temporary regulations provide that internal revenue taxes may
be paid by credit card or debit card. Payment of taxes by credit card
or debit card is voluntary on the part of the taxpayer. However, only
credit cards or debit cards approved by the Secretary may be used for
this purpose, only the types of tax liabilities specified by the
Secretary may be paid by credit card or debit card, and all such
payments must be made in the manner and in accordance with the forms,
instructions, and procedures prescribed by the Secretary. Thus,
payments by credit card or debit card may be limited to certain
designated cards, to payments made through certain service providers,
or to payments of specific types of taxes. It is anticipated that the
Secretary will be entering into contracts with specific card issuers or
other persons such as third parties who will process the credit and
debit card transactions, to facilitate payments by credit cards and
debit cards, subject to the requirement that the Secretary may not pay
any fee or provide any other monetary consideration under such
contracts.
Under the temporary regulations, a payment by credit card or debit
card received by the Secretary will be deemed made when the credit card
or debit card transaction is authorized by the card issuer, provided
the payment is actually received by the Secretary in the ordinary
course of business and is not returned due to correction of errors
relating to the credit card or debit card account.
The temporary regulations provide, as required by section
6311(d)(3), that payments of taxes by credit card or debit card are
subject to the error resolution
[[Page 68996]]
procedures of section 161 of the Truth in Lending Act, 15 U.S.C. 1666,
section 908 of the Electronic Fund Transfer Act, 15 U.S.C. 1693f, or
any similar provisions of state law, only for the purpose of resolving
errors relating to the credit card or debit card account, but not for
the purpose of resolving any errors, disputes, or adjustments relating
to the underlying tax liability. These provisions ensure that any
disputes concerning the merits of the tax liability will be resolved in
the traditional administrative and judicial forums (e.g., filing a
petition in Tax Court, paying the disputed tax and filing a claim for
refund), and will not be raised in any dispute with the card issuer,
financial institution, or other person participating in the credit card
or debit card transaction.
As authorized by section 6311(d)(3)(E), the temporary regulations
permit the Secretary to return funds erroneously received due to errors
relating to the credit card or debit card account by arranging for a
credit to the taxpayer's account with the issuer of the credit card or
debit card or other appropriate financial institution or person.
Returns of funds through credit card or debit card credits, however,
are only available to correct errors relating to the credit card and
debit card account, and not to refund overpayments of taxes.
The temporary regulations also provide that the Internal Revenue
Service may not impose any fee or charge on persons making payment of
taxes by credit card or debit card. The regulations provide that the
imposition of fees or charges by issuers of credit cards or debit cards
or by any other financial institution or person participating in the
credit card or debit card transaction are not prohibited. The Internal
Revenue Service may not receive any part of any fees that may be
charged.
The temporary regulations also provide the procedures required
under sections 6103(k)(9) and 6311(e) with respect to use and
disclosure of information relating to payment of taxes by credit card
and debit card. IRS personnel are authorized to disclose to card
issuers, financial institutions, and other persons information
necessary to process the tax payment or to bill or collect the amount
charged or debited (for example, to resolve billing errors). Pursuant
to section 6311(e), information received by any person in connection
with payment of tax by credit card or debit card shall be treated as
confidential by all persons who receive such information, whether such
information is received from the Secretary or from any other person
including the taxpayer.
The temporary regulations set forth the limited purposes and
activities for which such information may be used or disclosed by card
issuers, financial institutions, and other persons. The permitted
purposes and activities principally involve credit card and debit card
processing, billing, collection, account servicing, account transfers,
internal business records, legal compliance, and legal proceedings. The
temporary regulations expressly prohibit selling the information,
sharing it with credit bureaus, or using it for any marketing purpose,
for example, marketing tax-related products or any marketing that
targets those who have used a credit card or debit card to pay taxes.
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 also has been determined that
these regulations must be effective by January 1, 1999, to permit
taxpayers the opportunity to pay taxes by credit card for the 1999
filing season, and, therefore, it has been determined that sections 553
(b) and (d) of the Administrative Procedure Act (5 U.S.C. chapter 5) do
not apply to these regulations. It has also been determined that
because the regulations do not impose a collection of information on
small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f) of the Internal Revenue
Code, this temporary regulation will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regulations is Mitchel S. Hyman of
the Office of Assistant Chief Counsel (General Litigation) CC:EL:GL,
IRS. However, other personnel from 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.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 continues to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *.
Par. 2. Section 301.6103(k)(9)-1T is added to read as follows:
Sec. 301.6103(k)(9)-1T Disclosure of returns and return information
relating to payment of tax by credit card and debit card (temporary).
Officers and employees of the Internal Revenue Service may disclose
to card issuers, financial institutions or other persons such return
information as the Secretary deems necessary in connection with
processing credit card and debit card transactions to effectuate
payment of tax as authorized by Sec. 301.6311-2T. Officers and
employees of the Service may disclose such return information to such
persons as the Secretary deems necessary in connection with billing or
collection of the amounts charged or debited, including resolution of
errors relating to the credit card or debit card account as described
in Sec. 301.6311-2T(d).
Par. 3. Section 301.6311-2T is added to read as follows:
Sec. 301.6311-2T Payment by credit card and debit card (temporary).
(a) Authority to receive--(1) Payments by credit card and debit
card. Internal revenue taxes may be paid by credit card or debit card
as authorized by this section. Payment of taxes by credit card or debit
card is voluntary on the part of the taxpayer. However, only credit
cards or debit cards approved by the Secretary may be used for this
purpose, only the types of tax liabilities specified by the Secretary
may be paid by credit card or debit card, and all such payments must be
made in the manner and in accordance with the forms, instructions and
procedures prescribed by the Secretary. All references in this section
to ``tax'' also include interest, penalties and additions to tax.
(2) Payments by electronic funds transfer other than payments by
credit card and debit card. Provisions relating to payments by
electronic funds transfer other than payments by credit card and debit
card are contained in section 6302 and the Treasury Regulations
promulgated pursuant to section 6302.
(3) Definitions--(i) Credit card means any credit card as defined
in section 103(k) of the Truth in Lending Act, 15 U.S.C. 1602(k),
including any credit card, charge card or other credit device issued
for the purpose of obtaining
[[Page 68997]]
money, property, labor or services on credit.
(ii) Debit card means any accepted card or other means of access as
defined in section 903(1) of the Electronic Funds Transfer Act, 15
U.S.C. 1693a(1), including any debit card or similar device or means of
access to an account issued for the purpose of initiating electronic
fund transfers to obtain money, property, labor or services.
(b) When payment is deemed made. A payment of tax by credit card or
debit card shall be deemed made when the issuer of the credit card or
debit card properly authorizes the transaction, provided the payment is
actually received by the Secretary in the ordinary course of business
and is not returned pursuant to paragraph (d)(3) of this section.
(c) Payment not made--(1) Continuing liability of taxpayer. A
taxpayer who tenders payment of taxes by credit card or debit card is
not relieved of liability for such taxes until the payment is actually
received by the Secretary and is not required to be returned pursuant
to paragraph (d)(3) of this section. This continuing liability of the
taxpayer is in addition to, and not in lieu of, any liability of the
issuer of the credit card or debit card or financial institution
pursuant to paragraph (c)(2) of this section.
(2) Liability of financial institutions. If a taxpayer has tendered
a payment of internal revenue taxes by credit card or been guaranteed
expressly by a financial institution, and the United States is not duly
paid, the United States shall have a lien for the guaranteed amount of
the transaction upon all the assets of the institution making such
guarantee. The unpaid amount shall be paid out of such assets in
preference to any other claims whatsoever against such guaranteeing
institution, except the necessary costs and expenses of administration
and the reimbursement of the United States for the amount expended in
the redemption of the circulating notes of such institution.
(d) Resolution of errors relating to the credit card or debit card
account--(1) In general. Payments of taxes by credit card or debit card
shall be subject to the applicable error resolution procedures of
section 161 of the Truth in Lending Act, 15 U.S.C. 1666, or section 908
of the Electronic Fund Transfer Act, 15 U.S.C. 1693f, or any similar
provisions of state law, for the purpose of resolving errors relating
to the credit card or debit card account, but not for the purpose of
resolving any errors, disputes or adjustments relating to the
underlying tax liability.
(2) Matters covered by error resolution procedures. (i) The error
resolution procedures of paragraph (d)(1) of this section apply to the
following types of errors:
(A) An incorrect amount posted to the taxpayer's account as a
result of a computational error, numerical transposition, or similar
mistake.
(B) An amount posted to the wrong taxpayer's account.
(C) A transaction posted to the taxpayer's account without the
taxpayer's authorization.
(D) Similar types of errors that would be subject to resolution
under these procedures in ordinary commercial transactions.
(ii) An error described in paragraphs (d)(2)(i) (A) through (D) of
this section may only be resolved through the procedures referred to in
paragraph (d)(1) of this section and cannot be a basis for any claim or
defense in any administrative or court proceeding involving the
Secretary.
(3) Return of funds pursuant to error resolution procedures.
Notwithstanding section 6402 of the Internal Revenue Code, if a
taxpayer is entitled to a return of funds pursuant to the error
resolution procedures of paragraph (d)(1) of this section, the
Secretary may, in the Secretary's sole discretion, effect such return
by arranging for a credit to the taxpayer's account with the issuer of
the credit card or debit card or any other financial institution or
person that participated in the transaction in which the error
occurred.
(4) Matters not subject to error resolution procedures. The error
resolution procedures of paragraph (d)(1) of this section do not apply
to any error, question or dispute concerning the amount of tax owed by
any person for any year. For example, these error resolution procedures
do not apply to determine a taxpayer's entitlement to a refund of tax
for any year for any reason, nor may they be used to pay a refund. All
such matters shall be resolved through administrative and judicial
procedures established pursuant to the Internal Revenue Code and the
rules and regulations thereunder.
(5) Payments of taxes by credit card or debit card are not subject
to section 170 of the Truth in Lending Act, 15 U.S.C. 1666i, or to any
similar provision of state law.
(e) Fees or charges. The Internal Revenue Service may not impose
any fee or charge on persons making payment of taxes by credit card or
debit card. This section does not prohibit the imposition of fees or
charges by issuers of credit cards or debit cards or by any other
financial institution or person participating in the credit card or
debit card transaction. The Internal Revenue Service may not receive
any part of any fees that may be charged.
(f) Authority to enter into contracts. The Secretary may enter into
contracts related to receiving payments of tax by credit card or debit
card if such contracts are cost beneficial to the Government. The
determination of whether the contract is cost beneficial shall be based
on an analysis appropriate for the contract at issue and at a level of
detail appropriate to the size of the Government's investment or
interest. The Secretary may not pay any fee or charge or provide any
other monetary consideration under such contracts for such payments.
(g) Use and disclosure of information relating to payment of taxes
by credit card and debit card. Information obtained by any person other
than the taxpayer in connection with payment of taxes by a credit card
or debit card shall be treated as confidential, whether such
information is received from the Secretary or from any other person
(including the taxpayer). No person other than the taxpayer shall use
or disclose such information except as follows:
(1) Card issuers, financial institutions, or other persons
participating in the credit card or debit card transaction may use or
disclose such information for the purpose and in direct furtherance of
servicing cardholder accounts, including the resolution of errors in
accordance with paragraph (d) of this section. This authority includes
the following:
(i) Processing of the credit card or debit card transaction, in all
of its stages through and including the crediting of the amount charged
on account of tax to the United States Treasury.
(ii) Billing the taxpayer for the amount charged or debited with
respect to payment of the tax liability.
(iii) Collection of the amount charged or debited with respect to
payment of the tax liability.
(iv) Returning funds to the taxpayer in accordance with paragraph
(d)(3) of this section.
(2) Card issuers, financial institutions or other persons
participating in the credit card or debit card transaction may use and
disclose such information for the purpose and in direct furtherance of
any of the following activities:
(i) Assessment of statistical risk and profitability.
(ii) Transfer of receivables or accounts or any interest therein.
(iii) Audit of account information.
[[Page 68998]]
(iv) Compliance with Federal, State, or local law.
(v) Cooperation in properly authorized civil, criminal, or
regulatory investigations by Federal, State, or local authorities.
(3) Notwithstanding the foregoing, use or disclosure of information
relating to credit card and debit card transactions for purposes
related to any of the following is not authorized:
(i) Sale or exchange of such information separate from the
underlying receivable or account.
(ii) Marketing for any purpose, for example, marketing tax-related
products or services, or marketing any product or service that targets
those who have used a credit card or debit card to pay taxes.
(iii) Furnishing such information to any credit reporting agency or
credit bureau, except with respect to the aggregate amount of a
cardholder's account, with the amount attributable to payment of taxes
not separately identified.
(4) Use and disclosure of information other than as authorized by
this paragraph (g) may result in civil liability under section 7431(h)
of the Internal Revenue Code.
(h) Effective date. This section applies to payments of taxes made
on and after January 1, 1999, and through December 14, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved: December 1, 1998.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-32926 Filed 12-14-98; 8:45 am]
BILLING CODE 4830-01-U