[Federal Register Volume 66, Number 8 (Thursday, January 11, 2001)]
[Rules and Regulations]
[Pages 2261-2265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-485]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8935]
RIN 1545-AY59


Disclosure of Returns and Return Information to Designee of 
Taxpayer

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulation.

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SUMMARY: This document contains a temporary regulation relating to the 
disclosure of returns and return information to a designee of the 
taxpayer. The temporary regulation provides guidance to IRS employees 
responsible for disclosing returns and return information and to 
taxpayers who wish to designate a person or persons to whom returns and 
return information may be disclosed. The portion of this temporary 
regulation pertaining to nonwritten requests or consents reflects 
changes to the law made by the Taxpayer Bill of Rights II, Public Law 
104-168, section 1207, 110 Stat. 1473. With respect to written requests 
or consents, the temporary regulation amends the existing regulation to 
provide further guidance in certain limited situations and to clarify 
existing procedures. The text of the temporary regulation also serves 
as the text of the proposed regulation set forth in the notice of 
proposed rulemaking on this subject in the Proposed Rules section of 
this issue of the Federal Register.

DATES: Effective Date: This regulation is effective January 11, 2001.
    Applicability Date: For dates of applicability, see 
Sec. 301.6103(c)-1T(g).

[[Page 2262]]


FOR FURTHER INFORMATION CONTACT: Joseph Conley, (202) 622-4580 (not a 
toll-free number).

Background

    Under section 6103(a), returns and return information are 
confidential unless disclosure is otherwise authorized by the Internal 
Revenue Code. Section 6103(c), as amended by section 1207 of the 
Taxpayer Bill of Rights II, Public Law 104-168 (110 Stat. 1452), 
authorizes the IRS to disclose returns and return information to such 
person or persons as the taxpayer may designate in a request for or 
consent to disclosure, or to any other person at the taxpayer's request 
to the extent necessary to comply with a request for information or 
assistance made by the taxpayer to such other person. Disclosure is 
permitted subject to such requirements and conditions as may be 
prescribed by regulations. With the amendment in 1996, Congress 
eliminated the longstanding requirement that disclosures to designees 
of the taxpayer must be pursuant to the written request or consent of 
the taxpayer. The purpose of this amendment to section 6103(c) was to 
assist the IRS in developing a paperless tax administration system that 
relies on, among other things, electronic communication. H.R. Rep. No. 
104-506, at 49 (1996), reprinted in 1996 U.S.C.A.N. 1143, 1172. This 
document contains a temporary regulation that authorizes the disclosure 
of tax returns and return information to a designee of the taxpayer 
pursuant to a nonwritten request or consent when the taxpayer seeks the 
assistance of a third party in resolving a tax matter.
    This document also amends the existing regulation to clarify the 
rules applicable to written requests or consents to disclosure. On 
October 3, 1980, a final regulation (TD 7723) relating to the 
disclosure of tax returns and return information to a person designated 
by the taxpayer in a written request or consent were published in the 
Federal Register (45 FR 65564). Since the publication of this final 
regulation, the IRS and the Treasury Department have determined that 
further guidance on written consent requirements is necessary.

Explanation of Provisions

Nonwritten consents

    Under the existing regulation, if a taxpayer wishes a third party 
to assist in the resolution of a tax matter between the taxpayer and 
the IRS, and the third party is not otherwise authorized to practice 
before the Internal Revenue Service, a written section 6103(c) request 
or consent must be executed by the taxpayer.
    The temporary regulation authorizes the IRS to accept nonwritten 
requests or consents authorizing the disclosure of tax returns and 
return information to third parties assisting taxpayers in resolving 
tax related matters. Thus, for example, the temporary regulation 
clarifies that the taxpayer can orally consent to disclosures by the 
IRS to a person accompanying the taxpayer to meetings or interviews 
with the IRS, or participating in a telephone conversation with the 
taxpayer. When the taxpayer is present, either physically or on the 
telephone, the taxpayer will be able to knowingly and voluntarily 
consent to the disclosure without the need for further expressing that 
intent in writing.
    Thus, the use of nonwritten consents will enable the IRS to improve 
its customer service in that, with the assistance of their designees, 
taxpayers will be able to resolve tax problems in a more timely 
fashion, without the need for burdensome paperwork. Additionally, 
nonwritten requests or consents will assist the IRS in moving to a 
paperless environment by further facilitating the use of electronic 
communication systems.
    As with written requests or consents, before disclosing tax returns 
and return information to a third party pursuant to a taxpayer's 
nonwritten request or consent, the IRS will take reasonable steps to 
confirm the identity of the taxpayer and the designee. For example, IRS 
personnel, pursuant to existing procedures, verify that they are 
speaking to the taxpayer prior to disclosing return information to that 
taxpayer.
    Nonwritten requests for or consents to disclosure do not take the 
place of a power of attorney authorizing a third party to represent the 
taxpayer before the IRS. Practice before the IRS remains governed by 
the regulations at 26 CFR 601.501 et seq. and Treasury Department 
Circular 230 (31 CFR part 10).

Acknowledgments of, and Notices Regarding, Electronically Filed Returns

    The temporary regulation also provides parameters for the 
development of consents for the electronic filing program. The IRS 
currently provides an acknowledgment to an electronic return originator 
(ERO) to indicate that it has received information from the ERO in an 
acceptable form, and that the taxpayer identity information, as defined 
by section 6103(b)(6), matches IRS records. Alternatively, the IRS may 
notify the ERO that it has rejected the ERO's electronic submission 
because the taxpayer identity information does not match IRS records 
or, for example, because the taxpayer is not responsible for the tax 
payment. The taxpayer may also have authorized an electronic debit to 
pay a tax debt, and the taxpayer may want the IRS to send an 
acknowledgment to the ERO that the account has been properly debited, 
or to disclose information to the taxpayer's financial institution to 
resolve a problem with the electronic debit transaction. To ensure that 
the IRS is authorized to disclose tax returns and return information to 
third parties in an electronic system, the IRS must receive a valid 
request for or consent to disclosure pursuant to section 6103(c). The 
current system requires the taxpayer to execute a written consent on 
Form 8453 to permit these disclosures.
    The temporary regulation authorizes an electronic consent to permit 
the disclosures of the return information described above and such 
other information as the IRS determines is necessary to the operation 
of the electronic filing program. Such consent must inform the taxpayer 
of the return information that will be transmitted to the ERO and other 
third parties as a result of the electronic filing of the taxpayer's 
return or other information.

Combined FedState Filing Programs

    The temporary regulation also reduces the burden on taxpayers in 
combined Federal-State (FedState) return filing programs. If the 
taxpayer files a single combined Federal and State tax return with the 
IRS, the information contained in such FedState return that is gathered 
with respect to a taxpayer's liability under both Federal and State 
law, including the taxpayer's name, taxpayer identification number, and 
adjusted gross income, is return information protected by section 6103. 
If the IRS discloses such return information to the State in 
satisfaction of the taxpayer's State filing obligations, the 
information can be used by the State only for State tax administration 
purposes under section 6103(d). On the other hand, if a State tax 
return is filed directly with the State, information on the State 
return is not subject to the restrictions of section 6103(d) and can be 
used for appropriate non-tax purposes permitted under State law.
    In the current electronic FedState filing program, to avoid these 
section 6103 restrictions, return preparers make two separate 
electronic transmissions to the IRS--one for the Federal return and one 
for the State return. The common items of data are sent twice, once in 
the

[[Page 2263]]

Federal ``packet'' and once in the State ``packet.'' The items of 
information in the State packet are not restricted by section 6103 
because they have not been filed with the IRS with regard to Federal 
tax liability.
    Alternatively, in the FedState telefile program, a consent has been 
developed that permits the Internal Revenue Service to disclose common 
data items to the State tax agency. The information received by the 
State pursuant to the taxpayer's request or consent is treated, for 
purposes of section 6103, as if the State had received the information 
directly from the taxpayer, and therefore the information can be used 
for appropriate non-tax purposes under State law.
    Under the existing regulation, consents for FedState filing 
programs must comply with current Sec. 301.6103(c)-1(a). The existing 
regulation requires, among other things, a separate written consent 
document. The IRS and the Treasury Department believe a taxpayer's 
voluntary participation in an optional FedState filing program that 
provides the taxpayer with notice of the disclosures to be made to the 
State as part of the program constitutes a sufficient knowing and 
voluntary consent to permit disclosures to States in this situation. To 
reduce the burden on taxpayers and improve the efficiency of tax 
administration, the temporary regulation provides that by filing a 
combined FedState return, the taxpayer consents to the disclosure of 
the common data items to the State tax agency, and that the information 
will be treated as if it had been received directly by the State from 
the taxpayer. As noted above, the temporary regulation requires a 
notice of the disclosures that are to be made in the FedState filing 
program so that taxpayers may choose to participate in such programs 
with knowledge of such disclosures.

Other Changes

    The temporary regulation also provides needed clarification in a 
number of areas not specifically addressed under the existing 
regulation. The temporary regulation provides rules for receipt of 
section 6103(c) consents by entities other than the IRS. Certain 
Treasury Department agencies, such as the Financial Management Service, 
perform Federal tax administration functions and receive tax 
information from the IRS. In addition, IRS contractors receive tax 
information to provide tax administration services pursuant to section 
6103(n). The existing regulation provides only for receipt of requests 
for or consents to disclosure by the IRS. The temporary regulation 
permits Federal government agencies performing Federal tax 
administration functions to receive section 6103(c) consents and 
disclose returns and return information in the possession of such 
agency to the taxpayer's designee. For example, the temporary 
regulation clarifies that the Financial Management Service can disclose 
return information related to the offset of the taxpayer's tax refund 
to the designee of the taxpayer, such as in response to a Congressional 
inquiry. The temporary regulation also clarifies that receipt of a 
request or consent by an agent or contractor of the IRS is the same as 
receipt by the IRS. However, an agent or contractor of the IRS may make 
disclosures with the taxpayer's consent only if such disclosures are 
specifically authorized in the contract or otherwise specifically 
authorized in writing by the IRS. Sec. 301.6103(n)-1(a).
    The temporary regulation defines the term separate written document 
to conform to current IRS practice. The temporary regulation also 
specifies the Secretary of the Treasury's authority to provide for 
methods of signing requests for or consents to disclosure. See 
Sec. 301.6061-1(b).
    The temporary regulation clarifies the requirements for identifying 
the designee to whom disclosure is to be made when the disclosure 
occurs in a public forum, such as a courtroom, a congressional hearing, 
or in the media. In these circumstances, it may not be possible to 
designate specifically every person to whom disclosure is to be made. 
While identifying individual designees in a public forum may not be 
practical, a taxpayer can knowingly and voluntarily authorize 
disclosure in a public forum by specifically indicating the 
circumstances surrounding the public disclosure, including, for 
example, a description of the place, date, and time. The temporary 
regulation also incorporates the longstanding IRS practice that 
entities, such as corporations and State and local government agencies, 
are appropriate designees.
    The temporary regulation also affirms longstanding practices of the 
IRS regarding the authority to execute consents. Generally, persons 
that may receive returns pursuant to section 6103(e), paragraphs (1) 
through (5), may execute disclosure consents under section 6103(c). 
However, a one percent shareholder of a corporation, who may receive 
corporate returns pursuant to section 6103(e)(1)(D)(iii), may not 
execute disclosure consents because the right of inspection is personal 
to the shareholder, and such shareholder is not permitted to redisclose 
such information. See Internal Revenue Code Secs. 6103(a)(3), 
7213(a)(5). The temporary regulation also provides that if the taxpayer 
is an entity, generally a person with authority under State law to bind 
the entity may execute a section 6103(c) consent. Finally, the 
temporary regulation provides that the holder of a taxpayer's power of 
attorney may not execute a disclosure consent unless that authority is 
specifically granted in the power.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. This temporary 
regulation provides taxpayers with enhanced procedures to resolve 
problems with the IRS. For this reason, notice and public procedure and 
a delayed effective date would be contrary to the public interest 
pursuant to 5 U.S.C. 553(b)(B) and 553(d), respectively. Because this 
notice of proposed rulemaking is required, the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do 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 this regulation is Jamie Bernstein, Office 
of the Associate Chief Counsel, Procedure and Administration 
(Disclosure & Privacy Law Division). However, other personnel from the 
IRS and Treasury Department participated in its 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 is amended by 
adding an entry in numerical order to read as follows:


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

[[Page 2264]]

    Section 301.6103(c)-1 also issued under 26 U.S.C. 6103(c). * * *


Sec. 301.6103(c)-1  [Removed]

    Par. 2. Section 301.6103(c)-1 is removed.

    Par. 3. Section 301.6103(c)-1T is added to read as follows:


Sec. 301.6103(c)-1T  Disclosure of returns and return information to 
designee of taxpayer.

    (a) Overview. Subject to such requirements and conditions as the 
Secretary of the Treasury may prescribe by regulation, section 6103(c) 
of the Internal Revenue Code authorizes the Internal Revenue Service to 
disclose a taxpayer's return or return information to such person or 
persons as the taxpayer may designate in a request for or consent to 
such disclosure, or to any other person at the taxpayer's request to 
the extent necessary to comply with the taxpayer's request to such 
other person for information or assistance. This regulation contains 
the requirements that must be met before, and the conditions under 
which, the Internal Revenue Service may make such disclosures. 
Paragraph (b) of this section provides the requirements that are 
generally applicable to designate a third party to receive the 
taxpayer's returns and return information. Paragraph (c) of this 
section provides requirements under which the Internal Revenue Service 
may disclose information in connection with a taxpayer's written or 
nonwritten request for a third party to provide information or 
assistance with regard to a tax matter, for example, a Congressional 
inquiry. Paragraph (d) of this section provides the parameters for 
disclosure consents connected with electronic return filing programs 
and combined Federal State filing. Finally, paragraph (e) provides 
definitions and general rules related to requests for or consents to 
disclosure.
    (b) Disclosure of returns and return information to person or 
persons designated in a written request or consent--(1) General 
requirements. Pursuant to section 6103(c) of the Internal Revenue Code, 
the Internal Revenue Service (or an agent or contractor of the Internal 
Revenue Service) may disclose a taxpayer's return or return information 
to such person or persons as the taxpayer may designate in a request 
for or consent to such disclosure. A request for or consent to 
disclosure under this paragraph (b) must be in the form of a separate 
written document pertaining solely to the authorized disclosure. (For 
the meaning of separate written document, see paragraph (e)(1) of this 
section.) The separate written document must be signed (see paragraph 
(e)(2) of this section) and dated by the taxpayer who filed the return 
or to whom the return information relates. The taxpayer must also 
indicate in the written document--
    (i) The taxpayer's taxpayer identity information described in 
section 6103(b)(6);
    (ii) The identity of the person or persons to whom the disclosure 
is to be made;
    (iii) The type of return (or specified portion of the return) or 
return information (and the particular data) that is to be disclosed; 
and
    (iv) The taxable year or years covered by the return or return 
information.
    (2) Requirement that request or consent be received within sixty 
days of when signed and dated. The disclosure of a return or return 
information authorized by a written request for or written consent to 
the disclosure shall not be made unless the request or consent is 
received by the Internal Revenue Service (or an agent or contractor of 
the Internal Revenue Service) within 60 days following the date upon 
which the request or consent was signed and dated by the taxpayer.
    (c) Disclosure of returns and return information to designee of 
taxpayer to comply with a taxpayer's request for information or 
assistance. Where a taxpayer makes a written or nonwritten request, 
directly to another person or to the Internal Revenue Service, that 
such other person (for example, a member of Congress, friend, or 
relative of the taxpayer) provide information or assistance relating to 
the taxpayer's return or to a transaction or other contact between the 
taxpayer and the Internal Revenue Service, the Internal Revenue Service 
(or an agent or contractor of the Internal Revenue Service or a Federal 
government agency performing a Federal tax administration function) may 
disclose returns or return information to such other person under the 
circumstances set forth in paragraphs (c) (1) through (3) of this 
section.
    (1) Written request for information or assistance. (i) The 
taxpayer's request for information or assistance may be in the form of 
a letter or other written document, which must be signed (see paragraph 
(e)(2) of this section) and dated by the taxpayer. The taxpayer must 
also indicate in the written request--
    (A) The taxpayer's taxpayer identity information described in 
section 6103(b)(6);
    (B) The identity of the person or persons to whom disclosure is to 
be made; and
    (C) Sufficient facts underlying the request for information or 
assistance to enable the Internal Revenue Service to determine the 
nature and extent of the information or assistance requested and the 
returns or return information to be disclosed in order to comply with 
the taxpayer's request.
    (ii) A person who receives a copy of a taxpayer's written request 
for information or assistance but who is not the addressee of the 
request, such as a member of Congress who is provided with a courtesy 
copy of a taxpayer's letter to another member of Congress or to the 
Internal Revenue Service, cannot receive returns or return information 
under paragraph (c)(1) of this section.
    (2) Nonwritten request or consent. (i) A request for information or 
assistance may also be nonwritten. Disclosure of returns and return 
information to a designee pursuant to a taxpayer's nonwritten request 
will be made only after the Internal Revenue Service has--
    (A) Obtained from the taxpayer sufficient facts underlying the 
request for information or assistance to enable the Internal Revenue 
Service to determine the nature and extent of the information or 
assistance requested and the return or return information to be 
disclosed in order to comply with the taxpayer's request;
    (B) Confirmed the identity of the taxpayer and the designee; and
    (C) Confirmed the date, the nature, and the extent of the 
information or assistance requested.
    (ii) Examples of disclosures pursuant to nonwritten requests for 
information or assistance under this paragraph (c)(2) include, but are 
not limited to, disclosures to a friend, relative, or other person whom 
the taxpayer brings to an interview or meeting with Internal Revenue 
Service officials, or disclosures to a person whom the taxpayer wishes 
to involve in a telephone conversation with Internal Revenue Service 
officials.
    (3) Rules applicable to written and nonwritten requests for 
information or assistance. A return or return information will be 
disclosed to the taxpayer's designee as provided by this paragraph only 
to the extent considered necessary by the Internal Revenue Service to 
comply with the taxpayer's request or consent. Such disclosures shall 
not be made unless the request or consent is received by the Internal 
Revenue Service, its agent or contractor, or a Federal government 
agency performing a Federal tax administration function in connection 
with a request for advice or assistance relating to such function. This 
paragraph (c) does not apply to disclosures to a taxpayer's 
representative in connection with

[[Page 2265]]

practice before the Internal Revenue Service (as defined in Treasury 
Department Circular No. 230). For disclosures in these cases, see 
section 6103(e)(6) and Secs. 601.501 through 601.508 of this chapter.
    (d) Acknowledgments of electronically filed returns and other 
documents; combined filing programs with State tax agencies--(1) 
Acknowledgment of, and notices regarding, electronically filed returns 
and other documents. When a taxpayer files returns or other documents 
or information with the Internal Revenue Service electronically, the 
taxpayer may consent to the disclosure of return information to the 
transmitter or other third party, such as the taxpayer's financial 
institution, necessary to acknowledge that the electronic transmission 
was received and either accepted or rejected by the Internal Revenue 
Service, the reason for any rejection, and such other information as 
the Internal Revenue Service determines is necessary to the operation 
of the electronic filing program. The consent must inform the taxpayer 
of the return information that will be transmitted and to whom 
disclosure will be made. The requirements of paragraphs (b) and (c) of 
this section do not apply to a consent under this paragraph (d)(1).
    (2) Combined return filing programs with State tax agencies. (i) A 
taxpayer's participation in a combined return filing program between 
the Internal Revenue Service and a State agency, body, or commission 
(State agency) described in section 6103(d)(1) constitutes a consent to 
the disclosure by the Internal Revenue Service, to the State agency, of 
taxpayer identity information, signature, and items of common data 
contained on such return. For purposes of this paragraph, common data 
means information reflected on the Federal return required by State law 
to be attached to or included on the State return. Instructions 
accompanying the forms or published procedures involved in such program 
must indicate that by participating in the program, the taxpayer is 
consenting to the Internal Revenue Service's disclosure to the State 
agency of the taxpayer identity information, signature, and items of 
common data, and that such information will be treated by the State 
agency as if it had been directly filed with the State agency. Such 
instructions or procedures must also describe any verification that 
takes place before the taxpayer identity information, signature and 
common data is transmitted by the Internal Revenue Service to the State 
agency.
    (ii) No disclosures may be made under this paragraph (d)(2) unless 
there are provisions of State law protecting the confidentiality of 
such items of common data.
    (e) Definitions and rules applicable to this section--(1) Separate 
written document. (i) For the purposes of paragraph (b) of this 
section, separate written document means--
    (A) One side of a standard (8\1/2\" by 11" or larger) sheet of 
paper, which may be included as part of a larger document;
    (B) Text appearing on a single computer screen containing all the 
elements described in paragraph (b)(1) of this section, which can be 
signed (see paragraph (e)(2) of this section) and dated by the 
taxpayer, and which can be reproduced, if necessary; or
    (C) A consent on the record in an administrative or judicial 
proceeding, or a transcript of such proceeding recording such consent, 
containing the information required under paragraph (b)(1) of this 
section.
    (ii) A provision included in a taxpayer's application for a loan or 
other benefit authorizing the grantor of the loan or other benefit to 
obtain any financial information, including returns or return 
information, from any source as the grantor may request for purposes of 
verifying information supplied on the application, does not meet the 
requirements of paragraph (b)(1) of this section because the provision 
is not a separate written document relating solely to the disclosure of 
returns and return information. In addition, the provision does not 
contain the other information specified in paragraph (b)(1) of this 
section.
    (2) Method of signing. A request for or consent to disclosure may 
be signed by any method of signing the Secretary of the Treasury has 
prescribed pursuant to Sec. 301.6061-1(b) in forms, instructions, or 
other appropriate guidance.
    (3) Permissible designees and public forums. Permissible designees 
under this section include individuals; trusts; estates; corporations; 
partnerships; Federal, State, local and foreign government agencies or 
subunits of such agencies; or the general public. When disclosures are 
to be made in a public forum, such as in a courtroom or congressional 
hearing, the request for or consent to disclosure must describe the 
circumstances surrounding the public disclosure, e.g., congressional 
hearing, judicial proceeding, media, and the date or dates of the 
disclosure.
    (4) Authority to execute a request for or consent to disclosure. 
Any person who may obtain returns under section 6103(e)(1) through (5), 
except section 6103(e)(1)(D)(iii), may execute a request for or consent 
to disclose a return or return information to third parties. For 
taxpayers that are legal entities, such as corporations and municipal 
bond issuers, any officer of the entity with authority under applicable 
State law to legally bind the entity may execute a request for or 
consent to disclosure. A person described in section 6103(e)(6) (a 
taxpayer's representative or individual holding a power of attorney) 
may not execute a request for or consent to disclosure unless the 
designation of representation or power of attorney specifically 
delegates such authority. A designee pursuant to this section does not 
have authority to execute a request for or consent to disclosure 
permitting the Internal Revenue Service to disclose returns or return 
information to another person.
    (5) No disclosure of return information if impairment. A disclosure 
of return information shall not be made under this section if the 
Internal Revenue Service determines that the disclosure would seriously 
impair Federal tax administration (as defined in section 6103(b)(4) of 
the Internal Revenue Code).
    (f) Effective date. This section is applicable on January 11, 2001 
through January 12, 2004.

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: December 29, 2000.
Jonathan Talisman
Assistant Secretary of the Treasury.
[FR Doc. 01-485 Filed 1-10-01; 8:45 am]
BILLING CODE 4830-01-P