[Federal Register Volume 66, Number 31 (Wednesday, February 14, 2001)]
[Rules and Regulations]
[Pages 10191-10196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1292]



[[Page 10191]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 301, and 602

[TD 8942]
RIN 1545-AY00


Electronic Payee Statements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations under sections 
6041 and 6051 relating to the voluntary electronic furnishing of payee 
statements on Forms W-2, ``Wage and Tax Statement,'' and under section 
6050S relating to the voluntary electronic furnishing of statements to 
individuals for whom Forms 1098-T, ``Tuition Payments Statement,'' and 
Forms 1098-E, ``Student Loan Interest Statement,'' are filed. The 
regulations will affect persons required by the foregoing Internal 
Revenue Code sections to furnish these statements (furnishers) who wish 
to furnish these statements electronically. The regulations will also 
affect individuals, principally employees, students, and borrowers 
(recipients), who consent to receive these statements electronically. 
The text of the temporary regulations also serves as the text of the 
proposed regulations set forth in the notice of proposed rulemaking on 
this subject in the Proposed Rules section of this issue of the Federal 
Register. The temporary regulations do not affect the requirement to 
file copy A of Forms W-2 with the Social Security Administration or the 
requirement to file Forms 1098-T or Forms 1098-E with the IRS.

DATES: Effective Date: These regulations are effective February 14, 
2001.
    Applicability Date: These regulations apply to statements to 
recipients required to be furnished under sections 6041(d), 6050S(d), 
and 6051 after December 31, 2000.

FOR FURTHER INFORMATION CONTACT: Laura C. Nash at (202) 622-4910 (not a 
toll free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These temporary regulations are being issued without prior notice 
and public procedure pursuant to the Administrative Procedure Act (5 
U.S.C. 553). For this reason, the collection of information contained 
in these regulations has been reviewed, and pending receipt and 
evaluation of public comments, approved by the Office of Management and 
Budget (OMB) under control number 1545-1729. Responses to this 
collection of information are required if a person required by section 
6050S(d) to furnish statements to recipients for whom Forms 1098-T or 
Forms 1098-E are filed, or a person required by sections 6041(d) and 
6051 to furnish payee statements on Forms W-2, wishes to furnish the 
statements electronically using website technology.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number assigned by the Office of 
Management and Budget.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden, and suggestions for reducing this 
burden, please refer to the preamble to the cross-referencing notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register.
    Books and 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 Income Tax Regulations (26 
CFR part 1) relating to sections 6041(d) and 6050S(d), to the 
Regulations on Employment Taxes and Collection of Income Tax at Source 
(26 CFR part 31) relating to section 6051, and to the Regulations on 
Procedure and Administration (26 CFR Part 301) relating to section 
6724. Sections 6041(d) and 6050S(d) generally require certain persons 
to furnish a statement to a person with respect to whom an information 
return is required to be filed with the Federal government under 
sections 6041(a) and 6050S(a). Section 6051 requires certain persons to 
furnish a written statement to an employee regarding remuneration paid 
by such person to the employee. The foregoing statements (specified 
statements) are generally required to be furnished to recipients on or 
before January 31 of the year following the calendar year for which the 
related information returns are required to be filed or in which the 
wages or other compensation was paid.
    These temporary regulations state that furnishers may provide the 
written statements required by sections 6041(d), 6050S(d), and 6051 in 
an electronic format in lieu of a paper format. In addition, the 
temporary regulations provide furnishers with a method of furnishing 
these statements electronically using website technology. Furnishers 
who use this website technology and satisfy the requirements of the 
temporary regulations are treated as timely furnishing the statements 
under sections 6041(d), 6050S(d), and 6051.
    The objective of the temporary regulations is to facilitate the 
voluntary electronic furnishing of these statements. This objective is 
consistent with the general goals of (i) section 2001 of the Internal 
Revenue Service Restructuring and Reform Act of 1998 to eliminate 
barriers, provide incentives, and use competitive forces to increase 
electronic filing over the next ten years and (ii) the Electronic 
Signatures in Global and National Commerce Act (E-SIGN Act) to 
facilitate voluntary use of certain electronic records. However, 
furnishers are not required to use the website technology described in 
the temporary regulations if they wish to continue to provide paper 
statements. Thus, the temporary regulations do not require a furnisher 
to invest in new delivery systems or to meet any new legal requirements 
to furnish a statement.
    A major impetus for publishing these temporary regulations was the 
large number of requests for published guidance from lenders, 
educational institutions, employers and other furnishers who want the 
option of delivering statements to recipients in an electronic format. 
In addition, the Information Reporting Program Advisory Committee of 
the Internal Revenue Service (IRPAC) and the Electronic Tax 
Administration Advisory Committee (ETAAC) also strongly support 
providing furnishers with the option of furnishing statements 
electronically.
    At its May 11, 2000, public meeting, IRPAC advocated issuance of 
guidance permitting furnishers to use website technology to furnish 
statements electronically. The IRS consulted with IRPAC representatives 
to ensure that the temporary regulations provide furnishers with clear, 
practical, and administrable procedures for the voluntary electronic 
furnishing of the specified statements. The temporary regulations 
incorporate many of IRPAC's suggestions and those of other furnishers.

[[Page 10192]]

    These temporary regulations also strike a balance between 
furnishers' desires to reduce costs and modernize business processes by 
furnishing statements electronically and the tax administration concern 
that employees, students, and borrowers must be able to access 
electronic statements so that they can timely file accurate income tax 
returns. The consumer consent provisions of section 101(c)(1) of the E-
SIGN Act strike a similar balance between businesses' desire to 
transmit records electronically and concerns about consumers' abilities 
to access and use those records. Therefore, these temporary regulations 
include disclosure provisions that are consistent with the 
Congressionally-approved consent provisions of the E-SIGN Act. These 
disclosure provisions will ensure that recipients will obtain the 
information they need to make an informed choice to receive the 
statements electronically and to access them timely.
    The IRS and the Treasury Department invite comments about whether 
the provisions of these temporary regulations should apply to 
statements required to be furnished to recipients under other sections 
of the Internal Revenue Code. In addition, comments are invited about 
whether furnishers will use other technologies (such as e-mail) to 
furnish statements electronically and whether they need guidance on the 
conditions under which those statements will be considered timely 
furnished. Finally, comments are invited on whether the final 
regulations should prescribe standards to ensure confidentiality of 
taxpayer information posted on a website. Until final regulations are 
issued, the Treasury Department and the IRS expect that furnishers will 
take reasonable precautions to ensure confidentiality of taxpayer 
information.

Explanation of Provisions

    This temporary regulation provides guidance under Secs. 1.6041-
2T(a)(5) (by cross-reference to the regulations under section 6051), 
1.6050S-1T(a), 1.6050S-2T(a), and 31.6051-1T(j) regarding the 
electronic furnishing of specified statements. The temporary 
regulations provide that the written statements required by sections 
6041(d), 6050S(d), and 6051 may be furnished in an electronic format. 
In addition, the temporary regulations provide that a furnisher that 
complies with the consent, required disclosures, format, posting, 
notice, and retention provisions of the temporary regulations is 
treated as timely furnishing the specified statements under sections 
6041(d), 6050S(d), and 6051.

Consent

    The temporary regulations provide that a recipient must have 
affirmatively consented to receive the statement electronically and 
must not have withdrawn that consent before the statement is furnished. 
The consent or, alternatively, its confirmation must be made 
electronically in a manner that reasonably demonstrates that the 
recipient can access the statement in the electronic format in which it 
will be furnished to the recipient. A furnisher must take certain 
actions, including obtaining from the recipient a new electronic 
consent or confirmation of consent to receive the statement 
electronically, if a change in the hardware or software needed to 
access a statement creates a material risk that the recipient will not 
be able to access the statement.

Required Disclosures

    Prior to or at the time a recipient consents to receive a statement 
electronically, the furnisher must provide a clear and conspicuous 
statement to the recipient containing certain disclosures. These 
required disclosures are similar to the consumer consent provisions in 
the E-SIGN Act and, like those provisions, require a furnisher to 
inform a recipient about, for example, the scope and duration of a 
consent to receive an electronic statement, the ability to revoke that 
consent, the hardware and software required to access, print, and 
retain an electronic statement, and the ability to obtain a paper 
statement.

Format

    The temporary regulations require that the electronic version of a 
statement furnished to a recipient contain all required information and 
comply with applicable revenue procedures relating to substitute 
statements.

Posting

    The temporary regulations generally require that the furnisher post 
the statements on a website accessible to recipients on or before 
January 31 of the year following the calendar year to which the 
statements relate.

Notice

    The temporary regulations generally require the furnisher to notify 
a recipient that the statement is posted on a website on or before 
January 31 of the year following the calendar year to which the 
statement relates. The notice may be delivered by mail, electronic 
mail, or in person and must provide instructions to the recipient on 
how to access and print the statement. If a furnisher later posts 
corrected statements on the website, the furnisher must notify the 
recipients of that posting within 30 days after the posting.

Retention

    The temporary regulations generally require the furnisher to 
maintain access to the statements on the website through October 15 of 
the year following the calendar year to which the statements relate. In 
addition, the furnisher generally must maintain access to corrected 
statements that are posted on the website through October 15 of the 
year following the calendar year to which the statements relate or for 
90 days after that posting, whichever is later.

Special Analyses

    It has been determined that this temporary regulation is not a 
significant regulatory action as defined in Executive Order 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.
    Because no preceding notice of proposed rulemaking is required for 
this temporary regulation, the provisions of the Regulatory Flexibility 
Act do not apply. However, an initial Regulatory Flexibility Analysis 
was prepared for the proposed regulations published elsewhere in this 
issue of the Federal Register. Pursuant to section 7805(f) of the 
Internal Revenue Code, that notice of proposed rulemaking 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 temporary regulations is Eric Lucas, 
formerly of the Office of Associate Chief Counsel (Procedure and 
Administration). However, other personnel from the IRS and Treasury 
Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping

[[Page 10193]]

requirements, Social security, Unemployment compensation.

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.

Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 31, 301, and 602 are amended as 
follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read in part as follows:

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

    Section 1.6041-2T also issued under 26 U.S.C. 6041(d). * * *
    Section 1.6050S-1T also issued under 26 U.S.C. 6050S(g).
    Section 1.6050S-2T also issued under 26 U.S.C. 6050S(g). * * *


    Par. 2. Section 1.6041-2T is added to read as follows:


Sec. 1.6041-2T  Return of information as to payments to employees 
(temporary).

    (a)(1) through (4) [Reserved]
    (5) Statement for employees. An employer that is required under 
Sec. 1.6041-2(a) to file Form W-2 with respect to an employee is also 
required under section 6041(d) and 6051 to furnish a written statement 
to the employee. This written statement must be furnished on Form W-2 
in accordance with section 6051 and the regulations.
    (b) and (c). For further guidance, see Sec. 1.6041-2(b) and (c).

    Par. 3. Sections 1.6050S-1T and 1.6050S-2T are added to read as 
follows:


Sec. 1.6050S-1T  Information reporting for payments and reimbursements 
or refunds of qualified tuition and related expenses (temporary).

    (a) Electronic furnishing of statements--(1) In general. A person 
required by section 6050S(d) to furnish a written statement (furnisher) 
to the individual to whom it is required to be furnished (recipient) 
may furnish the statement in an electronic format in lieu of a paper 
format. A furnisher who meets the requirements of paragraphs (a)(2) 
through (7) of this section is treated as furnishing the statement in a 
timely manner.
    (2) Consent--(i) In general. The recipient must have affirmatively 
consented to receive the statement in an electronic format and must not 
have withdrawn that consent before the statement is furnished. The 
consent must be made electronically in a manner that reasonably 
demonstrates that the recipient can access the statement in the 
electronic format in which it will be furnished to the recipient. 
Alternatively, the consent may be made in a different manner (for 
example, in an e-mail or in a paper document) if it is confirmed 
electronically in the manner described in the preceding sentence.
    (ii) Change in hardware or software requirements. If a change in 
the hardware or software required to access the statement creates a 
material risk that the recipient will not be able to access the 
statement, the furnisher must, prior to changing the hardware or 
software, provide the recipient with a notice. The notice must describe 
the revised hardware and software required to access the statement and 
inform the recipient that a new consent to receive the statement in the 
revised electronic format must be provided to the furnisher. After 
implementing the revised hardware and software, the furnisher must 
obtain from the recipient, in the manner described in paragraph 
(a)(2)(i) of this section, a new consent or confirmation of consent to 
receive the statement electronically.
    (iii) Example. The following example illustrates the rules of this 
paragraph (a)(2):

    Example. Furnisher F sends Recipient R an e-mail stating that R 
may consent to receive statements required by section 6050S(d) 
electronically on a website instead of in a paper format. The e-mail 
contains an attachment instructing R how to consent to receive the 
statements electronically. The e-mail attachment uses the same 
electronic format that F will use for the electronically furnished 
statements. R opens the attachment, reads the instructions, and 
submits the consent in the manner provided in the instructions. R 
has consented to receive the statements electronically in the manner 
described in paragraph (a)(2)(i) of this section.

    (3) Required disclosures--(i) In general. Prior to, or at the time 
of, a recipient's consent, the furnisher must provide to the recipient 
a clear and conspicuous disclosure statement containing each of the 
disclosures described in paragraphs (a)(3)(ii) through (viii) of this 
section.
    (ii) Paper statement. The recipient must be informed that the 
statement will be furnished on paper if the recipient does not consent 
to receive it electronically.
    (iii) Scope and duration of consent. The recipient must be informed 
of the scope and duration of the consent. For example, the recipient 
must be informed whether the consent applies to statements furnished 
every year after the consent is given until it is withdrawn in the 
manner described in paragraph (a)(3)(v)(A) of this section or only to 
the statement required to be furnished on or before the January 31 
immediately following the date on which the consent is given.
    (iv) Post-consent request for a paper statement. The recipient must 
be informed of any procedure for obtaining a paper copy of the 
recipient's statement after giving the consent described in paragraph 
(a)(2)(i) of this section.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent at any time by furnishing 
the withdrawal in writing (electronically or on paper) to the person 
whose name, mailing address, telephone number, and e-mail address is 
provided in the disclosure statement;
    (B) The furnisher will confirm the withdrawal in writing (either 
electronically or on paper); and
    (C) A withdrawal of consent does not apply to a statement that was 
furnished electronically in the manner described in this paragraph (a) 
before the withdrawal of consent is furnished.
    (vi) Notice of termination. The recipient must be informed of the 
conditions under which a furnisher will cease furnishing statements 
electronically to the recipient.
    (vii) Updating information. The recipient must be informed of the 
procedures for updating the information needed by the furnisher to 
contact the recipient.
    (viii) Hardware and software requirements. The recipient must be 
provided with a description of the hardware and software required to 
access, print, and retain the statement, and the date when the 
statement will no longer be available on the website.
    (4) Format. The electronic version of the statement must contain 
all required information and comply with applicable revenue procedures 
relating to substitute statements to recipients.
    (5) Posting. The furnisher must on or before January 31 of the year 
following the calendar year to which the statement relates (or such 
other date permitted or required for furnishing the statement) post it 
on a website accessible to the recipient.
    (6) Notice--(i) In general. The furnisher must on or before January 
31 of the year following the calendar year to which the statement 
relates (or such other date permitted or required for furnishing the 
statement) notify the

[[Page 10194]]

recipient that the statement is posted on a website. The notice may be 
delivered by mail, electronic mail, or in person. The notice must 
provide instructions on how to access and print the statement. The 
notice must include the following statement in capital letters, 
``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' If the notice is provided 
by electronic mail, the foregoing statement should be on the subject 
line of the electronic mail and sent with high importance.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (a)(6)(i) of this section is returned as 
undeliverable, and the correct electronic address cannot be obtained 
from the furnisher's records or from the recipient, then the furnisher 
must furnish the notice by mail or in person within 30 days after the 
electronic notice is returned.
    (iii) Corrected statements. A furnisher must notify a recipient 
that it has posted corrected statements on a website within 30 days of 
such posting in the manner described in paragraph (a)(6)(i) of this 
section. This notice must be furnished by mail or in person if--
    (A) An electronic notice of the website posting of an original 
statement was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (7) Retention. The furnisher must maintain access to the statements 
on the website through October 15 of the year following the calendar 
year to which the statements relate (or the first business day after 
such October 15, if October 15 falls on a Saturday, Sunday, or legal 
holiday). The furnisher must maintain access to corrected statements 
that are posted on the website through October 15 of the year following 
the calendar year to which the statements relate (or the first business 
day after such October 15, if October 15 falls on a Saturday, Sunday, 
or legal holiday) or the date 90 days after the corrected statements 
are posted, whichever is later.
    (b) Effective date. This section applies to statements required to 
be furnished under section 6050S(d) after December 31, 2000.


Sec. 1.6050S-2T  Information reporting for payments of interest on 
qualified education loans (temporary).

    (a) Electronic furnishing of statements--(1) In general. A person 
required by section 6050S(d) to furnish a written statement (furnisher) 
to the individual to whom it is required to be furnished (recipient) 
may furnish the statement in an electronic format in lieu of a paper 
format. A furnisher who meets the requirements of paragraphs (a)(2) 
through (7) of this section is treated as furnishing the statement in a 
timely manner.
    (2) Consent--(i) In general. The recipient must have affirmatively 
consented to receive the statement in an electronic format and must not 
have withdrawn that consent before the statement is furnished. The 
consent must be made electronically in a manner that reasonably 
demonstrates that the recipient can access the statement in the 
electronic format in which it will be furnished to the recipient. 
Alternatively, the consent may be made in a different manner (for 
example, in an e-mail or in a paper document) if it is confirmed 
electronically in the manner described in the preceding sentence.
    (ii) Change in hardware or software requirements. If a change in 
the hardware or software required to access the statement creates a 
material risk that the recipient will not be able to access the 
statement, the furnisher must, prior to changing the hardware or 
software, provide the recipient with a notice. The notice must describe 
the revised hardware and software required to access the statement and 
inform the recipient that a new consent to receive the statement in the 
revised electronic format must be provided to the furnisher. After 
implementing the revised hardware and software, the furnisher must 
obtain from the recipient, in the manner described in paragraph 
(a)(2)(i) of this section, a new consent or confirmation of consent to 
receive the statement electronically.
    (iii) Example. The following example illustrates the rules of this 
paragraph (a)(2):

    Example. Furnisher F sends Recipient R an e-mail stating that R 
may consent to receive statements required by section 6050S(d) 
electronically on a website instead of in a paper format. The e-mail 
contains an attachment instructing R how to consent to receive the 
statements electronically. The e-mail attachment uses the same 
electronic format that F will use for the electronically furnished 
statements. R opens the attachment, reads the instructions, and 
submits the consent in the manner provided in the instructions. R 
has consented to receive the statements electronically in the manner 
described in paragraph (a)(2)(i) of this section.

    (3) Required disclosures--(i) In general. Prior to, or at the time 
of, a recipient's consent, the furnisher must provide to the recipient 
a clear and conspicuous disclosure statement containing each of the 
disclosures described in paragraphs (a)(3)(ii) through (viii) of this 
section.
    (ii) Paper statement. The recipient must be informed that the 
statement will be furnished on paper if the recipient does not consent 
to receive it electronically.
    (iii) Scope and duration of consent. The recipient must be informed 
of the scope and duration of the consent. For example, the recipient 
must be informed whether the consent applies to statements furnished 
every year after the consent is given until it is withdrawn in the 
manner described in paragraph (a)(3)(v)(A) of this section or only to 
the statement required to be furnished on or before the January 31 
immediately following the date on which the consent is given.
    (iv) Post-consent request for a paper statement. The recipient must 
be informed of any procedure for obtaining a paper copy of the 
recipient's statement after giving the consent described in paragraph 
(a)(2)(i) of this section.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent at any time by furnishing 
the withdrawal in writing (electronically or on paper) to the person 
whose name, mailing address, telephone number, and e-mail address is 
provided in the disclosure statement;
    (B) The furnisher will confirm the withdrawal in writing (either 
electronically or on paper); and
    (C) A withdrawal of consent does not apply to a statement that was 
furnished electronically in the manner described in this paragraph (a) 
before the withdrawal of consent is furnished.
    (vi) Notice of termination. The recipient must be informed of the 
conditions under which a furnisher will cease furnishing statements 
electronically to the recipient.
    (vii) Updating information. The recipient must be informed of the 
procedures for updating the information needed by the furnisher to 
contact the recipient.
    (viii) Hardware and software requirements. The recipient must be 
provided with a description of the hardware and software required to 
access, print, and retain the statement, and the date when the 
statement will no longer be available on the website.
    (4) Format. The electronic version of the statement must contain 
all required information and comply with applicable revenue procedures 
relating to substitute statements to recipients.
    (5) Posting. The furnisher must on or before January 31 of the year 
following the calendar year to which the statement relates (or such 
other date permitted or required for furnishing the statement) post it 
on a website accessible to the recipient.

[[Page 10195]]

    (6) Notice--(i) In general. The furnisher must on or before January 
31 of the year following the calendar year to which the statement 
relates (or such other date permitted or required for furnishing the 
statement) notify the recipient that the statement is posted on a 
website. The notice may be delivered by mail, electronic mail, or in 
person. The notice must provide instructions on how to access and print 
the statement. The notice must include the following statement in 
capital letters, ``IMPORTANT TAX DOCUMENT RETURN AVAILABLE.'' If the 
notice is provided by electronic mail, the foregoing statement should 
be on the subject line of the electronic mail and sent with high 
importance.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (a)(6)(i) of this section is returned as 
undeliverable, and the correct electronic address cannot be obtained 
from the furnisher's records or from the recipient, then the furnisher 
must furnish the notice by mail or in person within 30 days after the 
electronic notice is returned.
    (iii) Corrected statements. A furnisher must notify a recipient 
that it has posted corrected statements on a website within 30 days of 
such posting in the manner described in paragraph (a)(6)(i) of this 
section. This notice must be furnished by mail or in person if--
    (A) An electronic notice of the website posting of an original 
statement was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (7) Retention. The furnisher must maintain access to the statements 
on the website through October 15 of the year following the calendar 
year to which the statements relate (or the first business day after 
such October 15, if October 15 falls on a Saturday, Sunday, or legal 
holiday). The furnisher must maintain access to corrected statements 
that are posted on the website through October 15 of the year following 
the calendar year to which the statements relate (or the first business 
day after such October 15, if October 15 falls on a Saturday, Sunday, 
or legal holiday) or the date 90 days after the corrected statements 
are posted, whichever is later.
    (b) Effective date. This section applies to statements required to 
be furnished under section 6050S(d) after December 31, 2000.

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

    Par. 4. The authority citation for part 31 is amended to read in 
part as follows:

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

    Section 31.6051-1T also issued under 26 U.S.C. 6051. * * *


    Par. 5. Section 31.6051-1T is added to read as follows:


Sec. 31.6051-1T  Statements for employees (temporary).

    (a) through (i) [Reserved]. For further guidance, see Sec. 31.6051-
1(a) through (i).
    (j) Electronic furnishing of statements--(1) In general. A person 
required by section 6051 to furnish a written statement on Form W-2 
(furnisher) to the individual to whom it is required to be furnished 
(recipient) may furnish the Form W-2 in an electronic format in lieu of 
a paper format. A furnisher who meets the requirements of paragraphs 
(j)(2) through (7) of this section is treated as furnishing the Form W-
2 in a timely manner.
    (2) Consent--(i) In general. The recipient must have affirmatively 
consented to receive the Form W-2 in an electronic format and must not 
have withdrawn that consent before the Form W-2 is furnished. The 
consent must be made electronically in a manner that reasonably 
demonstrates that the recipient can access the Form W-2 in the 
electronic format in which it will be furnished to the recipient. 
Alternatively, the consent may be made in a different manner (for 
example, in an e-mail or in a paper document) if it is confirmed 
electronically in the manner described in the preceding sentence.
    (ii) Change in hardware or software requirements. If a change in 
hardware or software required to access the Form W-2 creates a material 
risk that the recipient will not be able to access the Form W-2, the 
furnisher must, prior to changing the hardware or software, provide the 
recipient with a notice. The notice must describe the revised hardware 
and software required to access the Form W-2 and inform the recipient 
that a new consent to receive the Form W-2 in the revised electronic 
format must be provided to the furnisher. After implementing the 
revised hardware and software, the furnisher must obtain from the 
recipient, in the manner described in paragraph (j)(2)(i) of this 
section, a new consent or confirmation of consent to receive the Form 
W-2 electronically.
    (iii) Example. The following example illustrates the rules of this 
paragraph (j)(2):

    Example. Furnisher F sends Recipient R an e-mail stating that R 
may consent to receive Forms W-2 electronically on a website instead 
of in a paper format. The e-mail contains an attachment instructing 
R how to consent to receive Forms W-2 electronically. The e-mail 
attachment uses the same electronic format that F will use for its 
electronically furnished Forms W-2. R opens the attachment, reads 
the instructions, and submits the consent in the manner provided in 
the instructions. R has consented to receive Forms W-2 
electronically in the manner described in paragraph (j)(2)(i) of 
this section.

    (3) Required disclosures--(i) In general. Prior to, or at the time 
of, a recipient's consent, the furnisher must provide to the recipient 
a clear and conspicuous disclosure statement containing each of the 
disclosures described in paragraphs (j)(3)(ii) through (viii) of this 
section.
    (ii) Paper statement. The recipient must be informed that the Form 
W-2 will be furnished on paper if the recipient does not consent to 
receive it electronically.
    (iii) Scope and duration of consent. The recipient must be informed 
of the scope and duration of the consent. For example, the recipient 
must be informed whether the consent applies to Forms W-2 furnished 
every year after the consent is given until it is withdrawn in the 
manner described in paragraph (j)(3)(v)(A) of this section or only to 
the Form W-2 required to be furnished on or before the January 31 
immediately following the date on which the consent is given.
    (iv) Post-consent request for a paper statement. The recipient must 
be informed of any procedure for obtaining a paper copy of the 
recipient's Form W-2 after giving the consent described in paragraph 
(j)(2)(i) of this section.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent at any time by furnishing 
the withdrawal in writing (electronically or on paper) to the person 
whose name, mailing address, telephone number, and e-mail address is 
provided in the disclosure statement;
    (B) The furnisher will confirm the withdrawal in writing (either 
electronically or on paper); and
    (C) A withdrawal of consent does not apply to a Form W-2 that was 
furnished electronically in the manner described in this paragraph (j) 
before the withdrawal of consent is furnished.
    (vi) Notice of termination. The recipient must be informed of the 
conditions under which a furnisher will cease furnishing statements 
electronically to the recipient (for example, termination of the 
recipient's employment with furnisher-employer).
    (vii) Updating information. The recipient must be informed of the 
procedures for updating the information needed by the furnisher to 
contact the recipient.

[[Page 10196]]

    (viii) Hardware and software requirements. The recipient must be 
provided with a description of the hardware and software required to 
access, print, and retain the Form W-2, and the date when the Form W-2 
will no longer be available on the website. The recipient must be 
informed that the Form W-2 may be required to be printed and attached 
to a Federal, State, or local income tax return.
    (4) Format. The electronic version of the Form W-2 must contain all 
required information and comply with applicable revenue procedures 
relating to substitute statements to recipients.
    (5) Posting. The furnisher must on or before January 31 of the year 
following the calendar year to which the Form W-2 relates (or such 
other date permitted or required for furnishing the Forms W-2) post it 
on a website accessible to the recipient.
    (6) Notice--(i) In general. The furnisher must on or before January 
31 of the year following the calendar year to which the Form W-2 
relates (or such other date permitted or required for furnishing the 
Form W-2) notify the recipient that the Form W-2 is posted on a 
website. The notice may be delivered by mail, electronic mail, or in 
person. The notice must provide instructions on how to access and print 
the statement. The notice must include the following statement in 
capital letters, ``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' If the 
notice is provided by electronic mail, the foregoing statement should 
be on the subject line of the electronic mail and sent with high 
importance.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (j)(6)(i) of this section is returned as 
undeliverable, and the correct electronic address cannot be obtained 
from the furnisher's records or from the recipient, then the furnisher 
must furnish the notice by mail or in person within 30 days after the 
electronic notice is returned.
    (iii) Corrected Forms W-2. A furnisher must notify a recipient that 
it has posted corrected Forms W-2 on a website within 30 days of such 
posting in the manner described in paragraph (j)(6)(i) of this section. 
This notice must be furnished by mail or in person if--
    (A) An electronic notice of the website posting of an original Form 
W-2 was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (7) Retention. The furnisher must maintain access to the Forms W-2 
on the website through October 15 of the year following the calendar 
year to which the Forms W-2 relate (or the first business day after 
October 15, if October 15 falls on a Saturday, Sunday, or legal 
holiday). The furnisher must maintain access to corrected Forms W-2 
that are posted on the website through October 15 of the year following 
the calendar year to which the Forms W-2 relate (or the first business 
day after such October 15, if October 15 falls on a Saturday, Sunday, 
or legal holiday) or the date 90 days after the corrected forms are 
posted, whichever is later.
    (k) Effective date. Paragraph (j) of this section applies to Forms 
W-2 required to be furnished under section 6051 after December 31, 
2000.

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 6. The authority citation for part 301 continues to read in 
part as follows:

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

    Par. 7. Section 301.6724-1T is added to read as follows:


Sec. 301.6724-1T  Reasonable cause (temporary).

    (a) through (d)(2) [Reserved]. For further information, see 
Sec. 301.6724-1 (a) through (d)(2).
    (d)(3) Special rule for furnishers of electronic statements. A 
filer may seek a waiver for reasonable cause pursuant to Sec. 301.6724-
1(c)(6), for failing to timely furnish a statement in the following 
situation. If the recipient of the statement withdraws a consent to 
receive the statement in an electronic format, the filer will be deemed 
to have acted in a responsible manner under Sec. 301.6724-1(d) if the 
filer furnishes a paper statement on or before the date 30 days after 
the date the withdrawal of consent is received.
    (e) through (n) [Reserved]. For further guidance, see 
Sec. 301.6724-1(e) through (n).

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

    Par. 8. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


    Par. 9. In Sec. 602.101, paragraph (b) is amended by adding entries 
to the table in numerical order to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                  *        *        *        *        *
1.6041-2T...............................................       1545-1729
 
                  *        *        *        *        *
1.6050S-1T..............................................       1545-1729
1.6050S-2T..............................................       1545-1729
 
                  *        *        *        *        *
31.6051-1T..............................................       1545-1729
 
                  *        *        *        *        *
------------------------------------------------------------------------


Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: January 10, 2001.
Jonathan Talisman,
Assistant Secretary of the Treasury.
[FR Doc. 01-1292 Filed 2-13-01; 8:45 am]
BILLING CODE 4830-01-P