[Federal Register Volume 66, Number 240 (Thursday, December 13, 2001)]
[Rules and Regulations]
[Pages 64351-64353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30619]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

[TD 8968]
RIN 1545-AY78


Disclosure of Returns and Return Information by Other Agencies

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulation.

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SUMMARY: This temporary regulation relates to the disclosure of returns 
and return information by Federal, state and local agencies other than 
the IRS. The temporary regulation permits the IRS to authorize agencies 
with access to returns and return information under section 6103 of the 
Internal Revenue Code (Code) to redisclose returns and return 
information, with the Commissioner's approval, to any authorized 
recipient set forth in section 6103, subject to the same conditions and 
restrictions, and for the same purposes, as if the recipient had 
received the information from the IRS directly.

DATES: This regulation is effective December 13, 2001.

FOR FURTHER INFORMATION CONTACT: Julie C. Schwartz, 202-622-4570 (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 under control number 1545-1757. Responses to this collection of 
information are required if the Commissioner is to authorize the 
disclosure of returns and return information from agencies with access 
to returns and return information under section 6103 to other 
authorized recipients of returns and return information in accordance 
with section 6103.
    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 OMB control number.
    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 or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by 26 U.S.C. 6103.

Background

    Section 6103(p)(2)(B) provides that return information disclosed 
pursuant to the Code may be disclosed by any mode or means that the 
Secretary determines necessary or appropriate. 26 CFR section 
301.6103(p)(2)(B)-1 currently permits certain recipients of returns and 
return information under section 6103, with the Commissioner's 
approval, to disclose returns and return information to certain other 
permissible recipients under section 6103. Specifically, the existing 
regulation permits disclosure by Federal agencies, with the 
Commissioner's approval, to (1) other Federal agencies, (2) state tax 
agencies, (3) the General Accounting Office, (4) Federal, state and 
local child support enforcement agencies, (5) persons described in 
section 6103(c) (person designated in a taxpayer consent), and 6) 
persons described in section 6103(e) (person with a material interest).
    The Consolidated Appropriations Act, 2001, Pub. L. 106-554 (114 
Stat. 2763), was signed into law on December 21, 2000. Section 1 of 
that Act enacted into law H.R. 5662, the Community Renewal Tax Relief 
Act of 2000. Section 310 of the Community Renewal Tax Relief Act of 
2000 added section 6103(j)(6) to the Code, authorizing the Commissioner 
to disclose return information to the Congressional Budget Office (CBO) 
for the purpose of, but only to the extent necessary for, long term 
models of the Social Security and Medicare programs. The conference 
report, H.R. Conf. Rep. No. 106-1033, at 1020-21 (2000), provides that 
it is the intent of Congress that all requests for information made by 
CBO under this provision be made to the Commissioner, who will use his 
authority under section 6103(p)(2) such that the Social Security 
Administration (SSA) or other agency can furnish the information 
directly to CBO for the purpose of CBO's long term models of Social 
Security and Medicare. SSA, not IRS, collects and maintains much of the 
information sought by CBO and also receives the tax information CBO 
seeks under other provisions of section 6103. However, section 
301.6103(p)(2)(B)-1 in its current form would not allow the 
Commissioner to authorize SSA to redisclose return information properly 
in its possession to CBO, an authorized recipient of the information 
under section 6103(j)(6). The temporary regulation allows SSA to make 
return information in its possession available to CBO to the extent 
authorized by section 6103(j)(6).
    There are other situations, similar to that found under section 
6103(j)(6), where it is more efficient for returns and return 
information in the possession of one authorized agency recipient, to be 
disclosed by such agency to another statutorily authorized recipient. 
The inability of agencies, including Federal, state and local agencies, 
to share returns and return information between themselves or even 
inside a single agency, even where the information is more readily 
available from an agency other than the IRS, was highlighted by the 
Department of the Treasury on pages 89-90 of its October 2000 Report to 
the Congress on the Scope and Use of Taxpayer Confidentiality and 
Disclosure Provisions. The report notes, for example, that currently a 
single agency within a state (or even a single caseworker) may be 
administering both child support under Title IV-D of the Social 
Security Act and welfare under Title IV-A of the Social Security Act. 
The agency may receive return information under both section 6103(l)(6) 
and section 6103(l)(7) to aid the agency in making determinations of 
eligibility for these programs, but the current regulation does not 
permit even intra-agency pooling or sharing of these data. The report 
notes that both intra- and inter-agency data sharing with respect to 
common data elements could be authorized by amendment to the Treasury 
regulations. The temporary regulation allows the IRS to authorize 
redisclosure in appropriate situations.

[[Page 64352]]

Explanation of Provisions

    The temporary regulation expands the agencies that may redisclose 
returns and return information if authorized by the Commissioner of 
Internal Revenue to any Federal, state or local agency that receives 
information under section 6103. Similarly, it expands the authorized 
recipients of returns and return information pursuant to this 
redisclosure authority to any recipient authorized to receive returns 
and return information in accordance with section 6103. All 
redisclosures by agencies pursuant to this regulation will be made 
subject to the same conditions, restrictions, safeguards, recordkeeping 
requirements, and civil and criminal penalties that would apply if the 
disclosure were made by the IRS. The reference in the existing 
regulation excepting redisclosures of return information under section 
6103(m) from the recordkeeping requirements has been deleted as 
unnecessary because section 6103(p)(3) does not require recordkeeping 
by the IRS of section 6103(m) disclosures. As under the existing 
regulation, Federal, state and local agencies making disclosures of 
return information under the temporary regulation will continue to 
provide to the IRS certain information regarding disclosures made 
pursuant to this authority, in order for the IRS to fulfill its 
reporting requirements under section 6103(p).

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. It has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 
6) do not apply to these regulations, and, therefore, a Regulatory 
Flexibility Analysis is not required. Pursuant to section 7805(f) of 
the Internal Revenue Code, these temporary regulations will be 
submitted to the Chief Counsel of the Small Business Administration for 
comment on their impact on small businesses.

Drafting Information

    The principal author of these regulations is Julie C. Schwartz, 
Office of the Associate Chief Counsel (Procedure and Administration), 
Disclosure and Privacy Law Division.

List of Subjects

26 CFR Part 301

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

26 CFR Part 602

    Reporting and recordkeeping requirements.

Amendments to the Regulations

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

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 is amended by 
adding an entry in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 301.6103(p)(2)(B)-1T also issued under 26 U.S.C. 
6103(p)(2); * * *


Sec. 301.6103(p)(2)(B)-1  [Removed]

    Par. 2. Section 301.6103(p)(2)(B)-1 is removed.

    Par. 3. Section 301.6103(p)(2)(B)-1T is added to read as follows:


Sec. 301.6103(p)(2)(B)-1T  Disclosure of Returns and Return Information 
by Other Agencies

    (a) General rule. Subject to the requirements of paragraphs (b), 
(c), and (d) of this section, returns or return information that have 
been obtained by a Federal, state or local agency, or its agents or 
contractors in accordance with section 6103 (the ``first recipient'') 
may be disclosed by the first recipient to another recipient authorized 
to receive such returns or return information under section 6103 (the 
``second recipient'').
    (b) Approval by Commissioner. A disclosure described in paragraph 
(a) of this section may be made if the Commissioner of Internal Revenue 
(the ``Commissioner'') determines, after receiving a written request 
under this section, that such returns or return information are more 
readily available from the first recipient than from the Internal 
Revenue Service. The disclosure authorization by the Commissioner shall 
be directed to the head of the first recipient and may contain such 
conditions or restrictions as the Commissioner may prescribe. The 
disclosure authorization may be revoked by the Commissioner at any 
time.
    (c) Requirements and restrictions. The second recipient may only 
receive returns or return information as authorized by the provision of 
section 6103 applicable to such second recipient. Any returns or return 
information disclosed may only be used by the second recipient for a 
purpose authorized by and subject to any conditions imposed by section 
6103 and the regulations thereunder, including, if applicable, 
safeguards imposed by section 6103(p)(4).
    (d) Records and reports of disclosure. The first recipient shall 
maintain to the satisfaction of the Internal Revenue Service a 
permanent system of standardized records regarding such disclosure 
authorization described in paragraph (a) of this section and any 
disclosure of returns and return information made pursuant to such 
authorization, and shall provide such information as prescribed by the 
Commissioner in order to enable the Internal Revenue Service to comply 
with its obligations under section 6103(p)(3) to keep accountings for 
disclosures and to make annual reports of disclosures to the Joint 
Committee on Taxation. The information required for reports to the 
Joint Committee on Taxation must be provided within 30 days after the 
close of each calendar year. The requirements of this paragraph do not 
apply to the disclosure of returns and return information as provided 
by paragraph (a) of this section which, had such disclosures been made 
directly by the Service, would not have been subject to the 
recordkeeping requirements imposed by section 6103(p)(3)(A).
    (e) Effective date. This section is applicable on December 13, 
2001.

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

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

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


    Paragraph 5. In Sec. 602.101, paragraph (b) is amended by adding an 
entry to the table in numerical order to read as follows:


Sec. 602.101  OMB Control Numbers.

* * * * *
    (b) * * *

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                                                            Current OMB
   CFR part or section where identified and described       control No.
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301.6103(p)(2)(B)-1T....................................       1545-1757
 
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[[Page 64353]]

    Approved: December 4, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Mark Weinberger,
Assistant Secretary (Tax Policy), Department of the Treasury.
[FR Doc. 01-30619 Filed 12-12-01; 8:45 am]
BILLING CODE 4830-01-P