[Federal Register Volume 68, Number 48 (Wednesday, March 12, 2003)]
[Rules and Regulations]
[Pages 11739-11741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5462]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

[TD 9044]
RIN 1545-BB13


Amendment of 26 CFR 301.6103(n)-1 to Incorporate Taxpayer 
Browsing Protection Act

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final rule.

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SUMMARY: This final regulation requires persons to whom returns or 
return information is or may be disclosed as authorized by Sec.  
301.6103(n)-1(a) (generally, contractors employed to perform tax 
administration services) to notify their officers and employees of the 
prohibitions against and penalties for unauthorized inspection of 
returns or return information.

DATES: Effective Date: This final regulation is effective March 12, 
2003.

FOR FURTHER INFORMATION CONTACT: Carol Marchant, 202-622-4590 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information in this final rule has been reviewed 
and, pending receipt and evaluation of public comments, approved by the 
Office of Management and Budget (OMB) under 44 U.S.C. 3507 and assigned 
control number 1545-1821. The collection of information in this 
regulation is in Sec.  301.6103(n)-1(c). This information is required 
and will be used

[[Page 11740]]

to promote compliance by officers and employees with the restrictions 
of sections 6103, 7213 and 7213A, and to protect the privacy of 
American taxpayers. The collection of information is required to obtain 
a benefit. The likely respondents are State or local governments, 
business or other for-profit institutions, Federal agencies, and/or 
small businesses or organizations.
    Comments on the collection of information should be sent to the 
Office of Management and Budget, Attn: Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, W:CAR:MP:T:T:SP, Washington, DC 
20224. Comments on the collection of information should be received by 
May 12, 2003.
    Comments are specifically requested concerning: Whether the 
collection of information is necessary for the proper performance of 
the functions of the Internal Revenue Service, including whether the 
information will have practical utility; The accuracy of the estimated 
burden associated with the collection of information (see below); How 
the quality, utility, and clarity of the information to be collected 
may be enhanced; How the burden of complying with the collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and Estimates of capital or start-up costs and costs of 
operation, maintenance, and purchase of service to provide information. 
Estimated total annual reporting burden: 250 hours. Estimated average 
annual burden hours per respondent: 6 minutes. Estimated number of 
respondents: 2500. Estimated annual frequency of responses: Annually.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget. 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, returns and return information are 
confidential, as required by 26 U.S.C. 6103.

Background

    Under section 7213A of the Internal Revenue Code (Code) as added by 
Public Law 105-35 (111 Stat. 1104) (the Taxpayer Browsing Protection 
Act of 1997), any person described in section 6103(n), or an officer or 
employee of any such person, is prohibited from willfully inspecting 
any returns or return information, except as authorized by the Code. 
Any person who violates section 7213A may be subject to a fine in any 
amount not exceeding $1,000, or imprisonment of not more than one year, 
or both. Currently, Sec.  301.6103(n)-1(c) provides that each officer 
or employee of any person to whom returns or return information is or 
may be disclosed as authorized by Sec.  301.6103(n)-1(a) must be 
notified of the prohibitions against unauthorized disclosure of returns 
or return information, and the potential penalties for such acts, 
imposed under section 7213. The regulation does not reflect the 
penalties imposed by section 7213A.
    This document adopts a final regulation amending Sec.  301.6103(n)-
1(c) to reflect the penalties contained in section 7213A. The 
regulation requires that each officer or employee of any person to whom 
returns or return information is or may be disclosed as authorized by 
Sec.  301.6103(n)-1(a) must also receive notification of the 
prohibitions against unauthorized inspection of returns or return 
information and the potential penalties for such acts, in addition to 
the notifications of the penalties for unauthorized disclosure. The 
Internal Revenue Service (IRS) already requires, in all section 6103(n) 
contracts, that contractors notify their officers and employees of the 
penalties for unauthorized inspection. The final regulation updates the 
regulatory requirements to conform to the present law for both 
unauthorized inspection and disclosure.

Explanation of Provisions

    This final regulation adds a requirement that persons to whom 
returns or return information is or may be disclosed as authorized by 
Sec.  301.6103(n)-1(a) notify their officers and employees that such 
officers and employees are prohibited from willfully inspecting any 
returns or return information, except as authorized by the Code, and 
that they may be subject to a fine in any amount not exceeding $1,000, 
or imprisonment of not more than one year, or both, for any violation 
of section 7213A.
    The IRS has a number of section 6103(n) agreements with Federal 
agencies. This final regulation also clarifies the penalty provisions 
that are applicable to officers and employees of Federal agencies who 
are performing tax administration services for the IRS pursuant to 
section 6103(n).

Special Analyses

    Section 553 of the Administrative Procedure Act (5 U.S.C. chapter 
5) requires that a notice of proposed rulemaking be published in the 
Federal Register and, after such notice, that the Federal agency that 
issued the notice give interested persons an opportunity to participate 
in the rulemaking through submission of written comments, with or 
without opportunity for oral presentation. These requirements are 
subject to certain exceptions set forth in 5 U.S.C. 553(b), including 
when the agency for good cause finds that notice and public comment are 
impracticable, unnecessary, or contrary to the public interest. Because 
the final regulation merely amends an existing regulation to add an 
additional notification requirement that has already been imposed 
administratively, it is determined that the notice and public-comment 
procedure required by 5 U.S.C. 553 is unnecessary in this case. For the 
same reason, a delayed effective date is not required pursuant to 5 
U.S.C. 553(d)(3).
    It has also 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. Because no notice 
of proposed rulemaking is required, the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601-612) do not apply. Pursuant to section 
7805(f) of the Code, this regulation was submitted to the Chief Counsel 
of the Small Business Administration for comment on its impact on small 
business.

Drafting Information

    The principal author of this final regulation is Carol Marchant, 
Office of Associate Chief Counsel (Procedure & 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.

Adoption of Amendments to the Regulations

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

[[Page 11741]]

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. In Sec.  301.6103(n)-1, paragraph (c) is revised and 
paragraph (f) is added to read as follows:


Sec.  301.6103(n)-1  Disclosure of returns and return information in 
connection with procurement of property and services for tax 
administration purposes.

* * * * *
    (c) Notification requirements. Persons to whom returns or return 
information is or may be disclosed as authorized by paragraph (a) of 
this section shall provide written notice to their officers or 
employees--
    (1) That returns or return information disclosed to such officer or 
employee can be used only for a purpose and to the extent authorized by 
paragraph (a) of this section;
    (2) That further inspection of any returns or return information 
for a purpose or to an extent unauthorized by paragraph (a) of this 
section constitutes a misdemeanor, punishable upon conviction by a fine 
of as much as $1,000, or imprisonment for as long as 1 year, or both, 
together with costs of prosecution;
    (3) That further disclosure of any returns or return information 
for a purpose or to an extent unauthorized by paragraph (a) of this 
section constitutes a felony, punishable upon conviction by a fine of 
as much as $5,000, or imprisonment for as long as 5 years, or both, 
together with the costs of prosecution;
    (4) That any such unauthorized further inspection or disclosure of 
returns or return information may also result in an award of civil 
damages against any person who is not an officer or employee of the 
United States in an amount not less than $1,000 for each act of 
unauthorized inspection or disclosure or the sum of actual damages 
sustained by the plaintiff as a result of such unauthorized disclosure 
or inspection as well as an award of costs and reasonable attorneys 
fees; and
    (5) If such person is an officer or employee of the United States, 
a conviction for an offense referenced in paragraph (c)(2) or (c)(3) of 
this section shall result in dismissal from office or discharge from 
employment.
* * * * *
    (f) Effective date. Section 301.6103(n)-1(c) is applicable on March 
12, 2003.

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

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

    Authority: 26 U.S.C. 7805.

    Par. 5. In Sec.  602.101, paragraph (b) is amended by adding an 
entry in numerical order to the table 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(n)-1(c)...........................................
 
                                * * * * *                      1545-1841
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    Approved: February 11, 2003.
David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
Pamela F. Olsen,
Assistant Secretary of the Treasury.
[FR Doc. 03-5462 Filed 3-11-03; 8:45 am]
BILLING CODE 4840-01-P