[Federal Register Volume 68, Number 131 (Wednesday, July 9, 2003)]
[Proposed Rules]
[Pages 40850-40857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17230]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-140930-02]
RIN 1545-BB15


Testimony or Production of Records in a Court or Other Proceeding

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed amendments to the existing 
regulation that establishes the procedures to be followed by IRS 
officers and employees upon receipt of a request or demand for 
disclosure of IRS records or information. The purpose of the proposed 
amendments is to provide specific instructions and to clarify when the 
existing regulation does not apply because more specific procedures 
take precedence. The proposed amendments extend the application of the 
regulation to former IRS officers and employees as well as to persons 
who are or were under contract to the IRS. The proposed amendments 
would affect current and former IRS officers, employees and contractors 
and persons who make requests or demands for disclosure.

DATES: Written or electronic comments and requests for a public hearing 
must be received by October 7, 2003.

ADDRESSES: Send submissions to: CC:PA:RU (REG-140930-02), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. 
and 4 p.m. to CC:PA:RU (REG-140930-02), Courier's Desk, Internal 
Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. 
Alternatively, taxpayers may submit electronic comments directly to IRS 
Internet site at: www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: David Fish or J. Suzanne Sones, (202) 
622-4590 (not a toll free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the

[[Page 40851]]

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 September 8, 2003. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
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 proposed 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.
    The collection of information in this proposed regulation is in 26 
CFR 301.9000-5(a). This information is required to enable the 
authorizing official to make an informed decision as to whether to 
grant a request or demand in a non-IRS matter. This information will be 
used to inform the authorizing official of the background of the non-
IRS matter and to refine the scope of the testimony or disclosures 
sought. The collection of information is voluntary and required to 
obtain a benefit. The likely respondents are individuals, farms, 
business or other for-profit institutions, nonprofit institutions, and 
small businesses or organizations.
    Estimated total annual reporting: 1,400 hours.
    Estimated average annual burden hours per respondent: 1 hour.
    Estimated number of respondents: 1,400.
    Estimated annual frequency of responses: 1,400.
    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, tax returns and 
tax return information are confidential, as required by section 6103 of 
the Internal Revenue Code (Code).

Background

    This document contains proposed amendments to 26 CFR part 301 under 
5 U.S.C. 301. The existing regulation provides procedures for IRS 
officers and employees to follow upon receipt of a request or demand 
for disclosure of IRS records or information. Under this proposed 
regulation, current and former IRS officers, employees and contractors 
may not disclose IRS records or information without first receiving 
authorization to do so. To conserve valuable resources, the IRS 
carefully considers the nature and circumstances of a request or demand 
for IRS records or information prior to committing resources to 
fulfilling the request or demand. If the IRS is a disinterested party 
or has no affected interest with respect to a request or demand and 
would consider the commitment of resources to comply with the request 
or demand inappropriate, the IRS may deny the request or demand for IRS 
records or information. For example, the IRS may deny a request by 
private litigants for the expert testimony of an IRS employee as to the 
Federal tax ramifications of various transactions based on information 
furnished by the private litigants. Such testimony could compromise the 
enforcement of the tax laws, should the IRS later conduct an 
examination of the tax consequences of the transactions.
    The proposed regulation provides more specificity regarding the 
content of a request to allow an authorizing official to make an 
informed decision when authorizing or denying the request. Similarly, 
the proposed regulation provides more specific guidance to the 
authorizing officials, or to current or former IRS officers, employees 
or contractors, who receive requests or demands for IRS records or 
information, as to the circumstances for authorization or denial of 
such requests. Additionally, the proposed regulation applies to former 
IRS officers, employees or contractors whose previous access to IRS 
records or information may be the subject of such requests or demands. 
In such cases the IRS has an interest in protecting IRS records or 
information and should receive notice and have an opportunity to 
determine the extent to which disclosure should be permitted.
    The existing regulation at 26 CFR 301.9000-1(f) provides guidance 
for IRS officers and employees in state liquor, tobacco, firearms, or 
explosives cases. This proposed regulation does not contain such a 
provision because Treasury Department Order No. 120-01, effective July 
1, 1972, transferred from the IRS to the United States Bureau of 
Alcohol, Tobacco and Firearms (ATF) those functions, powers and duties 
related to alcohol, tobacco, firearms and explosives. The ATF 
promulgated its own regulations guiding disclosure in testimony and in 
related matters, which can be found at 27 CFR 70.803. Effective January 
24, 2003, the Homeland Security Act of 2002, Public Law 107-296, 
divided ATF into two new agencies, the Tax and Trade Bureau (TTB) in 
the Treasury Department and the Bureau of Alcohol, Tobacco, Firearms 
and Explosives (ATFE) in the Justice Department. Section 1111(c)(1)-
(c)(2) of the Homeland Security Act transferred to ATFE the authorities 
and functions of ATF, except for the authorities and functions of ATF 
relating to the administration and enforcement of chapters 51 and 52 
and sections 4181 and 4182 of the Code, and title 27, USC. Section 
1111(d)(1), (d)(3) of the Homeland Security Act provided that TTB shall 
administer the authorities and functions of ATF not transferred to 
ATFE. Treasury Department Order No. 120-01, effective January 24, 2003, 
designated TTB as the Alcohol and Tobacco Tax and Trade Bureau. The 
disclosure regulations found at 27 CFR 70.803 are still applicable to 
TTB.
    The existing regulation contains a delegation of authority from the 
Secretary of the Treasury to the Commissioner of Internal Revenue 
(Commissioner) to respond to requests and demands for IRS records and 
information. This delegation has been deleted as unnecessary as it is 
contained in existing statutes and delegation orders. See, e.g., 
section 7804; Delegation Order 150-10.
    This proposed regulation reflects changes in format and definitions 
to make it easier to understand and apply.

Explanation of Provisions

Overview

    Under 5 U.S.C. 301, heads of Executive or military departments may 
prescribe regulations for, among other things, the custody, use, and 
preservation of the departments' records, papers, and property. Many 
departments and agencies have promulgated regulations under 5 U.S.C. 
301 to provide procedures for the disclosure of official records and 
information. Generally, these are termed Touhy regulations, after the 
Supreme Court's decision in United States ex rel. Touhy v. Ragen, 340 
U.S. 462 (1951). In that case, the Supreme Court held that an agency 
employee could not be held

[[Page 40852]]

in contempt for refusing to disclose agency records or information when 
following the instructions of his or her supervisor regarding the 
disclosure. As such, an agency's Touhy regulations are the instructions 
agency employees are to follow when those employees receive requests or 
demands to testify or otherwise disclose agency records or information.
    This proposed regulation expands the definition of IRS officers and 
employees to include both current and former officers and employees. In 
addition, this proposed regulation extends to IRS contractors, 
including their current and former employees. IRS records or 
information known by these persons retains the character of government 
records or information, subject to the direction and control of the 
Commissioner, even after the employment or contractual relationship has 
ended. This proposed regulation provides current and former IRS 
officers, employees and contractors with a procedure to follow when 
they receive requests and demands for IRS records and information.
    This proposed regulation is separated into six sections for ease of 
use.

Section 301.9000-1 Definitions

    New definitions appear in this proposed regulation to delineate the 
difference in treatment between requests or demands for IRS records or 
information in (1) tax administration proceedings and other proceedings 
in which the IRS or an IRS officer or employee acting in his or her 
official capacity is a party; (2) matters that do not involve the IRS, 
such as civil litigation between private parties; and (3) congressional 
matters. The proposed terminology is ``IRS matters,'' ``non-IRS 
matters,'' and ``IRS congressional matters,'' respectively. Previously, 
``IRS matters'' were also called ``referred cases.''
    By including former as well as current IRS officers and employees 
in the definition of ``IRS officers and employees,'' this proposed 
regulation extends the reach of the proposed procedures. Similarly, a 
new definition extends the proposed procedures to reach current and 
former ``IRS contractors.''
    This proposed regulation defines ``testimony authorization,'' the 
longstanding term for the instructions to the testifying employee or 
the employee providing the information, and ``authorizing official,'' 
the employee with delegated authority to authorize testimony. In 
addition, this proposed regulation gives a more detailed definition of 
``internal revenue records or information.''

Section 301.9000-2 Considerations in Responding to a Request or Demand 
for IRS Records or Information

    Testimony or disclosure of IRS records or information is not 
permitted if the testimony or disclosure would: violate a Federal 
statute or rule of procedure, violate a tax treaty or convention of the 
United States, violate a Federal regulation, or reveal classified 
national security information. This proposed regulation lists 
privileges that may be asserted in response to a request or demand.
    This proposed regulation specifically mentions section 6103 of the 
Code, as that is the primary statute governing disclosure of IRS 
records and information. The majority of the records and information 
sought in both IRS and non-IRS matters are returns and return 
information protected by the confidentiality provisions of section 6103 
of the Code.
    This proposed regulation provides a list of factors to consider in 
deciding whether to authorize testimony or disclosure in non-IRS 
matters, because requests and demands in non-IRS matters divert 
resources from the administration of the internal revenue laws and 
related statutes. These factors generally are aimed at the effect 
compliance with the request or demand would have on the IRS's primary 
mission of enforcement of the internal revenue laws and related 
statutes. The factors include the IRS's anticipated commitment of time 
and anticipated expenditure of funds necessary to comply with the 
request or demand, the number of similar requests and their cumulative 
effect on the expenditure of IRS resources, the potential effect of a 
non-IRS matter on the administration of the internal revenue laws and 
related statutes, and the importance of the legal issues presented. The 
IRS also considers practical problems with complying with a request or 
demand for IRS records or information.

Section 301.9000-3 Prohibition on Disclosure of IRS Records or 
Information Without Testimony Authorization

    The general rule is that, in response to a request or demand, an 
IRS officer, employee or contractor may not provide testimony or IRS 
records or information unless the Commissioner, or a delegate, gives 
instructions therefor. Such an instruction is called a ``testimony 
authorization.'' A ``testimony authorization'' includes an instruction 
to testify or provide IRS records or information in whole, in part or 
not at all. In the interim between receipt of a request or demand and 
the issuance of a testimony authorization, an IRS officer, employee or 
contractor may appear in person to advise that he or she is awaiting 
instructions (in the form of a testimony authorization).
    Testimony authorizations are required, for the most part, in 
situations involving court or congressional testimony. There are, 
however, exceptions to the requirement of a testimony authorization. In 
an IRS matter in which the attorney or other representative of the 
government requests testimony, no testimony authorization is required. 
Similarly, this proposed regulation does not require a testimony 
authorization in an IRS matter in which the request or demand is for 
responses solely in writing, produced under the direction of government 
counsel, such as admissions, document production and written 
interrogatories to parties. Also, testimony authorization is not 
required if a former IRS officer, employee or contractor receives a 
request or demand for IRS records or information that involve general 
knowledge gained while employed or under contract with the IRS. 
Finally, testimony authorization also is not required if more specific 
procedures of the Commissioner apply to the disclosure. Such procedures 
include, for example, those relating to Freedom of Information Act (5 
U.S.C. 552) or Privacy Act (5 U.S.C. 552a) requests, disclosures in 
accordance with 26 CFR 601.702(d), disclosures to state tax agencies 
pursuant to section 6103(d) of the Code, or disclosures to the United 
States Department of Justice pursuant to an ex parte order under 
section 6103(i)(1) of the Code.

Section 301.9000-4 Procedure in the Event of a Request or Demand for 
IRS Records or Information

    This proposed regulation gives specific instructions to IRS 
officers, employees and contractors who receive requests or demands for 
IRS records or information. An IRS officer, employee or contractor who 
receives a request or demand for IRS records or information (except for 
requests or demands in United States Tax Court cases, in personnel, 
labor relations, government contract, or IRS congressional matters, or 
in matters related to informant claims or the rules of Bivens v. Six 
Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 
(1971) (Bivens matters), or the Federal Tort Claims Act (FTCA)) shall 
notify promptly the IRS Disclosure Officer servicing the IRS officer's, 
employee's or contractor's

[[Page 40853]]

geographic area and await instructions from an authorizing official.
    In the case of a request or demand on behalf of a petitioner in a 
United States Tax Court case, IRS officers, employees and contractors 
shall notify promptly the IRS Chief Counsel attorney assigned to the 
case and await instructions from an authorizing official. In the case 
of a request or demand on behalf of an appellant, grievant, complainant 
or representative for IRS records or information in a personnel, labor 
relations, government contract, Bivens or FTCA matter, or a matter 
related to informant claims, IRS officers, employees or contractors 
shall notify promptly the IRS Associate Chief Counsel (General Legal 
Services) attorney assigned to the case. If there is no IRS Associate 
Chief Counsel (General Legal Services) attorney assigned to the case, 
the IRS officer, employee or contractor shall notify promptly the IRS 
Associate Chief Counsel (General Legal Services) attorney servicing the 
geographic area. The IRS officer, employee or contractor shall then 
await instructions from an authorizing official. In the case of a 
request or demand in an IRS congressional matter, the IRS officer, 
employee or contractor shall notify promptly the IRS Office of 
Legislative Affairs and await instructions.
    If, in response to a demand for IRS records or information, an 
authorizing official has not had a sufficient opportunity to issue a 
testimony authorization, or determines that denial of the demand for 
IRS records or information is proper, the authorizing official shall 
request the attorney or other representative of the government to 
oppose such demand and respectfully inform the court, administrative 
agency or other authority, by appropriate action, that the authorizing 
official either has not yet issued a testimony authorization, or has 
issued a testimony authorization, to the IRS officer, employee or 
contractor, that denies permission, in whole or in part, to testify or 
disclose the IRS records or information. If the authorizing official 
denies a testimony authorization in whole or in part, the authorizing 
official shall request the attorney or other representative of the 
government to inform the court, administrative agency, or other 
authority of the reasons for not authorizing the testimony or the 
disclosure of the IRS records or information and to take such other 
action in opposition as may be appropriate (including, but not limited 
to, filing a motion to quash or a motion to remove to Federal district 
court).
    In addition to providing specific procedural instructions, this 
proposed regulation clarifies and updates the provision in the existing 
regulation pertaining to penalties that apply to IRS officers, 
employees and contractors in case of failure to follow the requirements 
of the proposed regulation.

Section 301.9000-5 Written Statement Required by Party Seeking 
Testimony or Disclosure of IRS Records or Information in Non-IRS 
Matters

    This proposed regulation formalizes the practice of requiring a 
party who seeks testimony or disclosure of IRS records or information 
for use in any non-IRS matter to provide detailed information that 
would enable the authorizing official to make an informed decision 
whether to grant or limit the request or demand. Such information is 
necessary to inform the authorizing official of the factual background 
of the non-IRS matter. By contrast, generally the factual background 
information already is known to the authorizing official in an IRS 
matter. The factual background is also useful in refining the scope of 
the testimony or document production, thereby conserving IRS resources 
and avoiding waste. For example, a request for testimony may be 
obviated by providing IRS records or information in a form admissible 
in court without need for the presence of an IRS officer or employee, 
or by submission of a declaration under penalty of perjury pursuant to 
28 U.S.C. 1746.
    This proposed regulation establishes requirements for a written 
statement setting forth particular information that will provide 
authorizing officials with the facts necessary to determine whether to 
grant or limit testimony or the disclosure of IRS records or 
information so as to comply with the law and conserve IRS resources. 
Parties in non-IRS matters sometimes serve process with extremely short 
time frames. The IRS will comply with such requests or demands only if 
the IRS has time to evaluate adequately the request. This proposed 
regulation establishes a reasonable time for compliance, generally, not 
less than fifteen (15) business days. Also, parties in non-IRS matters 
are sometimes unaware that a request or demand does not supersede the 
confidentiality accorded to returns and return information under 
section 6103 of the Code. This proposed regulation generally requires a 
statement of the applicable exception under section 6103 of the Code 
that would permit the disclosure of returns and return information for 
the purpose sought. The authorizing official may waive the requirement 
of a written statement for good cause.

Section 301.9000-6 Examples

    This proposed regulation gives examples of testimony authorization 
situations that illustrate the principles of this proposed regulation.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has been 
determined that 5 U.S.C. 553(b), the Administrative Procedure Act, does 
not apply to these proposed regulations.
    It is hereby certified that the collection of information in these 
regulations will not have a significant economic impact on a 
substantial number of small entities. This certification is based upon 
the fact that of the estimated 1,400 requests received annually, less 
than 500 of those requests are estimated to be received from small 
entities. Moreover, the burden associated with complying with the 
collection of information in these regulations is estimated to be only 
1 hour per respondent. Therefore, a Regulatory Flexibility Analysis 
under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not 
required.
    Pursuant to section 7805(f) of the Code, this 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 
businesses.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
the IRS will consider any written (a signed original and eight (8) 
copies) or electronic comments that the IRS timely receives. The IRS 
and Treasury Department request comments on the clarity of the proposed 
rules and how they can be made easier to understand. All comments will 
be available for public inspection and copying. A public hearing will 
be scheduled if requested in writing by any person who timely submits a 
written comment. If a public hearing is scheduled, notice of the date, 
time, and place for the public hearing will be published in the Federal 
Register.

Drafting Information

    The principal authors of this proposed regulation are David Fish 
and J. Suzanne Sones, Office of Associate

[[Page 40854]]

Chief Counsel (Procedure & Administration), Disclosure & Privacy Law 
Division.

List of Subjects in 26 CFR Part 301

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

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be amended as follows.

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for Part 301 is amended by 
adding the following entries in numerical order to read in part as 
follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 301.9000-1 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804;
    Section 301.9000-2 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804;
    Section 301.9000-3 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804;
    Section 301.9000-4 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804;
    Section 301.9000-5 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804;
    Section 301.9000-6 also issued under 5 U.S.C. 301 and 26 U.S.C. 
6103(q) and 7804; * * *
    Par. 2. Section 301.9000-1 is revised and Sec. Sec.  301.9000-2 
through 301.9000-7 are added to read as follows:


Sec.  301.9000-1  Definitions when used in Sec. Sec.  301.9000-1 
through 301.9000-6.

    (a) IRS records or information means any material (including copies 
thereof) contained in the files (including paper, electronic or other 
media files) of the Internal Revenue Service (IRS), any information 
relating to material contained in the files of the IRS, or any 
information acquired by an IRS officer or employee, while an IRS 
officer or employee, as a part of the performance of official duties or 
because of that IRS officer or employee's official status with respect 
to the administration of the internal revenue laws or any other laws 
administered by or concerning the IRS. IRS records or information 
includes, but is not limited to, returns and return information as 
those terms are defined in section 6103(b)(1) and (2) of the Internal 
Revenue Code (Code), tax convention information as defined in section 
6105 of the Code, information gathered during Bank Secrecy Act and 
money laundering investigations, and personnel records and other 
information pertaining to IRS officers and employees. IRS records and 
information also includes information received, generated or collected 
by an IRS contractor pursuant to the contractor's contract or agreement 
with the IRS. The term does not include records or information obtained 
by IRS officers and employees while under the direction and control of 
the United States Attorney's Office during the conduct of a Federal 
grand jury investigation. The term IRS records or information does 
include records or information obtained during the administrative stage 
of a criminal investigation (prior to the initiation of the grand 
jury), obtained from IRS files (such as transcripts or tax returns), or 
subsequently obtained by the IRS for use in a civil investigation.
    (b) IRS officers and employees means all officers and employees of 
the United States appointed by, employed by, or subject to the 
directions, instructions, or orders of the Commissioner or IRS Chief 
Counsel and also includes such former officers and employees.
    (c) IRS contractor means any person, including such person's 
current and former employees, maintaining IRS records or information 
pursuant to a contract or agreement with the IRS, and also includes 
former contractors.
    (d) A request is any request for testimony of an IRS officer, 
employee or contractor or for production of IRS records or information, 
oral or written, by any person, which is not a demand.
    (e) A demand is any subpoena or other order of any court, 
administrative agency or other authority, or the Congress, or a 
committee or subcommittee of the Congress, and any notice of deposition 
(either upon oral examination or written questions), request for 
admissions, request for production of documents or things, written 
interrogatories to parties, or other notice of, request for, or service 
for discovery in a matter before any court, administrative agency or 
other authority.
    (f) An IRS matter is any matter before any court, administrative 
agency or other authority in which the United States, the Commissioner, 
the IRS, or any IRS officer or employee acting in an official capacity, 
or any IRS officer or employee (including an officer or employee of IRS 
Chief Counsel's office) in his or her individual capacity if the United 
States Department of Justice or the agency has agreed to represent or 
provide representation to the IRS officer or employee, is a party and 
that is directly related to official business of the IRS or to any law 
administered by or concerning the IRS, including, but not limited to, 
judicial and administrative proceedings described in section 6103(h)(4) 
and (l)(4) of the Code.
    (g) An IRS congressional matter is any matter before the Congress, 
or a committee or subcommittee of the Congress, that is related to the 
administration of the internal revenue laws or any other laws 
administered by or concerning the IRS, or to IRS records or 
information.
    (h) A non-IRS matter is any matter that is not an IRS matter or an 
IRS congressional matter.
    (i) A testimony authorization is a written instruction or oral 
instruction memorialized in writing within a reasonable period by an 
authorizing official that sets forth the scope of and limitations on 
proposed testimony and/or disclosure of IRS records or information 
issued in response to a request or demand for such IRS records or 
information. A testimony authorization may grant or deny authorization 
to testify or disclose IRS records or information and may make an 
authorization effective only upon the occurrence of a precedent 
condition, such as the receipt of a consent complying with the 
provisions of section 6103(c) of the Code. To authorize testimony means 
to issue the instruction described in this paragraph (i).
    (j) An authorizing official is a person with delegated authority to 
authorize testimony and the disclosure of IRS records or information.


Sec.  301.9000-2  Considerations in responding to a request or demand 
for IRS records or information.

    (a) Situations in which disclosure shall not be authorized. 
Authorizing officials shall not permit testimony or disclosure of IRS 
records or information in response to requests or demands if--
    (1) Testimony or disclosure of IRS records or information would 
violate a Federal statute including, but not limited to, sections 6103 
or 6105 of the Internal Revenue Code (Code), the Privacy Act of 1974 (5 
U.S.C. 552a), or a rule of procedure, such as the grand jury secrecy 
rule, Fed. R. Crim. P. 6(e);
    (2) Testimony or disclosure of IRS records or information would 
violate a specific Federal regulation, including, but not limited to, 
31 CFR 103.53;
    (3) Testimony or disclosure of IRS records or information would 
reveal classified national security information, unless properly 
declassified;
    (4) Testimony or disclosure of IRS records or information would 
reveal the identity of an informant; or
    (5) Testimony or disclosure of IRS records or information would 
reveal investigatory records or information compiled for law 
enforcement purposes which would permit interference with law 
enforcement proceedings or would disclose investigative techniques and

[[Page 40855]]

procedures, the effectiveness of which could thereby be impaired.
    (b) Assertion of privileges. Any applicable privilege or protection 
under law may be asserted in response to a request or demand for 
testimony or disclosure of IRS records or information, including, but 
not limited to, the following--
    (1) Attorney-client privilege;
    (2) Attorney work product doctrine; and
    (3) Deliberative process (executive) privilege.
    (c) Non-IRS matters. If any person makes a request or demand for 
IRS records or information in connection with a non-IRS matter, 
authorizing officials shall take into account the following additional 
factors in responding to such request or demand--
    (1) Whether the requester is a Federal agency, or a state or local 
government or agency thereof;
    (2) Whether the demand was issued by a Federal or State court, 
administrative agency or other authority;
    (3) The potential effect of the case on the administration of the 
internal revenue laws or any other laws administered by or concerning 
the IRS;
    (4) The importance of the legal issues presented;
    (5) Whether the IRS records or information are available from other 
sources;
    (6) The IRS's anticipated commitment of time and anticipated 
expenditure of funds necessary to comply with the request or demand;
    (7) The number of similar requests and their cumulative effect on 
the expenditure of IRS resources;
    (8) Whether the request or demand allows a reasonable time for 
compliance (generally, at least fifteen business days);
    (9) Whether the testimony or disclosure is appropriate under the 
rules of procedure governing the case or matter in which the request or 
demand arises;
    (10) Whether the request or demand involves expert witness 
testimony;
    (11) Whether the request or demand is for the testimony of an IRS 
officer, employee or contractor who is without personal knowledge of 
relevant facts;
    (12) Whether the request or demand is for the testimony of a 
presidential appointee or senior executive and whether the testimony of 
a lower-level official would suffice;
    (13) Whether the procedures in Sec.  301.9000-5 have been followed; 
and
    (14) Any other relevant factors that may be brought to the 
attention of the authorizing official.


Sec.  301.9000-3  Testimony authorizations.

    (a) Prohibition on disclosure of IRS records or information without 
testimony authorization. Except as provided in paragraph (b) of this 
section, when a request or demand for IRS records or information is 
made, no IRS officer, employee or contractor shall testify or disclose 
IRS records or information to any court, administrative agency or other 
authority, or to the Congress, or to a committee or subcommittee of the 
Congress without a testimony authorization. However, an IRS officer, 
employee or contractor may appear in person to advise that he or she is 
awaiting instructions from an authorizing official with respect to the 
request or demand.
    (b) Exceptions. No testimony authorization is required in the 
following circumstances--
    (1) To respond to a request or demand for IRS records or 
information by an attorney or other government representative regarding 
an IRS matter;
    (2) To respond solely in writing, under the direction of an 
attorney or other representative of the government, to requests and 
demands in IRS matters, including, but not limited to, admissions, 
document production, and written interrogatories to parties;
    (3) To respond to a request or demand issued to a former IRS 
officer, employee or contractor for expert or opinion testimony if the 
testimony involves general knowledge (such as information contained in 
published procedures of the IRS or the IRS Office of Chief Counsel) 
gained while the former IRS officer, employee or contractor was 
employed or under contract with the IRS; or
    (4) If a more specific procedure established by the Commissioner 
governs the disclosure of IRS records or information. These procedures 
include, but are not limited to, those relating to: procedures pursuant 
to 26 CFR 601.702(d), Freedom of Information Act requests pursuant to 5 
U.S.C. 552, Privacy Act of 1974 requests pursuant to 5 U.S.C. 552a, 
disclosures to state tax agencies pursuant to section 6103(d) of the 
Code, and disclosures to the United States Department of Justice 
pursuant to an ex parte order under section 6103(i)(1) of the Code.


Sec.  301.9000-4  Procedure in the event of a request or demand for IRS 
records or information.

    (a) Purpose and scope. This section prescribes procedures to be 
followed by IRS officers, employees and contractors upon receipt of a 
request or demand in matters where a testimony authorization is or may 
be required.
    (b) Notification of the Disclosure Officer. Except for requests or 
demands in United States Tax Court cases, in personnel, labor 
relations, government contract, or IRS congressional matters, or in 
matters related to informant claims or the rules of Bivens v. Six 
Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 
(1971) (Bivens matters), or the Federal Tort Claims Act (FTCA), an IRS 
officer, employee or contractor who receives a request or demand for 
IRS records or information for which a testimony authorization is or 
may be required shall notify promptly the Disclosure Officer servicing 
the IRS officer's, employee's or contractor's geographic area. Such IRS 
officer, employee or contractor shall await instructions from the 
authorizing official concerning the response to the request or demand.
    (c) Requests or demands in United States Tax Court cases. An IRS 
officer, employee or contractor who receives a request or demand for 
IRS records or information on behalf of a petitioner in a United States 
Tax Court case shall notify promptly the IRS Chief Counsel attorney 
assigned to the case. Such IRS Chief Counsel attorney shall notify 
promptly the authorizing official. The IRS officer, employee or 
contractor who received such request or demand shall await instructions 
from the authorizing official.
    (d) Requests or demands in personnel, labor relations, government 
contract, Bivens or FTCA matters, or matters related to informant 
claims. An IRS officer, employee or contractor who receives a request 
or demand, on behalf of an appellant, grievant, complainant or 
representative, for IRS records or information in a personnel, labor 
relations, government contract, Bivens or FTCA matter, or matter 
related to informant claims, shall notify promptly the IRS Associate 
Chief Counsel (General Legal Services) attorney assigned to the case. 
If no IRS Associate Chief Counsel (General Legal Services) attorney is 
assigned to the case, the IRS officer, employee or contractor shall 
notify promptly the IRS Associate Chief Counsel (General Legal 
Services) attorney servicing the geographic area. Such IRS Associate 
Chief Counsel (General Legal Services) attorney shall notify promptly 
the authorizing official. The IRS officer, employee or contractor who 
received such request or demand shall await instructions from the 
authorizing official.
    (e) Requests or demands in IRS congressional matters. An IRS 
officer, employee or contractor who receives a request or demand in an 
IRS congressional matter shall notify

[[Page 40856]]

promptly the IRS Office of Legislative Affairs. The IRS officer, 
employee or contractor who received such request or demand shall await 
instructions from the authorizing official.
    (f) Opposition to a demand for IRS records or information in IRS 
and non-IRS matters. If, in response to a demand for IRS records or 
information, an authorizing official has not had a sufficient 
opportunity to issue a testimony authorization, or determines that the 
demand for IRS records or information should be denied, the authorizing 
official shall request the attorney or other representative of the 
government to oppose such demand and respectfully inform the court, 
administrative agency or other authority, by appropriate action, that 
the authorizing official either has not yet issued a testimony 
authorization, or has issued a testimony authorization, to the IRS 
officer, employee or contractor, that denies permission to testify or 
disclose the IRS records or information. If the authorizing official 
denies authorization in whole or in part, the attorney or other 
representative of the government shall inform the court, administrative 
agency or other authority of the reasons the authorizing official gives 
for not authorizing the testimony or the disclosure of the IRS records 
or information or take such other action in opposition as may be 
appropriate (including, but not limited to, filing a motion to quash or 
a motion to remove to Federal court).
    (g) Procedure in the event of an adverse ruling. In the event such 
court, administrative agency, or other authority rules adversely with 
respect to the refusal to disclose the IRS records or information 
pursuant to the testimony authorization, or declines to defer a ruling 
until a testimony authorization has been received, the IRS officer, 
employee or contractor who has received the request or demand shall, 
pursuant to this section, respectfully decline to testify or disclose 
the IRS records or information.
    (h) Penalties. Any IRS officer or employee who discloses IRS 
records or information without following the provisions of this section 
or Sec.  301.9000-3, may be subject to administrative discipline, up to 
and including dismissal. Any IRS officer, employee or contractor may be 
subject to applicable contractual sanctions and/or criminal penalties, 
including prosecution under 5 U.S.C. 552a(i), for willful disclosure in 
an unauthorized manner of information protected by the Privacy Act, or 
under section 7213 of the Code, for willful disclosure in an 
unauthorized manner of return information.
    (i) No creation of benefit or separate privilege. Nothing in this 
section, and nothing in Sec. Sec.  301.9000-1 through 301.9000-6, 
creates, is intended to create, or may be relied upon to create, any 
right or benefit, substantive or procedural, enforceable at law by a 
party against the United States. Nothing in these regulations creates a 
separate privilege or basis to withhold IRS records or information.


Sec.  301.9000-5  Written statement required for requests or demands in 
non-IRS matters.

    (a) Written statement. A request or demand for IRS records or 
information for use in a non-IRS matter shall be accompanied by a 
written statement made by or on behalf of the party seeking the 
testimony or disclosure of IRS records or information, setting forth--
    (1) A brief description of the parties to and subject matter of the 
proceeding and the issues;
    (2) A summary of the testimony, IRS records or information sought, 
the relevance to the proceeding, and the estimated volume of IRS 
records involved;
    (3) The time that will be required to present the testimony (on 
both direct and cross examination);
    (4) Whether any of the IRS records or information is a return or is 
return information (as defined in section 6103(b) of the Internal 
Revenue Code (Code)), or tax convention information (as defined in 
section 6105(c)(1) of the Code), and the statutory authority for the 
disclosure of such return or return information (and, if no consent to 
disclose pursuant to section 6103(c) of the Code accompanies the 
request or demand, the reason such consent is not necessary);
    (5) Whether a declaration of an IRS officer, employee or contractor 
under penalties of perjury pursuant to 28 U.S.C. 1746 would suffice in 
lieu of deposition or trial testimony;
    (6) Whether deposition or trial testimony is necessary where IRS 
records are authenticated under applicable rules of evidence and 
procedure;
    (7) Whether IRS records or information are available from other 
sources; and
    (8) A statement that the request or demand allows a reasonable time 
(generally, at least fifteen business days) for compliance.
    (b) Permissible waiver of statement. The requirement of a written 
statement in paragraph (a) of this section may be waived by the 
authorizing official for good cause.


Sec.  301.9000-6  Examples.

    The following examples illustrate the provisions of Sec. Sec.  
301.9000-1 through 301.9000-5:

    Example 1. A taxpayer sues a practitioner in state court for 
malpractice in connection with the practitioner's preparation of a 
Federal income tax return. The taxpayer subpoenas an IRS employee to 
testify concerning the IRS employee's examination of the taxpayer's 
Federal income tax return. The taxpayer provides the statement 
required by Sec.  301.9000-5. This is a non-IRS matter. A testimony 
authorization would be required for the IRS employee to give such 
testimony. (In addition, the taxpayer would be required to execute 
an appropriate consent under section 6103(c) of the Internal Revenue 
Code (Code)). The IRS generally opposes an IRS officer's, employee's 
or contractor's appearance in such cases because the IRS is a 
disinterested party with respect to the dispute and would consider 
the commitment of resources to comply with the subpoena 
inappropriate.
    Example 2. In a state judicial proceeding concerning child 
support, the child's custodial parent subpoenas for a deposition an 
Internal Revenue Service (IRS) agent who is examining certain of the 
non-custodial parent's post-divorce Federal income tax returns. This 
is a non-IRS matter. The custodial parent submits with the subpoena 
the statement required by Sec.  301.9000-5 stating as the reason for 
the lack of taxpayer consent to disclosure that the non-custodial 
parent has refused to provide the consent. (Both a consent from the 
taxpayer complying with section 6103(c) and a testimony 
authorization would be required prior to the IRS agent testifying at 
the deposition.) Should taxpayer consent be obtained, where 
appropriate, the IRS may provide a declaration and/or certified 
return information of the taxpayer. A deposition would be 
unnecessary under the circumstances.
    Example 3. The chairperson of a congressional committee requests 
the appearance of an IRS employee before the committee and committee 
staff to submit to questioning by committee staff concerning the 
procedures for processing Federal employment tax returns. This is an 
IRS congressional matter. Even though questioning would not involve 
the disclosure of returns or return information, the questioning 
would involve the disclosure of IRS records or information; 
therefore, a testimony authorization would be required. The IRS 
employee must contact the IRS Office of Legislative Affairs for 
instructions before appearing.
    Example 4. The IRS opens a criminal investigation as to the tax 
liabilities of a taxpayer. This is an IRS matter. At some point 
during the criminal investigation, the IRS refers the matter to the 
United States Department of Justice, requesting the institution of a 
Federal grand jury to investigate further potential criminal tax 
violations. Subsequently, the United States Department of Justice 
approves the request and initiates a grand jury investigation. The 
grand jury subsequently indicts the taxpayer,

[[Page 40857]]

and the taxpayer subpoenas an IRS special agent for testimony 
regarding the investigation. The records and information collected 
during the administrative stage of the investigation, including the 
taxpayer's tax returns from IRS files, are IRS records and 
information. A testimony authorization is required for the IRS 
special agent to testify regarding this information. However, no IRS 
testimony authorization is required regarding the information 
collected by the IRS special agent when the IRS special agent was 
acting under the direction and control of the United States 
Attorney's Office in the Federal grand jury investigation. That 
information is not IRS records or information within the meaning of 
Sec.  301.9000-1(a).
    Example 5. The United States Department of Justice attorney 
representing the IRS in a suit for refund requests testimony from an 
IRS revenue agent. This is an IRS matter. A testimony authorization 
would not be required in order for the IRS revenue agent to testify 
because the testimony was requested by government counsel.
    Example 6. A state assistant attorney general, acting in 
accordance with a recommendation from his state's department of 
revenue, is prosecuting a taxpayer under a state criminal law 
proscribing the intentional failure to file a state income tax 
return. The assistant attorney general serves an IRS employee with a 
subpoena to testify concerning the taxpayer's Federal income tax 
return filing history. This is a non-IRS matter. This is also a 
state judicial proceeding pertaining to tax administration within 
the meaning of section 6103(h)(4) and (b)(4). As such, the 
procedures of section 6103(h)(4) apply. A testimony authorization 
would be required for the testimony demand in the subpoena.
    Example 7. A former IRS revenue agent is requested to testify in 
a divorce proceeding. The request seeks testimony explaining the 
meaning of entries appearing on one of the parties' transcript of 
account which is already in the possession of the parties. This is a 
non-IRS matter. No testimony authorization is required because the 
testimony requested from the former IRS employee involves general 
knowledge gained while the former IRS revenue agent was employed 
with the IRS.


Sec.  301.9000-7  Effective date.

    The provisions of Sec. Sec.  301.9000-1 through 301.9000-6 apply to 
any request or demand for IRS records or information received by any 
IRS officer, employee or contractor on or after the date of publication 
of the Treasury decision adopting these rules as final regulations in 
the Federal Register.

David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
[FR Doc. 03-17230 Filed 7-8-03; 8:45 am]
BILLING CODE 4830-01-P