[Federal Register Volume 69, Number 32 (Wednesday, February 18, 2004)]
[Rules and Regulations]
[Pages 7567-7574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3544]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 301, and 602

[TD 9114]
RIN 1545-AY50


Electronic Payee Statements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations relating to the 
voluntary electronic furnishing of statements on Forms W-2, ``Wage and 
Tax Statement,'' under sections 6041 and 6051, and statements on Forms 
1098-T, ``Tuition Statement,'' and Forms 1098-E, ``Student Loan 
Interest Statement,'' under section 6050S. These final regulations 
affect businesses, other for-profit institutions, and eligible 
educational institutions that wish to furnish these required statements 
electronically. The regulations will also affect individuals 
(recipients), principally employees, students, and borrowers, who 
consent to receive these statements electronically.

DATES: Effective Date: These regulations are effective February 18, 
2004.
    Applicability Date: These regulations apply to statements and 
reports required to be furnished after February 13, 2004. The rules 
relating to maintenance of access to Web site statements also apply to 
statements and reports required to be furnished after December 31, 
2003.

FOR FURTHER INFORMATION CONTACT: Michael E. Hara at (202) 622-4910 (not 
a toll free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1729. Responses to this collection of information 
are required to obtain the benefit of providing payee statements 
electronically.
    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.
    The estimated annual burden per respondent or recordkeeper varies 
depending on individual circumstances, with an estimated average of 6 
minutes.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:SP 
Washington, DC 20224, and 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.
    Books or records relating to this 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

    On February 14, 2001, the IRS published a notice of proposed 
rulemaking (by cross reference to temporary regulations) and a notice 
of public hearing, (REG-107186-00) (66 FR 10247). The regulations 
proposed to permit the voluntary electronic furnishing of (1) 
statements on Form W-2 under sections 6041 and 6051, (2) ``Tuition 
Statements'' (Form 1098-T) under section 6050S, and (3) ``Student Loan 
Interest Statements'' (Form 1098-E) under section 6050S. These proposed 
amendments were intended (1) to increase electronic filing consistent 
with section 2001 of the Internal Revenue Service Restructuring and 
Reform Act of 1998, Public Law 105-206 (July 22, 1998); and (2) to 
facilitate the use of electronic communication and record keeping 
consistent with the Electronic Signatures in Global and National 
Commerce Act (E-SIGN Act) Public Law No. 106-229, 114 Stat. 464 (2000), 
15 U.S.C. sections 7001 through 7006 (2000). The IRS received written 
comments on the proposed regulations. A public hearing was held on July 
25, 2001. After consideration of all the comments, the proposed 
regulations are adopted as revised by this Treasury Decision. The 
temporary regulations under sections 6041, 6050S, 6051, and 6724 are 
removed.
    On December 18, 2002, final regulations were issued under section 
6050S (TD 9029), addressing information reporting for qualified tuition 
payments and reimbursements; TD 9029 also renumbered the regulations 
under section 6050S.

Explanation of Revisions and Summary of Comments

1. Expansion to Additional Statements, Notices, and Reports
    Five commentators recommended that the regulations be expanded to 
allow the electronic furnishing of additional statements and reports, 
including Forms 5498 and 1099-R. After the IRS issued the proposed 
regulations, Congress enacted the Job Creation and Worker Assistance 
Act of 2002 (JCWAA), Public Law 107-147 (March 9, 2002). Section 401 of 
JCWAA permits the electronic furnishing of any statement required under 
subpart B of part III of subchapter A of chapter 61 of Title 26 
(sections 6041 through 6050T). Section 401 of JCWAA specifically 
eliminated the first-class-mailing requirement that prevented 
electronic furnishing of statements under sections 6042(c), 6044(e), 
and 6049(c)(2). In addition, Congress expressed its support for 
electronic furnishing of all statements required by the Code. See Joint 
Committee on Taxation Staff, Technical Explanation of the ``Job 
Creation and Worker Assistance Act of 2002,'' 107th Cong., 2d Sess. 
(2002) at page 27.
    Section 401 of JCWAA permits the electronic furnishing of all 
statements required under sections 6041 through 6050T, if the recipient 
consents to receive the statement in a manner similar to the one 
permitted by regulations under section 6051 or in such other manner as 
provided by the Secretary. Because section 401 of JCWAA authorizes the 
electronic furnishing of all statements required under sections 6041 
through 6050T, final regulations are not necessary to allow the 
voluntary electronic furnishing of statements required under sections 
6041 through 6050T, as long as the recipient consents to receive the 
statement in a manner similar to the one permitted under these final 
regulations. In addition, Notice 2004-10 permits

[[Page 7568]]

electronic furnishing of the Form 1099-R, Distributions from Pensions, 
Annuities, Retirement or Profit-Sharing Plans, IRA, Insurance 
Contracts, Form 1099-MSA, Distributions From an Archer MSA or 
Medicare+Choice MSA, Form 1099-Q, Payments from Qualified Education 
Programs (Under Section 529 or 530), Form 5498, Individual Retirement 
Arrangement Contribution Information, Form 5498-ESA, Coverdell ESA 
Contribution Information, and Form 5498-MSA, Archer MSA or 
Medicare+Choice MSA Information, payee statements.
2. Electronic Mail Attachments
    The only method of electronic furnishing specifically authorized by 
the proposed regulations required posting on Web sites. Two 
commentators recommended that the regulations allow taxpayers to send 
statements as attachments to e-mail. One commentator stated that some 
organizations might not wish to provide tax statements by e-mail 
because of security and privacy concerns.
    The final regulations do not restrict furnishers solely to the use 
of Web site technology. Treasury and the IRS believe that Web site 
technology currently provides the most secure method of furnishing 
statements electronically but do not intend to limit the technology to 
be used in furnishing statements electronically. Accordingly, under the 
final regulations, taxpayers are permitted to furnish statements 
through any electronic means to which the recipient consents, including 
by e-mail.
3. Standards To Ensure Confidentiality of Taxpayer Information
    One commentator recommended that the IRS adopt security 
requirements that require simply a sign-on and a password. Two 
commentators recommended against adoption of specific standards. The 
final regulations do not adopt specific security standards to ensure 
the confidentiality of recipient information. Rather, the final 
regulations leave room for security methodologies to evolve through 
advances in technology.
4. Consent Consistent With the E-SIGN Act's Notice and Consent 
Provisions
    The proposed regulations adopted notice and consent requirements 
consistent with the E-SIGN Act. Three commentators stated that the 
notice and consent requirements of the regulation should not apply to 
the electronic transmission of statements between employers and 
employees. One commentator observed that the notice and consent 
requirement will require the employer to modify existing databases and/
or create a separate data base to distinguish between employees who 
have consented to receive statements electronically and those who will 
receive a paper statement. The commentator asserted that the cost of 
these database changes would offset any savings from electronic 
furnishing. Two commentators stated that credit unions could not 
efficiently provide statements to their employees electronically, if 
the credit unions were subject to the regulation's (E-SIGN Act's) 
notice and consent requirements.
    The final regulations retain the notice and consent requirements. 
The notice and consent requirements are justified on tax administration 
grounds; it is important that taxpayers be able to demonstrate the 
ability to receive the tax statements electronically and then actually 
receive them. Moreover, the IRS and Treasury continue to believe that 
electronic furnishing should be voluntary for recipients as well as 
furnishers to accommodate recipients who prefer to receive their 
statements by traditional paper delivery for perceived security and 
privacy reasons. Section 401 of JCWAA, which adopted the notice and 
consent requirements in the temporary regulations, suggests that 
Congress also believes that electronic furnishing should be voluntary.
5. Verification of Receipt
    Two commentators stated that, since the recipient chooses whether 
to receive information electronically, the recipient should be 
responsible for having the hardware and software necessary to receive 
the information electronically. The commentators pointed out that 
electronic mail systems are not standardized and some systems do not 
provide verification of delivery.
    The regulations were not changed to reflect these comments. Both 
the furnisher and the recipient must voluntarily participate in the 
electronic delivery system. Both parties are responsible for ensuring 
that the system complies with the requirements of the regulations.
6. Consent Demonstrating Ability To Obtain Statements
    One commentator recommended clarification of the example provided 
in the regulations regarding consent from the recipient. The 
commentator noted that a recipient's being able to receive and send e-
mail does not necessarily prove that the recipient can access a Web 
site and download the statement. The commentator recommended an example 
describing alternatives to consent by e-mail.
    The rule for consent requires that the recipient demonstrate the 
ability to access statements, which is done in the regulation's example 
by opening the attachment. However, the IRS agrees with the 
commentator's observation and has added two examples of alternative 
methods of providing consent in the final regulation.
7. Posting Despite Lack of Consent to Electronic Delivery
    Two commentators recommended that the regulations expressly permit 
furnishers to post all their statements to a Web site and to send each 
recipient his/her statement as an e-mail attachment, even if the 
recipient has not consented to electronic furnishing. The furnisher 
could then provide paper copies of the statements to recipients who did 
not consent to electronic furnishing. The commentators cited the ease 
and economy of total versus piecemeal posting.
    The final regulations do not expressly adopt the recommendation. 
However, the regulations do not prohibit a furnisher from storing all 
statements on the Web server. Whether the furnisher stores all 
statements or only those statements for which consents are received is 
a business decision for the furnisher.
8. Contact Information of Person To Whom a Withdrawal of Consent Should 
Be Furnished
    Three commentators noted that providing the contact information for 
a specific individual to whom withdrawal of consent should be furnished 
may cause confusion, because in many large companies no single 
individual can accommodate communications from a potentially large 
number of recipients. The commentators suggest that the regulations 
provide that the recipients may be provided the name, address, phone 
number and e-mail address of an individual or department, such as a 
Human Resources Department, or Payroll Department on the disclosure 
statement. The regulations have been amended to provide that either the 
name of an individual or of a department may be included in the 
disclosure statement.
9. Definition of High Importance
    Two commentators requested clarification of the term high 
importance in proposed Sec.Sec. 1.6050S-1(a)(6)(i), 1.6050S-2(a)(6)(i), 
and 31.6051-1(j)(6)(i). The commentators noted that if this term refers 
to assigning a high priority to the e-mail, as some e-mail

[[Page 7569]]

software allows, there must be allowances made for e-mail software that 
does not have that capability. The commentators suggest that in a case 
where the sending or receiving software does not offer or recognize 
levels of priority, the regulations should allow the use of a subject 
line stating ``HIGH IMPORTANCE--IMPORTANT TAX RETURN DOCUMENT 
AVAILABLE.''
    The final regulations do not require furnishers to assign high 
priority to e-mail because some software does not have this capability 
and the IRS and Treasury do not intend to favor any particular 
technology. Accordingly, furnishers will not be required to use e-mail 
software with the capability of assigning high priority.
10. Use of Other Subject Lines
    One commentator expressed concern that requiring use of the 
language ``IMPORTANT TAX RETURN DOCUMENT AVAILABLE'' on the subject 
line of e-mail notices could be exploited to spread a computer virus 
through e-mails with the same subject line. The commentator suggests 
that each organization be permitted to create its own subject line 
containing the name of the issuing organization.
    The regulations have not been amended to include this modification 
of the subject line. It is important to use standard language to 
identify the statement. Moreover, to prevent the spread of computer 
viruses, the recipient need only monitor who sent the e-mail.
11. Undeliverable Notice
    One commentator suggested that when an electronic notice is 
returned and the furnisher notifies the recipient, the recipient may 
give the furnisher a corrected electronic address to receive the 
statement electronically. The consent rule in the final regulations 
allows the furnisher to obtain a new address from the recipient and 
resend the notice.
12. Allowable Period to Deliver Paper Statement
    Two commentators recommended that if the recipient states that he 
or she no longer has an e-mail address or Internet access, and desires 
a paper statement, the furnisher should construe the recipient's 
statement as a withdrawal of consent. Furnishers will then be allowed a 
certain number of days to furnish the paper statement to the recipient. 
In addition, several members of the information reporting industry 
requested that a cut-off date be provided for withdrawing consent.
    The final regulations retain the rules regarding withdrawal of 
consent, but allow the furnisher to treat a request for a paper 
statement as a withdrawal of consent. Treasury and the IRS do not think 
the regulations should impose a cut-off date for withdrawing consent. 
Furnishers may, however, provide that a withdrawal of consent takes 
effect either on the date it is received by the furnisher or on a 
subsequent date, thereby imposing their own cut-off date for 
withdrawing consents.
    The final regulations retain the rule that a withdrawal of consent 
will not affect a statement that has been furnished electronically. 
Thus, if the withdrawal takes effect after the statement is furnished 
electronically, the statement will be considered timely if it was 
furnished electronically by the applicable due date. The final 
regulations also provide that if the withdrawal of consent takes effect 
before the statement is furnished electronically a paper statement must 
be furnished. In this case, a paper statement furnished after the 
statement due date will be considered timely if furnished within 30 
days after the date the withdrawal of consent is received by the 
furnisher. This extension of time eliminates the need to address 
reasonable cause for late filing under section 6724. Therefore, the 
proposed amendment to the regulations under section 6724 is not adopted 
and temporary regulation Sec. 301.6724-1T is removed.
13. Corrected Statements
    Two commentators requested that the furnisher be able to post both 
Forms W-2c and replacement Forms W-2 on the Web site. The commentators 
noted that an employer may prefer to completely replace an employee's 
W-2, if it can be done before W-2s are filed with the Social Security 
Administration, thereby avoiding the W-2c process. The regulations have 
not been amended to allow a replacement Form W-2 if a Form W-2c is 
otherwise required. The purpose of the regulations is to describe the 
manner in which statements may be furnished electronically. The 
regulations are not intended to change the established procedures for 
correcting statements. Employers should consult IRS forms and 
instructions for the appropriate correction procedures.
14. Access Period
    Two commentators recommended shortening the period of time during 
which statements can be accessed by changing the period's end date from 
October 15th to April 30th (or August 15) to reduce the amount of time 
computer hackers will have to access the confidential information on 
the Web site. One commentator noted that even if a recipient intends to 
apply for two extensions, it is highly likely that the recipient will 
have accessed the Form W-2 on the Web site by April 15 to determine 
whether a payment was necessary by that date. One commentator suggested 
that furnishers have the option to maintain statements on the Web site 
until April 30, as long as they provide replacements through October 15 
by paper or as attachments to an e-mail.
    The final regulations do not change the access period. It is the 
responsibility of the furnisher to maintain a secure Web site. It is 
important to allow access to the Web site during the entire filing 
season (including the period of extensions) to enable taxpayers to 
import the information directly to their returns if they choose to file 
electronically.

Special Analyses

    It has been determined that these final regulations are 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.

Final Regulatory Flexibility Analysis

    The collection of information contained in Sec.Sec. 1.6041-2, 
1.6050S-2, 1.6050S-4, and 31.6051-1 is required if a person required to 
furnish a taxpayer with a statement wishes to furnish the statement 
electronically. This information will be used to determine that the 
recipient has consented to receive the statement electronically. The 
objectives of these final regulations are to provide uniform, 
practicable, and administrable rules for providing information 
statements electronically. The types of small entities to which the 
regulations may apply are small eligible educational institutions (such 
as colleges and universities), small corporations and partnerships, and 
small employers.
    There are no known Federal rules that duplicate, overlap, or 
conflict with these regulations. The regulations impose the least 
economic burden on small entities of all of the alternatives 
considered. The collection of information is required only from persons 
receiving the statements electronically using a method authorized by 
the final regulations.

[[Page 7570]]

Drafting Information

    The principal author of these final regulations is Michael E. Hara, 
of the Office of Associate Chief Counsel (Procedure and 
Administration), Administrative Provisions and Judicial Practice 
Division. 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 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.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1, 31, 301, and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by removing 
the entries for ``Section 1.6041-2T, ``Section 6050S-4T,'' and 
``Section 6050S-2T'' and adding entries in numerical order to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.6041-2 also issued under 26 U.S.C. 6041(d). * * *
    Section 1.6050S-2 also issued under 26 U.S.C. 6050S(g).
    Section 1.6050S-4 also issued under 26 U.S.C. 6050S(g). * * *


0
Par. 2. Section 1.6041-2(a)(5) is added to read as follows:


Sec. 1.6041-2  Return of information as to payments to employees.

    (a) * * *
    (5) Statement for employees. An employer required under this 
paragraph (a) to file Form W-2 with respect to an employee is also 
required under sections 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.
* * * * *


Sec. 1.6041-2T  [Removed]

0
Par. 3. Section 1.6041-2T is removed.

0
Par. 4. Section 1.6050S-2 is added to read as follows:


Sec. 1.6050S-2  Information reporting for payments and reimbursements 
or refunds of qualified tuition and related expenses.

    (a) Electronic furnishing of statements--(1) In general. A person 
required by section 6050S(d) to furnish a written statement regarding 
payments and reimbursements or refunds of qualified tuition and related 
expenses (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 (6) of this section is treated as furnishing 
the required statement.
    (2) Consent--(i) In general. The recipient must have affirmatively 
consented to receive the statement in an electronic format. The consent 
may be made electronically in any 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 paper document if it is confirmed electronically.
    (ii) Withdrawal of consent. The consent requirement of this 
paragraph (a)(2) is not satisfied if the recipient withdraws the 
consent and the withdrawal takes effect before the statement is 
furnished. The furnisher may provide that a withdrawal of consent takes 
effect either on the date it is received by the furnisher or on a 
subsequent date. The furnisher may also provide that a request for a 
paper statement will be treated as a withdrawal of consent.
    (iii) 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.
    (iv) Examples. The following examples illustrate the rules of this 
paragraph (a)(2):

    Example 1. Furnisher F sends Recipient R a letter stating that R 
may consent to receive statements required by section 6050S(d) 
electronically on a Web site instead of in a paper format. The 
letter contains instructions explaining how to consent to receive 
the statements electronically by accessing the Web site, downloading 
the consent document, completing the consent document and e-mailing 
the completed consent back to F. The consent document posted on the 
Web site uses the same electronic format that F will use for the 
electronically furnished statements. R 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.
    Example 2. Furnisher F sends Recipient R an e-mail stating that 
R may consent to receive statements required by section 6050S(d) 
electronically 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.
    Example 3. Furnisher F posts a notice on its Web site stating 
that Recipient R may receive statements required by section 6050S(d) 
electronically instead of in a paper format. The Web site contains 
instructions on how R may access a secure Web page and consent to 
receive the statements electronically. By accessing the secure Web 
page and giving consent, 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

[[Page 7571]]

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 and whether a request for a paper statement 
will be treated as a withdrawal of consent.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent by writing (electronically 
or on paper) to the person or department whose name, mailing address, 
telephone number, and e-mail address is provided in the disclosure 
statement;
    (B) The furnisher will confirm the withdrawal and the date on which 
it takes effect 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 date on which the withdrawal of consent takes effect.
    (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. The furnisher must inform the recipient of any 
change in the furnisher's contact information.
    (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 Web site.
    (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) Notice--(i) In general. If the statement is furnished on a Web 
site, the furnisher must notify the recipient that the statement is 
posted on a Web site. 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 must be on the subject line of the electronic mail.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (a)(5)(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. If the furnisher has corrected a 
recipient's statement that was furnished electronically, the furnisher 
must furnish the corrected statement to the recipient electronically. 
If the recipient's statement was furnished through a Web site posting 
and the furnisher has corrected the statement, the furnisher must 
notify the recipient that it has posted the corrected statement on the 
Web site within 30 days of such posting in the manner described in 
paragraph (a)(5)(i) of this section. The corrected statement or the 
notice must be furnished by mail or in person if--
    (A) An electronic notice of the Web site posting of an original 
statement was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (6) Access period. Statements furnished on a Web site must be 
retained on the Web site 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 Web site 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) Paper statements after withdrawal of consent. If a recipient 
withdraws consent to receive a statement electronically and the 
withdrawal takes effect before the statement is furnished 
electronically, a paper statement must be furnished. A paper statement 
furnished after the statement due date under this paragraph (b) will be 
considered timely if furnished within 30 days after the date the 
withdrawal of consent is received by the furnisher.
    (c) Effective date. This section applies to statements required to 
be furnished after February 13, 2004. Paragraph (a)(6) of this section 
also applies to statements required to be furnished after December 31, 
2004.


1.6050S-4T  [Removed]

0
Par. 5 Section 1.6050S-4T is removed.

0
Par. 6 Section 1.6050S-4 is added to read as follows:


Sec. 1.6050S-4  Information reporting for payments of interest on 
qualified education loans.

    (a) Electronic furnishing of statements--(1) In general. A person 
required by section 6050S(d) to furnish a written statement regarding 
payments of interest on qualified education loans (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 (6) of this section is treated as furnishing the required 
statement.
    (2) Consent--(i) In general. The recipient must have affirmatively 
consented to receive the statement in an electronic format. The consent 
may be made electronically in any 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 paper document if it is confirmed electronically.
    (ii) Withdrawal of consent. The consent requirement of this 
paragraph (a)(2) is not satisfied if the recipient withdraws the 
consent and the withdrawal takes effect before the statement is 
furnished. The furnisher may provide that a withdrawal of consent takes 
effect either on the date it is received by the furnisher or on a 
subsequent date. The furnisher may also provide that a request for a 
paper statement will be treated as a withdrawal of consent.
    (iii) 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.

[[Page 7572]]

    (iv) Examples. The following examples illustrate the rules of this 
paragraph (a)(2):

    Example 1. Furnisher F sends Recipient R a letter stating that R 
may consent to receive statements required by section 6050S(d) 
electronically on a Web site instead of in a paper format. The 
letter contains instructions explaining how to consent to receive 
the statements electronically by accessing the Web site, downloading 
the consent document, completing the consent document and e-mailing 
the completed consent back to F. The consent document posted on the 
Web site uses the same electronic format that F will use for the 
electronically furnished statements. R 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.
    Example 2. Furnisher F sends Recipient R an e-mail stating that 
R may consent to receive statements required by section 6050S(d) 
electronically 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.
    Example 3. Furnisher F posts a notice on its Web site stating 
that Recipient R may receive statements required by section 6050S(d) 
electronically instead of in a paper format. The Web site contains 
instructions on how R may access a secure Web page and consent to 
receive the statements electronically. By accessing the secure Web 
page and giving consent, 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 and whether a request for a paper statement 
will be treated as a withdrawal of consent.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent by writing (electronically 
or on paper) to the person or department whose name, mailing address, 
telephone number, and e-mail address is provided in the disclosure 
statement;
    (B) The furnisher will confirm the withdrawal and the date on which 
it takes effect 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 date on which the withdrawal of consent takes effect.
    (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. The furnisher must inform the recipient of any 
change in the furnisher's contact information.
    (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 Web site.
    (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) Notice--(i) In general. If the statement is furnished on a Web 
site, the furnisher must notify the recipient that the statement is 
posted on a Web site. 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 must be on the subject line of the electronic mail.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (a)(5)(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. If the furnisher has corrected a 
recipient's statement that was furnished electronically, the furnisher 
must furnish the corrected statement to the recipient electronically. 
If the recipient's statement was furnished though a Web site posting 
and the furnisher has corrected the statement, the furnisher must 
notify the recipient that it has posted the corrected statement on the 
Web site within 30 days of such posting in the manner described in 
paragraph (a)(5)(i) of this section. The corrected statement or the 
notice must be furnished by mail or in person if--
    (A) An electronic notice of the Web site posting of an original 
statement or the corrected statement was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (6) Access period. Statements furnished on a Web site must be 
retained on the Web site 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 Web site 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 after February 13, 2004. Paragraph (a)(6) of this section 
also applies to statements required to be furnished after December 31, 
2003.


Sec. 1.6050S-2T  [Removed]

0
Par. 7 Section 1.6050S-2T is removed.

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

0
Par. 8. The authority citation for part 31 is amended by revising the 
entry for ``31.6051-1(d'') and removing the entry

[[Page 7573]]

for ``Section 31.6051-1T'' to read, in part, as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 31.6051-1 also issued under 26 U.S.C. 6051. * * *


0
Par. 9. In Sec. 31.6051-1, paragraph (j) is added to read as follows:


Sec. 31.6051-1  Statements for employees.

* * * * *
    (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 (6) 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. The consent 
may be made electronically in any 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 paper document if it is confirmed electronically.
    (ii) Withdrawal of consent. The consent requirement of this 
paragraph (j)(2) is not satisfied if the recipient withdraws the 
consent and the withdrawal takes effect before the statement is 
furnished. The furnisher may provide that a withdrawal of consent takes 
effect either on the date it is received by the furnisher or on a 
subsequent date. The furnisher may also provide that a request for a 
paper statement will be treated as a withdrawal of consent.
    (iii) 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.
    (iv) Examples. The following examples illustrate the rules of this 
paragraph (j)(2):

    Example 1. Furnisher F sends Recipient R a letter stating that R 
may consent to receive Form W-2 electronically on a Web site instead 
of in a paper format. The letter contains instructions explaining 
how to consent to receive Form W-2 electronically by accessing the 
Web site, downloading the consent document, completing the consent 
document and e-mailing the completed consent back to F. The consent 
document posted on the Web site uses the same electronic format that 
F will use for the electronically furnished Form W-2. R 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 (j)(2)(i) of 
this section.
    Example 2. Furnisher F sends Recipient R an e-mail stating that 
R may consent to receive Form W-2 electronically instead of in a 
paper format. The e-mail contains an attachment instructing R how to 
consent to receive Form W-2 electronically. The e-mail attachment 
uses the same electronic format that F will use for the 
electronically furnished Form 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 Form W-2 electronically in 
the manner described in paragraph (j)(2)(i) of this section.
    Example 3. Furnisher F posts a notice on its Web site stating 
that Recipient R may receive Form W-2 electronically instead of in a 
paper format. The Web site contains instructions on how R may access 
a secure Web page and consent to receive the statements 
electronically. By accessing the secure Web page and giving consent, 
R has consented to receive Form 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 each Form W-2 required 
to be furnished 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 first Form W-2 required to be furnished 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 
(j)(2)(i) of this section and whether a request for a paper statement 
will be treated as a withdrawal of consent.
    (v) Withdrawal of consent. The recipient must be informed that--
    (A) The recipient may withdraw a consent by writing (electronically 
or on paper) to the person or department whose name, mailing address, 
telephone number, and e-mail address is provided in the disclosure 
statement;
    (B) The furnisher will confirm the withdrawal and the date on which 
it takes effect 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 (j) 
before the date on which the withdrawal of consent takes effect.
    (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. The furnisher must inform the recipient of any 
change in the furnisher's contact information.
    (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 Web site. 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) Notice--(i) In general. If the statement is furnished on a Web 
site, the furnisher must notify the recipient that the statement is 
posted on a Web site. 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,

[[Page 7574]]

``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' If the notice is provided 
by electronic mail, the foregoing statement must be on the subject line 
of the electronic mail.
    (ii) Undeliverable electronic address. If an electronic notice 
described in paragraph (j)(5)(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 Form W-2. If the furnisher has corrected a 
recipient's Form W-2 that was furnished electronically, the furnisher 
must furnish the corrected Form W-2 to the recipient electronically. If 
the recipient's Form W-2 was furnished through a Web site posting and 
the furnisher has corrected the Form W-2, the furnisher must notify the 
recipient that it has posted the corrected Form W-2 on the Web site 
within 30 days of such posting in the manner described in paragraph 
(j)(5)(i) of this section. The corrected Form W-2 or the notice must be 
furnished by mail or in person if--
    (A) An electronic notice of the Web site posting of an original 
Form W-2 or the corrected Form W-2 was returned as undeliverable; and
    (B) The recipient has not provided a new e-mail address.
    (6) Access period. Forms W-2 furnished on a Web site must be 
retained on the Web site 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 Web site 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.
    (7) Paper statements after withdrawal of consent. If a recipient 
withdraws consent to receive a statement electronically and the 
withdrawal takes effect before the statement is furnished 
electronically, a paper statement must be furnished. A paper statement 
furnished after the statement due date under this paragraph (j)(7) will 
be considered timely if furnished within 30 days after the date the 
withdrawal of consent is received by the furnisher.
    (8) Effective date. This paragraph (j) applies to Forms W-2 
required to be furnished after February 13, 2004. Paragraph (j)(6) of 
this section also applies to Forms W-2 required to be furnished after 
December 31, 2003.


Sec. 31.6051-1T  [Removed]

0
Par. 10. Section 31.6051-1T is removed.

PART 301--REGULATIONS ON PROCEDURE AND ADMINISTRATION

0
Par. 11. The authority citation for part 301 continues to read, in 
part, as follows:

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


Sec. 301.6724-1T  [Removed]

0
Par. 12. Section 301.6724-1T is removed.

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

0
Par. 13. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


0
Par. 14. In Sec. 602.101, paragraph (b) is amended by:

0
1. Removing the following entries from the table:

1.6041-2T..................................................    1545-1729
1.6050S-2T.................................................    1545-1729
1.6050S-4T.................................................    1545-1729
31.6051-1T.................................................    1545-1729
 


0
2. Revising the entry for ``31.6051-1'' in the table to read as 
follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control No.
------------------------------------------------------------------------
 
                                * * * * *
31.6051-1..................................................    1545-0008
                                                               1545-0182
                                                               1545-0458
                                                               1545-1729
------------------------------------------------------------------------

* * * * *

0
3. Adding the following entries in numerical order to the table to read 
as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control No.
------------------------------------------------------------------------
 
                                * * * * *
1.6041-2...................................................    1545-1729
 
                                * * * * *
1.6050S-2..................................................    1545-1729
 
                                * * * * *
1.6050S-4..................................................    1545-1729
 
                                * * * * *
------------------------------------------------------------------------


Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
    Approved: February 12, 2004.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 04-3544 Filed 2-13-04; 10:16 am]
BILLING CODE 4830-01-P