[Federal Register Volume 73, Number 34 (Wednesday, February 20, 2008)]
[Rules and Regulations]
[Pages 9188-9190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-3100]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9380]
RIN1545-BC45


Substitute for Return

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 returns 
prepared or signed by the Commissioner or other Internal Revenue 
Officers or employees under section 6020 of the Internal Revenue Code. 
These final regulations provide guidance for preparing a substitute for 
return under section 6020(b). Absent the existence of a return under 
section 6020(b), the addition to tax under section 6651(a)(2) does not 
apply to a nonfiler. These final regulations affect any person who 
fails to file a required return.

DATES: Effective Date: These regulations are effective on February 20, 
2008.
    Applicability Date: For dates of applicability, see Sec.  301.6020-
1(d).

FOR FURTHER INFORMATION CONTACT: Alicia E. Goldstein at (202) 622-3630 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final regulations relating to substitutes 
for returns. These final regulations reflect amendments to 26 CFR part 
301 under section 6020 of the Internal Revenue Code. Section 301.6020-1 
of the Procedure and Administration Regulations provides for the 
preparation or execution of returns by authorized Internal Revenue 
Officers or employees. Section 1301(a) of the Taxpayer Bill of Rights 
Act of 1996, Public Law 104-168 (110 Stat. 1452), amended section 6651 
to add subsection (g)(2), which provides that, for returns due after 
July 30, 1996 (determined without regard to extensions), a return made 
under section 6020(b) shall be treated as a return filed by the 
taxpayer for purposes of determining the amount of the additions to tax 
under section 6651(a)(2) and (a)(3). Absent the existence of a return 
under section 6020(b), the addition to tax under section 6651(a)(2) 
does not apply to a nonfiler.
    In Cabirac v. Commissioner, 120 T.C. 163 (2003), aff'd in an 
unpublished opinion, No. 03-3157 (3rd Cir. Feb. 10, 2004), and Spurlock 
v. Commissioner, T.C. Memo. 2003-124, the Tax Court found that the 
Service did not establish that it had prepared and signed a return in 
accordance with section 6020(b). In Spurlock, the Tax Court held that a 
return for section 6020(b) purposes must be subscribed, contain 
sufficient information from which to compute the taxpayer's tax 
liability, and the return and any attachments must ``purport to be a 
return.'' Spurlock, T.C.Memo. 2003-124 at 27. These decisions prompted 
the IRS and the Treasury Department to revise its rules for the 
preparation or execution of returns by authorized Internal Revenue 
Officer or employees. Temporary regulations and a notice of proposed 
rulemaking (Reg-131739-03) were published in the Federal Register on 
July 18, 2005 [70 FR 41165].
    The IRS and the Treasury Department received written public 
comments responding to the proposed regulations. After consideration of 
the comments received, the proposed regulations are adopted as revised 
by this Treasury decision. These final regulations generally retain the 
provisions of the proposed regulations with one minor change as 
explained in more detail in the preamble.

Explanation of Provisions and Summary of Comments

    The regulations provide that a document (or set of documents) 
signed by an authorized Internal Revenue Officer or employee is a 
return under section 6020(b) if the document (or set of documents) 
identifies the taxpayer by name and taxpayer identification number, 
contains sufficient information from which to compute the taxpayer's 
tax liability, and the document (or set of documents) purports to be a 
return under section 6020(b). A Form 13496, ``IRC Section 6020(b) 
Certification,'' or any other form that an authorized Internal Revenue 
Officer or employee signs and uses to identify a document (or set of 
documents) containing the information set forth in this preamble as a 
section 6020(b) return, and the documents identified, constitute a 
valid section 6020(b) return.
    Further, because the Service prepares and signs section 6020(b) 
returns both by hand and through automated means, these regulations 
provide that a name or title of an Internal Revenue Officer or employee 
appearing upon a return made in accordance with section 6020(b) is 
sufficient as a subscription by that officer or employee to adopt the 
document as a return for the taxpayer without regard to whether the 
name or title is handwritten, stamped, typed, printed or otherwise 
mechanically affixed to the document. The document or set of documents 
and subscription may be in written or electronic form.
    These final regulations do not alter the method for the preparation 
of returns under section 6020(a) as provided in TD 6498. Under section 
6020(a), if the taxpayer consents to disclose necessary information, 
the Service may prepare a return on behalf of a taxpayer, and if the 
taxpayer signs the return, the Service will receive it as the 
taxpayer's return.
    The proposed regulations generated numerous comments. For the most 
part, the comments were variations of ten different form letters. The 
commentators took issue with the regulation because the signature on 
the certification was not signed under oath, and therefore not signed 
under a penalty of perjury; because a ``set of documents'' could 
substitute for a return instead of the form that would have been used 
by the taxpayer; and because the IRS was making the decision of who 
should file a tax return.
    After considering these comments, the IRS and the Treasury 
Department have concluded that they provide no basis for adopting 
changes in the final regulations. In particular, the argument that the 
IRS should not be able to decide who should file a tax return is 
without merit. The requirement to file a tax return is not voluntary 
and is clearly set forth in sections 6011(a) and 6012(a).
    There has been one minor change to the text of the temporary 
regulations. The temporary regulation provided that any return made in 
accordance with paragraph (b)(1) of this section and signed by the 
Commissioner or other authorized Internal Revenue Officer or employee 
shall be prima facie good and sufficient for all legal purposes. In 
2005, new language was added to the Bankruptcy Code at 11 U.S.C. 523(a) 
that specifically provided that a section 6020(b) return is not a 
return for dischargeability purposes. Therefore, the portion of the 
temporary regulation that stated that the return was sufficient for all 
legal purposes is no longer correct. The language in the regulation has 
been changed to state that a section 6020(b) return is sufficient for 
all legal purposes ``except insofar as any Federal statute expressly 
provides otherwise.''

[[Page 9189]]

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations, and because the 
regulations do not impose a collection of information, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to 
section 7805(f) of the Internal Revenue Code, the notice of proposed 
rulemaking preceding these regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these regulations is Alicia Goldstein, 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

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

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read in 
part as follows:

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


Sec.  301.6020-1T  [Removed]

0
Par. 2. Section 301.6020-1T is removed.


0
Par. 3. Section 301.6020-1 is added to read as follows:


Sec.  301.6020-1  Returns prepared or executed by the Commissioner or 
other Internal Revenue Officers.

    (a) Preparation of returns--(1) In general. If any person required 
by the Internal Revenue Code or by the regulations to make a return 
fails to make such return, it may be prepared by the Commissioner or 
other authorized Internal Revenue Officer or employee provided such 
person consents to disclose all information necessary for the 
preparation of such return. The return upon being signed by the person 
required to make it shall be received by the Commissioner as the return 
of such person.
    (2) Responsibility of person for whom return is prepared. A person 
for whom a return is prepared in accordance with paragraph (a)(1) of 
this section shall for all legal purposes remain responsible for the 
correctness of the return to the same extent as if the return had been 
prepared by him.
    (b) Execution of returns--(1) In general. If any person required by 
the Internal Revenue Code or by the regulations to make a return (other 
than a declaration of estimated tax required under section 6654 or 
6655) fails to make such return at the time prescribed therefore, or 
makes, willfully or otherwise, a false, fraudulent or frivolous return, 
the Commissioner or other authorized Internal Revenue Officer or 
employee shall make such return from his own knowledge and from such 
information as he can obtain through testimony or otherwise. The 
Commissioner or other authorized Internal Revenue Officer or employee 
may make the return by gathering information and making computations 
through electronic, automated or other means to make a determination of 
the taxpayer's tax liability.
    (2) Form of the return. A document (or set of documents) signed by 
the Commissioner or other authorized Internal Revenue Officer or 
employee shall be a return for a person described in paragraph (b)(1) 
of this section if the document (or set of documents) identifies the 
taxpayer by name and taxpayer identification number, contains 
sufficient information from which to compute the taxpayer's tax 
liability, and purports to be a return. A Form 13496, ``IRC Section 
6020(b) Certification,'' or any other form that an authorized Internal 
Revenue Officer or employee signs and uses to identify a set of 
documents containing the information set forth in this paragraph as a 
section 6020(b) return, and the documents identified, constitute a 
return under section 6020(b). A return may be signed by the name or 
title of an Internal Revenue Officer or employee being handwritten, 
stamped, typed, printed or otherwise mechanically affixed to the 
return, so long as that name or title was placed on the document to 
signify that the Internal Revenue Officer or employee adopted the 
document as a return for the taxpayer. The document and signature may 
be in written or electronic form.
    (3) Status of returns. Any return made in accordance with paragraph 
(b)(1) of this section and signed by the Commissioner or other 
authorized Internal Revenue Officer or employee shall be good and 
sufficient for all legal purposes except insofar as any Federal statute 
expressly provides otherwise. Furthermore, the return shall be treated 
as the return filed by the taxpayer for purposes of determining the 
amount of the addition to tax under sections 6651(a)(2) and (3).
    (4) Deficiency procedures. For deficiency procedures in the case of 
income, estate, and gift taxes, see sections 6211 through 6216, 
inclusive, and Sec. Sec.  301.6211-1 through 301.6215-1, inclusive.
    (5) Employment status procedures. For pre-assessment procedures in 
employment taxes cases involving worker classification, see section 
7436 (proceedings for determination of employment status).
    (6) Examples. The application of this paragraph (b) is illustrated 
by the following examples:

    Example 1. Individual A, a calendar-year taxpayer, fails to file 
his 2003 return. Employee X, an Internal Revenue Service employee, 
opens an examination related to A's 2003 taxable year. At the end of 
the examination, X completes a Form 13496, ``IRC Section 6020(b) 
Certification,'' and attached to it the documents listed on the 
form. Those documents explain examination changes and provide 
sufficient information to compute A's tax liability. The Form 13496 
provides that the Service employee identified on the form certifies 
that the attached pages constitute a return under section 6020(b). 
When X signs the certification package, the package constitutes a 
return under paragraph (b) of this section because the package 
identifies A by name, contains A's taxpayer identifying number 
(TIN), has sufficient information to compute A's tax liability, and 
contains a statement stating that it constitutes a return under 
section 6020(b). In addition, the Service will determine the amount 
of the additions to tax under section 6651(a)(2) by treating the 
section 6020(b) return as the return filed by the taxpayer. 
Likewise, the Service will determine the amount of any addition to 
tax under section 6651(a)(3), which arises only after notice and 
demand for payment, by treating the section 6020(b) return as the 
return filed by the taxpayer.
    Example 2. Same facts as in Example 1, except that, after 
performing the examination, X does not compile any examination 
documents together as a related set of documents. X also does not 
sign and complete the Form 13496 nor associate the forms explaining 
examination changes with any other document. Because X did not sign 
any document stating that it constitutes a return under section 
6020(b) and the documents otherwise do not purport to be a section 
6020(b) return, the documents do not constitute a return under 
section 6020(b). Therefore, the Service cannot determine the section 
6651(a)(2) addition to tax against nonfiler A for A's 2003 taxable 
year on the basis of those documents.
    Example 3. Individual C, a calendar-year taxpayer, fails to file 
his 2003 return. The Service determines through its automated 
internal matching programs that C received

[[Page 9190]]

reportable income and failed to file a return. The Service, again 
through its automated systems, generates a Letter 2566, ``30 Day 
Proposed Assessment (SFR-01) 910 SC/CG.'' This letter contains C's 
name, TIN, and has sufficient information to compute C's tax 
liability. Contemporaneous with the creation of the Letter 2566, the 
Service, through its automated system, electronically creates and 
stores a certification stating that the electronic data contained as 
part of C's account constitutes a valid return under section 6020(b) 
as of that date. Further, the electronic data includes the signature 
of the Service employee authorized to sign the section 6020(b) 
return upon its creation. Although the signature is stored 
electronically, it can appear as a printed name when the Service 
requests a paper copy of the certification. The electronically 
created information, signature, and certification is a return under 
section 6020(b). The Service will treat that return as the return 
filed by the taxpayer in determining the amount of the section 
6651(a)(2) addition to tax with respect to C's 2003 taxable year. 
Likewise, the Service will determine the amount of any addition to 
tax under section 6651(a)(3), which arises only after notice and 
demand for payment, by treating the section 6020(b) return as the 
return filed by the taxpayer.
    Example 4. Corporation M, a quarterly taxpayer, fails to file a 
Form 941, ``Employer's Quarterly Federal Tax Return,'' for the 
second quarter of 2004. Q, a Service employee authorized to sign 
returns under section 6020(b), prepares a Form 941 by hand, stating 
Corporation M's name, address, and TIN. Q completes the Form 941 by 
entering line item amounts, including the tax due, and then signs 
the document. The Form 941 that Q prepared and signed constitutes a 
section 6020(b) return because the Form 941 purports to be a return 
under section 6020(b), the form contains M's name and TIN, and it 
includes sufficient information to compute M's tax liability for the 
second quarter of 2004.

    (c) Cross references--(1) For provisions that a return executed by 
the Commissioner or other authorized Internal Revenue Officer or 
employee will not start the running of the period of limitations on 
assessment and collection, see section 6501(b)(3) and Sec.  
301.6501(b)-1(e).
    (2) For determining the period of limitations on collection after 
assessment of a liability on a return executed by the Commissioner or 
other authorized Internal Revenue Officer or employee, see section 6502 
and Sec.  301.6502-1.
    (3) For additions to the tax and additional amounts for failure to 
file returns, see section 6651 and Sec.  301.6651-1, and section 6652 
and Sec.  301.6652-1, respectively.
    (4) For additions to the tax for failure to pay tax, see section 
6651 and Sec.  301.6651-1.
    (5) For criminal penalties for willful failure to make returns, see 
sections 7201, 7202 and 7203.
    (6) For criminal penalties for willfully making false or fraudulent 
returns, see sections 7206 and 7207.
    (7) For civil penalties for filing frivolous income tax returns, 
see section 6702.
    (8) For authority to examine books and witnesses, see section 7602 
and Sec.  301.7602-1.
    (d) Effective/Applicability date. This section is applicable on 
February 20, 2008.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: February 5, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E8-3100 Filed 2-19-08; 8:45 am]
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