[Federal Register Volume 73, Number 242 (Tuesday, December 16, 2008)]
[Rules and Regulations]
[Pages 76216-76217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-29770]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9437]
RIN 1545-BI00


Amendments to the Section 7216 Regulations--Disclosure or Use of 
Information by Preparers of Returns

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and removal of temporary regulations.

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SUMMARY: This document contains final regulations that provide rules 
relating to the disclosure and use of tax return information by tax 
return preparers. These regulations affect tax return preparers and 
provide updated guidance regarding the disclosure of a taxpayer's 
social security number to a tax return preparer located outside of the 
United States.

DATES: Effective Date: These regulations are effective on December 16, 
2008.
    Applicability Date: See Sec.  301.7216-3(d), which states that the 
regulations apply to disclosures or uses of tax return information 
occurring on or after January 1, 2009.

FOR FURTHER INFORMATION CONTACT: Molly K. Donnelly, (202) 622-4940 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document amends 26 CFR part 301. On December 8, 2005, the 
Treasury Department and the IRS published a notice of proposed 
rulemaking (REG-137243-02) in the Federal Register (70 FR 72954) 
proposing amendments to the regulations under section 7216 (regarding 
the use or disclosure of tax return information by income tax return 
preparers). On January 3, 2008, the Treasury Department and the IRS 
issued final regulations under section 7216 (TD 9375) applicable to 
disclosures or uses of tax return information occurring on or after 
January 1, 2009. Thus, TD 9375 replaced previously issued final 
regulations that remain applicable to disclosures or uses of tax return 
information occurring prior to January 1, 2009.
    TD 9375 included a revision of Sec.  301.7216-3(b)(4) which, for 
disclosures and uses of tax return information occurring on or after 
January 1, 2009, provided that an income tax return preparer located in 
the United States may not disclose the taxpayer's social security 
number (SSN) to a tax return preparer located outside of the United 
States even if the taxpayer consents to the disclosure.
    On July 1, 2008, a temporary regulation (TD 9409) was published in 
the Federal Register (73 FR 37804) that created a limited exception to 
the rule prohibiting the disclosure of a taxpayer's SSN outside of the 
United States. This temporary regulation modified the rules under Sec.  
301.7216-3(b)(4). A notice of proposed rulemaking (REG-121698-08) 
cross-referencing the temporary regulations was published in the 
Federal Register for the same day (73 FR 37910), requesting comments 
and setting a public hearing date.

Summary of Comments and Explanation of Revisions

    The IRS and the Treasury Department requested written or electronic 
comments by September 30, 2008. Persons wishing to present oral 
comments at the public hearing scheduled for October 6, 2008, were to 
submit an outline of the topics to be discussed at the hearing by 
September 15, 2008, and written or electronic comments by September 30, 
2008. No written or electronic comments or requests to speak at the 
hearing, together with the required outline of topics, were submitted, 
and the hearing was cancelled (73 FR 56534).
    The final regulations adopt the rules published in the proposed 
regulations without substantial change. The final regulations maintain 
the general rule in Sec.  301.7216-3(b)(4) providing that an income tax 
return preparer located in the United States may not disclose the 
taxpayer's SSN to a tax return preparer located outside of the United 
States even if the taxpayer consents to the disclosure. The final 
regulations create a limited exception to the general rule providing 
that a tax return preparer located within the United States,

[[Page 76217]]

including any territory or possession of the United States, may obtain 
consent to disclose the taxpayer's SSN to a tax return preparer located 
outside of the United States or any territory or possession of the 
United States only if the tax return preparer discloses the SSN through 
the use of an adequate protection safeguard as described in guidance 
published in the Internal Revenue Bulletin and verifies the maintenance 
of the adequate data protection safeguards in the request for the 
taxpayer's consent pursuant to the specifications described in guidance 
published in the Internal Revenue Bulletin.
    The rules adopted in the final regulations are substantially 
identical to those proposed in the notice of proposed rulemaking with 
the exception that Sec.  301.7216-3T(d), which set forth the effective 
date for the rules contained in the temporary regulations, was removed 
and not adopted in the final regulations because the identical 
effective date is currently set forth in Sec.  301.7216-3(d). In 
addition, minor and non-substantive edits were made to provide 
grammatical consistency and clarity throughout the regulations. 
Additional guidance regarding the adequate data protection safeguard 
set forth in the regulations may be found in Revenue Procedure 2008-35, 
2008-29 I.R.B. 132. See Sec.  601.601(d)(2)(ii)(b).

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 on small 
entities, 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 were 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal author of these regulations is Molly K. Donnelly, 
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 * * *


0
Par. 2. Section 301.7216-3 is amended by revising paragraph (b)(4) to 
read as follows:


Sec.  301.7216-3  Disclosure or use permitted only with the taxpayer's 
consent.

* * * * *
    (b) * * *
    (4) No consent to the disclosure of a taxpayer's social security 
number to a return preparer outside of the United States with respect 
to a taxpayer filing a return in the Form 1040 Series--(i) In general. 
Except as provided in paragraph (b)(4)(ii) of this section, a tax 
return preparer located within the United States, including any 
territory or possession of the United States, may not obtain consent to 
disclose the taxpayer's social security number (SSN) with respect to a 
taxpayer filing a return in the Form 1040 Series, for example, Form 
1040, Form 1040NR, Form 1040A, or Form 1040EZ, to a tax return preparer 
located outside of the United States or any territory or possession of 
the United States. Thus, if a tax return preparer located within the 
United States (including any territory or possession of the United 
States) obtains consent from an individual taxpayer to disclose tax 
return information to another tax return preparer located outside of 
the United States, as provided under Sec. Sec.  301.7216-2(c) and 
301.7216-2(d), the tax return preparer located in the United States may 
not disclose the taxpayer's SSN, and the tax return preparer must 
redact or otherwise mask the taxpayer's SSN before the tax return 
information is disclosed outside of the United States. If a tax return 
preparer located within the United States initially receives or obtains 
a taxpayer's SSN from another tax return preparer located outside of 
the United States, however, the tax return preparer within the United 
States may, without consent, retransmit the taxpayer's SSN to the tax 
return preparer located outside the United States that initially 
provided the SSN to the tax return preparer located within the United 
States. For purposes of this section, a tax return preparer located 
outside of the United States does not include a tax return preparer who 
is continuously and regularly employed in the United States or any 
territory or possession of the United States and who is in a temporary 
travel status outside of the United States.
    (ii) Exception. A tax return preparer located within the United 
States, including any territory or possession of the United States, may 
obtain consent to disclose the taxpayer's SSN to a tax return preparer 
located outside of the United States or any territory or possession of 
the United States only if the tax return preparer within the United 
States discloses the SSN to a tax return preparer outside of the United 
States through the use of an adequate data protection safeguard as 
defined by the Secretary in guidance published in the Internal Revenue 
Bulletin (see Sec.  601.601(d)(2)(ii)(b) of this chapter) and verifies 
the maintenance of the adequate data protection safeguards in the 
request for the taxpayer's consent pursuant to the specifications 
described by the Secretary in guidance published in the Internal 
Revenue Bulletin.
* * * * *


Sec.  301.7216-3T  [Removed]

0
Par. 3. Section 301.7216-3T is removed.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: December 10, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-29770 Filed 12-15-08; 8:45 am]
BILLING CODE 4830-01-P