[Federal Register Volume 76, Number 11 (Tuesday, January 18, 2011)]
[Proposed Rules]
[Pages 2852-2853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-928]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-131151-10]
RIN 1545-BJ89


Rewards and Awards for Information Relating to Violations of 
Internal Revenue Laws

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains a proposed regulation relating to the 
payment of rewards under section 7623(a) of the Internal Revenue Code 
and awards under section 7623(b). The guidance is necessary to clarify 
the definition of proceeds of amounts collected and collected proceeds 
under section 7623. This regulation provides needed guidance to the 
general public as well as officers and employees of the IRS who review 
claims under section 7623.

DATES: Written or electronic comments and requests for a public hearing 
must be received by April 18, 2011.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-131151-10), Room 5203, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
131151-10), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically, via the Federal 
eRulemaking Portal at http://www.regulations.gov (IRS--REG-131151-10).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, 
Kirsten N. Witter, at (202) 927-0900; concerning submissions of 
comments and requests for a public hearing, Richard A. Hurst at 
[email protected], or (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provision

    Section 7623(a) provides the Secretary with the authority to pay 
such sums as he deems necessary from proceeds of amounts collected 
based on information provided to the Secretary when the information 
relates to the detection of underpayments of tax or the detection and 
bringing to trial and punishment persons guilty of violating the 
internal revenue laws or conniving at the same. Section 7623(b) 
provides the Secretary with the authority to pay awards to individuals 
if the Secretary proceeds with an administrative or judicial action 
described in section 7623(a) that results in collected proceeds based 
on information provided by the individuals. Section 301.7623-1(a) 
currently provides that proceeds of amounts (other than interest) 
collected by reason of the information provided include both amounts 
collected because of the information provided and amounts collected 
prior to receipt of the information if the information leads to the 
denial of a claim for refund that otherwise would have been paid. 63 FR 
44777.
    Section 301.7623-1(a) was promulgated prior to amendments of 
section 7623 as part of the Tax Relief and Health Care Act of 2006, 
division A, section 406, Public Law 109-432, 120 Stat. 2958. The 
amendments designated the existing section 7623 as section 7623(a). As 
originally enacted, section 7623 provided that rewards shall be paid 
``from the proceeds of amounts (other than interest) collected by 
reason of the information provided z5 * * * '' The 2006 amendments to 
section 7623 struck the ``other than interest'' language. The 
amendments also added section 7623(b), which provides that in certain 
cases individuals shall receive an award of at least 15% but not more 
than 30% of the collected proceeds resulting from the action with which 
the Secretary proceeded based on information brought to the attention 
of the Secretary by the individual. The 2006 amendments to section 7623 
also created the IRS Whistleblower Office, which is responsible for 
administering a whistleblower program within the IRS.

[[Page 2853]]

    This regulation clarifies the definitions of proceeds of amounts 
collected and collected proceeds for purposes of section 7623 and that 
the provisions of Treas. Reg. Sec.  301.7623-1(a) concerning refund 
prevention claims are applicable to claims under section 7623(a) and 
(b). In clarifying the definitions of proceeds of amounts collected and 
collected proceeds, this regulation provides that the reduction of an 
overpayment credit balance is also considered proceeds of amounts 
collected and collected proceeds under section 7623.

Special Analysis

    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 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 Code, these regulations have 
been 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 this proposed regulation is adopted as a final regulation, 
consideration will be given to any electronic or written comments (a 
signed original and eight (8) copies) that are submitted timely to the 
IRS. The Treasury Department and the IRS request comments on the 
clarity of the proposed rule and how it may be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing may be scheduled if requested in writing by a 
person that timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place of the hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of this regulation is Kirsten N. Witter, 
Office of the Associate Chief Counsel (General Legal Services).

List of Subjects in 26 CFR Part 301

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

Proposed Amendment 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 an entry in numerical order to read as follows:

    Authority:  26 U.S.C. 7805 * * * Section 301.7623-1 also issued 
under 26 U.S.C. 7623. * * *

    Par. 2. Section 301.7623-1 is amended by revising the section 
heading, and paragraphs (a) and (g), to read as follows:


Sec.  301.7623-1  Rewards and awards for information relating to 
violations of internal revenue laws.

    (a) In general--(1) Rewards and awards. When information that has 
been provided to the Internal Revenue Service results in the detection 
of underpayments of tax or the detection and bringing to trial and 
punishment persons guilty of violating the internal revenue laws or 
conniving at the same, the IRS may approve a reward under section 
7623(a) in a suitable amount from the proceeds of amounts collected in 
cases when rewards are not otherwise provided by law, or shall 
determine an award under section 7623(b) from collected proceeds.
    (2) Proceeds of amounts collected and collected proceeds. For 
purposes of section 7623 and this section, both proceeds of amounts 
collected and collected proceeds include: tax, penalties, interest, 
additions to tax, and additional amounts collected by reason of the 
information provided; amounts collected prior to receipt of the 
information if the information provided results in the denial of a 
claim for refund that otherwise would have been paid; and a reduction 
of an overpayment credit balance used to satisfy a tax liability 
incurred because of the information provided.
* * * * *
    (g) Effective/applicability date. This section is applicable with 
respect to rewards paid after January 29, 1997, except the rules of 
paragraph (a) of this section apply with respect to rewards and awards 
paid after these regulations are published as final regulations in the 
Federal Register.

Heather C. Maloy,
(Acting) Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-928 Filed 1-14-11; 8:45 am]
BILLING CODE 4830-01-P