[Federal Register Volume 76, Number 220 (Tuesday, November 15, 2011)]
[Rules and Regulations]
[Pages 70640-70644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29385]


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DEPARTMENT OF THE TREASURY

Office of the Secretary

31 CFR Part 1

RIN 1505-AC33


Privacy Act of 1974; Implementation

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final rule.

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SUMMARY: In accordance with the requirements of the Privacy Act of 
1974, as amended, 5 U.S.C. 552a, the Department of the Treasury gives 
notice of an amendment to this part to reflect consolidation of 
existing Internal Revenue Service (IRS) systems of records and to 
continue to exempt the resulting revised systems of records from 
certain provisions of the Privacy Act. The Office of Chief Counsel has 
consolidated twelve systems of records into six systems of records. 
This final rule migrates the previously approved exemptions to the 
newly revised, renamed, and renumbered systems of records.

DATES: This rule is effective November 15, 2011.

ADDRESSES: Inquiries may be addressed to Sarah Tate, Office of 
Associate Chief Counsel, Procedure & Administration,

[[Page 70641]]

Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 
20224.

FOR FURTHER INFORMATION CONTACT: Sarah Tate, Office of Associate Chief 
Counsel, Procedure & Administration, Internal Revenue Service, 1111 
Constitution Avenue NW., Washington, DC 20224. Ms. Tate may be reached 
via telephone at (202) 622-4570 (not a toll-free call).

SUPPLEMENTARY INFORMATION: When the IRS first promulgated its systems 
of records in 1975, the Office of Chief Counsel was aligned, in its 
headquarters operations, by the nature of the work performed and, in 
its field operations, by the type of the litigation activities 
performed. In 1998, Congress enacted the Internal Revenue Restructuring 
& Reform Act (RRA98), which, among other things, mandated the most 
dramatic organizational changes in the IRS (and the Office of Chief 
Counsel) since 1952. RRA98 directed the IRS to shift from a 
geographically based structure to a structure that serves particular 
groups of taxpayers with similar needs (i.e., individuals, small 
businesses, large businesses, and tax exempt entities). The Office of 
Chief Counsel reorganized itself to more closely align to the 
restructured IRS, and the revised notices simplify the manner in which 
the Office of Chief Counsel maintains individually identifiable 
information. This direct final rule does not alter the exemptions 
claimed for the individually identifiable information maintained in the 
consolidated systems of records.
    The Chief Counsel, IRS has reorganized the twelve systems of 
records it maintains pursuant to the Privacy Act, which have been 
consolidated into six systems of records. These systems of records 
contain information maintained by the IRS for which an exemption has 
been established previously. On October 2, 1975, the Department 
published its final rule which included the exemption claimed pursuant 
5 U.S.C. 552a(j)(2) and, (k)(2), published at 40 FR 45695, and the 
exemption claimed pursuant to 5 U.S.C. 552a(k)(5), published at 40 FR 
45697.
    The Department of the Treasury is publishing separately in the 
Federal Register the notices of the consolidated systems of records to 
be maintained by IRS.
    Under 5 U.S.C. 552a(j)(2), the head of a Federal agency may 
promulgate rules to exempt a system of records from certain provisions 
of 5 U.S.C. 552a if the system of records is ``maintained by an agency 
or component thereof which performs as its principal function any 
activity pertaining to the enforcement of criminal laws, including 
police efforts to prevent, control, or reduce crime or to apprehend 
criminals, and the activities of prosecutors, courts, correctional, 
probation, pardon, or parole authorities, and which consists of (A) 
Information compiled for the purpose of identifying individual criminal 
offenders and alleged offenders and consisting only of identifying data 
and notations of arrests, the nature and disposition of criminal 
charges, sentencing, confinement, release, and parole and probation 
status; (B) information compiled for the purpose of a criminal 
investigation, including reports of informants and investigators, and 
associated with an identifiable individual; or (C) reports identifiable 
to an individual compiled at any stage of the process of enforcement of 
the criminal laws from arrest or indictment through release from 
supervision.''
    To the extent that these systems of records contain investigative 
material within the provisions of 5 U.S.C.552a(j)(2), the Department of 
the Treasury has previously exempted material which will now be 
maintained in the following systems of records from various provisions 
of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2):

Treasury/IRS 90.001--Chief Counsel Management Information System 
Records.
Treasury/IRS 90.003--Chief Counsel Litigation and Advice (Criminal) 
Records.
Treasury/IRS 90.004--Chief Counsel Legal Processing Division Records.
Treasury/IRS 90.005--Chief Counsel Library Records.

    The exemption under 5 U.S.C. 552a(j)(2) for the above-referenced 
systems of records is from provisions 5 U.S.C. 552a (c)(3), (c)(4), 
(d)(1), (d)(2), (d)(3), (d)(4), (e)(1), (e)(2), (e)(3), (e)(4)(G), 
(e)(4)(H), (e)(4)(I), (e)(5), (e)(8), (f), and (g).
    Under 5 U.S.C. 552a(k)(2), the head of a Federal agency may 
promulgate rules to exempt a system of records from certain provisions 
of 5 U.S.C. 552a if the system of records is ``investigatory material 
compiled for law enforcement purposes, other than material within the 
scope of subsection (j)(2).'' To the extent that these systems of 
records contain investigative material within the provisions of 5 
U.S.C. 552a(k)(2), the Department of the Treasury has previously 
exempted material that will now be maintained in the following systems 
of records from various provisions of the Privacy Act pursuant to 5 
U.S.C. 552a(k)(2):

Treasury/IRS 90.001--Chief Counsel Management Information System 
Records.
Treasury/IRS 90.002--Chief Counsel Litigation and Advice (Civil) 
Records.
Treasury/IRS 90.004--Chief Counsel Legal Processing Division Records.
Treasury/IRS 90.005--Chief Counsel Library Records.

    The exemption under 5 U.S.C. 552a(k)(2) for the above-referenced 
systems of records is from provisions 5 U.S.C. 552a(c)(3), (d)(1), 
(d)(2), (d)(3), (d)(4), (e)(1), (e)(4)(G), (e)(4)(H), (e)(4)(I), and 
(f).
    The following are the reasons why the investigative material 
contained in the above-referenced systems of records maintained by IRS 
have been exempted from various provisions of the Privacy Act pursuant 
to 5 U.S.C. 552a(j)(2) and/or 5 U.S.C. 552a(k)(2) since 1975.
    (1) 5 U.S.C. 552a(e)(4)(G) and (f)(l) enable individuals to inquire 
whether a system of records contains records pertaining to themselves. 
Disclosure of this information to the subjects of investigations would 
provide individuals with information concerning the nature and scope of 
any current investigation. Further, providing information as required 
by this provision would alert the individual to the existence of an 
investigation and afford the individual an opportunity to attempt to 
conceal his/her criminal activities so as to avoid apprehension, may 
enable the individual to avoid detection or apprehension, may enable 
the destruction or alteration of evidence of the criminal conduct that 
would form the basis for an arrest, and could impede or impair IRS's 
ability to investigate the matter. In addition, to provide this type of 
information may enable individuals to learn whether they have been 
identified as subjects of investigation.
    (2) 5 U.S.C. 552a(d)(1), (e)(4)(H), and (f)(2), (3), and (5) grant 
individuals access, or concern procedures by which an individual may 
gain access, to records pertaining to themselves. Disclosure of this 
information to the subjects of investigations would provide them with 
information concerning the nature and scope of any current 
investigation, may enable them to avoid detection or apprehension, may 
enable them to destroy or alter evidence of criminal conduct that would 
form the basis for their arrest, and could impede or impair IRS's 
ability to investigate the matter. In addition, permitting access to 
investigative files and records could disclose the identity of 
confidential sources and the nature of the information supplied by 
informants as well as endanger the physical safety of

[[Page 70642]]

those sources by exposing them to possible reprisals for having 
provided the information. Confidential sources and informers might 
refuse to provide IRS with valuable information unless they believe 
that their identities would not be revealed through disclosure of their 
names or the nature of the information they supplied. Loss of access to 
such sources would seriously impair IRS's ability to perform its law 
enforcement responsibilities. Furthermore, providing access to records 
contained in the systems of records could reveal the identities of 
undercover law enforcement officers who compiled information regarding 
the individual's criminal activities, thereby endangering the physical 
safety of those undercover officers by exposing them to possible 
reprisals. Permitting access in keeping with these provisions would 
also discourage other law enforcement and regulatory agencies from 
freely sharing information with IRS and thus would restrict its access 
to information necessary to accomplish its mission most effectively.
    (3) 5 U.S.C. 552a(d)(2), (3), and (4), (e)(4)(H), and (f)(4) permit 
an individual to request amendment of a record pertaining to the 
individual or concern related procedures, and require the agency either 
to amend the record or to note the disputed portion of the record, and 
to provide a copy of the individual's statement of disagreement with 
the agency's refusal to amend a record to persons or other agencies to 
whom the record is thereafter disclosed. Since these provisions depend 
upon the individual having access to his or her records, and since an 
exemption from the provisions of 5 U.S.C. 552a relating to access to 
records is proposed, for the reasons set out in the preceding paragraph 
of this section, these provisions should not apply to the above-listed 
systems of records.
    (4) 5 U.S.C. 552a(c)(3) requires an agency to make accountings of 
disclosures of a record available to the individual named in the record 
upon his or her request. Making accountings of disclosures available to 
the subjects of investigations would alert them to the fact that IRS is 
conducting an investigation into their activities as well as identify 
the nature, scope, and purpose of that investigation. Providing 
accountings to the subjects of investigations would alert them to the 
fact that IRS has information regarding their activities and could 
inform them of the general nature of that information. The subjects of 
the investigations, if provided an accounting of disclosures, would be 
able to take measures to avoid detection or apprehension by altering 
their operations or by destroying or concealing evidence that would 
form the basis for detection or apprehension.
    (5) 5 U.S.C. 552a(c)(4) requires an agency to inform any person or 
other agency about any correction or notation of dispute that the 
agency made in accordance with 5 U.S.C. 552a(d) to any record that the 
agency disclosed to the person or agency if an accounting of the 
disclosure was made. Since this provision depends on an individual's 
having access to and an opportunity to request amendment of records 
pertaining to the individual, and since an exemption from the 
provisions of 5 U.S.C. 552a relating to access to, and amendment of, 
records is proposed for the reasons set out in paragraph (2) of this 
section, this provision should not apply to these systems of records.
    (6) 5 U.S.C. 552a(e)(4)(I) requires an agency to publish a general 
notice listing the categories of sources for information contained in a 
system of records. Revealing sources of information could disclose 
investigative techniques and procedures, result in threats or reprisals 
against confidential informants by the subjects of investigations, and 
cause confidential informants to refuse to give full information to 
criminal investigators for fear of having their identities as sources 
disclosed.
    (7) 5 U.S.C. 552a(e)(1) requires an agency to maintain in its 
records only such information about an individual as is relevant and 
necessary to accomplish a purpose of the agency required to be 
accomplished by statute or Executive Order. The term ``maintain,'' as 
defined in 5 U.S.C. 552a(a)(3), includes ``collect'' and 
``disseminate.'' The application of this provision could impair IRS's 
ability to collect and disseminate valuable law enforcement 
information. In the early stages of an investigation, it may be 
impossible to determine whether information collected is relevant and 
necessary, and information that initially appears irrelevant and 
unnecessary often may, upon further evaluation or upon review of 
information developed subsequently, prove particularly relevant and 
necessary to a law enforcement program. Compliance with the records 
maintenance criteria listed in the foregoing provision would require 
IRS to periodically update the investigatory material it collects and 
maintains in these systems to ensure that the information remains 
timely and complete. Further, IRS oftentimes will uncover evidence of 
violations of law that fall within the investigative jurisdiction of 
other law enforcement agencies. To promote effective law enforcement, 
IRS will refer this evidence to other law enforcement agencies, 
including State, local, and foreign agencies, that have jurisdiction 
over the offenses to which the information relates. If required to 
adhere to the provisions of 5 U.S.C. 552a(e)(1), IRS might be placed in 
the position of having to ignore information relating to violations of 
law not within its jurisdiction when that information comes to IRS's 
attention during the collection and analysis of information in its 
records.
    (8) 5 U.S.C. 552a(e)(2) requires an agency to collect information 
to the greatest extent practicable directly from the subject individual 
when the information may result in adverse determinations about an 
individual's rights, benefits, and privileges under Federal programs. 
The application of this provision to the above-referenced systems of 
records would impair IRS's ability to collect, analyze, and disseminate 
investigative, intelligence, and enforcement information. During 
criminal investigations it is often a matter of sound investigative 
procedure to obtain information from a variety of sources to verify the 
accuracy of the information obtained. IRS often collects information 
about the subject of a criminal investigation from third parties, such 
as witnesses and informants. It is usually not feasible to rely upon 
the subject of the investigation as a credible source for information 
regarding his or her alleged criminal activities. An attempt to obtain 
information from the subject of a criminal investigation will often 
alert that individual to the existence of an investigation, thereby 
affording the individual an opportunity to attempt to conceal his 
criminal activities so as to avoid apprehension.
    (9) 5 U.S.C. 552a(e)(3) requires an agency to inform each 
individual, whom it asks to supply information, of the agency's 
authority for soliciting the information, whether disclosure of 
information is voluntary or mandatory, the principal purpose(s) for 
which the agency will use the information, the routine uses that may be 
made of the information, and the effects on the individual of not 
providing all or part of the information. The above-referenced systems 
of records should be exempted from these provisions to avoid impairing 
IRS's ability to collect and maintain investigative material. 
Confidential sources or undercover law enforcement officers often 
obtain information under circumstances in which it is necessary to keep 
the true purpose of their actions secret so as not to let the subject 
of the investigation or

[[Page 70643]]

his or her associates know that a criminal investigation is in 
progress. Further, application of this provision could result in an 
unwarranted invasion of the personal privacy of the subject of the 
criminal investigation, particularly where further investigation 
reveals that the subject was not involved in any criminal activity.
    (10) 5 U.S.C. 552a(e)(5) requires an agency to maintain all records 
it uses in making any determination about any individual with such 
accuracy, relevance, timeliness, and completeness as is reasonably 
necessary to assure fairness to the individual in the determination. 
Since 5 U.S.C. 552a(a)(3) defines ``maintain'' to include ``collect'' 
and ``disseminate,'' application of this provision to the systems of 
records would hinder the initial collection of any information that 
could not, at the moment of collection, be determined to be accurate, 
relevant, timely, and complete. In collecting information during a 
criminal investigation, it is often neither possible nor feasible to 
determine accuracy, relevance, timeliness, or completeness at the time 
that the information is collected. Information that may initially 
appear inaccurate, irrelevant, untimely, or incomplete may, when 
analyzed with other available information, become more relevant as an 
investigation progresses. Compliance with the records maintenance 
criteria listed in the foregoing provision would require the periodic 
review of IRS's investigative records to insure that the records 
maintained in the system remain timely, accurate, relevant, and 
complete.
    (11) 5 U.S.C. 552a(e)(8) requires an agency to make reasonable 
efforts to serve notice on an individual when the agency makes any 
record on the individual available to any person under compulsory legal 
process, when such process becomes a matter of public record. The 
above-referenced systems of records should be exempted from this 
provision to avoid revealing investigative techniques and procedures 
outlined in those records and to prevent revelation of the existence of 
an ongoing investigation where there is need to keep the existence of 
the investigation secret.
    (12) 5 U.S.C. 552a(g) provides for civil remedies to an individual 
when an agency wrongfully refuses to amend a record or to review a 
request for amendment, when an agency wrongfully refuses to grant 
access to a record, when an agency fails to maintain accurate, 
relevant, timely, and complete records which are used to make a 
determination adverse to the individual, and when an agency fails to 
comply with any other provision of 5 U.S.C. 552a so as to adversely 
affect the individual. The investigatory information in the above-
referenced systems of records should be exempted from this provision to 
the extent that the civil remedies may relate to provisions of 5 U.S.C. 
552a from which this would exempt the systems of records, since there 
should be no civil remedies for failure to comply with provisions from 
which IRS is exempted. Exemption from this provision will also protect 
IRS from baseless civil court actions that might hamper its ability to 
collect, analyze, and disseminate investigative, intelligence, and law 
enforcement data.
    Under 5 U.S.C. 552a(k)(5), the head of any agency may promulgate 
rules to exempt any system of records within the agency from certain 
provisions of the Privacy Act of 1974 if the system is investigatory 
material compiled solely for the purpose of determining suitability, 
eligibility, and qualifications for Federal civilian employment or 
access to classified information, but only to the extent that the 
disclosure of such material would reveal the identity of a source who 
furnished information to the Government under an express promise that 
the identity of the source would be held in confidence, or, prior to 
September 27, 1975, under an implied promise that the identity of the 
source would be held in confidence. Thus to the extent that the records 
in this system can be disclosed without revealing the identity of a 
confidential source, they are not within the scope of this exemption 
and are subject to all the requirements of the Privacy Act.
    This paragraph applies to the following system of records 
maintained by the Internal Revenue Service: Treasury/IRS 90.006--Chief 
Counsel Human Resources and Administrative Records Files.
    The Department has previously exempted material that will now be 
maintained in the above system of records of this section from the 
following provisions of 5 U.S.C. 552a, pursuant to 5 U.S.C. 552a(k)(5): 
5 U.S.C. 552a(c)(3), 5 U.S.C. 552a(d)(1), (2), (3), and (4), 5 U.S.C. 
552a(e)(1), 5 U.S.C. 552a(e)(4)(G), (H), and (I), and 5 U.S.C. 552a(f).
    (1) The sections of 5 U.S.C. 552a from which the system of records 
has been exempted since 1975 include in general those providing for 
individuals' access to or amendment of records. When such access or 
amendment would cause the identity of a confidential source to be 
revealed, it would impair the future ability of the Department to 
compile investigatory material for the purpose of determining 
suitability, eligibility, or qualifications for Federal civilian 
employment, Federal contracts, or access to classified information. In 
addition, the systems shall be exempt from 5 U.S.C. 552a(e)(1) which 
requires that an agency maintain in its records only such information 
about an individual as is relevant and necessary to accomplish a 
purpose of the agency required to be accomplished by statute or 
executive order. The Department believes that to fulfill the 
requirements of 5 U.S.C. 552a(e)(1) would unduly restrict the agency in 
its information gathering inasmuch as it is often not until well after 
the investigation that it is possible to determine the relevance and 
necessity of particular information.
    (2) If any investigatory material contained in the above-named 
systems becomes involved in criminal or civil matters, exemptions of 
such material under 5 U.S.C. 552a(j)(2) or (k)(2) is hereby claimed.
    These regulations are being published as a final rule because the 
amendments do not impose any requirements on any member of the public. 
This amendment is the most efficient means for the Treasury Department 
to implement its internal requirements for complying with the Privacy 
Act.
    Accordingly, pursuant to the administrative procedure provisions in 
5 U.S.C. 553, the Department of the Treasury finds good cause that 
prior notice and other public procedure with respect to this rule are 
impracticable and unnecessary and finds good cause for making this rule 
effective on the date of publication in the Federal Register.
    In accordance with Executive Order 12866, it has been determined 
that this rule is not a ``significant regulatory action'' and, 
therefore, does not require a Regulatory Impact Analysis.
    The regulation will not have a substantial direct effect on the 
States, on the relationship between the national Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, it is determined that this 
final rule does not have federalism implications under Executive Order 
13132.
    Because no notice of proposed rulemaking is required, the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do 
not apply.
    In accordance with the provisions of the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501 et seq.), the Department of the Treasury has 
determined that this rule will not impose new record keeping, 
application, reporting, or other types of information collection 
requirements.

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List of Subjects in 31 CFR Part 1

    Privacy.

    Part 1, subpart C of Title 31 of the Code of Federal Regulations is 
amended as follows:

PART 1--[AMENDED]

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

    Authority:  5 U.S.C. 301, 31 U.S.C. 321, subpart A also issued 
under 5 U.S.C. 552, as amended. Subpart C also issued under 5 U.S.C. 
552a.

0
2. Section 1.36 is amended as follows:
0
a. Paragraph (c)(1)(viii) is amended by revising the entry for ``IRS 
90.001''.
0
b. Paragraph (c)(1)(viii) is further amended by adding entries for 
``IRS 90.003''; ``IRS 90.004''; and ``IRS 90.005'' to the table in 
numerical order.
0
c. Paragraph (g)(1)(viii) is amended by removing entries for ``IRS 
90.002''; ``IRS 90.004''; ``IRS 90.005''; ``IRS 90.009''; ``IRS 
90.010''; ``IRS 90.013''; and ``IRS 90.016''.
0
d. Paragraph (g)(1)(viii) is further amended by adding entries for 
``IRS 90.001''; ``IRS 90.002'';``IRS 90.004'', and ``IRS 90.005'' to 
the table in numerical order.
0
e. Paragraph (m)(1)(viii) is amended by removing entries for ``IRS 
90.003'' and ``IRS 90.011''.
0
f. Paragraph (m)(1)(viii) is further amended by adding ``IRS 90.006'' 
to the table in numerical order.
    The revisions and additions read as follows:


Sec.  1.36  Systems exempt in whole or in part from provisions of 5 
U.S.C. 522a and this part.

* * * * *
    (c) * * *
    (1) * * *
    (viii) * * *

------------------------------------------------------------------------
                 Number                            System name
------------------------------------------------------------------------
 
                                * * * * *
IRS 90.001.............................  Chief Counsel Management
                                          Information System Records.
IRS 90.003.............................  Chief Counsel Litigation and
                                          Advice (Criminal) Records.
IRS 90.004.............................  Chief Counsel Legal Processing
                                          Division Records.
IRS 90.005.............................  Chief Counsel Library Records.
------------------------------------------------------------------------

* * * * *
    (g) * * *
    (1) * * *
    (viii) * * *

------------------------------------------------------------------------
                 Number                            System name
------------------------------------------------------------------------
 
                                * * * * *
IRS 90.001.............................  Chief Counsel Management
                                          Information System Records.
IRS 90.002.............................  Chief Counsel Litigation and
                                          Advice (Criminal) Records.
IRS 90.004.............................  Chief Counsel Legal Processing
                                          Division Records.
IRS 90.005.............................  Chief Counsel Library Records.
------------------------------------------------------------------------

* * * * *
    (m) * * *
    (1) * * *
    (viii) * * *

------------------------------------------------------------------------
                 Number                            System name
------------------------------------------------------------------------
 
                                * * * * *
IRS 90.006.............................  Chief Counsel Human Resources
                                          and Administrative Records.
------------------------------------------------------------------------

* * * * *

    Dated: October 24, 2011.
Melissa Hartman,
Deputy Assistant Secretary for Privacy, Transparency and Records.
[FR Doc. 2011-29385 Filed 11-14-11; 8:45 am]
BILLING CODE 4830-01-P