[Federal Register Volume 81, Number 237 (Friday, December 9, 2016)]
[Rules and Regulations]
[Pages 89004-89007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29488]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9802]
RIN 1545-BN64


Disclosures of Return Information Reflected on Returns to 
Officers and Employees of the Department of Commerce for Certain 
Statistical Purposes and Related Activities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations that authorize 
the disclosure of certain items of return information to the Bureau of 
the Census (Bureau) in conformance with section 6103(j)(1) of the 
Internal Revenue Code (Code). These temporary regulations are

[[Page 89005]]

made pursuant to a request from the Secretary of Commerce. These 
temporary regulations also provide clarifying language for an item of 
return information and remove duplicative paragraphs contained in the 
existing regulations. These temporary regulations require no action by 
taxpayers and have no effect on their tax liabilities. Thus, no 
taxpayers are likely to be affected by the disclosures authorized by 
this guidance. The text of the temporary regulations also serves as the 
text of the proposed regulations set forth in the Proposed Rules 
section in this issue of the Federal Register.

DATES: Effective Date: These temporary regulations are effective on 
December 9, 2016.
    Applicability Date: For dates of applicability, see Sec.  
301.6103(j)(1)-1T(e).

FOR FURTHER INFORMATION CONTACT: William Rowe, (202) 317-6834 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    This document contains amendments to 26 CFR part 301. Section 
6103(j)(1)(A) of the Internal Revenue Code authorizes the Secretary of 
the Treasury (Secretary) to furnish, upon written request by the 
Secretary of Commerce, such returns or return information as the 
Secretary may prescribe by regulation to officers and employees of the 
Bureau for the purpose of, but only to the extent necessary in, the 
structuring of censuses and national economic accounts and conducting 
related statistical activities authorized by law. Section 
301.6103(j)(1)-1 of the existing regulations further defines such 
purposes by reference to 13 U.S.C. chapter 5 and provides an itemized 
description of the return information authorized to be disclosed for 
such purposes.
    By letter dated August 2, 2016, the Secretary of Commerce requested 
amendments to Sec.  301.6103(j)(1)-1 to allow disclosure of several 
additional items of return information to the Bureau for purposes of 
its economic statistics program, structuring the censuses, and related 
program evaluations. The Secretary of Commerce's letter lists the 
additional items of return information requested based on the Bureau's 
specific need for each item of information.
    The Secretary of Commerce's letter requested additional expense 
items from business tax returns in order to improve the expense data 
that is collected by the Bureau. Specifically, the Secretary of 
Commerce requested disclosure of the following enumerated components of 
total expenses or total deductions from business tax returns (Forms 
1065, Forms in the 1120 series, and Form 1040, Schedule C, E or C/EZ): 
(1) Repairs (and maintenance) expense; (2) rents (or lease) expense; 
(3) taxes and licenses expense; (4) interest expense, including 
mortgage or other interest; (5) depreciation expense; (6) depletion 
expense; (7) advertising expense; (8) pension and profit-sharing plans 
(retirement plans) expense; (9) employee benefit programs expense; (10) 
utilities expense; (11) supplies expense; (12) contract labor expense; 
and (13) management (and investment advisory) fees. The Secretary of 
Commerce has also requested purchases from Form 1125-A and the 
following additional items from Form 1040, Schedule C: (1) Materials 
and supplies; and (2) purchases less cost of items withdrawn for 
personal use. The Secretary of Commerce determined that these 
additional items are needed to evaluate the quality of expense data 
collected from surveys and to improve the Bureau's imputation models as 
the Bureau faces a trend of rising non-response rates in its surveys.
    The Secretary of Commerce's letter also requested additional items 
of return information from business tax returns for the purpose of 
directing a high proportion of research and development surveys towards 
businesses with known research activities. Specifically, the Secretary 
of Commerce requested the following additional items of return 
information from Forms 6765 (when filed with corporation income tax 
returns): (1) Cycle posted; and (2) the research tax credit amount to 
be carried over to a business return, schedule, or form. The Secretary 
of Commerce determined that the amount of research tax credit is needed 
to improve the coverage and reliability of surveys that collect 
research and development data, and determined that the cycle posted is 
needed in order to align the research tax credit with the appropriate 
survey year for sampling purposes.
    The Secretary of Commerce's letter also requested additional items 
of return information for purposes of maintaining a centralized, 
continuous Business Register that comprehensively lists and 
characterizes United States business establishments and their domestic 
parent enterprises. The Business Register provides the central business 
list necessary to support the Bureau's economic census and survey 
activities. Specifically, the Secretary of Commerce requested the 
following additional items of return information from employment tax 
returns: (1) If a business has closed or stopped paying wages; (2) 
final date a business paid wages; and (3) if a business is a seasonal 
employer and does not have to file a return for every quarter of the 
year. The Secretary of Commerce has determined that these items of 
return information are vital to reducing or eliminating costly mailings 
to businesses that have closed or are seasonal in nature. The Secretary 
of Commerce also requested the electronic system filing indicator from 
business tax returns and the cycle from the IRS's Business Master 
Files. The Secretary of Commerce determined that the electronic system 
filing indicator is needed to help establish the ideal survey mode for 
a particular entity (electronic or paper reporting forms).
    The Secretary of Commerce's letter also requested additional items 
of return information for purposes of modeling firm survival for 
production of statistics on business dynamics. Specifically, the 
Secretary of Commerce has requested the following additional items of 
return information from business tax returns: (1) Dividends, including 
ordinary and qualified; and (2) type of REIT (from Form 1120-REIT). The 
Secretary of Commerce has determined that these items are needed to 
estimate models of firm survival and to estimate an owner's percentage 
of capital.
    The Secretary of Commerce's letter also requested additional items 
of return information for purposes of the Survey of Business Owners. 
Specifically, the Secretary of Commerce has requested the following 
additional items of return information from Form 1065, Schedule K-1: 
(1) Publicly-traded partnership indicator; (2) partner's share of 
nonrecourse, qualified nonrecourse, and recourse liabilities; and (3) 
ordinary business income (loss). The Secretary of Commerce has also 
requested ordinary business income (loss) from Forms 1120S, Schedule K-
1. The Secretary of Commerce has determined that the ordinary business 
income (loss) and partner's share of liabilities items are needed in 
order to ascertain which owner's demographic information to use for the 
entity and as a proxy for ownership share of the partner. The publicly-
traded partnership indicator is needed to save the cost of mailing 
surveys to publicly-traded partnerships since it is unlikely that 
publicly-traded partnerships could accurately provide demographic 
information about their owners.
    Finally, the Secretary of Commerce's letter also requested 
additional items of return information for purposes of developing and 
preparing the Quarterly Financial Report. Specifically, the Secretary 
of Commerce requested the following additional items of return

[[Page 89006]]

information from Forms 1120-REIT: (1) Type of Real Estate Investment 
Trust (``REIT''); and (2) gross rents from real property. The Secretary 
of Commerce also requested the corporation's method of accounting from 
Form 1120F and the total amount reported from Form 1096. The Secretary 
of Commerce determined that gross rents from real property is needed to 
design and select the annual Quarterly Financial Report sample, and 
that the type of REIT is needed for editing and imputation purposes in 
the event that there are characteristic differences between the types 
of REITs. The Secretary of Commerce determined that the corporation's 
method of accounting is needed to understand how businesses with 
different accounting methods might report differently in the Quarterly 
Financial Report surveys. The Secretary of Commerce has determined that 
the total amounts reported from Form 1096 are needed to measure labor 
inputs for productivity since it would provide information on labor 
costs not covered by administrative records or survey reports of 
payroll.
    The Secretary of Commerce asserted that good cause exists to amend 
Sec.  301.6103(j)(1)-1 of the regulations to add these additional items 
to the list of items of return information that may be disclosed to the 
Bureau. The Treasury Department and the IRS agree that amending 
existing regulations to permit disclosure of these items to the Bureau 
is appropriate to meet the needs of the Bureau. These temporary 
regulations amend the existing regulations to allow disclosure of the 
items requested by the Secretary of Commerce.
    This temporary regulation also amends language in the existing 
regulations to clarify that the T.D. 9500, which was published in the 
Federal Register (75 FR 52458), authorized disclosure only of 
categorical information for total qualified research expenses from 
Forms 6765. In accordance with the preamble to T.D. 9500, the existing 
regulations do not authorize the disclosure of the exact amount of 
total research expenses as reported on Form 6765. By letter dated 
February 6, 2006, the Secretary of Commerce requested disclosure of 
categorical information on total qualified research expenses in three 
ranges: Greater than zero, but less than $1 million; greater than or 
equal to $1 million, but less than $3 million; and, greater than or 
equal to $3 million. These temporary regulations amend the existing 
regulations to more clearly reflect the categorical nature of the 
disclosure of total research expenses from Form 6765.
    Lastly, this temporary regulation also removes duplicate paragraphs 
contained in the existing regulations. Under the existing regulations, 
each of the following items of return information from business-related 
returns was authorized for disclosure by two identical paragraphs: 
Social Security tip income; total Social Security taxable earnings; and 
gross distributions from employer-sponsored and individual retirement 
plans from Form 1099-R. Because there is no need for duplicate 
paragraphs that authorize disclosure of the same items of return 
information for the same purpose, the duplicate paragraphs are removed.
    The text of the temporary regulations also serves as the text of 
the proposed regulations set forth in the notice of proposed rulemaking 
on this subject in the Proposed Rules section of this issue of the 
Federal Register.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory assessment is not 
required. It is hereby certified that these regulations will not have a 
significant economic impact on a substantial number of small entities 
because the regulations do not impose a collection of information on 
small entities. Accordingly, a regulatory flexibility analysis is not 
required under the Regulatory Flexibility Act (5 U.S.C. chapter 6). 
Pursuant to section 7805(f) of the Internal Revenue Code, this 
regulation has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
businesses.

Drafting Information

    The principal author of these temporary regulations is William 
Rowe, Office of the Associate Chief Counsel (Procedure & 
Administration).

List of Subjects in 26 CFR Part 301

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

Amendments to the Regulations

    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 301.6103(j)(1)-1T is added to read as follows:


Sec.  301.6103(j)(1)-1T  Disclosures of return information reflected on 
returns to officers and employees of the Department of Commerce, for 
certain statistical purposes and related activities (Temporary).

    (a) through (b)(2)(iii)(H) [Reserved]. For further guidance see 
Sec.  301.6103(j)(1)-1(a) through (b)(2)(iii)(H).
    (I) Total taxable wages paid for purposes of chapter 21; (J) 
[Reserved]. For further guidance see Sec.  301.6103(j)(1)-
1(b)(2)(iii)(J).
    (K) If a business has closed or stopped paying wages;
    (L) Final date a business paid wages; and
    (M) If a business is a seasonal employer and does not have to file 
a return for every quarter of the year;
    (b)(2)(iv) through (b)(3)(iv) [Reserved]. For further guidance see 
Sec.  301.6103(j)(1)-1(b)(2)(iv) through (b)(3)(iv).
    (v) Total expenses or deductions, including totals of the following 
components thereof:
    (A) Repairs (and maintenance) expense;
    (B) Rents (or lease) expense;
    (C) Taxes and licenses expense;
    (D) Interest expense, including mortgage or other interest;
    (E) Depreciation expense;
    (F) Depletion expense;
    (G) Advertising expense;
    (H) Pension and profit-sharing plans (retirement plans) expense;
    (I) Employee benefit programs expense;
    (J) Utilities expense;
    (K) Supplies expense;
    (L) Contract labor expense; and
    (M) Management (and investment advisory) fees.
    (b)(3)(vi) through (b)(3)(xxiv) [Reserved]. For further guidance 
see Sec.  301.6103(j)(1)-1(b)(3)(vi) through (b)(3)(xxiv).
    (xxv) From Form 6765 (when filed with corporation income tax 
returns)--
    (A) Indicator that total qualified research expenses is greater 
than zero, but less than $1 million; greater than or equal to $1 
million, but less than $3 million; or, greater than or equal to $3 
million;
    (B) Cycle posted; and
    (C) Research tax credit amount to be carried over to a business 
return, schedule, or form.
    (xxvi) Total number of documents reported on Form 1096 transmitting 
Forms 1099-MISC.
    (xxvii) Total amount reported on Form 1096 transmitting Forms 1099-
MISC.

[[Page 89007]]

    (xxviii) Type of REIT.
    (xxix) From Form 1125-A--purchases.
    (xxx) From Form 1040, Schedule C--
    (A) Purchases less cost of items withdrawn for personal use; and
    (B) Materials and supplies.
    (xxxi) Electronic filing system indicator.
    (xxxii) Posting cycle date relative to filing.
    (xxxiii) Dividends, including ordinary or qualified.
    (xxxiv) From Form 1120S, Schedule K-1--ordinary business income 
(loss).
    (xxxv) From Form 1065, Schedule K-1--
    (A) Publicly-traded partnership indicator;
    (B) Partner's share of nonrecourse, qualified nonrecourse, and 
recourse liabilities; and
    (C) Ordinary business income (loss).
    (b)(4) through (b)(6)(i)(B) [Reserved]. For further guidance see 
Sec.  301.6103(j)(1)-1(b)(4) through (b)(6)(i)(B).
    (C) From Form 1120-REIT--
    (1) Type of REIT; and
    (2) Gross rents from real property;
    (D) From Form 1120F--corporation's method of accounting.
    (E) From Form 1096--total amount reported.
    (b)(6)(ii) through (d)(3)(ii) [Reserved]. For further guidance see 
Sec.  301.6103(j)(1)-1(b)(6)(ii) through (d)(3)(ii).
    (e) Applicability date. This section applies to disclosures to the 
Bureau of the Census made on or after December 9, 2016.
    (f) Expiration date. The applicability of this section expires on 
or before December 9, 2019.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: November 23, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-29488 Filed 12-8-16; 8:45 am]
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