[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Rules and Regulations]
[Pages 13880-13882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6111]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9516]
RIN 1545-BG73
Disclosure of Return Information in Connection With Written
Contracts Among the IRS, Whistleblowers, and Legal Representatives of
Whistleblowers
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 the
disclosure of return information by an officer or employee of the
Treasury Department, to a whistleblower and, if applicable, the legal
representative of the whistleblower, to the extent necessary in
connection with a written contract among the IRS, the whistleblower
and, if applicable, the legal representative of the whistleblower, for
services relating to the detection of violations of the internal
revenue laws or related statutes. The final regulations will affect
officers and employees of the Treasury Department who disclose return
information to whistleblowers or their legal representatives in
connection with written contracts among the IRS, whistleblowers and, if
applicable, their legal representatives, for services relating to the
detection of violations of the internal revenue laws or related
statutes. The final regulations will also affect any whistleblower or
legal representative of a whistleblower who receives return information
in connection with a written contract among the IRS, the whistleblower
and, if applicable, the legal representative of the whistleblower, for
services relating to the detection of violations of the internal
revenue laws or related statutes.
[[Page 13881]]
DATES: Effective Date: These final regulations are effective on March
15, 2011.
Applicability Date: For dates of applicability, see Sec.
301.6103(n)-2(f).
FOR FURTHER INFORMATION CONTACT: Helene R. Newsome, 202-622-7950 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations implementing amendments to
the Procedure and Administration Regulations (26 CFR part 301) under
section 6103(n) relating to the disclosure of return information in
connection with written contracts among the IRS, whistleblowers and, if
applicable, their legal representatives.
The Tax Relief and Health Care Act of 2006, Public Law 109-432 (120
Stat. 2958), (the Act) was enacted on December 20, 2006. Section 406 of
the Act amends section 7623, concerning the payment of awards to
whistleblowers, and establishes a Whistleblower Office within the IRS
that has responsibility for the administration of a whistleblower
program. In connection with analyzing information provided by a
whistleblower, or investigating a matter, the IRS may determine that it
requires the assistance of the whistleblower, or the legal
representative of the whistleblower. The Joint Committee on Taxation
(the JCT) has noted that ``[t]o the extent the disclosure of returns or
return information is required [for the whistleblower or his or her
legal representative] to render such assistance, the disclosure must be
pursuant to an IRS tax administration contract.'' Joint Committee on
Taxation, Technical Explanation of H.R. 6408, The ``Tax Relief and
Health Care Act of 2006,'' as Introduced in the House on December 7,
2006, at 89 (JCX-50-06), December 7, 2006. The JCT has further noted
that ``[i]t is expected that such disclosures will be infrequent and
will be made only when the assigned task cannot be properly or timely
completed without the return information to be disclosed.'' Id.
Under section 6103(a), returns and return information are
confidential unless the Internal Revenue Code authorizes disclosure.
Section 6103(n) is the authority by which returns and return
information may be disclosed pursuant to a tax administration contract.
Section 6103(n) authorizes, pursuant to regulations prescribed by the
Secretary, returns and return information to be disclosed to any
person, for purposes of tax administration, to the extent necessary in
connection with: (1) The processing, storage, transmission, and
reproduction of returns and return information; (2) the programming,
maintenance, repair, testing, and procurement of equipment; and (3) the
providing of other services.
On March 25, 2008, temporary regulations (TD 9389) under section
6103(n) were published in the Federal Register (73 FR 15668) describing
the circumstances under which officers and employees of the Treasury
Department may disclose return information to whistleblowers and, if
applicable, their legal representatives, in connection with written
contracts for services relating to the detection of violations of the
internal revenue laws or related statutes. A notice of proposed
rulemaking (REG-114942-07) cross-referencing the temporary regulations
was published in the Federal Register for the same day (73 FR 15687).
One written comment responding to the notice of proposed rulemaking
was received. No public hearing was requested or held. After
consideration of the comment, the regulations are adopted as proposed
with only minor technical changes made.
The limitations applicable to section 6103(n) contracts as outlined
in these regulations are not a limitation on the use of return
information that may be disclosed to a whistleblower or the legal
representative of a whistleblower during an award determination
administrative proceeding and in an award determination appeal to the
U.S. Tax Court.
Summary of Comment
The commentator recommended that Sec. 301.6103(n)-2(b)(3) of the
proposed regulations be revised to eliminate any requirement that a
written contract be in place for a whistleblower to be provided with
basic status information about the whistleblower's claim for award
under section 7623. The commentator drew a comparison with
whistleblower claims under the False Claims Act and argued that the
standard for the IRS to share status information with a whistleblower
should not be the same as that required to share information from the
actual returns of taxpayers. Unlike other statutory schemes, however,
information regarding the status of a whistleblower's claim with the
IRS is ``return information'' as defined in section 6103(b)(2). Like
returns (defined in section 6103(b)(1)), return information is
confidential under section 6103(a) and may only be disclosed if
authorized by a specific provision of the Code. In order to disclose
status information to a whistleblower, an exception to section 6103
must be applicable. Section 6103(n) provides authority for the IRS to
make status information disclosures to a whistleblower. Because
disclosures pursuant to section 6103(n) require a written tax
administration contract, the final regulations do not adopt the
commentator's recommendation.
The commentator also recommended that Sec. 301.6103(n)-2(d)(3) of
the proposed regulations be revised to eliminate the inspection
requirement. The commentator asserted that, by contrast, Sec.
301.6103(n)-1, ``Disclosure of returns and return information in
connection with written contracts or agreements for the acquisition of
property or services for tax administration purposes,'' does not
include such a requirement and argued that the requirement is
unnecessary in that the regulations already provide for severe
sanctions for any failure to comply with the terms of written contracts
for services. In fact, Sec. 301.6103(n)-1(e)(1) does indeed contain an
inspection requirement. The final regulations retain the inspection
requirement as consistent with the longstanding safeguard procedures
that incorporate inspection as an integral part of the contracting
process under section 6103(n).
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 Code, the proposed
regulations 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 Helene R. Newsome,
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.
[[Page 13882]]
Adoption of 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 is amended by adding
entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6103(n)-2 also issued under 26 U.S.C. 6103(n). * * *
Section 301.6103(n)-2 also issued under 26 U.S.C. 6103(q). * * *
0
Par. 2. Section 301.6103(n)-2 is added to read as follows:
Sec. 301.6103(n)-2 Disclosure of return information in connection
with written contracts among the IRS, whistleblowers, and legal
representatives of whistleblowers.
(a) General rule. (1) Pursuant to the provisions of sections
6103(n) and 7623 of the Internal Revenue Code and subject to the
conditions of this section, an officer or employee of the Treasury
Department is authorized to disclose return information (as defined in
section 6103(b)(2)) to a whistleblower and, if applicable, the legal
representative of the whistleblower, to the extent necessary in
connection with a written contract among the Internal Revenue Service
(IRS), the whistleblower and, if applicable, the legal representative
of the whistleblower, for services relating to the detection of
violations of the internal revenue laws or related statutes.
(2) The IRS shall have the discretion to determine whether to enter
into a written contract pursuant to section 7623 with the whistleblower
and, if applicable, the legal representative of the whistleblower, for
services described in paragraph (a)(1) of this section.
(b) Limitations. (1) Disclosure of return information in connection
with a written contract for services described in paragraph (a)(1) of
this section shall be made only to the extent the IRS deems it
necessary in connection with the reasonable or proper performance of
the contract. Disclosures may include, but are not limited to,
disclosures to accomplish properly any purpose or activity of the
nature described in section 6103(k)(6) and the regulations thereunder.
(2) If the IRS determines that the services of a whistleblower and,
if applicable, the legal representative of the whistleblower, as
described in paragraph (a)(1) of this section, can be performed
reasonably or properly by disclosure of only parts or portions of
return information, then only the parts or portions of the return
information shall be disclosed.
(3) Upon written request by a whistleblower, or a legal
representative of a whistleblower, with whom the IRS has entered into a
written contract for services as described in paragraph (a)(1) of this
section, the Director of the Whistleblower Office, or designee of the
Director, may inform the whistleblower and, if applicable, the legal
representative of the whistleblower, of the status of the
whistleblower's claim for award under section 7623, including whether
the claim is being evaluated for potential investigative action, or is
pending due to an ongoing examination, appeal, collection action, or
litigation. The information may be disclosed only if the IRS determines
that the disclosure would not seriously impair Federal tax
administration.
(4) Return information disclosed to a whistleblower and, if
applicable, a legal representative of a whistleblower, under this
section, shall not be further disclosed or otherwise used by the
whistleblower or a legal representative of a whistleblower, except as
expressly authorized in writing by the IRS.
(c) Penalties. Any whistleblower, or legal representative of a
whistleblower, who receives return information under this section, is
subject to the civil and criminal penalty provisions of sections 7431,
7213, and 7213A for the unauthorized inspection or disclosure of the
return information.
(d) Safeguards. (1) Any whistleblower, or the legal representative
of a whistleblower, who receives return information under this section,
shall comply with all applicable conditions and requirements as the IRS
may prescribe from time to time for the purposes of protecting the
confidentiality of the return information and preventing any disclosure
or inspection of the return information in a manner not authorized by
this section (prescribed requirements).
(2) Any written contract for services as described in paragraph
(a)(1) of this section shall provide that any whistleblower and, if
applicable, the legal representative of a whistleblower, who has access
to return information under this section, shall comply with the
prescribed requirements.
(3) Any whistleblower, or the legal representative of a
whistleblower, who may receive return information under this section,
shall agree in writing, before any disclosure of return information is
made, to permit an inspection of the whistleblower's or the legal
representative's premises by the IRS relative to the maintenance of the
return information disclosed under these regulations and, upon
completion of services as described in the written contract with the
IRS, to dispose of all return information by returning the return
information, including any and all copies or notes made, to the IRS, or
to the extent that it cannot be returned, by destroying the information
in a manner consistent with prescribed requirements.
(4) If the IRS determines that any whistleblower, or the legal
representative of a whistleblower, who has access to return information
under this section, has failed to, or does not, satisfy the prescribed
requirements, the IRS, using the procedures described in the
regulations under section 6103(p)(7), may take any action it deems
necessary to ensure that the prescribed requirements are or will be
satisfied, including--
(i) Suspension of further disclosures of return information by the
IRS to the whistleblower and, if applicable, the legal representative
of the whistleblower, until the IRS determines that the conditions and
requirements have been or will be satisfied; and
(ii) Suspension or termination of any duty or obligation arising
under the contract with the IRS.
(e) Definitions. For purposes of this section--
(1) The term Treasury Department includes the IRS and the Office of
the Chief Counsel for the IRS.
(2) The term whistleblower means an individual who provides
information to the IRS regarding violations of the tax laws or related
statutes and submits a claim for an award under section 7623 with
respect to the information.
(3) The term legal representative means any individual who is a
member in good standing in the bar of the highest court of any state,
possession, territory, commonwealth, or the District of Columbia, and
who has a written power of attorney executed by the whistleblower.
(f) Effective/applicability date. This section is applicable on
March 15, 2011.
Sec. 301.6103(n)-2T [Removed]
0
Par. 3. Section 301.6103(n)-2T is removed.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: March 9, 2011.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-6111 Filed 3-14-11; 8:45 am]
BILLING CODE 4830-01-P