[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Rules and Regulations]
[Page 15668-15671]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-6]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9389]
RIN 1545-BG74
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: Temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains temporary regulations relating to the
disclosure of return information, pursuant to section 6103(n) of the
Internal Revenue Code (Code), 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 temporary 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 temporary 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. 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 in this issue of the Federal
Register.
DATES: Effective Date: These temporary regulations are effective on
March 25, 2008.
Applicability Date: For dates of applicability, see Sec.
301.6103(n)-2T(f).
FOR FURTHER INFORMATION CONTACT: Helene R. Newsome, 202-622-7950 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains 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. The Whistleblower Office, in connection with administering a
whistleblower program, will analyze information provided by a
[[Page 15669]]
whistleblower, and either investigate the matter itself or assign it to
the appropriate IRS office for investigation. In analyzing information
provided by a whistleblower, or investigating a matter, the
Whistleblower Office may determine that it requires the assistance of
the whistleblower, or the legal representative of the whistleblower.
The legislative history of section 406 of the Act states 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 legislative history further states 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 (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, including any person described in section
7513(a), 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. These temporary regulations describe the
circumstances, pursuant to section 6103(n), 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.
Explanation of Provisions
General Rule
The temporary regulations, at Sec. 301.6103(n)-2T(a)(1), provide
that an officer or employee of the Treasury Department may, pursuant to
sections 6103(n) and 7623, disclose return information 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. If a whistleblower has retained the services of a legal
representative, then, in addition to the whistleblower, the
whistleblower's legal representative must be a party to the written
contract with the IRS. These temporary regulations do not provide for
the disclosure of returns to whistleblowers or their legal
representatives.
The temporary regulations, at Sec. 301.6103(n)-2T(a)(2), provide
that the Commissioner has the discretion to determine whether to enter
into a written contract with the whistleblower and, if applicable, the
legal representative of the whistleblower, for services as described in
Sec. 301.6103(n)-2T(a)(1). The IRS expects to enter into these
contracts only infrequently, and any contract that is entered into, and
any disclosures made pursuant to this type of contract, will be
carefully tailored to the specific facts of the case.
Limitations
The temporary regulations, at Sec. 301.6103(n)-2T(b)(1), set forth
the condition that the disclosure of return information in connection
with a written contract for services described in Sec. 301.6103(n)-
2T(a)(1) may be made only to the extent the IRS deems it necessary in
connection with the reasonable or proper performance of the contract.
In this regard, disclosures should relate to relevant taxable years and
types of tax. The temporary regulations, at Sec. 301.6103-2T(b)(2),
set forth the additional condition that if the IRS determines that the
services of a whistleblower and, if applicable, the legal
representative of the whistleblower as described in Sec. 301.6103(n)-
2T(a)(1) 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 are to be disclosed.
The temporary regulations, at Sec. 301.6103(n)-2T(b)(3), provide
that, 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 Sec. 301.6103(n)-
2T(a)(1), 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. This information may be disclosed only if the Commissioner
determines that the disclosure would not seriously impair Federal tax
administration.
The temporary regulations, at Sec. 301.6103(n)-2T(b)(4), impose
the condition that return information disclosed to a whistleblower and,
if applicable, a legal representative of a whistleblower, may not be
disclosed or otherwise used by the whistleblower or a legal
representative of a whistleblower, except as expressly authorized by
the IRS.
Penalties
The temporary regulations, at Sec. 301.6103(n)-2T(c), set forth
the civil and criminal penalties to which whistleblowers and their
legal representatives are subject for unauthorized inspection or
disclosure of return information by operation of sections 7431(a)(2),
7213(a)(1), and 7213A(a)(1)(B).
Safeguards
The temporary regulations, at Sec. 301.6103(n)-2T(d)(1), provide
that whistleblowers and their legal representatives who receive return
information under these regulations must comply with all applicable
conditions and requirements as the IRS may prescribe from time to time
(prescribed requirements) for the purposes of protecting the
confidentiality of the return information and preventing unauthorized
disclosures and inspections of the return information (for example,
requirements pertaining to computer security, physical security of
return information, methods of destruction of return information).
The temporary regulations, at Sec. 301.6103(n)-2T(d)(2), provide
that any written contract for services as described in Sec.
301.6103(n)-2T(a)(1) must provide that any whistleblower and, if
applicable, the legal representative of a whistleblower, who has access
to return information under these regulations shall comply with the
prescribed requirements.
The temporary regulations, at Sec. 301.6103(n)-2T(d)(3), impose
the requirement that whistleblowers, and their legal representatives
who receive return information under these regulations, must agree in
writing, before any disclosure of return information is made, to permit
an
[[Page 15670]]
inspection of their premises by the IRS relative to the maintenance of
the return information disclosed to them 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 security guidelines and other safeguards
for protecting return information in guidance published by the IRS.
The temporary regulations, at Sec. 301.6103(n)-2T(d)(4), provide
that if the IRS determines that any whistleblower, or the legal
representative of a whistleblower, who has access to return information
under these regulations, 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.
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. For the
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6)
refer to the Special Analyses section of the preamble to the cross-
reference notice of proposed rulemaking published in the Proposed Rules
section in this issue of the Federal Register. 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 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.
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 is amended by adding
an entry in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6103(n)-2T also issued under 26 U.S.C. 6103(n); * *
*
0
Par. 2. Section 301.6103(n)-2T is added to read as follows:
Sec. 301.6103(n)-2T Disclosure of return information in connection
with written contracts among the IRS, whistleblowers, and legal
representatives of whistleblowers (temporary).
(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 Commissioner 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 Commissioner
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 disclosed or otherwise used by the whistleblower
or a legal representative of a whistleblower, except as expressly
authorized in writing by the Director of the Whistleblower Office.
(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 (prescribed requirements) 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.
(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 his or her 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
[[Page 15671]]
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
security guidelines and other safeguards for protecting return
information in guidance published by the IRS.
(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 a 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 25, 2008.
(g) Expiration date. This section will expire on March 24, 2011.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Approved: March 12, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-6067 Filed 3-24-08; 8:45 am]
BILLING CODE 4830-01-P