Disclosure of Returns and Return Information to Procure Property or Services for Tax Administration Purposes

DEPARTMENT OF THE TREASURY

26 CFR Part 301

[DL-01-95]

RIN 1545-AT48

Disclosure of Returns and Return Information to Procure Property

or Services for Tax Administration Purposes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: These proposed regulations relate to the disclosure of returns

and return information in connection with the procurement of property

and services for tax administration purposes. The amendments would

authorize the Department of Justice, including offices of United States

Attorneys, to make such disclosures. Current disclosure authority

within the Department of Justice rests only with the Tax Division. The

amendments also reflect a change to the law made by the Omnibus Budget

Reconciliation Act of 1990 regarding the type of services about which

disclosures may be made.

DATES: Comments and requests for a public hearing must be received by

March 14, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (DL-01-95), room 5228,

Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be hand delivered between

the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (DL-01-95), Courier's

Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC.

FOR FURTHER INFORMATION CONTACT: Donald Squires, 202-622- 4570 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 6103(n) of the Internal Revenue Code (Code) authorizes the

disclosure of returns and return information, pursuant to regulations

prescribed by the Secretary of the Treasury, ``to the extent necessary

in connection with the processing, storage, transmission, and

reproduction of such returns and return information, the programming,

maintenance, repair,

[[Page 64403]]

testing, and procurement of equipment, and the providing of other

services, for purposes of tax administration.''

Existing regulations promulgated under this section prescribe the

persons who may make such disclosures, the situations under which such

disclosures may be made and the notification and safeguarding

procedures to be followed when such disclosures are made. Among the

persons who may make such disclosures are officers and employees of the

Tax Division of the Department of Justice. The amendments would

authorize such disclosures by the Department of Justice (not solely the

Tax Division) to third parties who provide services for tax

administration purposes under the conditions and restrictions of the

regulations. The amendments would provide that, for the purpose of this

section, the ``Department of Justice'' includes offices of United

States Attorneys.

The amendments would also conform the regulation to the language of

section 6103(n), which was amended by the Omnibus Budget Reconciliation

Act of 1990 to clarify that the disclosures authorized by this section

included those in connection with ``the providing of other services''

(i.e., services other than those related to the mechanical processing

of returns and return information).

Explanation of Provisions

As currently written, 26 CFR 301.6103(n)-1 authorizes the Tax

Division of the Department of Justice, among other entities and

individuals, to make disclosures of returns and return information

pursuant to section 6103(n) of the Internal Revenue Code. This

authority allows the Tax Division to disclose tax information incident

to its contracts to private parties for, among other purposes,

automated litigation support services.

The Department of Justice has indicated its intention to establish

an expanded automated tracking system for all monetary judgments in

favor of the United States, which will be operated by a private company

under contract with the Department. Although the majority of tax cases

are handled by the Tax Division, there are several United States

Attorneys' offices that also have litigation responsibility in the

civil tax area. In addition, the Tax Division refers some judgments in

tax cases to the United States Attorneys for collection. Existing

regulations arguably would not permit these offices, which are

technically not part of the Tax Division, to disclose tax information

incident to their inclusion of tax judgments in the automated tracking

system.

The proposed amendment would authorize the Department of Justice,

including offices of United States Attorneys, to make disclosures to

procure property and services for tax administration purposes. Any such

disclosures will be made under the same conditions and restrictions

already set forth in the existing regulations. By definition, any

office within the Department of Justice without tax administration

duties will not have occasion or authority pursuant to these

regulations to make such disclosures.

The proposed amendment would also authorize disclosures in

connection with ``the providing of other services,'' i.e., services not

related to the strict mechanical processing or manipulation of tax

returns or return information. This would conform the regulations to

the language of the statute, as amended by the Omnibus Budget

Reconciliation Act of 1990 (Pub. L. 101-508, 104 Stat. 1388-353).

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It has also been determined

that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and, therefore, a Regulatory

Flexibility Analysis is not required. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice of proposed rulemaking will be

submitted to the Chief Counsel for Advocacy of the Small Business

Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments that are submitted

timely (preferably a signed original and eight copies) to the IRS. All

comments will be available for public inspection and copying. A public

hearing may be scheduled if requested in writing by any person that

timely submits written comments. If a public hearing is scheduled,

notice of the date, time, and place for the hearing will be published

in the Federal Register.

Drafting Information

The principal author of these proposed regulations is Donald

Squires, Office of the Assistant Chief Counsel (Disclosure Litigation),

IRS. However, other personnel from the IRS, Department of Justice and

Treasury Department participated in their development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments 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 continues to read

in part as follows:

Authority: 26 U.S.C. 7805 * * *

Para. 2. Section 301.6103(n)-1 is amended as follows:

1. The first sentence of paragraph (a) introductory text is amended

by removing the language ``Tax Division,''.

2. Paragraph (a)(2) is amended by removing the language ``or to''.

3. Paragraph (a)(2) is further amended by adding the language ``or

the providing of other services,'' immediately following the text

``other property,''.

4. The concluding text following paragraph (a)(2) is amended by

removing the language ``Tax Division,''.

5. The second sentence of paragraph (d) introductory text is

amended by removing the language ``Tax Division,''.

6. Paragraph (d)(2) is amended by removing the language ``Tax

Division,''.

7. Paragraph (e)(1) is amended by removing the language ``, and''

at the end of the paragraph and adding a semicolon in its place.

8. Paragraph (e)(2) is amended by removing the period at the end of

the paragraph and adding ``; and'' in its place.

9. Paragraph (e)(3) is added.

10. The authority citation immediately following Sec. 301.6103(n)

is removed.

The addition reads as follows:

Sec. 301.6103(n)-1 Disclosure of returns and return information in

connection with procurement of property and services for tax

administration purposes.

* * * * *

(e) * * *

(3) The term Department of Justice includes offices of the United

States Attorneys.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95-30505 Filed 12-14-95; 8:45 am]

BILLING CODE 4830-01-U