Disclosure of Return Information to the Bureau of the Census

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8811]

RIN 1545-AV83

Disclosure of Return Information to the Bureau of the Census

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations

relating to additions to, and deletions from, the list of items of

information disclosed to the Bureau of the Census for use in certain

statistical programs. These regulations provide guidance to IRS

personnel responsible for disclosing the information. 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.

DATES: Effective Date: These regulations are effective January 25,

1999.

Applicability Date: For dates of applicability, see

Sec. 301.6103(j)(1)-1T(e) of these regulations.

FOR FURTHER INFORMATION CONTACT: Jamie Bernstein, (202) 622-4570 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Under section 6103(j)(1) of the Internal Revenue Code, upon written

request from the Secretary of Commerce, the Secretary is to furnish to

the Bureau of the Census (``Bureau'') tax return information that is

prescribed by Treasury regulations for the purpose of structuring

censuses and national economic accounts and conducting related

statistical activities. Section 301.6103(j)(1)-1 of the regulations

provides an itemized description of the return information authorized

to be disclosed for this purpose. Periodically, the disclosure

regulations are amended to reflect the changing needs of the Bureau for

data for its statutorily authorized statistical activities.

This document adopts temporary regulations that authorize IRS

personnel to disclose the additional items of return information that

have been requested by the Secretary of Commerce. The temporary

regulations also delete certain items of return information that are

enumerated in the existing regulations but that the Secretary of

Commerce has indicated are no longer needed.

Except for Sec. 301.6103(j)(1)-1T(b)(3), (b)(6)(i)(A) and

(b)(6)(iii), the text of the temporary regulations is the same as 26

CFR 301.6103(j)(1)-1. The changes made by Sec. 301.6103(j)(1)-1T(b)(3),

(b)(6)(i)(A) and (b)(6)(iii) are discussed below.

Explanation of Provisions

The request by the Secretary of Commerce for additional items of

return information has indicated several areas in which changes to

existing Bureau access to tax return information either would improve

present statistical programs or are necessary to implement new

programs.

To reduce small businesses' direct reporting burden in quinquennial

economic censuses and current economic surveys, and to improve the

quality of the data received, the Bureau needs certain items of

information set forth in tax returns. These items include total

expenses or deductions, beginning-and end-of-year inventories, net gain

from sales of business property, other income, and total income.

The Secretary of Commerce also has requested identity information

of parent corporations as shown on corporate tax returns. This

information will enable the Bureau to collect data for various economic

surveys at the subsidiary or division level rather than at the

establishment level. Restructuring data collection in accordance with

such new organizational linkages will reduce the burden on individual

business establishments to estimate data relating to their affiliates,

enhance the quality of the data collected, and provide the Bureau with

an efficient sampling frame for surveys collecting certain data, such

as capital expenditures, that are typically not available at the

establishment level.

To eliminate the follow-up contact of corporate taxpayers presently

required under the Quarterly Financial Report (QFR) program in order to

establish S corporation status, the Bureau needs the document code and

district office code from corporate returns. Another improvement to the

QFR program would be effected by the requested disclosure of parent

corporation identity information, because subsidiaries could then be

linked before a sample was selected and would be relieved of the

separate Census reporting requirements. Finally, the Bureau seeks to

enhance the quality and reduce the size of sample frames under the QFR

program by identifying inactive corporations so that they can be

excluded from the universe subject to sampling. This requires that

certain items of corporate employment tax information (employer

identification number, tax period, total compensation, and taxable

wages and tips), available to the Bureau under the existing regulations

for economic census purposes, be available to the Bureau as well for

QFR purposes.

The Secretary of Commerce has advised that the Bureau no longer

uses certain items of information listed in the existing regulations:

sales of livestock and produce raised, Schedule E information filed

with the Form 1120 series, and, with respect to the QFR program, net

income or loss. Accordingly, the temporary regulations have deleted

these items from the enumeration of return information to be disclosed

to the Bureau.

The transfer of the Census of Agriculture to the Department of

Agriculture under the Census of Agriculture Act of 1997 (Pub. L. 105-

113) has also obviated the need for the Secretary of Commerce to

receive certain items of information. These items are: Schedule F filed

with the Form 1040 series, net farm profits, agricultural activity

code, and answers to material participation questions. These items have

been deleted in the temporary regulations. For simplification and

consistency, the term ``loss'' is not expressly stated in these

regulations as an alternative to ``income'' or ``gain,'' but it is the

intent of the Secretary to interpret ``income'' or ``gain'' as

including negative or loss figures and to provide any such figures to

the Bureau.

Special Analyses

It has been determined that this Treasury decision is not a

significant regulatory action as defined in EO 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) see 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

Internal Revenue Code, these temporary regulations will be 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 Douglas Giblen, Office

of the Associate Chief Counsel

[[Page 3632]]

(International) (formerly of the Office of Assistant Chief Counsel

(Disclosure Litigation)). However, other personnel from the IRS 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.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

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(j)(1)-1T also issued under 26 U.S.C. 6103(j)(1); *

* *

Par. 2. Section 301.6103(j)(1)-1 is amended by revising paragraphs

(b)(3) and (b)(6)(i)(A) to read as follows:

Sec. 301.6103(j)(1)-1 Disclosures of return information to officers

and employees of the Department of Commerce for certain statistical

purposes and related activities.

* * * * *

(b)(3)[Reserved]. For further guidance, see Sec. 301.6103(j)(1)-

1T(b)(3).

* * * * *

(b)(6)(i)(A)[Reserved]. For further guidance, see

Sec. 301.6103(j)(1)-1T(b)(6)(i)(A).

* * * * *

Par. 3. Section 301.6103(j)(1)-1T is added to read as follows:

Sec. 301.6103(j)(1)-1T Disclosure of return information to officers

and employees of the Department of Commerce for certain statistical

purposes and related activities (temporary).

(a) through (b)(2)[Reserved]. For further guidance, see

Sec. 301.6103(j)(1)-1(a) through (b)(2).

(b)(3) Officers or employees of the Internal Revenue Service will

disclose the following business related return information reflected on

the return of a taxpayer to officers and employees of the Bureau of the

Census for purposes of, but only to the extent necessary in, conducting

and preparing, as authorized by chapter 5 of title 13, United States

Code, demographic, economic, and agricultural statistics programs,

censuses, and surveys. The ``return of a taxpayer'' includes, but is

not limited to, Form 941; Form 990 series; Form 1040 series and

Schedules C and SE; Form 1065 and all attending schedules and Form

8825; Form 1120 series and all attending schedules and Form 8825; Form

851; Form 1096; and other business returns, schedules and forms that

the Internal Revenue Service may issue--

(i) Taxpayer identity information (as defined in section

6103(b)(6)) including parent corporation, shareholder, partner, and

employer identity information;

(ii) Gross income, profits, or receipts;

(iii) Returns and allowances;

(iv) Cost of labor, salaries, and wages;

(v) Total expenses or deductions;

(vi) Total assets;

(vii) Beginning- and end-of-year inventory;

(viii) Royalty income;

(ix) Interest income, including portfolio interest;

(x) Rental income, including gross rents;

(xi) Tax-exempt interest income;

(xii) Net gain from sales of business property;

(xiii) Other income;

(xiv) Total income;

(xv) Percentage of stock owned by each shareholder;

(xvi) Percentage of capital ownership of each partner;

(xvii) End-of-year code;

(xviii) Months actively operated;

(xix) Principal industrial activity code, including the business

description;

(xx) Total number of documents and the total amount reported on the

Form 1096 transmitting Forms 1099-MISC;

(xxi) Form 941 indicator and business address on Schedule C; and

(xxii) Consolidated return indicator.

(b)(4) and (5)[Reserved]. For further guidance, see

Sec. 301.6103(j)(1)-1(b)(4) and (5).

(b)(6)(i) Officers or employees of the Internal Revenue Service

will disclose the following return information (but not including

return information described in section 6103(o)(2)) reflected on the

return of a corporation with respect to the tax imposed by Chapter 1 to

officers and employees of the Bureau of the Census for purposes of, but

only to the extent necessary in, developing and preparing, as

authorized by law, the Quarterly Financial Report--

(A) From the business master files of the Internal Revenue

Service--

(1) Taxpayer identity information (as defined in section

6103(b)(6)), including parent corporation identity information;

(2) Document code;

(3) District office code;

(4) Consolidated return and final return indicators;

(5) Principal industrial activity code;

(6) Partial year indicator;

(7) Annual accounting period;

(8) Gross receipts less returns and allowances; and

(9) Total assets.

(b)(6)(i)(B) and (ii)[Reserved]. For further guidance, see

Sec. 301.6103(j)(1)-1(b)(6)(i)(B) and (ii).

(iii) Information from an employment tax return disclosed pursuant

to Sec. 301.6103(j)(1)-1(b)(2)(iii)(A), (B), (D), (I) and (J) may be

used by officers and employees of the Bureau of the Census for the

purpose described in and subject to the limitations of this paragraph

(b)(6).

(c) and (d) [Reserved]. For further guidance, see

Sec. 301.6103(j)(1)-1(c) and (d).

(e) Effective date. This section is applicable to the Bureau of the

Census on January 25, 1999 through January 22, 2002.

Approved: December 29, 1998.

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue.

Donald C. Lubick,

Assistant Secretary of the Treasury.

[FR Doc. 99-1284 Filed 1-22-99; 8:45 am]

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