Disclosure of Returns and Return Information by Other Agencies

DEPARTMENT OF THE TREASURY 
Internal Revenue Service 26 CFR Parts 301 and 602 [REG-105344-01]
RIN 1545-AY77

TITLE: Disclosure of Returns and Return Information by Other
Agencies

AGENCY:  Internal Revenue Service (IRS), Treasury.

ACTION:  Notice of proposed rulemaking by cross-reference to
temporary regulations.

SUMMARY:  In the Rules and Regulations section of this issue of the
Federal Register, the IRS is issuing a temporary regulation to
enable the Commissioner to authorize Federal, state and local
agencies with access to returns and return information under section
6103 of the Internal Revenue Code to redisclose such returns and
return information, with the Commissioner's approval, to any
authorized recipient set forth in section 6103 of the Internal
Revenue Code, subject to the same restrictions and for the same
purposes, as if the recipient had received the information from the
IRS directly.

DATES:  Written comments and electronic comments and requests for a
public hearing must be received by February 14, 2002.

ADDRESSES:  Send submissions to CC:ITA:RU (REG-105344-01), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to CC:ITA:RU
(REG-105344-01), Courier's Desk, Internal Revenue Service,

1111 Constitution Avenue, NW., Washington, DC.  Alternatively,
taxpayers may submit comments electronically via the Internet by
selecting the ATax Regs@ option on the IRS Home Page, or by
submitting comments directly to the IRS Internet site:
http://www.irs.gov/prod/tax_regs/comments/html.

FOR FURTHER INFORMATION CONTACT:  Julie C. Schwartz, 202-622-4570
(not a toll-free number).

SUPPLEMENTARY INFORMATION: Paperwork Reduction Act

The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)).  Comments on the collection of information
should be sent to the Office of Management and Budget, Attn: Desk
Officer for the DEPARTMENT OF THE TREASURY, Office of Information
and Regulatory Affairs, Washington, DC 20503, with copies to the
Internal Revenue Service, Attn: IRS Reports Clearance Officer,
W:CAR:MP:FP:S, Washington, DC 20224.  Comments on the collection of
information should be received by February 14, 2002.  Comments are
specifically requested concerning:

Whether the proposed collection of information is necessary for the
proper performance of the functions of the Internal revenue Service,
including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed
collection of information (see below); How the quality, utility, and
clarity of the information to be collected may be enhanced; How the
burden of complying with the proposed collection of information may
be minimized, including through the application of automated
collection techniques or other forms of information technology; and
Estimates of capital or star-up costs and costs of operation,
maintenance, and purchase of service to provide information. The
collection of information in this proposed regulation is in 26 CFR
301.6103(p)(2)(B)-1T.  This information is required for the
Commissioner to authorize agencies with access to returns and return
information under section 6103 to disclose such to other authorized
recipients of returns and return information in accordance with
section 6103.  The collection of information is required to obtain a
benefit.  The likely respondents and recordkeepers are federal
agencies and state or local governments. Estimated total annual
reporting and/or recordkeeping burden: 11 hours. Estimated average
annual burden hours per respondent and/or recordkeeper: 1 hour.
Estimated number of respondents and/or recordkeepers: 11 Estimated
annual frequency of responses: once An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid control number assigned by
the Office of Management and Budget.

Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of an internal revenue law. Generally, tax returns
and return information are confidential, as required by 26 U.S.C.
6103.

Background

Section 6103(p)(2)(B) provides that return information disclosed
pursuant to the Code may be disclosed by any mode or means that the
Secretary determines necessary or appropriate.  26 CFR 301.6103(p)
(2)(B)-1 currently permits certain recipients of returns and return
information under section 6103, with the Commissioner's approval, to
disclose returns and return information to certain other permissible
recipients under section 6103.  Specifically, the existing
regulation permits disclosure by Federal agencies, with the
Commissioner's approval, to 1) other Federal agencies, 2) state tax
agencies, 3) the General Accounting Office, 4) Federal, state and
local child support enforcement agencies, 5) persons described in
section 6103(c) (person designated in a taxpayer consent), and 6)
persons described in section 6103(e) (person with a material
interest). The Consolidated Appropriations Act, 2001, Pub. L. No.
106-554 (114 Stat. 2763), was signed into law on December 21, 2000.
Section 1 of that Act enacted into law H.R. 5662, the Community
Renewal Tax Relief Act of 2000.  Section 310 of the Community
Renewal Tax Relief Act of 2000 added section 6103(j)(6) to the Code,
authorizing the Commissioner to disclose return information to the
Congressional

Budget Office (CBO) for the purpose of, but only to the extent
necessary for, long term models of the Social Security and Medicare
programs. The conference report, H. R. Conf. Rep. No. 106-1033, at
1020-21 (2000), provides that it is the intent of Congress that all
requests for information made by CBO under this provision be made to
the Commissioner, who will use his authority under section 6103(p)
(2) such that the Social Security Administration (SSA) or other
agency can furnish the information directly to CBO for the purpose
of CBO's long term models of Social Security and Medicare.  SSA, not
IRS, collects and maintains much of the information sought by CBO
and also receives the tax information CBO seeks under other
provisions of section 6103.  However, section 301.6103(p)(2)(B)-1 in
its current form would not allow the Commissioner to authorize SSA
to redisclose return information properly in its possession to CBO,
an authorized recipient of the information under section 6103(j)(6).
Updating the regulation would allow SSA to make return information
in its possession available to CBO to the extent authorized by
section 6103(j)(6).

There are other situations, similar to that found under section
6103(j)(6), where it is more efficient for returns and return
information in the possession of one authorized agency recipient, to
be disclosed by such agency to another statutorily authorized
recipient.  The inability of agencies, including Federal, state and
local agencies, to share returns and return information between
themselves or even inside a single agency, even where the
information is more readily available from an agency other than the
IRS, was highlighted by the DEPARTMENT OF THE TREASURY on pages
89-90 of its

October 2000 Report to the Congress on the Scope and Use of Taxpayer
Confidentiality and Disclosure Provisions.  The report notes, for
example, that currently a single agency within a state (or even a
single caseworker) may be administering both child support under
Title IV-D of the Social Security Act and welfare under Title IV-A
of the Social Security Act.  The agency may receive return
information under both section 6103(l)(6) and section 6103(l)(7) to
aid the agency in making determinations of eligibility for these
programs, but the current regulation does not permit even
intraagency pooling or sharing of these data.  The report notes that
both intra- and inter- agency data sharing with respect to common
data elements could be authorized by amendment to the Treasury
regulations.  Updating the regulation would allow the IRS to
authorize such redisclosure in appropriate situations.

The text of the proposed temporary regulation also serves as the
text of this proposed regulation.  The preamble to the temporary
regulation contains a full explanation of the reasons underlying the
issuance of the proposed regulation.

Special Analyses

It has been determined that this notice of proposed rulemaking 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) 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 Code, this notice of proposed
rulemaking will be submitted to the Chief Counsel of the Small
Business Administration for comment on its impact on small
businesses.

Comments and Request for a Public Hearing

    Before this proposed regulation is adopted as a final
regulation, consideration will be given to any electronic and
written comments (a signed original and eight (8) copies) that are
submitted timely to the IRS.  All comments will be available for
public inspection and copying.  A public hearing may be scheduled if
requested in writing by a 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 this regulation is Julie C. Schwartz,
	Office of the Associate Chief Counsel (Procedure and
	Administration), Disclosure and Privacy Law Division.

List of Subjects  26 CFR part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and Recordkeeping requirements. 26 CFR
part 602

Reporting and recordkeeping requirements. Amendments to the
Regulations

    Accordingly, 26 CFR parts 301 and 602 are proposed to be 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(p)(2)(B)-1 also
issued under 26 U.S.C. 6103(p)(2);*** ' 301.6103(p)(2)(B)-1
[Removed] Par. 2. Section 301.6103(p)(2)(B)-1 is removed. Par. 3.
Section 301.6103(p)(2)(B)-1T is added to read as follows:

    [The text of this proposed section is the same as the text of
	'301.6103(p)(2)(B)- 1T published elsewhere in this issue of the
	Federal Register]. PART 602 B OMB CONTROL NUMBERS UNDER THE
	PAPERWORK REDUCTION ACT Par. 4. The authority citation for part
	602 continues to read as follows: Authority:  26 U.S.C. 7805 ***

Par. 5.  In § 602.101, paragraph (b) is amended by adding an
entry to the table in numerical order to read as follows: [The text
of this proposed section is the same as the text of  § 602.101
published elsewhere in this issue of the Federal Register]. 

Deputy Commissioner of Internal Revenue

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