Disclosure of Returns and Return Information to Designee of Taxpayer

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Notice of proposed rulemaking and notice of public hearing.

SUMMARY:

This document contains a proposed regulation pertaining to the period for submission to the IRS of taxpayer authorizations permitting disclosure of returns and return information to third-party designees. Specifically, the proposed regulation extends from 60 days to 120 days the period within which a signed and dated authorization must be received by the IRS (or an agent or contractor of the IRS) in order for it to be effective. The proposed regulation extends the period as some institutions charged with assisting taxpayers in their financial dealings have encountered difficulty in obtaining written authorizations and submitting the authorizations within the 60-day period allowed by the existing regulations. The proposed regulation will affect taxpayers who submit authorizations permitting disclosure of returns and return information to third-party designees. This document also provides notice of a public hearing on the proposed regulation.

DATES:

Written or electronic comments must be received by May 17, 2011. Outlines of topics to be discussed at the public hearing scheduled for Thursday, June 9, 2011 at 10 a.m. must be received by Wednesday, May 18, 2011.

ADDRESSES:

Send submissions to CC:PA:LPD:PR (REG-153338-09), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153338-09), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-153338-09). The public hearing will be held in Auditorium, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulation, contact Amy Mielke, (202) 622-4570; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Oluwafunmilayo Taylor, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this proposed regulation has been previously approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-1816.

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 and records relating to the collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103.

Background

This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301). Section 6103(c) of the Internal Revenue Code (Code) authorizes the IRS (or an agent or contractor of the IRS) to disclose returns and return information to such person or persons as the taxpayer may designate in a request for or consent to disclosure. The proposed regulation amends § 301.6103(c)-1 by extending the period for submission to the IRS of taxpayer authorizations permitting disclosure of returns and return information to designees of a taxpayer. Specifically, the proposed regulation extends from 60 days to 120 days the period within which a signed and dated authorization must be received by the IRS (or an agent or contractor of the IRS) in order for it to be effective.

On December 18, 2009, the IRS published Notice 2010-8, 2010-3 IRB 297, which announced an intention to amend the regulation under § 301.6103(c)-1 to expand the time frame for submission of section 6103(c) authorizations. The notice additionally announced interim rules extending from 60 days to 120 days the period within which section 6103(c) authorizations must be received in order to be effective. The interim rules apply to authorizations signed and dated on or after October 19, 2009. Per Notice 2010-8, the interim rules remain in effect until promulgation of a final regulation under section 6103(c). See § 601.601(d)(2)(ii)(d).

Explanation of Provisions

The IRS recognizes the importance of limiting the effective period of authorizations provided pursuant to section 6103(c). Reasonable limitation on the effective period of written authorizations helps ensure the currency of the authorization and protects taxpayer privacy. The 60-day period allowed by the existing regulation, however, has proven problematic. Some institutions charged with assisting taxpayers in their financial dealings have encountered difficulty in obtaining written authorizations and submitting the authorizations to the IRS within the 60 days allowed by the existing regulation. To reduce the burden on taxpayers and the institutions and professionals assisting them, the IRS proposes amending the regulation under section 6103(c) to extend from 60 days to 120 days the period within which taxpayer-provided authorizations must be received by the IRS (or an agent or contractor of the IRS) in order to be effective.

Proposed Effective Date

This regulation, as proposed, will be effective upon publication in the Federal Register of a Treasury decision adopting this rule as a final regulation. The regulation, once effective, will apply to section 6103(c) authorizations signed on or after October 19, 2009.

Effect on Other Documents

Notice 2010-8, 2010-3 IRB 297, will be obsolete upon publication in the Federal Register of a Treasury decision adopting this rule as a final regulation.

Special Analyses

It has been determined that this proposed regulation is not a significant regulatory action as defined in Executive Order 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) does not apply to this regulation. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

When an agency issues a rulemaking proposal, the Regulatory Flexibility Act (5 U.S.C. chapter 6), requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis” that will “describe the impact of the proposed rule on small entities.” (5 U.S.C. 603(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. It is hereby certified that the collection of information in this regulation will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that any burden on taxpayers is minimal, since the regulation only applies to taxpayers which request or consent to the disclosure of returns or return information, and since the information collected is only that necessary to carry out the disclosure of returns or return information requested or consented to by the taxpayer (such as the name and taxpayer identification number of the taxpayer, the return or return information to be disclosed, and the identity of the designee). Moreover, it is based upon the fact that the regulation reduces the burden imposed upon taxpayers by the prior regulation by extending the period in which consents may be received by the IRS. Accordingly, a Regulatory Flexibility Analysis is not required.

Comments and Public Hearing

Before this proposed regulation is adopted as a final regulation, consideration will be given to any written comments (a signed original and eight (8) copies) and electronic comments that are timely submitted to the IRS. The IRS and the Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying.

The public hearing is scheduled for Thursday, June 9, 2011 at 10 a.m., and will be held in Auditorium, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. All visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the section of this preamble titled FOR FURTHER INFORMATION CONTACT.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by Wednesday, May 18, 2011. A period of 10 minutes will be allotted to each person for the making of comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Drafting Information

The principal author of this proposed regulation is Amy Mielke, Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

• Administrative practice and procedure
• Alimony
• Bankruptcy
• Child support
• Continental shelf
• Courts
• Crime
• Employment taxes
• Estate taxes
• Excise taxes
• Gift taxes
• Income taxes
• Investigations
• Law enforcement
• Oil pollution
• Penalties
• Pensions
• Reporting and recordkeeping requirements
• Seals and insignia
• Statistics
• Taxes

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 as follows:

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

Par. 2. Section 301.6103(c)-1 is amended by revising paragraphs (b)(2) and (f) and adding paragraph (g) to read as follows: