Reg-140930-02

REG-140930-02.pdf

REG-140930-02 (TD 9178 - Final) Testimony or Production of Records in a Court or Other Proceeding (TD 9178)

REG-140930-02

OMB: 1545-1850

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40850

Federal Register / Vol. 68, No. 131 / Wednesday, July 9, 2003 / Proposed Rules

or for special media (e.g., computer
printouts, transcripts, CD–ROM
reproductions), shall be no more than
the fee that would be assessed under the
fee schedule promulgated pursuant to
section (a)(4)(A)(i) of the Freedom of
Information Act (FOIA), 5 U.S.C.
§ 552(a)(4)(A)(i), by the Commissioner
from time to time (the ‘‘IRS’ FOIA fee
schedule’’). For paper copies, the IRS’
FOIA fee schedule, at 26 CFR
§ 601.702(f)(3)(iv), grants the first 100
pages free of charge to requesters other
than commercial use requesters, but
otherwise sets a per-page copying fee
applicable to all requesters. The IRS’
FOIA fee schedule, at 26 CFR
§ 601.702(f)(5), authorizes fees based on
the actual cost of non-paper products,
such as computer disks.
Currently, § 301.6104(d)–1(d)(3)(i)
provides that an exempt organization
required to furnish copies to a requester
may charge a copying fee corresponding
to that which the IRS may charge. This
notice of proposed rulemaking amends
the existing regulations to make clear
that an exempt organization may charge
the applicable per-page copying fee
under the IRS’ FOIA fee schedule. An
exempt organization need not provide
the first 100 pages of copies free of
charge to requesters other than
commercial use requesters as the IRS
does.
Through December 18, 2002, the IRS’
FOIA fee schedule set fees of $1.00 for
the first page and $.15 for each
subsequent page of exempt organization
returns and related documents. 26 CFR
§ 601.702(f)(5)(iv)(B). Effective
December 19, 2002, the fees are to be
established by the Commissioner from
time to time. 26 CFR § 601.702(f) as
updated at 67 FR 69673, 69682.
Currently, the Commissioner has
established fees of $.20 per page, up to
81⁄2 by 14 inches, made by photocopy or
similar process, and actual cost for other
types of duplication. 31 CFR
§ 1.7(g)(1)(i), (ii) and (iii).
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
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because these
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, this notice
of proposed rulemaking will be
submitted to the Chief Counsel of the

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Small Business Administration for
comment on its impact on small
businesses.

DEPARTMENT OF THE TREASURY

Comments and Request for a Public
Hearing

26 CFR Part 301

Before these proposed regulations are
adopted as final regulations, the IRS
will consider any electronic or written
comments (a signed original and eight
(8) copies) that the IRS timely receives.
All comments will be available for
public inspection and copying. A public
hearing may be scheduled if requested
in writing by a person who 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 notice of
proposed rulemaking is Sarah Tate,
Office of the Associate Chief Counsel
(Procedure & Administration),
Disclosure & Privacy Law Division.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
proposed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
1. The authority citation for part 301
is amended by adding entries in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6104(a)–6(d) is also issued
under 5 U.S.C. 552
Section 301.6104(b)–1(d)(4) is also issued
under 5 U.S.C. 552
Section 301.6104(d)–1(d)(3)(i) is also
issued under 5 U.S.C. 552 * * *

2. In § 301.6104(a)–6(d), the fourth
sentence is revised to read as follows:
[The text of this proposed revision is
the same as the text of § 301.6104(a)–
6(d)–T published elsewhere in this issue
of the Federal Register].
3. In § 301.6104(b)–1(d)(4), the last
sentence is revised to read as follows:
[The text of this proposed revision is
the same as the text of § 301.6104(b)–
1(d)(4)–T published elsewhere in this
issue of the Federal Register].
4. In § 301.6104(d)–1(d)(3)(i), the
second sentence is revised to read as
follows:
[The text of this proposed revision is
the same as the text of § 301.6104(d)–
1(d)(3)(i)–T published elsewhere in this
issue of the Federal Register].
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 03–17228 Filed 7–8–03; 8:45 am]
BILLING CODE 4830–01–P

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Internal Revenue Service

[REG–140930–02]
RIN 1545–BB15

Testimony or Production of Records in
a Court or Other Proceeding
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed amendments to the existing
regulation that establishes the
procedures to be followed by IRS
officers and employees upon receipt of
a request or demand for disclosure of
IRS records or information. The purpose
of the proposed amendments is to
provide specific instructions and to
clarify when the existing regulation
does not apply because more specific
procedures take precedence. The
proposed amendments extend the
application of the regulation to former
IRS officers and employees as well as to
persons who are or were under contract
to the IRS. The proposed amendments
would affect current and former IRS
officers, employees and contractors and
persons who make requests or demands
for disclosure.
DATES: Written or electronic comments
and requests for a public hearing must
be received by October 7, 2003.
ADDRESSES: Send submissions to:
CC:PA:RU (REG–140930–02), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered between the hours of 8 a.m.
and 4 p.m. to CC:PA:RU (REG–140930–
02), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC. Alternatively,
taxpayers may submit electronic
comments directly to IRS Internet site
at: www.irs.gov/regs.
FOR FURTHER INFORMATION CONTACT:
David Fish or J. Suzanne Sones, (202)
622–4590 (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

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Federal Register / Vol. 68, No. 131 / Wednesday, July 9, 2003 / Proposed Rules
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:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by
September 8, 2003. Comments are
specifically requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the IRS,
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 start-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
301.9000–5(a). This information is
required to enable the authorizing
official to make an informed decision as
to whether to grant a request or demand
in a non-IRS matter. This information
will be used to inform the authorizing
official of the background of the non-IRS
matter and to refine the scope of the
testimony or disclosures sought. The
collection of information is voluntary
and required to obtain a benefit. The
likely respondents are individuals,
farms, business or other for-profit
institutions, nonprofit institutions, and
small businesses or organizations.
Estimated total annual reporting:
1,400 hours.
Estimated average annual burden
hours per respondent: 1 hour.
Estimated number of respondents:
1,400.
Estimated annual frequency of
responses: 1,400.
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 any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by section

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6103 of the Internal Revenue Code
(Code).
Background
This document contains proposed
amendments to 26 CFR part 301 under
5 U.S.C. 301. The existing regulation
provides procedures for IRS officers and
employees to follow upon receipt of a
request or demand for disclosure of IRS
records or information. Under this
proposed regulation, current and former
IRS officers, employees and contractors
may not disclose IRS records or
information without first receiving
authorization to do so. To conserve
valuable resources, the IRS carefully
considers the nature and circumstances
of a request or demand for IRS records
or information prior to committing
resources to fulfilling the request or
demand. If the IRS is a disinterested
party or has no affected interest with
respect to a request or demand and
would consider the commitment of
resources to comply with the request or
demand inappropriate, the IRS may
deny the request or demand for IRS
records or information. For example, the
IRS may deny a request by private
litigants for the expert testimony of an
IRS employee as to the Federal tax
ramifications of various transactions
based on information furnished by the
private litigants. Such testimony could
compromise the enforcement of the tax
laws, should the IRS later conduct an
examination of the tax consequences of
the transactions.
The proposed regulation provides
more specificity regarding the content of
a request to allow an authorizing official
to make an informed decision when
authorizing or denying the request.
Similarly, the proposed regulation
provides more specific guidance to the
authorizing officials, or to current or
former IRS officers, employees or
contractors, who receive requests or
demands for IRS records or information,
as to the circumstances for authorization
or denial of such requests. Additionally,
the proposed regulation applies to
former IRS officers, employees or
contractors whose previous access to
IRS records or information may be the
subject of such requests or demands. In
such cases the IRS has an interest in
protecting IRS records or information
and should receive notice and have an
opportunity to determine the extent to
which disclosure should be permitted.
The existing regulation at 26 CFR
301.9000–1(f) provides guidance for IRS
officers and employees in state liquor,
tobacco, firearms, or explosives cases.
This proposed regulation does not
contain such a provision because
Treasury Department Order No. 120–01,

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effective July 1, 1972, transferred from
the IRS to the United States Bureau of
Alcohol, Tobacco and Firearms (ATF)
those functions, powers and duties
related to alcohol, tobacco, firearms and
explosives. The ATF promulgated its
own regulations guiding disclosure in
testimony and in related matters, which
can be found at 27 CFR 70.803. Effective
January 24, 2003, the Homeland
Security Act of 2002, Public Law 107–
296, divided ATF into two new
agencies, the Tax and Trade Bureau
(TTB) in the Treasury Department and
the Bureau of Alcohol, Tobacco,
Firearms and Explosives (ATFE) in the
Justice Department. Section 1111(c)(1)–
(c)(2) of the Homeland Security Act
transferred to ATFE the authorities and
functions of ATF, except for the
authorities and functions of ATF
relating to the administration and
enforcement of chapters 51 and 52 and
sections 4181 and 4182 of the Code, and
title 27, USC. Section 1111(d)(1), (d)(3)
of the Homeland Security Act provided
that TTB shall administer the
authorities and functions of ATF not
transferred to ATFE. Treasury
Department Order No. 120–01, effective
January 24, 2003, designated TTB as the
Alcohol and Tobacco Tax and Trade
Bureau. The disclosure regulations
found at 27 CFR 70.803 are still
applicable to TTB.
The existing regulation contains a
delegation of authority from the
Secretary of the Treasury to the
Commissioner of Internal Revenue
(Commissioner) to respond to requests
and demands for IRS records and
information. This delegation has been
deleted as unnecessary as it is contained
in existing statutes and delegation
orders. See, e.g., section 7804;
Delegation Order 150–10.
This proposed regulation reflects
changes in format and definitions to
make it easier to understand and apply.
Explanation of Provisions
Overview
Under 5 U.S.C. 301, heads of
Executive or military departments may
prescribe regulations for, among other
things, the custody, use, and
preservation of the departments’
records, papers, and property. Many
departments and agencies have
promulgated regulations under 5 U.S.C.
301 to provide procedures for the
disclosure of official records and
information. Generally, these are termed
Touhy regulations, after the Supreme
Court’s decision in United States ex rel.
Touhy v. Ragen, 340 U.S. 462 (1951). In
that case, the Supreme Court held that
an agency employee could not be held

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Federal Register / Vol. 68, No. 131 / Wednesday, July 9, 2003 / Proposed Rules

in contempt for refusing to disclose
agency records or information when
following the instructions of his or her
supervisor regarding the disclosure. As
such, an agency’s Touhy regulations are
the instructions agency employees are to
follow when those employees receive
requests or demands to testify or
otherwise disclose agency records or
information.
This proposed regulation expands the
definition of IRS officers and employees
to include both current and former
officers and employees. In addition, this
proposed regulation extends to IRS
contractors, including their current and
former employees. IRS records or
information known by these persons
retains the character of government
records or information, subject to the
direction and control of the
Commissioner, even after the
employment or contractual relationship
has ended. This proposed regulation
provides current and former IRS
officers, employees and contractors with
a procedure to follow when they receive
requests and demands for IRS records
and information.
This proposed regulation is separated
into six sections for ease of use.
Section 301.9000–1

Definitions

New definitions appear in this
proposed regulation to delineate the
difference in treatment between requests
or demands for IRS records or
information in (1) tax administration
proceedings and other proceedings in
which the IRS or an IRS officer or
employee acting in his or her official
capacity is a party; (2) matters that do
not involve the IRS, such as civil
litigation between private parties; and
(3) congressional matters. The proposed
terminology is ‘‘IRS matters,’’ ‘‘non-IRS
matters,’’ and ‘‘IRS congressional
matters,’’ respectively. Previously, ‘‘IRS
matters’’ were also called ‘‘referred
cases.’’
By including former as well as current
IRS officers and employees in the
definition of ‘‘IRS officers and
employees,’’ this proposed regulation
extends the reach of the proposed
procedures. Similarly, a new definition
extends the proposed procedures to
reach current and former ‘‘IRS
contractors.’’
This proposed regulation defines
‘‘testimony authorization,’’ the
longstanding term for the instructions to
the testifying employee or the employee
providing the information, and
‘‘authorizing official,’’ the employee
with delegated authority to authorize
testimony. In addition, this proposed
regulation gives a more detailed

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definition of ‘‘internal revenue records
or information.’’
Section 301.9000–2 Considerations in
Responding to a Request or Demand for
IRS Records or Information
Testimony or disclosure of IRS
records or information is not permitted
if the testimony or disclosure would:
violate a Federal statute or rule of
procedure, violate a tax treaty or
convention of the United States, violate
a Federal regulation, or reveal classified
national security information. This
proposed regulation lists privileges that
may be asserted in response to a request
or demand.
This proposed regulation specifically
mentions section 6103 of the Code, as
that is the primary statute governing
disclosure of IRS records and
information. The majority of the records
and information sought in both IRS and
non-IRS matters are returns and return
information protected by the
confidentiality provisions of section
6103 of the Code.
This proposed regulation provides a
list of factors to consider in deciding
whether to authorize testimony or
disclosure in non-IRS matters, because
requests and demands in non-IRS
matters divert resources from the
administration of the internal revenue
laws and related statutes. These factors
generally are aimed at the effect
compliance with the request or demand
would have on the IRS’s primary
mission of enforcement of the internal
revenue laws and related statutes. The
factors include the IRS’s anticipated
commitment of time and anticipated
expenditure of funds necessary to
comply with the request or demand, the
number of similar requests and their
cumulative effect on the expenditure of
IRS resources, the potential effect of a
non-IRS matter on the administration of
the internal revenue laws and related
statutes, and the importance of the legal
issues presented. The IRS also considers
practical problems with complying with
a request or demand for IRS records or
information.
Section 301.9000–3 Prohibition on
Disclosure of IRS Records or
Information Without Testimony
Authorization
The general rule is that, in response
to a request or demand, an IRS officer,
employee or contractor may not provide
testimony or IRS records or information
unless the Commissioner, or a delegate,
gives instructions therefor. Such an
instruction is called a ‘‘testimony
authorization.’’ A ‘‘testimony
authorization’’ includes an instruction
to testify or provide IRS records or

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information in whole, in part or not at
all. In the interim between receipt of a
request or demand and the issuance of
a testimony authorization, an IRS
officer, employee or contractor may
appear in person to advise that he or she
is awaiting instructions (in the form of
a testimony authorization).
Testimony authorizations are
required, for the most part, in situations
involving court or congressional
testimony. There are, however,
exceptions to the requirement of a
testimony authorization. In an IRS
matter in which the attorney or other
representative of the government
requests testimony, no testimony
authorization is required. Similarly, this
proposed regulation does not require a
testimony authorization in an IRS
matter in which the request or demand
is for responses solely in writing,
produced under the direction of
government counsel, such as
admissions, document production and
written interrogatories to parties. Also,
testimony authorization is not required
if a former IRS officer, employee or
contractor receives a request or demand
for IRS records or information that
involve general knowledge gained while
employed or under contract with the
IRS. Finally, testimony authorization
also is not required if more specific
procedures of the Commissioner apply
to the disclosure. Such procedures
include, for example, those relating to
Freedom of Information Act (5 U.S.C.
552) or Privacy Act (5 U.S.C. 552a)
requests, disclosures in accordance with
26 CFR 601.702(d), disclosures to state
tax agencies pursuant to section 6103(d)
of the Code, or disclosures to the United
States Department of Justice pursuant to
an ex parte order under section
6103(i)(1) of the Code.
Section 301.9000–4 Procedure in the
Event of a Request or Demand for IRS
Records or Information
This proposed regulation gives
specific instructions to IRS officers,
employees and contractors who receive
requests or demands for IRS records or
information. An IRS officer, employee
or contractor who receives a request or
demand for IRS records or information
(except for requests or demands in
United States Tax Court cases, in
personnel, labor relations, government
contract, or IRS congressional matters,
or in matters related to informant claims
or the rules of Bivens v. Six Unknown
Named Agents of Federal Bureau of
Narcotics, 403 U.S. 388 (1971) (Bivens
matters), or the Federal Tort Claims Act
(FTCA)) shall notify promptly the IRS
Disclosure Officer servicing the IRS
officer’s, employee’s or contractor’s

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Federal Register / Vol. 68, No. 131 / Wednesday, July 9, 2003 / Proposed Rules
geographic area and await instructions
from an authorizing official.
In the case of a request or demand on
behalf of a petitioner in a United States
Tax Court case, IRS officers, employees
and contractors shall notify promptly
the IRS Chief Counsel attorney assigned
to the case and await instructions from
an authorizing official. In the case of a
request or demand on behalf of an
appellant, grievant, complainant or
representative for IRS records or
information in a personnel, labor
relations, government contract, Bivens
or FTCA matter, or a matter related to
informant claims, IRS officers,
employees or contractors shall notify
promptly the IRS Associate Chief
Counsel (General Legal Services)
attorney assigned to the case. If there is
no IRS Associate Chief Counsel (General
Legal Services) attorney assigned to the
case, the IRS officer, employee or
contractor shall notify promptly the IRS
Associate Chief Counsel (General Legal
Services) attorney servicing the
geographic area. The IRS officer,
employee or contractor shall then await
instructions from an authorizing official.
In the case of a request or demand in an
IRS congressional matter, the IRS
officer, employee or contractor shall
notify promptly the IRS Office of
Legislative Affairs and await
instructions.
If, in response to a demand for IRS
records or information, an authorizing
official has not had a sufficient
opportunity to issue a testimony
authorization, or determines that denial
of the demand for IRS records or
information is proper, the authorizing
official shall request the attorney or
other representative of the government
to oppose such demand and respectfully
inform the court, administrative agency
or other authority, by appropriate
action, that the authorizing official
either has not yet issued a testimony
authorization, or has issued a testimony
authorization, to the IRS officer,
employee or contractor, that denies
permission, in whole or in part, to
testify or disclose the IRS records or
information. If the authorizing official
denies a testimony authorization in
whole or in part, the authorizing official
shall request the attorney or other
representative of the government to
inform the court, administrative agency,
or other authority of the reasons for not
authorizing the testimony or the
disclosure of the IRS records or
information and to take such other
action in opposition as may be
appropriate (including, but not limited
to, filing a motion to quash or a motion
to remove to Federal district court).

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40853

In addition to providing specific
procedural instructions, this proposed
regulation clarifies and updates the
provision in the existing regulation
pertaining to penalties that apply to IRS
officers, employees and contractors in
case of failure to follow the
requirements of the proposed
regulation.

sought. The authorizing official may
waive the requirement of a written
statement for good cause.

Section 301.9000–5 Written Statement
Required by Party Seeking Testimony or
Disclosure of IRS Records or
Information in Non-IRS Matters
This proposed regulation formalizes
the practice of requiring a party who
seeks testimony or disclosure of IRS
records or information for use in any
non-IRS matter to provide detailed
information that would enable the
authorizing official to make an informed
decision whether to grant or limit the
request or demand. Such information is
necessary to inform the authorizing
official of the factual background of the
non-IRS matter. By contrast, generally
the factual background information
already is known to the authorizing
official in an IRS matter. The factual
background is also useful in refining the
scope of the testimony or document
production, thereby conserving IRS
resources and avoiding waste. For
example, a request for testimony may be
obviated by providing IRS records or
information in a form admissible in
court without need for the presence of
an IRS officer or employee, or by
submission of a declaration under
penalty of perjury pursuant to 28 U.S.C.
1746.
This proposed regulation establishes
requirements for a written statement
setting forth particular information that
will provide authorizing officials with
the facts necessary to determine
whether to grant or limit testimony or
the disclosure of IRS records or
information so as to comply with the
law and conserve IRS resources. Parties
in non-IRS matters sometimes serve
process with extremely short time
frames. The IRS will comply with such
requests or demands only if the IRS has
time to evaluate adequately the request.
This proposed regulation establishes a
reasonable time for compliance,
generally, not less than fifteen (15)
business days. Also, parties in non-IRS
matters are sometimes unaware that a
request or demand does not supersede
the confidentiality accorded to returns
and return information under section
6103 of the Code. This proposed
regulation generally requires a statement
of the applicable exception under
section 6103 of the Code that would
permit the disclosure of returns and
return information for the purpose

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
has been determined that 5 U.S.C.
553(b), the Administrative Procedure
Act, does not apply to these proposed
regulations.
It is hereby certified that the
collection of information in these
regulations will not have a significant
economic impact on a substantial
number of small entities. This
certification is based upon the fact that
of the estimated 1,400 requests received
annually, less than 500 of those requests
are estimated to be received from small
entities. Moreover, the burden
associated with complying with the
collection of information in these
regulations is estimated to be only 1
hour per respondent. Therefore, a
Regulatory Flexibility Analysis under
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required.
Pursuant to section 7805(f) of the
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 businesses.

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Section 301.9000–6 Examples
This proposed regulation gives
examples of testimony authorization
situations that illustrate the principles
of this proposed regulation.

Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, the IRS
will consider any written (a signed
original and eight (8) copies) or
electronic comments that the IRS timely
receives. The IRS and 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. A public
hearing will be scheduled if requested
in writing by any person who timely
submits a written comment. If a public
hearing is scheduled, notice of the date,
time, and place for the public hearing
will be published in the Federal
Register.
Drafting Information
The principal authors of this
proposed regulation are David Fish and
J. Suzanne Sones, Office of Associate

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Federal Register / Vol. 68, No. 131 / Wednesday, July 9, 2003 / Proposed Rules

Chief Counsel (Procedure &
Administration), Disclosure & Privacy
Law Division.
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 is amended by adding the
following entries in numerical order to
read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.9000–1 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
Section 301.9000–2 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
Section 301.9000–3 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
Section 301.9000–4 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
Section 301.9000–5 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
Section 301.9000–6 also issued under 5
U.S.C. 301 and 26 U.S.C. 6103(q) and 7804;
* * *

Par. 2. Section 301.9000–1 is revised
and §§ 301.9000–2 through 301.9000–7
are added to read as follows:
§ 301.9000–1 Definitions when used in
§§ 301.9000–1 through 301.9000–6.

(a) IRS records or information means
any material (including copies thereof)
contained in the files (including paper,
electronic or other media files) of the
Internal Revenue Service (IRS), any
information relating to material
contained in the files of the IRS, or any
information acquired by an IRS officer
or employee, while an IRS officer or
employee, as a part of the performance
of official duties or because of that IRS
officer or employee’s official status with
respect to the administration of the
internal revenue laws or any other laws
administered by or concerning the IRS.
IRS records or information includes, but
is not limited to, returns and return
information as those terms are defined
in section 6103(b)(1) and (2) of the
Internal Revenue Code (Code), tax
convention information as defined in
section 6105 of the Code, information
gathered during Bank Secrecy Act and
money laundering investigations, and
personnel records and other information
pertaining to IRS officers and
employees. IRS records and information
also includes information received,
generated or collected by an IRS

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contractor pursuant to the contractor’s
contract or agreement with the IRS. The
term does not include records or
information obtained by IRS officers and
employees while under the direction
and control of the United States
Attorney’s Office during the conduct of
a Federal grand jury investigation. The
term IRS records or information does
include records or information obtained
during the administrative stage of a
criminal investigation (prior to the
initiation of the grand jury), obtained
from IRS files (such as transcripts or tax
returns), or subsequently obtained by
the IRS for use in a civil investigation.
(b) IRS officers and employees means
all officers and employees of the United
States appointed by, employed by, or
subject to the directions, instructions, or
orders of the Commissioner or IRS Chief
Counsel and also includes such former
officers and employees.
(c) IRS contractor means any person,
including such person’s current and
former employees, maintaining IRS
records or information pursuant to a
contract or agreement with the IRS, and
also includes former contractors.
(d) A request is any request for
testimony of an IRS officer, employee or
contractor or for production of IRS
records or information, oral or written,
by any person, which is not a demand.
(e) A demand is any subpoena or
other order of any court, administrative
agency or other authority, or the
Congress, or a committee or
subcommittee of the Congress, and any
notice of deposition (either upon oral
examination or written questions),
request for admissions, request for
production of documents or things,
written interrogatories to parties, or
other notice of, request for, or service for
discovery in a matter before any court,
administrative agency or other
authority.
(f) An IRS matter is any matter before
any court, administrative agency or
other authority in which the United
States, the Commissioner, the IRS, or
any IRS officer or employee acting in an
official capacity, or any IRS officer or
employee (including an officer or
employee of IRS Chief Counsel’s office)
in his or her individual capacity if the
United States Department of Justice or
the agency has agreed to represent or
provide representation to the IRS officer
or employee, is a party and that is
directly related to official business of
the IRS or to any law administered by
or concerning the IRS, including, but
not limited to, judicial and
administrative proceedings described in
section 6103(h)(4) and (l)(4) of the Code.
(g) An IRS congressional matter is any
matter before the Congress, or a

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committee or subcommittee of the
Congress, that is related to the
administration of the internal revenue
laws or any other laws administered by
or concerning the IRS, or to IRS records
or information.
(h) A non-IRS matter is any matter
that is not an IRS matter or an IRS
congressional matter.
(i) A testimony authorization is a
written instruction or oral instruction
memorialized in writing within a
reasonable period by an authorizing
official that sets forth the scope of and
limitations on proposed testimony and/
or disclosure of IRS records or
information issued in response to a
request or demand for such IRS records
or information. A testimony
authorization may grant or deny
authorization to testify or disclose IRS
records or information and may make an
authorization effective only upon the
occurrence of a precedent condition,
such as the receipt of a consent
complying with the provisions of
section 6103(c) of the Code. To
authorize testimony means to issue the
instruction described in this paragraph
(i).
(j) An authorizing official is a person
with delegated authority to authorize
testimony and the disclosure of IRS
records or information.
§ 301.9000–2 Considerations in
responding to a request or demand for IRS
records or information.

(a) Situations in which disclosure
shall not be authorized. Authorizing
officials shall not permit testimony or
disclosure of IRS records or information
in response to requests or demands if—
(1) Testimony or disclosure of IRS
records or information would violate a
Federal statute including, but not
limited to, sections 6103 or 6105 of the
Internal Revenue Code (Code), the
Privacy Act of 1974 (5 U.S.C. 552a), or
a rule of procedure, such as the grand
jury secrecy rule, Fed. R. Crim. P. 6(e);
(2) Testimony or disclosure of IRS
records or information would violate a
specific Federal regulation, including,
but not limited to, 31 CFR 103.53;
(3) Testimony or disclosure of IRS
records or information would reveal
classified national security information,
unless properly declassified;
(4) Testimony or disclosure of IRS
records or information would reveal the
identity of an informant; or
(5) Testimony or disclosure of IRS
records or information would reveal
investigatory records or information
compiled for law enforcement purposes
which would permit interference with
law enforcement proceedings or would
disclose investigative techniques and

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procedures, the effectiveness of which
could thereby be impaired.
(b) Assertion of privileges. Any
applicable privilege or protection under
law may be asserted in response to a
request or demand for testimony or
disclosure of IRS records or information,
including, but not limited to, the
following—
(1) Attorney-client privilege;
(2) Attorney work product doctrine;
and
(3) Deliberative process (executive)
privilege.
(c) Non-IRS matters. If any person
makes a request or demand for IRS
records or information in connection
with a non-IRS matter, authorizing
officials shall take into account the
following additional factors in
responding to such request or demand—
(1) Whether the requester is a Federal
agency, or a state or local government or
agency thereof;
(2) Whether the demand was issued
by a Federal or State court,
administrative agency or other
authority;
(3) The potential effect of the case on
the administration of the internal
revenue laws or any other laws
administered by or concerning the IRS;
(4) The importance of the legal issues
presented;
(5) Whether the IRS records or
information are available from other
sources;
(6) The IRS’s anticipated commitment
of time and anticipated expenditure of
funds necessary to comply with the
request or demand;
(7) The number of similar requests
and their cumulative effect on the
expenditure of IRS resources;
(8) Whether the request or demand
allows a reasonable time for compliance
(generally, at least fifteen business
days);
(9) Whether the testimony or
disclosure is appropriate under the rules
of procedure governing the case or
matter in which the request or demand
arises;
(10) Whether the request or demand
involves expert witness testimony;
(11) Whether the request or demand is
for the testimony of an IRS officer,
employee or contractor who is without
personal knowledge of relevant facts;
(12) Whether the request or demand is
for the testimony of a presidential
appointee or senior executive and
whether the testimony of a lower-level
official would suffice;
(13) Whether the procedures in
§ 301.9000–5 have been followed; and
(14) Any other relevant factors that
may be brought to the attention of the
authorizing official.

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§ 301.9000–3

Testimony authorizations.

(a) Prohibition on disclosure of IRS
records or information without
testimony authorization. Except as
provided in paragraph (b) of this
section, when a request or demand for
IRS records or information is made, no
IRS officer, employee or contractor shall
testify or disclose IRS records or
information to any court, administrative
agency or other authority, or to the
Congress, or to a committee or
subcommittee of the Congress without a
testimony authorization. However, an
IRS officer, employee or contractor may
appear in person to advise that he or she
is awaiting instructions from an
authorizing official with respect to the
request or demand.
(b) Exceptions. No testimony
authorization is required in the
following circumstances—
(1) To respond to a request or demand
for IRS records or information by an
attorney or other government
representative regarding an IRS matter;
(2) To respond solely in writing,
under the direction of an attorney or
other representative of the government,
to requests and demands in IRS matters,
including, but not limited to,
admissions, document production, and
written interrogatories to parties;
(3) To respond to a request or demand
issued to a former IRS officer, employee
or contractor for expert or opinion
testimony if the testimony involves
general knowledge (such as information
contained in published procedures of
the IRS or the IRS Office of Chief
Counsel) gained while the former IRS
officer, employee or contractor was
employed or under contract with the
IRS; or
(4) If a more specific procedure
established by the Commissioner
governs the disclosure of IRS records or
information. These procedures include,
but are not limited to, those relating to:
procedures pursuant to 26 CFR
601.702(d), Freedom of Information Act
requests pursuant to 5 U.S.C. 552,
Privacy Act of 1974 requests pursuant to
5 U.S.C. 552a, disclosures to state tax
agencies pursuant to section 6103(d) of
the Code, and disclosures to the United
States Department of Justice pursuant to
an ex parte order under section
6103(i)(1) of the Code.
§ 301.9000–4 Procedure in the event of a
request or demand for IRS records or
information.

(a) Purpose and scope. This section
prescribes procedures to be followed by
IRS officers, employees and contractors
upon receipt of a request or demand in
matters where a testimony authorization
is or may be required.

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40855

(b) Notification of the Disclosure
Officer. Except for requests or demands
in United States Tax Court cases, in
personnel, labor relations, government
contract, or IRS congressional matters,
or in matters related to informant claims
or the rules of Bivens v. Six Unknown
Named Agents of Federal Bureau of
Narcotics, 403 U.S. 388 (1971) (Bivens
matters), or the Federal Tort Claims Act
(FTCA), an IRS officer, employee or
contractor who receives a request or
demand for IRS records or information
for which a testimony authorization is
or may be required shall notify
promptly the Disclosure Officer
servicing the IRS officer’s, employee’s or
contractor’s geographic area. Such IRS
officer, employee or contractor shall
await instructions from the authorizing
official concerning the response to the
request or demand.
(c) Requests or demands in United
States Tax Court cases. An IRS officer,
employee or contractor who receives a
request or demand for IRS records or
information on behalf of a petitioner in
a United States Tax Court case shall
notify promptly the IRS Chief Counsel
attorney assigned to the case. Such IRS
Chief Counsel attorney shall notify
promptly the authorizing official. The
IRS officer, employee or contractor who
received such request or demand shall
await instructions from the authorizing
official.
(d) Requests or demands in personnel,
labor relations, government contract,
Bivens or FTCA matters, or matters
related to informant claims. An IRS
officer, employee or contractor who
receives a request or demand, on behalf
of an appellant, grievant, complainant
or representative, for IRS records or
information in a personnel, labor
relations, government contract, Bivens
or FTCA matter, or matter related to
informant claims, shall notify promptly
the IRS Associate Chief Counsel
(General Legal Services) attorney
assigned to the case. If no IRS Associate
Chief Counsel (General Legal Services)
attorney is assigned to the case, the IRS
officer, employee or contractor shall
notify promptly the IRS Associate Chief
Counsel (General Legal Services)
attorney servicing the geographic area.
Such IRS Associate Chief Counsel
(General Legal Services) attorney shall
notify promptly the authorizing official.
The IRS officer, employee or contractor
who received such request or demand
shall await instructions from the
authorizing official.
(e) Requests or demands in IRS
congressional matters. An IRS officer,
employee or contractor who receives a
request or demand in an IRS
congressional matter shall notify

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promptly the IRS Office of Legislative
Affairs. The IRS officer, employee or
contractor who received such request or
demand shall await instructions from
the authorizing official.
(f) Opposition to a demand for IRS
records or information in IRS and nonIRS matters. If, in response to a demand
for IRS records or information, an
authorizing official has not had a
sufficient opportunity to issue a
testimony authorization, or determines
that the demand for IRS records or
information should be denied, the
authorizing official shall request the
attorney or other representative of the
government to oppose such demand and
respectfully inform the court,
administrative agency or other
authority, by appropriate action, that the
authorizing official either has not yet
issued a testimony authorization, or has
issued a testimony authorization, to the
IRS officer, employee or contractor, that
denies permission to testify or disclose
the IRS records or information. If the
authorizing official denies authorization
in whole or in part, the attorney or other
representative of the government shall
inform the court, administrative agency
or other authority of the reasons the
authorizing official gives for not
authorizing the testimony or the
disclosure of the IRS records or
information or take such other action in
opposition as may be appropriate
(including, but not limited to, filing a
motion to quash or a motion to remove
to Federal court).
(g) Procedure in the event of an
adverse ruling. In the event such court,
administrative agency, or other
authority rules adversely with respect to
the refusal to disclose the IRS records or
information pursuant to the testimony
authorization, or declines to defer a
ruling until a testimony authorization
has been received, the IRS officer,
employee or contractor who has
received the request or demand shall,
pursuant to this section, respectfully
decline to testify or disclose the IRS
records or information.
(h) Penalties. Any IRS officer or
employee who discloses IRS records or
information without following the
provisions of this section or § 301.9000–
3, may be subject to administrative
discipline, up to and including
dismissal. Any IRS officer, employee or
contractor may be subject to applicable
contractual sanctions and/or criminal
penalties, including prosecution under
5 U.S.C. 552a(i), for willful disclosure in
an unauthorized manner of information
protected by the Privacy Act, or under
section 7213 of the Code, for willful
disclosure in an unauthorized manner
of return information.

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(i) No creation of benefit or separate
privilege. Nothing in this section, and
nothing in §§ 301.9000–1 through
301.9000–6, creates, is intended to
create, or may be relied upon to create,
any right or benefit, substantive or
procedural, enforceable at law by a
party against the United States. Nothing
in these regulations creates a separate
privilege or basis to withhold IRS
records or information.
§ 301.9000–5 Written statement required
for requests or demands in non-IRS
matters.

(a) Written statement. A request or
demand for IRS records or information
for use in a non-IRS matter shall be
accompanied by a written statement
made by or on behalf of the party
seeking the testimony or disclosure of
IRS records or information, setting
forth—
(1) A brief description of the parties
to and subject matter of the proceeding
and the issues;
(2) A summary of the testimony, IRS
records or information sought, the
relevance to the proceeding, and the
estimated volume of IRS records
involved;
(3) The time that will be required to
present the testimony (on both direct
and cross examination);
(4) Whether any of the IRS records or
information is a return or is return
information (as defined in section
6103(b) of the Internal Revenue Code
(Code)), or tax convention information
(as defined in section 6105(c)(1) of the
Code), and the statutory authority for
the disclosure of such return or return
information (and, if no consent to
disclose pursuant to section 6103(c) of
the Code accompanies the request or
demand, the reason such consent is not
necessary);
(5) Whether a declaration of an IRS
officer, employee or contractor under
penalties of perjury pursuant to 28
U.S.C. 1746 would suffice in lieu of
deposition or trial testimony;
(6) Whether deposition or trial
testimony is necessary where IRS
records are authenticated under
applicable rules of evidence and
procedure;
(7) Whether IRS records or
information are available from other
sources; and
(8) A statement that the request or
demand allows a reasonable time
(generally, at least fifteen business days)
for compliance.
(b) Permissible waiver of statement.
The requirement of a written statement
in paragraph (a) of this section may be
waived by the authorizing official for
good cause.

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§ 301.9000–6

Examples.

The following examples illustrate the
provisions of §§ 301.9000–1 through
301.9000–5:
Example 1. A taxpayer sues a practitioner
in state court for malpractice in connection
with the practitioner’s preparation of a
Federal income tax return. The taxpayer
subpoenas an IRS employee to testify
concerning the IRS employee’s examination
of the taxpayer’s Federal income tax return.
The taxpayer provides the statement required
by § 301.9000–5. This is a non-IRS matter. A
testimony authorization would be required
for the IRS employee to give such testimony.
(In addition, the taxpayer would be required
to execute an appropriate consent under
section 6103(c) of the Internal Revenue Code
(Code)). The IRS generally opposes an IRS
officer’s, employee’s or contractor’s
appearance in such cases because the IRS is
a disinterested party with respect to the
dispute and would consider the commitment
of resources to comply with the subpoena
inappropriate.
Example 2. In a state judicial proceeding
concerning child support, the child’s
custodial parent subpoenas for a deposition
an Internal Revenue Service (IRS) agent who
is examining certain of the non-custodial
parent’s post-divorce Federal income tax
returns. This is a non-IRS matter. The
custodial parent submits with the subpoena
the statement required by § 301.9000–5
stating as the reason for the lack of taxpayer
consent to disclosure that the non-custodial
parent has refused to provide the consent.
(Both a consent from the taxpayer complying
with section 6103(c) and a testimony
authorization would be required prior to the
IRS agent testifying at the deposition.)
Should taxpayer consent be obtained, where
appropriate, the IRS may provide a
declaration and/or certified return
information of the taxpayer. A deposition
would be unnecessary under the
circumstances.
Example 3. The chairperson of a
congressional committee requests the
appearance of an IRS employee before the
committee and committee staff to submit to
questioning by committee staff concerning
the procedures for processing Federal
employment tax returns. This is an IRS
congressional matter. Even though
questioning would not involve the disclosure
of returns or return information, the
questioning would involve the disclosure of
IRS records or information; therefore, a
testimony authorization would be required.
The IRS employee must contact the IRS
Office of Legislative Affairs for instructions
before appearing.
Example 4. The IRS opens a criminal
investigation as to the tax liabilities of a
taxpayer. This is an IRS matter. At some
point during the criminal investigation, the
IRS refers the matter to the United States
Department of Justice, requesting the
institution of a Federal grand jury to
investigate further potential criminal tax
violations. Subsequently, the United States
Department of Justice approves the request
and initiates a grand jury investigation. The
grand jury subsequently indicts the taxpayer,

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and the taxpayer subpoenas an IRS special
agent for testimony regarding the
investigation. The records and information
collected during the administrative stage of
the investigation, including the taxpayer’s tax
returns from IRS files, are IRS records and
information. A testimony authorization is
required for the IRS special agent to testify
regarding this information. However, no IRS
testimony authorization is required regarding
the information collected by the IRS special
agent when the IRS special agent was acting
under the direction and control of the United
States Attorney’s Office in the Federal grand
jury investigation. That information is not
IRS records or information within the
meaning of § 301.9000–1(a).
Example 5. The United States Department
of Justice attorney representing the IRS in a
suit for refund requests testimony from an
IRS revenue agent. This is an IRS matter. A
testimony authorization would not be
required in order for the IRS revenue agent
to testify because the testimony was
requested by government counsel.
Example 6. A state assistant attorney
general, acting in accordance with a
recommendation from his state’s department
of revenue, is prosecuting a taxpayer under
a state criminal law proscribing the
intentional failure to file a state income tax
return. The assistant attorney general serves
an IRS employee with a subpoena to testify
concerning the taxpayer’s Federal income tax
return filing history. This is a non-IRS matter.
This is also a state judicial proceeding
pertaining to tax administration within the
meaning of section 6103(h)(4) and (b)(4). As
such, the procedures of section 6103(h)(4)
apply. A testimony authorization would be
required for the testimony demand in the
subpoena.
Example 7. A former IRS revenue agent is
requested to testify in a divorce proceeding.
The request seeks testimony explaining the
meaning of entries appearing on one of the
parties’ transcript of account which is
already in the possession of the parties. This
is a non-IRS matter. No testimony
authorization is required because the
testimony requested from the former IRS
employee involves general knowledge gained
while the former IRS revenue agent was
employed with the IRS.
§ 301.9000–7

Effective date.

The provisions of §§ 301.9000–1
through 301.9000–6 apply to any
request or demand for IRS records or
information received by any IRS officer,
employee or contractor on or after the
date of publication of the Treasury
decision adopting these rules as final
regulations in the Federal Register.
David A. Mader,
Assistant Deputy Commissioner of Internal
Revenue.
[FR Doc. 03–17230 Filed 7–8–03; 8:45 am]
BILLING CODE 4830–01–P

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26 CFR Part 301

622–4910; concerning submissions of
comments, the hearing, and/or to be
placed on the building access list to
attend the hearing, Treena Garrett at
(202) 622–7180 (not toll-free numbers).

[REG–141669–02]

SUPPLEMENTARY INFORMATION:

RIN 1545–BB41

Background

Waiver of Information Reporting
Penalties—Determining Whether
Correction is Prompt

This document contains proposed
amendments to the Procedure and
Administration Regulations (26 CFR
part 301) under section 6724(a) of the
Code. Section 301.6724–1(d)(1)(ii)(D) of
the proposed regulations will clarify
when a correction of an information
return is prompt for purposes of
establishing reasonable cause to waive
the penalty under section 6721 of the
Code. Existing § 301.6724–1(d)(1)(ii)(D),
adopted on December 31, 1991 (56 FR
67178), provides in pertinent part that a
correction is prompt if it occurs on the
earliest date of a regular submission of
corrections, defining regular
submissions as occurring at intervals of
30 or fewer days. Many information
return filers have urged the IRS to
replace the 30-day correction interval
with an interval corresponding to the
schedule for tiered penalties.

DEPARTMENT OF THE TREASURY
Internal Revenue Service

AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to waiver
under section 6724 of the Internal
Revenue Code (Code) of a penalty
imposed by section 6721 for failure to
file a correct information return. The
proposed regulations provide guidance
on the requirement of prompt correction
of the failure to file or file correctly. The
proposed regulations provide that the
IRS will deem information returns
promptly corrected if corrected within
30 days of the required filing date, or by
August 1 following that required filing
date. After August 1, a correction is
prompt if made by the time announced
by the IRS in published guidance. The
proposed regulations do not change the
rules for determining reasonable cause
for waiving the penalty for failure to
furnish correct payee statements under
section 6722 or the time to comply with
other information reporting
requirements under section 6723.
DATES: Written and electronic comments
are due by October 7, 2003. Requests to
speak (with outlines of topics to be
discussed) at the public hearing
scheduled for October 21, 2003, are due
by September 30, 2003.
ADDRESSES: Send submissions to:
CC:PA:RU (REG–141669–02), Room
5526, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Commenters may hand
deliver submissions Monday through
Friday between the hours of 8 a.m. and
4 p.m. to: CC:PA:RU (REG–141669–02),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC. Alternatively,
commenters may submit comments
electronically to the IRS Internet site at
http://www.irs.gov/regs. The public
hearing will be held in the IRS
Auditorium, Internal Revenue Building,
1111 Constitution Avenue, NW.,
Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
contact Robert A. Desilets, Jr. at (202)

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Explanation of Provisions
I. Section 6721
Section 6721 imposes penalties on
failures to file, or file correct,
information returns. Section 6721
creates a three-tiered penalty structure
to encourage timely filing and prompt
correction of errors in previously filed
returns. Congress enacted the threetiered penalty structure in the Omnibus
Budget Reconciliation Act of 1989
(Public Law 101–239, 103 Stat. 2388,
2389). Section 6721 generally imposes a
penalty in the amount of $50 for each
return with respect to which a failure
occurs, but not to exceed $250,000 per
person per calendar year. However, if a
filer corrects a failure within 30 days
after the required filing date, the penalty
with respect to such return shall be $15
in lieu of $50, but not to exceed $75,000
per filer per calendar year. Moreover, if
a filer corrects a failure more than 30
days after the required filing date, but
before August 1 of the calendar year in
which the required filing date occurs,
the penalty with respect to each return
shall be $30 in lieu of $50, but not to
exceed $150,000 per filer per calendar
year. Section 6721 provides these
penalties to encourage prompt
corrections of failures to file, or file
correct, information returns. H.R. Rep.
101–386, at 648–649 (1989).

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File Typeapplication/pdf
File TitleDocument
SubjectExtracted Pages
AuthorU.S. Government Printing Office
File Modified2012-10-14
File Created2003-07-09

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