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Mar 29 -- The Internal Revenue Service (IRS), Treasury, invites comments and a request for a public hearing by April 29, 2024 regarding proposed amendments to the regulations relating to the disclosure of specified return information to the Bureau of the Census (Bureau). The proposed amendments would ensure the efficient and appropriate transfer of return information to the Bureau and would permit the disclosure of additional return information pursuant to a request from the Secretary of Commerce. These proposed regulations would require no action by taxpayers and would have no effect on their tax liabilities.

This document contains proposed amendments to the Procedure and Administration Regulations, 26 CFR part 301, relating to section 6103(j)(1)(A) of the Internal Revenue Code (Code). Section 6103(j)(1)(A) of the Code authorizes the Secretary of the Treasury or her delegate (Secretary) to furnish, upon written request by the Secretary of Commerce, such returns or return information as the Secretary may prescribe by regulation to officers and employees of the Bureau for the purpose of, but only to the extent necessary in, the structuring of censuses and national economic accounts and conducting related statistical activities authorized by law.

There is a long history of providing return information to the Bureau under section 6103(j)(1)(A), and the regulations promulgated under this section have been amended periodically to increase the amount of return information provided to facilitate the statistical activities of the Bureau.

The existing regulations under section 6103(j)(1)(A) are set forth in 26 CFR 301.6103(j)(1)-1 (existing § 301.6103(j)(1)-1). They authorize the Bureau to receive return information that supports many different Bureau projects and programs, including the Economic Census, the Longitudinal Employer-Household Dynamics program, and the Small Area Income and Poverty Estimates program, among others.

Pursuant to section 6103(p)(4), the IRS sets stringent privacy and security requirements for agencies receiving return information, including the Bureau. These requirements are currently detailed in IRS Publication 1075, Tax Information Security Guidelines For Federal, State and Local Agencies. See also, § 301.6103(p)(4)-1.

By letter dated February 29, 2024, the Secretary of Commerce requested amendments to existing § 301.6103(j)(1)-1 to allow disclosure of additional items of return information to the Bureau to enable the Bureau to perform mission critical statistical functions. The Secretary of Commerce further stated that the additional items would allow the Bureau to conduct its economic, demographic, decennial, and research statistics programs, censuses, and related program evaluations. The amendments to the existing regulations would permit the Bureau to publish statistical information, enhance the use of administrative records, improve the quality of program estimates, and support the reduction of burden. The Secretary of Commerce's letter lists the additional items of return information requested based on the Bureau's specific need for each item of information.

The Secretary of Commerce asserted that good cause exists to amend existing § 301.6103(j)(1)-1 to add the requested items to the list of items of return information that may be disclosed to the Bureau. The Treasury Department and the IRS agree that amending existing § 301.6103(j)(1)-1 to permit disclosure of these items to the Bureau is appropriate to meet the needs of the Bureau.

Accordingly, the proposed regulations would amend the existing regulations to authorize disclosure of additional return information and reorganize the list of items that may be disclosed to the Bureau to allow the IRS more administrative flexibility when providing the authorized return information.

The proposed regulations would also permit the disclosure of return information if an item of return information currently listed in the regulations is subsequently reported in a substantially similar format or on a substantially similar document. Complications can occur when a data element in the regulations is described as located on a particular document and that document is later updated or superseded. For example, the regulations under section 6103(j) allow the Bureau to have access to data pertaining to pensions and annuities for individual taxpayers, but not individual retirement arrangements (IRAs). See existing § 301.6103(j)(1)-1(b)(1)(ix)(F). In 2018, the Form 1040, U.S. Individual Tax Return, combined the pension and annuity income line item with the IRA income line item. Because the IRS was only authorized to provide the Bureau with data pertaining to pensions and annuities, and not IRAs, the IRS could not provide the Bureau with the return information from the combined pension-annuities-IRA line item to the Bureau. Thus, for 2018, the Bureau was unable to receive return information pertaining to annuities and pensions. These proposed regulations would seek to address this type of discrepancy and other similar situations. The IRS seeks comments on how to address these types of situations to balance the need to properly disclose return information with the need to ensure only return information authorized by the regulations is transmitted to the Bureau.

The proposed regulations would further include amendments to existing § 301.6103(j)(1)-1(d) (proposed § 301.6103(j)(1)-1(d)) to require that all projects that use return information disclosed under these regulations be approved by the IRS Director of Statistics of Income, the Director's successor, or the Director's delegate. This includes both projects authorized under title 13, U.S.C., chapter 5 and projects under title 13, U.S.C., chapter 3. These amendments would formalize existing practice.

Finally, proposed § 301.6103(j)(1)-1(d) would include language related to the IRS's and the Bureau's disclosure review obligations. First, proposed § 301.6103(j)(1)-1(d)would permit the IRS to authorize the use of the Bureau's disclosure review processes prior to any public disclosure by the Bureau of a project using return information disclosed pursuant to these regulations so long as the Bureau's processes ensure that all releases meet or exceed all requirements set by the IRS for protecting the confidentiality of returns and return information. Second, proposed § 301.6103(j)(1)-1(d)would permit review by the IRS Statistics of Income Disclosure Review Board of any Bureau project that used return information disclosed under these regulations prior to disclosure of that information to the public. The IRS seeks comments on each of these proposed additions. These proposed amendments would also formalize existing practice.

Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the Treasury Department and the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations including, but not limited to: (1) the scope of permitted disclosures and taxpayer privacy concerns, if any; (2) the addition of “substantially similar” information or document language; (3) the approval requirements by the IRS Director of Statistics of Income; and (4) the use of the Bureau's review processes and review by the IRS Statistics of Income Disclosure Review Board prior to public disclosure of a Bureau project using information released under these proposed regulations.

FRN: https://www.federalregister.gov/d/2024-06756

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