[Federal Register Volume 62, Number 198 (Tuesday, October 14, 1997)]
[Rules and Regulations]
[Pages 53230-53232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26858]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

[TD 8737]
RIN 1545-AU88


Rewards for Information Relating to Violations of Internal 
Revenue Laws

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains temporary regulations relating to 
rewards for information that relates to violations of the internal 
revenue laws. The regulations reflect changes to the law made by the 
Taxpayer Bill of Rights 2 and affect persons that are eligible to 
receive an informant's reward.
    The text of these 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: These regulations are effective October 14, 1997.
    For dates of applicability, see Sec. 301.7623-1T(g).

FOR FURTHER INFORMATION CONTACT: Judith A. Lintz (202)622-4940 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These regulations are being issued without prior notice and public 
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). 
For this reason, the collections of information contained in these 
regulations have been reviewed and, pending receipt and evaluation of 
public comments, approved by the Office of Management and Budget under 
control number 1545-1534. Responses to the collection of information 
are voluntary with respect to the provision of information relating to 
violations of the internal revenue laws, but are required to obtain a 
benefit with respect to filing a claim for reward.
    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.
    For further information concerning these collections of 
information, and where to submit comments on the collections of 
information and the accuracy of the estimated burden, and suggestions 
for reducing this burden, please refer to the preamble to the cross-
referencing notice of proposed rulemaking published in the Proposed 
Rules section of this issue of the Federal Register.
    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 26 U.S.C. 6103.

Background

    This document contains amendments to the Procedure and 
Administration Regulations (26 CFR part 301) under section 7623 
relating to rewards for information that relates to violations of the 
internal revenue laws. This section was amended by section 1209 of the 
Taxpayer Bill of Rights 2 (TBOR 2) (Pub. L. 104-168, 110 Stat. 1452 
(1996)).

Explanation of Provisions

    Section 7623 provides the Secretary with the authority, by 
regulation, to pay rewards for information that relates to violations 
of the internal revenue laws. Section 1209 of TBOR 2 amended section 
7623 to clarify that rewards may be paid for information relating to 
civil, as well as criminal, violations. TBOR 2 also provided that the 
rewards are to be paid out of the proceeds of amounts (other than 
interest) collected by reason of the information. These temporary 
regulations reflect those amendments.
    In addition, these temporary regulations incorporate and update 
Sec. 301.7623-1. For example, the regulations increase the limit on 
awards from 10% to 15% and provide new titles and addresses to which 
persons should submit information relating to violations of the 
internal revenue laws.

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 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.
    It is hereby certified that the regulations in this document will 
not have a significant economic impact on a substantial number of small 
entities. This certification is based on a determination that in the 
past approximately 10,000 persons have filed claims for reward on an 
annual basis. Of these persons, almost all have been individuals. 
Accordingly, a regulatory

[[Page 53231]]

flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, this 
Treasury Decision will be submitted to the Chief Counsel for Advocacy 
of the Small Business Administration for comments on its impact on 
small businesses.
    Drafting Information: The principal author of these regulations is 
Judith A. Lintz, Office of Assistant Chief Counsel (Income Tax & 
Accounting), Internal Revenue Service. However, other personnel from 
the IRS and Treasury Department participated in their development.

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.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 301 and 602 are amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

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

    Par. 2. Sec. 301.7623-1 is amended by adding paragraph (g) to read 
as follows:


Sec. 301.7623-1  Rewards for information relating to violations of 
internal revenue laws.

* * * * *
    (g) Effective date. This section is applicable with respect to 
rewards paid on or before January 29, 1997. See Sec. 301.7623-1T for 
rewards paid after January 29, 1997.
    Par. 3. Section 301.7623-1T is added to read as follows:


Sec. 301.7623-1T  Rewards for information relating to violations of 
internal revenue laws (temporary).

    (a) In general. In cases where rewards are not otherwise provided 
for by law, a district or service center director may approve a reward, 
in a suitable amount, for information that leads to the detection of 
underpayments of tax, or the detection and bringing to trial and 
punishment of persons guilty of violating the internal revenue laws or 
conniving at the same. The rewards provided for by section 7623 and 
this section will be paid from the proceeds of amounts (other than 
interest) collected by reason of the information provided.
    (b) Eligibility to file claim for reward--(1) In general. Any 
person, other than certain present or former federal employees 
described in paragraph (b)(2) of this section, that submits, in the 
manner described in paragraph (d) of this section, information relating 
to the violation of an internal revenue law is eligible to file a claim 
for reward under section 7623 and this section.
    (2) Federal employees. No person who was an officer or employee of 
the Department of the Treasury at the time the individual came into 
possession of information relating to violations of the internal 
revenue laws, or at the time the individual divulged such information, 
is eligible for a reward under section 7623 and this section. Any other 
current or former federal employee is eligible to file a claim for 
reward if the information provided came to the individual's knowledge 
other than in the course of the individual's official duties.
    (3) Deceased informants. A claim for reward may be filed by an 
executor, administrator, or other legal representative on behalf of a 
deceased informant if, prior to the informant's death, the informant 
was eligible to file a claim for such reward under section 7623 and 
this section. Certified copies of the letters testamentary, letters of 
administration, or other similar evidence must be attached to the claim 
for reward on behalf of a deceased informant in order to show the 
authority of the legal representative to file the claim.
    (c) Amount and payment of reward. All relevant factors, including 
the value of the information furnished in relation to the facts 
developed by the investigation of the violation, will be taken into 
account by a district or service center director in determining whether 
a reward will be paid, and, if so, the amount of the reward. The amount 
of a reward will represent what the district or service center director 
deems to be adequate compensation in the particular case, generally not 
to exceed fifteen percent of the amounts (other than interest) 
collected by reason of the information. Payment of a reward will be 
made as promptly as the circumstances of the case permit, but not until 
the taxes, penalties, or fines involved have been collected.
    However, if the informant waives any claim for reward with respect 
to an uncollected portion of the taxes, penalties, or fines involved, 
the claim may be immediately processed. Partial reward payments, 
without waiver of the uncollected portion of the taxes, penalties, or 
fines involved, may be made when a criminal fine has been collected 
prior to completion of the civil aspects of a case, and also when there 
are multiple tax years involved and the deficiency for one or more of 
the years has been paid in full. No person is authorized under these 
regulations to make any offer, or promise, or otherwise to bind a 
district or service center director with respect to the payment of any 
reward or the amount of the reward.
    (d) Submission of information. A person that desires to claim a 
reward under section 7623 and this section may submit information 
relating to violations of the internal revenue laws, in person, to the 
office of a district director, preferably to a representative of the 
Criminal Investigation Division. Such information may also be submitted 
in writing to the Commissioner of Internal Revenue, Attention: 
Assistant Commissioner (Criminal Investigation), 1111 Constitution 
Avenue, N.W., Washington, DC 20224, to any district director, 
Attention: Chief, Criminal Investigation Division, or to any service 
center director. If the information is submitted in person, either 
orally or in writing, the name and official title of the person to whom 
it is submitted and the date on which it is submitted must be included 
in the formal claim for reward.
    (e) Identification of informant. No unauthorized person will be 
advised of the identity of an informant.
    (f) Filing claim for reward. An informant that intends to claim a 
reward under section 7623 and this section should notify the person to 
whom the information is submitted of such intention, and must file a 
formal claim on Form 211, Application for Reward for Original 
Information, signed by the informant in the informant's true name, as 
soon as practicable after the submission of the information. If other 
than the informant's true name was used in furnishing the information, 
satisfactory proof of identity as that of the informant must be 
included with the claim for reward.
    (g) Effective date. This section is applicable with respect to 
rewards paid after January 29, 1997. See Sec. 301.7623-1 for rewards 
paid on or before January 29, 1997.

PART 602--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.


[[Page 53232]]


    Par. 5. In Sec. 602.101, paragraph (c) is amended by adding an 
entry in numerical order to the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

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                                                             Current OMB
     CFR part or section where identified and described      control No.
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301.7623-1T................................................    1545-1534
                                                                        
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Michael P. Dolan,
Acting Commissioner of Internal Revenue.

    Approved: August 26, 1997.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 97-26858 Filed 10-10-97; 8:45 am]
BILLING CODE 4830-01-U