Disclosures of Return Information Reflected on Returns to Officers and Employees of the Department of Commerce, Including the Bureau of the Census, for Certain Statistical Purposes and Related Activities

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 301</CFR> <DEPDOC>[TD 10013]</DEPDOC> <RIN>RIN 1545-BQ74</RIN> <SUBJECT>Disclosures of Return Information Reflected on Returns to Officers and Employees of the Department of Commerce, Including the Bureau of the Census, for Certain Statistical Purposes and Related Activities</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Final regulations. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains final regulations that amend existing regulations relating to the disclosure of specified return information to the Bureau of the Census (Bureau). The final regulations ensure the efficient and appropriate transfer of return information to the Bureau and permit the disclosure of additional return information pursuant to a request from the Secretary of Commerce. These regulations require no action by taxpayers and have no effect on their tax liabilities. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> These final regulations are effective on November 26, 2024. <E T="03">Applicability date:</E> For the date of applicability, <E T="03">see</E> § 301.6103(j)(1)-1. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Elizabeth Erickson of the Office of the Associate Chief Counsel (Procedure and Administration), at (202) 317-6834; (not a toll-free number). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document amends the Procedure and Administration Regulations, 26 CFR part 301, relating to section 6103(j)(1)(A) of the Internal Revenue Code (Code), by adding final regulations under section 6103 (final regulations). Section 6103(j)(1) provides an express delegation of authority to the Secretary of the Treasury or her delegate (Secretary), stating that, “[u]pon request in writing by the Secretary of Commerce, the Secretary shall furnish . . . such returns, or return information reflected thereon, to officers and employees of the Bureau of the Census” and “such return information reflected on returns of corporations to officers and employees of the Bureau of Economic Analysis” “as the Secretary may prescribe by regulation 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.” Section 6103(q) further authorizes the Secretary to “prescribe such other regulations as are necessary to carry out the provisions of” section 6103. The final regulations are also issued under the express delegation of authority under section 7805(a) of the Code. <HD SOURCE="HD1">Background</HD> 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. <E T="03">See e.g.,</E> TD 9037, 68 FR 2693, January 21, 2003; TD 9188, 70 FR 12141, March 11, 2005; TD 9267, 71 FR 38263, July 6, 2006; TD 9372, 72 FR 73262, December 27, 2007; TD 9439, 73 FR 79361, December 29, 2008; TD 9500, 75 FR 52459, August 26, 2010; TD 9631, 78 FR 52857, August 27, 2013; TD 9754, 81 FR 9767, February 26, 2016; TD 9856, 84 FR 14011, April 9, 2019. The existing regulations under section 6103(j)(1)(A) are set forth in 26 CFR 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, <E T="03">Tax Information Security Guidelines For Federal, State and Local Agencies. See also</E> § 301.6103(p)(4)-1. By letter dated February 29, 2024, the Secretary of Commerce requested the Secretary amend existing § 301.6103(j)(1)-1 to provide for the 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. On March 29, 2024, a notice of proposed rulemaking (REG-123376-22) was published in the <E T="04">Federal Register</E> (89 FR 22101) (proposed regulations). The proposed regulations proposed amending the regulations that authorize disclosure of specified return information to the Bureau. The proposed regulations would allow the disclosure of additional items of return information requested by the Secretary of Commerce to enable the Bureau to perform mission critical statistical functions. 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. The proposed regulations would formalize existing practice to include (1) the requirement that all projects that use return information disclosed under these regulations be approved by the IRS Director of Statistics of Income, and (2) language related to the IRS's and the Bureau's disclosure review obligations. <HD SOURCE="HD1">Summary of Comments and Explanation of Revisions</HD> The Department of the Treasury (Treasury Department) and the IRS received eighteen comments in response to the proposed regulations. The comments are available for public inspection at <E T="03">https://www.regulations.gov</E> or upon request. There was no request for a public hearing, and none was held. After full consideration of the comments received, which are described in this Summary of Comments and Explanation of Revisions, these final regulations adopt the proposed regulations with minor changes. <HD SOURCE="HD2">A. Comments Supporting the Proposed Regulations</HD> Nine of the comments received did not seek to modify the items of return information permitted to be disclosed to the Bureau pursuant to the proposed regulations. Of these comments, six were supportive of the proposed regulations. One comment noted the importance of administrative tax data in measuring and understanding income and wealth in the United States. Another comment noted that the proposed regulations would improve the Bureau's ability to accurately estimate household income and otherwise evaluate and improve the Bureau's statistical products. This same comment also encouraged the IRS and the Bureau, along with the Office of Management and Budget and other statistical agencies, to explore additional pathways for increasing the statistical agencies' access to Federal tax data, as well as a greater sharing of administrative data across statistical agencies, noting that increased use of administrative data has significant promise for improving statistics on U.S. households and businesses. Finally, this comment noted its support for further consideration of possible means of expanding access to tax data for appropriate purposes in a reliably secure and confidential way. Another comment supported the proposed regulations and stated that the data that could be disclosed as outlined in the proposed regulations was crucial for the IRS's efforts to advance equity. As one example, this comment noted that, if finalized, the proposed regulations would provide an important opportunity for government and independent researchers to understand demographic trends regarding the Child Tax Credit (CTC) and other refundable credits, as well as to identify and track potential disparities in tax administration. Another comment noted that the proposed changes to the existing regulations would enable the Bureau to produce data that provides more detail about the economic conditions of various populations across the United States, including populations that have been historically underserved, marginalized, and adversely affected by health inequity. These comments reflect support for the proposed regulations' items of return information permitted to be disclosed to the Bureau. The Treasury Department and IRS agree that disclosure of this information will further the needs of the Bureau by authorizing 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. <HD SOURCE="HD2">B. Comments Proposing That Additional Items of Return Information Be Disclosed to the Bureau</HD> Two comments suggested that additional information on the variety of energy credits under the Inflation Reduction Act of 2022 (IRA) be furnished to the Bureau. The IRA, Public Law 117-169, 136 Stat. 1818 (August 16, 2022), featured a significant number of new tax provisions related to clean energy. Section 6103(j)(1)(A) provides that the Secretary “shall furnish” returns or return information requested by the Secretary of Commerce “for the ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 55k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━