Internal Revenue Bulletin 2013-3 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 201
3-3
January 14, 2013
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9603, page 273.
Final regulations under section 181 of the Code provide rules to
reflect the amendments to section 181 made by the Tax Exten-
ders and Alternative Minimum Tax Relief Act of 2008. Section
181 allows producers to deduct the first $15 million ($20 mil-
lion in certain cases) of the costs of producing qualified film
and television productions.
T.D. 9608, page 274.
Final regulations that provide rules under section 7216 of the
Code relating to the disclosure or use of tax return information
by tax return preparers.
REG–141066–09, page 289.
Proposed regulations that will provide comprehensive guidance
for the award program authorized under section 7623 of the
Code, as amended.
Rev. Proc. 2013–14, page 283.
This procedure under section 7216 of the Code provides guid-
ance, pursuant to section 301.7216–3 of the Regulations on
Procedure and Administration, to tax return preparers regard-
ing the format and content of taxpayer consents to disclose
and consents to use tax return information with respect to tax-
payers filing a return in the Form 1040 series. Rev. Proc.
2008–35 modified and superseded.
Announcement 2013–6, page 307.
This document contains corrections to a notice of proposed
rulemaking (REG–140668–07, 2013–43 I.R.B. 501) that was
published in the Federal Register on Monday, September 17,
2012 (77 FR 57452). The proposed regulation provides guid-
ance regarding the treatment of corporate equity reduction
transactions (CERTs), including the treatment of multiple step
plans for the acquisition of stock and CERTs involving members
of a consolidated group.
Announcement 2013–7, page 308.
This document amends temporary regulations (T.D. 9564,
2012–14 I.R.B. 614) regarding the deduction and capital-
ization of expenditures under sections 162(a) and 263(a) of
theCoderelatingtotangiblepropertytoapplytotaxable
years beginning on or after January 1, 2014, while permitting
taxpayers to apply the temporary regulations for taxable years
beginning on or after January 1, 2012, and before applicability
date of the final regulations.
TAX CONVENTIONS
Announcement 2013–5, page 306.
This document provides a copy of the Competent Authority
Agreement entered into by the competent authorities of the
United States of America and the Kingdom of Norway clarify-
ing the meaning of “remuneration described in Article 17 (Gov-
ernmental Functions)” and “payments described in Article 19
(Social Security Payments)” as those phrases are used in the
last sentence of paragraph 6 of Article 24 (Source of Income)
of the Convention Between the United States of America and
the Kingdom of Norway for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on
Income and Property, signed on December 3, 1971, and as
amended by the Protocol signed on September 19, 1980.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
Notice 2013–1, page 281.
This notice updates the list of Indian tribes that have settled
tribal trust cases between the United States and those Indian
tribes. Members of those tribes may receiveper capitapay-
ments that are excluded from income. Notice 2012–60 super-
seded.
Announcement 2013–10, page 311.
This document contains updates to Publication 1220 due to
the recent changes made by the American Taxpayer Relief Act
of 2012. Rev. Proc. 2012–30 updated.
January 14, 20132013–3 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2013–3 I.R.B.January 14, 2013

January 14, 20132013–3 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 168.—
Accelerated
Cost Recovery
System
Treasury Deci
sion amending the temporary reg-
ulations rega
rding the deduction and capitalization
of expenditur
es related to tangible property to ap-
plytotaxabl
e years beginning on or after January 1,
2014, while p
ermitting taxpayers to apply the tempo-
rary regulat
ions for taxable years beginning on or af-
ter January 1
, 2012, and before the applicability date
of the final
regulations. See Announcement 2013-7,
page 308.
Section 181.—Treatment of
Certain Qualified Film and
Television Productions
26 CFR 1.181–0: Table of contents.
T.D. 9603
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Deduction for Qualified Film
and Television Production
Costs
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains final
regulations relating to deductions for the
cost of producing qualified film and televi-
sion productions. These final regulations
reflect changes to the law made by the Tax
Extenders and Alternative Minimum Tax
Relief Act of 2008 and affect taxpayers
that produce films and television produc-
tions within the United States.
DATES:Effective Date:These regulations
are effective on December 7, 2012.
Applicability Dates:For dates of appli-
cability, see §1.181–6.
FOR FURTHER INFORMATION
CONTACT: Bernard P. Harvey, (202)
622–4930 (not a toll-free number).
SUPPLEMENTAR
Y INFORMATION:
Background
This document contains final regula-
tions that amend 26 CFR part 1 to reflect
amendments made to section 181 of the In-
ternal Revenue Code of 1986 (Code) by
section 502 of the Tax Extenders and Alter-
native Minimum Tax Relief Act of 2008,
Public Law No. 110–343 (122 Stat. 3765)
(October 3, 2008).
On October 19, 2011, the IRS and the
Treasury Department published in the
Federal Register(T.D. 9552, 2011–47
I.R.B. 783 [76 FR 64816]) temporary reg-
ulations amending the rules under section
181 for deductions relating to the cost
of producing qualified film and televi-
sion productions to reflect section 502 of
the Tax Extenders and Alternative Mini-
mum Tax Relief Act of 2008. A notice of
proposed rulemaking (REG–146297–09,
2011–47 I.R.B. 795) cross-referencing the
temporary regulations was published in
theFederal Register(76 FR 64879) on
the same day. No comments were received
fromthepublicinresponsetothenoticeof
proposed rulemaking. No public hearing
was requested or held. The proposed reg-
ulations under section 181 are adopted by
this Treasury decision and the correspond-
ing temporary regulations are removed.
Effective/Applicability Date
These final regulations apply to qual-
ified film and television productions to
which section 181 is applicable and for
which the first day of principal photogra-
phy or in-between animation occurs on or
after December 7, 2012. The owner of
a qualified film or television production
may apply the final regulations to produc-
tions to which section 181 applies and for
which principal photography or, for an an-
imated production, in-between animation
commenced before December 7, 2012.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant reg-
ulatory action as defined in Executive
Order 12866, a
s supplemented by Ex-
ecutive Order
13563. Therefore, a reg-
ulatory asses
sment is not required. It
also has been
determined that section
553(b) and (d
) of the Administrative Pro-
cedure Act (5
U.S.C. chapter 5) does
not apply to t
hese regulations. Because
the regulat
ions do not impose a collec-
tion of info
rmation on small entities,
the Regulat
ory Flexibility Act (5 U.S.C.
chapter 6) d
oes not apply. Pursuant to
section 780
5(f) of the Code, the notice of
proposed r
ulemaking that preceded these
final regu
lations was submitted to the
Chief Coun
sel for Advocacy of the Small
Business A
dministration for comment
on its imp
act on small business, and no
comments
were received.
Drafting
Information
The princ
ipal author of these regula-
tions is B
ernard P. Harvey, Office of Asso-
ciate Chi
ef Counsel (Income Tax and Ac-
counting
). However, other personnel from
the IRS a
nd the Treasury Department par-
ticipat
ed in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.181–0 is amended by:
1. Adding the entries for §1.181–1
paragraphs (a)(6), (b)(1)(ii) and (c)(2).
2. Revising the entry for §1.181–6
paragraph (b) and removing paragraph (c).
The revision and additions to read as
follows:
§1.181–0 Table of contents.
*****
§1.181–1 Deduction for qualified film and
television production costs.
(a) * * *
2013–3 I.R.B.273January 14, 2013

(6) Post-amendment production.
*****
(b) * * *
(1) * * *
(ii) Post-amendment production.
*****
(c) * * *
(2) Post-amendment production.
*****
§1.181–6 Effective/applicability date.
*****
(b) Pre-effective date productions.
§1.181–0T [Removed]
Par. 3. Section 1.181–0T is removed.
Par. 4. Section 1.181–1 is amended
by revising paragraphs (a)(1)(ii), (a)(6),
(b)(1)(ii), (b)(2)(vi), and (c)(2) to read as
follows:
§1.181–1 Deduction for qualified film and
television production costs.
(a)***(1)***
(ii) This section provides rules for
determining the owner of a production,
the production costs (as defined in para-
graph (a)(3) of this section), the maximum
amount of aggregate production costs (as
defined in paragraph (a)(4) of this sec-
tion) that may be paid or incurred for a
pre-amendment production (as defined in
paragraph (a)(5) of this section) for which
the owner makes an election under sec-
tion 181, and the maximum amount of
aggregate production costs that may be
claimed as a deduction for a post-amend-
ment production (as defined in paragraph
(a)(6) of this section) for which the owner
makes an election under section 181. Sec-
tion 1.181–2 provides rules for making
the election under section 181. Section
1.181–3 provides definitions and rules
concerning qualified film and television
productions. Section 1.181–4 provides
special rules, including rules for recap-
ture of the deduction. Section 1.181–5
provides examples of the application
of §§1.181–1 through 1.181–4, while
§1.181–6 provides the effective date of
§§1.181–1 through 1.181–5.
*****
(6)Post-amendment production.The
termpost-amendment productionmeans
a qualified film or television production
commencing on or after January 1, 2008.
*****
(b)***(1)***
(ii)Post-amendment production. Sec-
tion 181 permits a deduction for the first
$15,000,000 (or, if applicable under para-
graph (b)(2) of this section, $20,000,000)
of the aggregate production costs of any
post-amendment production.
*****
(2) * * *
(vi)Allocation. Solely for purposes of
determining whether a production quali-
fies for the higher production cost limit
(for pre-amendment productions) or de-
duction limit (for post-amendment pro-
ductions) provided under this paragraph
(b)(2), compensation to actors (as defined
in §1.181–3(f)(1)), directors, producers,
and other relevant production personnel
(as defined in §1.181–3 (f)(2)) is allocated
entirely to first-unit principal photography.
*****
(c) * * *
(2)Post-amendment production.
Amounts not allowable as a deduction
under section 181 for a post-amendment
production may be deducted under any
other applicable provision of the Code.
§1.181–1T [Removed]
Par. 5. Section 1.181–1T is removed.
Par. 6. Section 1.181–6 is revised to
read as follows:
§1.181–6 Effective/applicability date.
(a)In general. Except as otherwise pro-
vided in this section, §§1.181–1 through
1.181–5 apply to productions the first day
of principal photography for which occurs
on or after September 29, 2011. Para-
graphs 1.181–1(a)(1)(ii), (a)(6), (b)(1)(ii),
(b)(2)(vi), and (c)(2) of §1.181–1 apply to
productions to which section 181 is appli-
cable and for which thefirst day of princi-
pal photography or in-between animation
occurs on or after December 7, 2012.
(b)Pre-effective date productions.For
any taxable year for which the period of
limitation on refund or credit under section
6511 has not expired, the owner may ap-
ply §§1.181–1 through 1.181–5 to any pro-
duction to which section 181 applies and
for which the first day of principal photog-
raphy (or in-between animation) occurred
before December 7, 2012, provided the
owner applies all relevant provisions of
§§1.181–1 through 1.181–5 to the produc-
tion.
§1.181–6T [Removed]
Par. 7. Paragraph 1.181–6T is re-
moved.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved November 30, 2012.
Mark J. Mazur,
Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on December 6,
2012, 8:45 a.m., and published in the issue of the Federal
Register for December 7, 2012, 77 F.R. 72923)
Section 7216.—Disclosure
or Use of Information by
Preparers of Returns
26 CFR 301.7216–0: Table of contents.
T.D. 9608
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 301
Disclosure or Use of
Information by Preparers
of Returns
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations that provide rules relating
to the disclosure or use of tax return in-
formation by tax return preparers. These
regulations provide updated guidance af-
fecting tax return preparers regarding the
use of information related to lists for so-
licitation of tax return business; the dis-
closure or use of statistical compilations
January 14, 20132742013–3 I.R.B.

of data under section 7216 of the Internal
Revenue Code (Code) by a tax return pre-
parer in connection with, or in support of,
a tax return preparer’s tax return prepara-
tion business; and the disclosure or use of
information for the purpose of performing
conflict reviews.
DATES:Effective Date:These regulations
are effective on December 28, 2012.
Applicability Date:For date of applica-
bility see §301.7216–2(s).
FOR FURTHER INFORMATION
CONTACT: Emily M. Lesniak, (202)
622–4910 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regula-
tions amending the Regulations on Pro-
cedure and Administration (26 CFR part
301). On January 4, 2010, the IRS and the
Treasury Department published a notice of
proposed rulemaking (REG–131028–09,
2010–4 I.R.B. 332) in theFederal Reg-
ister(75 FR 94), cross-referencing tem-
porary regulations (T.D. 9478, 2010–4
I.R.B. 315 [75 FR 48]), providing rules
relating to the ability of a tax return pre-
parertousetaxreturninformationfor
the purposes of compiling, maintaining,
and using lists for solicitation of tax re-
turn business under §301.7216–2T(n); to
disclose or use statistical compilations of
data described in §301.7216–1(b)(3)(i)(B)
under §301.7216–2T(o); and to dis-
close or use tax return information for
the purpose of performing conflict re-
views under §301.7216–2T(p) without
taxpayer consent. The modifications to
§301.7216–2(o) in the temporary and pro-
posed regulations were made following
the issuance of Notice 2009–13, 2009–6
I.R.B. 447 (February 9, 2009), and the re-
ceipt of comments submitted in response
to that notice. These comments were sum-
marized in the preamble to T.D. 9478. No
public hearing on the notice of proposed
rulemaking was requested or held. Written
and electronic comments responding to
the notice of proposed rulemaking were
received. All comments were considered
and are available forpublic inspection at
www.regulations.govor upon request. Af-
ter consideration of all the comments, the
proposed regulations, with minor clarifica-
tions and revisions to ensure the language
of the regulations is internally consistent
and technically correct, are adopted by this
Treasury decision. This preamble summa-
rizes the significant comments received by
the IRS and Treasury.
Summary of Comments
The IRS and Treasury received seven
(7) comments in response to the proposed
regulations. Some of the discussion con-
tained in the comments did not relate to
the rules in the proposed regulations but
instead was directed towards other unre-
lated content contained in the section 7216
regulations or other published guidance
pertaining to section 7216. This Summary
of Comments focuses solely on comments
relating to the proposed regulations and
does not address comments relating to
other published guidance pertaining to
section 7216, which are outside the scope
of this rule.
1. Comments Relating to §301.7216–2(n)
of the Proposed Regulations
A. Use of the list
As proposed, §301.7216–2(n) allows
tax return preparers to maintain a list of
limited tax return information that may be
used by the compiler to contact taxpayers
to provide tax information and general
business or economic information or anal-
ysis for educational purposes or to solicit
tax return preparation services.
One commentator asked to expand the
acceptable list maintenance purposes to in-
clude solicitation of “accounting services”
“consistent with legal and ethical respon-
sibilities.” The commentator explained
that these accounting services include, for
example, assistancewith bookkeeping,
the preparation of payroll returns, and the
preparation of regulatory returns. The
commentator also included the prepara-
tion of state and local income tax returns
as an accounting service. The preparation
of state and local income tax returns is,
however, tax return preparation expressly
authorized by the statute, and use of the
list is permissible to solicit this service.
The language of section 7216(a)(2) pro-
hibits the use of “any such information for
any purposes other than to prepare, or as-
sist in the preparing, of any such return . .
.” except as specifically excepted by sec-
tion 7216(b). The IRS and Treasury have
determined that it is inconsistent with the
purpose of section 7216 to exercise regula-
tory authority to provide an exception un-
der section 7216 for the use of tax return
information to solicit accounting services.
Taxpayers may consent in writing to allow
tax return preparers to use their tax return
information to solicit non-tax return prepa-
ration services, such as the accounting ser-
vices listed by the commentator. Accord-
ingly, to the extent the commentator re-
quested the inclusion of accounting ser-
vices as a list maintenance purpose, this
comment was not adopted.
The proposed regulations provide:
“This list may be used by the compiler
solely to contact the taxpayers on the list
for the purpose of providing tax infor-
mation and general business or economic
information or analysis for educational
purposes, or soliciting additional tax re-
turn preparation services. The list may not
be used to solicit any service or product
other than tax return preparation ser-
vices.” A commentator asked that the final
regulations clarify this statement. The
commentator specifically asked whether,
under the rule set forth in the proposed
regulations, articles could be included in a
newsletter that address several topics that
do not constitute tax return preparation
services.
Under the final regulations, a tax re-
turn preparer may, without taxpayer con-
sent, compile a list of certain taxpayer spe-
cific information that may be used to con-
tact the taxpayers on the list for two pur-
poses: 1) providing tax information and
general business or economic information
or analysis for educational purposes, and
2) soliciting additional tax return prepara-
tion services. A tax return preparer may
not use the list to solicit non-tax return
preparation services. The final regulations
do not attempt to describe every scenario
that may constitute either a permissible
or prohibited use of the list. Rather, a
taxreturnpreparerseekingtousetaxre-
turn information in the manner proposed
by the commentator must carefully con-
sider, on a case-by-case basis, the specific
content of a particular newsletter article to
ensure that the content meets the require-
ments of §301.7216–2(n). For example, a
newsletter that summarizes recent case law
or describes current legal developments
2013–3 I.R.B.275January 14, 2013

would be considered to be for educational
or informational purposes and a permissi-
ble use of the list. If a tax return preparer
wishes to solicit non-tax return prepara-
tion services in the preparer’s newsletter,
a consent must be obtained from clients
that authorizes the use of specified tax re-
turn information to solicit those non-tax re-
turn preparation services in the preparer’s
newsletter.
The final regulations retain the provi-
sions in the proposed regulations that re-
quire written consent for all other purposes
not expressly allowed by the regulations.
This is consistent with the congressional
discussion regarding section 7216, which
provides that “[section 7216] simply pre-
serves the confidentiality of information
provided by the taxpayer to the one who
prepares the returns as a professional act.”
Senate Discussion on Conference Report,
117 Cong. Record S. 18,627 (daily ed.
November 15, 1971) (statement of Sen.
Mathias). This floor discussion further
provides that “[p]resumably, where appro-
priate, the Treasury Department will per-
mit the use of the information within the
business organization of the preparer of
the return if the taxpayers [sic]has indi-
cated in writingthat he desires the infor-
mation to be used by the organizationfor
some purpose specifically benefitting the
taxpayer.” (Emphasis added). House Dis-
cussion on Conference Report, 117 Cong.
Rec. H12,118 (daily ed. Dec. 9, 1971)
(statement of Rep. Mills).
B. Authorized delivery methods
One commentator recommended that
the proposed regulations be clarified to
state that §301.7216–2(n)(1) permits a
tax return preparer to use any delivery
method that employs or is based on the list
information sanctioned by that regulation
provision. The commentator expressed a
concern that the two examples provided
in the temporary regulations limited the
method of delivery to only e-mail or U.S.
mail. The examples were not intended
to limit the scope of the rule. The final
regulations authorize any delivery method
that will facilitate direct contact with the
taxpayers on the list through the use of
only the information authorized for com-
pilation of a list under §301.7216–2(n).
The examples were modified to clarify
this point.
CLimits on tax return information
contained in lists
One commentator suggested removing
any limits on the tax return informa-
tion a tax return preparer may include in
compiling and maintaining lists for the
solicitation of tax return business under
§301.7216–2(n). This comment appears
to be based upon an interpretation that
the policy of section 7216 was intended
to protect only privacy concerns. Section
7216(b)(3) provides the Secretary with
broad authority to issue regulations au-
thorizing specific disclosures or uses of
tax return information. When publishing
regulations allowing for these disclosures
or uses, the IRS and Treasury must bal-
ance congressional intent and concerns for
the protection of sensitive taxpayer data
with the benefits taxpayers may receive
from the proposed disclosures or uses. Re-
moval of all restrictions on the allowable
types of tax return information that may
be included in the compilation and main-
tenance of lists is inconsistent with section
7216’s underlying purpose. The proposed
regulations expanded the types of tax re-
turn information a tax return preparer may
use to compile a list for the purpose of
soliciting tax return preparation business
in a manner consistent with the purpose of
section 7216 and the regulations. Accord-
ingly, this comment was not adopted.
The commentator also stated that the
temporary regulations contained ambigu-
ous and vague language that required
clarification regarding the entities and
form numbers that may be maintained,
such as whether an S corporation can be
distinguished from a C corporation or
whether a Form 1120 can be distinguished
from a Form 1120–S. The rule and ex-
amples in the regulations already address
whether entity classifications maintained
in a list pursuant to §301.7216–2(n) in-
clude individuals and the types of busi-
nesses that would file different types of
returns. The regulations provide that the
“specific type of business entity” may be
maintained in the list. Further,Example
1in §301.7216–2(n)(2) illustrates that tax
return preparers may limit the provision of
information based upon filer type. In ad-
dition, the income tax return form number
refers to the form number that appears on
the first page of the particular tax return
form that the tax return preparer prepares
(for example, Form 1120–S). To clarify
this point, a parenthetical has been added
to §301.7216–2(n).
One commentator stated that the pro-
posed regulations should be clarified re-
garding whether nontax return information
may be included in a list maintained pur-
suant to §301.7216–2(n) and that the reg-
ulations should be modified to state that
nontax return information can be included
in the list with the allowed items of tax re-
turn information. This comment was not
adopted. The inclusion of nontax return
information in the list could facilitate cir-
cumvention of the restrictions of section
7216 as to items of tax return information
that may not be kept on the list by per-
mitting tax return preparers to obtain the
tax return information from other sources.
In any event, if tax return preparers wish
to include additional information in a list,
they may obtain consent to do so from their
clients. The language in §301.7216–2(n),
however, has been clarified to eliminate
any potential confusion arising from the
wording of the provision.
One commentator recommended that
the IRS and Treasury issue guidance, pur-
suant to the terms of §301.7216–2T(n),
to further expand the types of tax return
information that may be included in a
list compiled for solicitation of tax return
business. This comment was not adopted.
This comment requested that the tax re-
turn information that may be included in a
list compiled for solicitation purposes be
expanded to include tax schedules filed,
certain information regarding tax prepara-
tion software, the date taxpayers file their
returns, the employer identification num-
ber of taxpayers’ employers, the number
and age of taxpayers’ dependents, and
whether taxpayers file with a tax balance
due. The IRS and Treasury considered
adding each item to the information that
may be included in a list compiled for so-
licitation of tax return business. Including
these items, however, would be inconsis-
tent with the taxpayer protection purpose
of section 7216, as demonstrated by the
congressional discussion. Moreover, cer-
tain items present a risk of abuse by tax
return preparers that would exceed any
potential benefit to the taxpayer.
January 14, 20132762013–3 I.R.B.

2. Comments Relating to §301.7216–2(o)
of the Proposed Regulations
A. Clarify meaning of “bona fide
research” and “public policy discussions”
One commentator recommended that
the final regulations clarify the meaning
of “bona fideresearch” and “public policy
discussions” by explicitly including exam-
ples of individuals or entities that engage
in these activities, including lawmakers,
academics, nonprofit organizations, and
other agencies that facilitate tax policy.
While these individuals and entities may,
at times, conductbona fideresearch or
engage in public policy discussions, tax
return preparers must determine, on a
case-by-case basis, whether a disclosure
or use is in support ofbona fideresearch
or public policy discussions. For ex-
ample, public policy discussions would
include discussion ofthe implications of
legislative amendments and tax reform
proposals.
B. Limitations on the use and purpose of
statistical compilations of data
One commentator recommended lim-
itingthediscretionaffordedtotaxreturn
preparers to determine appropriate dis-
closures of statistical compilations. The
commentator expressed concern that tax
return preparers will disclose more in-
formation than is lawfully permissible or
even sell data to third parties. This com-
ment was not adopted. The availability
of anonymous statistical compilations can
assist lawmakers and others in the private
and public sectors in discussing, formulat-
ing, and implementing sound tax policy.
The final regulations sufficiently limit the
construction of the statistical compilations
to prevent the disclosure of any individ-
ual’s tax return information. In addition,
§301.7216–2(o)(1) specifically prohibits
the sale of a statistical compilation of data
except in conjunction with the transfer of
assets made pursuant to the sale or other
disposition of the tax return preparer’s tax
return preparation business. Finally, there
are penalties imposed by sections 7216
and 6713 for the improper disclosure or
use of tax return information.
One commentator recommended re-
moving all restrictions on the disclosure or
use of anonymous statistical compilations.
This comment was not adopted. The pur-
pose of section 7216 and its accompanying
regulations is to preserve taxpayer confi-
dentiality by protecting taxpayers from the
unauthorized disclosures or uses of sensi-
tivetaxreturninformationbytaxreturn
preparers. Eliminating all restrictions on
the use of statistical compilations would
contravene this purpose and could increase
opportunities for taxpayer’s personal in-
formation to be improperly disclosed or
misused. In particular, it is possible to
craft statistical compilations in a way that
allows for the data to be associated with a
particular taxpayer.
One commentator recommended that
the restriction on the disclosure or use
of anonymous statistical information be
eliminated to allow for the compilation of
statistically anonymous information relat-
ing to the dollar amounts of refunds, cred-
its, or deductions. This comment was not
adopted. Section 7216 authorizes the IRS
and Treasury to promulgate rules regulat-
inghowtaxreturnpreparersmaydisclose
or use tax return information while ensur-
ing that the taxpayer protection purpose
of section 7216 is fulfilled. Eliminating
all restrictions on the use of statistical
compilations regarding the dollar amounts
of refunds, credits, or deductions would
provide tax return preparers the unfettered
ability to use tax return information. This
would undermine the purpose and basic
protections of preventing inappropriate
disclosure or use of tax return information
by tax return preparers afforded by section
7216.
One commentator requested that volun-
teer income tax assistance programs be ex-
empted from the restrictions on the disclo-
sure or use of statistical compilations for
marketing or advertising purposes. This
comment was not adopted. Taxpayers who
receive volunteer income assistance and
taxpayers who receive tax preparation as-
sistance from compensated preparers de-
serve the same protection of their tax re-
turn information. Section 301.7216–2(o)
already makes appropriate allowances for
a preparer’s status as a participant in a
volunteer income tax assistance program
by allowing for use of statistical compila-
tions in fundraising activities conducted by
volunteer return preparation programs and
other entities described in section 501(c).
As a result, IRS and Treasury believe that
the regulations already address the con-
cerns expressed by this commentator.
3. Comments Relating to §301.7216–2(p)
of the Proposed Regulations
No comments were received in re-
sponse to §301.7216–2(p) of the proposed
regulations, and §301.7216–2(p) is being
finalized without change.
4. Effective date of T.D. 9478
Onecommentatorquestioned
the appropriateness of applying
§301.7216–2T(o) of the temporary reg-
ulations contained in T.D. 9478 with an
immediate effective date, stating that one
provision of this section is more restric-
tive than prior guidance (Notice 2009–13,
2009–5 I.R.B. 419) indicated. The com-
mentator requested that the effective date
of this particular proposal be made fully
prospective and only after regulations are
finalized. This comment was not adopted
for the following reasons.
By its specific terms, Notice 2009–13
expired on December 31, 2009, while T.D.
9478 is applicable to disclosures or uses of
tax return information occurring on or af-
ter January 4, 2010. Because there is no
conflicting or overlapping period of appli-
cation of this related guidance, tax return
preparers could not have relied upon No-
tice 2009–13 beyond December 31, 2009.
As T.D. 9478 was not applicable until Jan-
uary 4, 2010, there is no retroactive appli-
cation of the rule contained in that Trea-
sury decision.
Further, Notice 2009–13 requested
comments, and comments in response to
the notice were taken into account in the
drafting and publication of T.D. 9478.
As explained in the preamble to T.D.
9478, concerns were expressed regarding
the scope of the language used in No-
tice 2009–13 on this specific issue. The
amendments provided in T.D. 9478 are
responsive to public comments on and a
logical outgrowth of the language in No-
tice 2009–13.
Finally, the general rule under sec-
tion 7216 prohibits the disclosure or use
of tax return information unless a writ-
ten consent is obtained or an exception
applies. With the expiration of Notice
2009–13 on December 31, 2009, the uses
of statistical compilations allowed for in
2013–3 I.R.B.277January 14, 2013

thenoticewerenolongerpermissible. If
§301.7216–2T(o) was made effective only
upon publication of the final regulations,
as the commentator seems to suggest,
neither the exceptions provided for in
Notice 2009–13 nor those provided for
in §301.7216–2T(o) would be applicable
after December 2009. The permissible
use of statistical compilations without tax-
payer consent would be more, not less,
restrictive than if §301.7216–2T(o) had
not been published as a temporary regula-
tion.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been deter-
mined that section 553(b) of the Adminis-
trative Procedure Act (5 U.S.C. chapter 5)
does not apply to these regulations, and be-
cause the regulations do not impose a col-
lection of information on small entities, the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) does not apply. Pursuant to section
7805(e) of the Code, the temporary regula-
tions and the proposed regulations preced-
ing these final regulations were published
in theFederal Registerto provide notice
and the opportunity to comment. Pursuant
to section 7805(f) of the Code, the pro-
posed regulations preceding these regula-
tions were submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business, and no comments were re-
ceived.
Drafting Information
The principal authors of these reg-
ulations are Skyler K. Bradbury and
Emily M. Lesniak, Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Amendments to the Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.7216–0 is amended
by revising the entries for §301.7216–2,
paragraphs (n), (o), and (p) to read as fol-
lows:
§301.7216–0 Table of contents.
*****
§301.7216–2 Permissible disclosures or
uses without consent of the taxpayer.
*****
(n) Lists for solicitation of tax return
preparation business.
(o) Producing statistical information
in connection with tax return preparation
business.
(p) Disclosure or use of information for
quality, peer, or conflict reviews.
*****
§301.7216–0T [Removed]
Par. 3. Section 301.7216–0T is re-
moved.
Par. 4. Section 301.7216–2 is amended
by revising paragraphs (n), (o), (p), and (s)
to read as follows:
§301.7216–2 Permissible disclosures or
uses without consent of the taxpayer.
*****
(n)Lists for solicitation of tax return
preparation business. (1) A tax return
preparer, other than a person who is a tax
return preparer solely because the person
provides auxiliary services as defined in
§301.7216–1(b)(2)(iii), may compile and
maintain a separate list containing solely
items of tax return information. The fol-
lowing items of tax return information
are permissible: the names, mailing ad-
dresses, e-mail addresses, phone numbers,
taxpayer entity classification (including
“individual” or the specific type of busi-
ness entity), and income tax return form
number (for example, Form 1040–EZ) of
taxpayers whose tax returns the tax return
preparer has prepared or processed. The
Internal Revenue Service may issue guid-
ance, by publication in the Internal Rev-
enue Bulletin (see §601.601(d)(2)(ii)(b)
of this chapter), describing other types of
information that may be included in a list
compiled and maintained pursuant to this
paragraph. This list may be used by the
compiler solely to contact the taxpayers
on the list for the purpose of providing
tax information and general business or
economic information or analysis for edu-
cational purposes, or soliciting additional
tax return preparation services. The list
may not be used to solicit any service
or product other than tax return prepa-
ration services. The compiler of the list
may not transfer the taxpayer list, or any
part thereof, to any other person unless
the transfer takes place in conjunction
with the sale or other disposition of the
compiler’s tax return preparation busi-
ness. Due diligence conducted prior to a
proposed sale of a compiler’s tax return
preparation business is in conjunction with
the sale or other disposition of a com-
piler’s tax return preparation business and
will not constitute a transfer of the list if
conducted pursuant to a written agreement
that requires confidentiality of the tax re-
turn information disclosed and expressly
prohibits the further disclosure or use of
the tax return information for any purpose
other than that related to the purchase of
the tax return preparation business. A
person who acquires a taxpayer list, or a
part thereof, in conjunction with a sale or
other disposition of a tax return prepara-
tion business falls under the provisions of
this paragraph with respect to the list. The
termlist,asusedinthisparagraph(n),
includes any record orsystem whereby the
types of information expressly authorized
for inclusion in a taxpayer list pursuant to
the terms of this paragraph (n) are retained.
The provisions of this paragraph (n) also
apply to the transfer of any records and
related papers to which this paragraph (n)
applies.
(2)Examples. The following examples
illustrate this paragraph (n):
Example 1. Preparer A is a tax return preparer
as defined by §301.7216–1(b)(2)(i)(A). Preparer A’s
office is located in southeast Pennsylvania, and Pre-
parer A prepares federal and state income tax returns
for taxpayers who live in Pennsylvania, New Jersey,
Maryland, and Delaware. Preparer A maintains a
list of taxpayer clients containing the information al-
lowedbythisparagraph(n). Preparer A provides
quarterly state income tax information updates to his
January 14, 20132782013–3 I.R.B.

individual taxpayer clients by e-mail or U.S. mail. To
ensure that his clients only receive the information
updates that are relevant to them, Preparer A uses his
list to direct his outreach efforts towards the relevant
clients by searching his list to filter it by zip code
and income tax return form number (Form 1040 and
corresponding state income tax return form number).
Preparer A may use the list information in this man-
ner without taxpayer consent because he is providing
tax information for educational or informational pur-
poses and is targeting clients based solely upon tax re-
turn information that is authorized by this paragraph
(n) (by zip code, which is part of a taxpayer’s address,
and by income tax return form number). Without tax-
payer consent, Preparer A also may deliver this in-
formation to his clients by e-mail, U.S. mail, or other
method of delivery that uses only information autho-
rized by this paragraph (n).
Example 2. Preparer B is a tax return preparer
as defined by §301.7216–1(b)(2)(i)(A). Preparer B
maintains a list of taxpayer clients containing the in-
formation allowed by this paragraph (n). Preparer
B provides monthly federal income tax information
updates in the form of a newsletter to all of her tax-
payer clients by e-mail or U.S. mail. When Preparer
B hires a new employee who participates or assists
in tax return preparation, she announces that hire in
the newsletter for the month that follows the hiring.
Each announcement includes a photograph of the new
employee, the employee’sname, the employee’s tele-
phone number, a brief listing of the employee’s qual-
ifications, and a brief listing of the employee’s em-
ployment responsibilities. Preparer B may use the
tax return information described in this paragraph (n)
in this manner without taxpayer consent because she
is providing tax information for educational or infor-
mational purposes to provide general federal income
tax information updates. Preparer B may include the
new employee announcements in the form described
because this is considered tax information for infor-
mational purposes, provided the announcements do
not contain solicitations for non-tax return prepara-
tion services. Without taxpayer consent, Preparer B
also may deliver this information to her clients by
e-mail, U.S. mail, or other method of delivery that
uses only information authorized by this paragraph
(n).
(o)Producing statistical information
in connection with tax return preparation
business. (1) A tax return preparer may
use tax return information, subject to the
limitations specified in this paragraph (o),
to produce a statisticalcompilation of data
described in §301.7216–1(b)(3)(i)(B). The
purpose for and disclosure or use of the
statistical compilation requiring data ac-
quired during the tax return preparation
process must relate directly to the internal
management or support of the tax return
preparer’s tax return preparation business,
or tobona fideresearch or public policy
discussions concerning state or federal
taxation. A tax return preparer may not
disclose the statistical compilation, or any
part thereof, to any other person unless
disclosure of the statistical compilation is
anonymous as to taxpayer identity, does
not disclose an aggregate figure contain-
ing data from fewer than ten tax returns,
and is in direct support of the tax return
preparer’s tax return preparation busi-
ness or ofbona fideresearch or public
policy discussions concerning state or
federal taxation. A statistical compilation
is anonymous as to taxpayer identity if
it is in a form which cannot be associ-
ated with, or otherwise identify, directly
or indirectly, a particular taxpayer. For
purposes of this paragraph, marketing
and advertising is in direct support of the
tax return preparer’s tax return prepara-
tion business provided the marketing and
advertising is not false, misleading, or un-
duly influential. This paragraph, however,
does not authorize the disclosure or use in
marketing or advertising of any statistical
compilations, or partthereof, that iden-
tify dollar amounts of refunds, credits,
or deductions associated with tax returns,
or percentages relating thereto, whether
or not the data are statistical, averaged,
aggregated, or anonymous. Disclosures
made in support of fundraising activities
conducted by volunteer return prepara-
tion programs and other organizations
described in section 501(c) of the Internal
Revenue Code (Code) in direct support
of their tax return preparation businesses
are not marketing and advertising under
this paragraph. A tax return preparer who
produces a statistical compilation of data
described in §301.7216–1(b)(3)(i)(B) may
disclose the compilation to comply with fi-
nancial accounting or regulatory reporting
requirements whether or not the statistical
compilation is anonymous as to taxpayer
identity or discloses an aggregate figure
containing data from fewer than ten tax
returns.
(2) A tax return preparer may not
sell or exchange for value a statisti-
cal compilation of data described in
§301.7216–1(b)(3)(i)(B), in whole or in
part, except in conjunction with the trans-
fer of assets made pursuant to the sale
or other disposition of the tax return pre-
parer’s tax return preparation business.
The provisions of paragraph (n) of this
section regarding the transfer of a taxpayer
list also apply to the transfer of any sta-
tistical compilations of data to which this
paragraph applies. A person who acquires
a statistical compilation, or a part thereof,
pursuant to the operation of this paragraph
(o) or in conjunction with a sale or other
disposition of a tax return preparation
business is subject to the provisions of this
paragraph with respect to the compilation.
(3)Examples. The following examples
illustrate this paragraph (o):
Example 1. Preparer A is a tax return preparer
as defined by §301.7216–1(b)(2)(i)(A). In 2009, A
used tax return information to produce a statistical
compilation of data for both internal management
purposes and to support A’s tax return preparation
business. The statistical compilation included an
aggregate figure containing the information that A
prepared 32 S corporation tax returns in 2009. In
2010, A decided to embark upon a new marketing
campaign emphasizing its experience preparing
small business tax returns. In the campaign, A
discloses the aggregate figure containing the number
of S corporation tax returns prepared in 2009. A’s
disclosure does not include any information that can
be associated with or identify any specific taxpayers.
A may disclose the anonymous statistical compilation
without taxpayer consent.
Example 2. Preparer B is a tax return preparer as
defined by §301.7216–1(b)(2)(i)(A). In 2010, in sup-
port of B’s tax return preparation business, B wants to
advertise that the average tax refund obtained for its
clients in 2009 was $2,800. B may not disclose this
information becauseit contains a statistical compila-
tion reflecting average refund amounts.
Example 3. Preparer C is a tax return preparer
as defined by §301.7216–1(b)(2)(i)(A) and is a vol-
unteer income tax assistance program. In 2010, in
support of C’s tax return preparation business, C
submits a grant application to a charitable founda-
tion to fund C’s operations providing free tax return
preparation services to low- and moderate-income
families. In support of C’s request, C includes anony-
mous statistical data consisting of aggregated figures
containing data from ten or more tax returns showing
that, in 2009, C provided services to 500 taxpayers,
that 95 percent of the taxpayer population served by
C received the Earned Income Tax Credit (EITC),
and that the average amount of the EITC received
was $3,300. Despite the fact that this information
constitutes an average credit amount, C may disclose
the information to the charitable foundation because
disclosures made in support of fundraising activities
conducted by volunteer income tax assistance pro-
grams and other organizations described in section
501(c) of the Code in direct support of their tax return
preparation business are not considered marketing
and advertising for purposes of §301.7216–2(o)(1).
Example 4. Preparer D is a tax return preparer
as defined by §301.7216–1(b)(2)(i)(A). In December
2009, D produced an anonymous statistical compi-
lation of tax return information obtained during the
2009 filing season. In 2010, D wants to disclose
portions of the anonymous statistical compilation
from aggregated figures containing data from ten
or more tax returns in connection with the mar-
keting of its financial advisory and asset planning
services. D is required to receive taxpayer consent
under §301.7216–3 before disclosing the tax return
information contained in the anonymous statistical
compilation because the disclosure is not being made
in support of D’s tax return preparation business.
2013–3 I.R.B.279January 14, 2013

(p)Disclosure or use of information
for quality, peer, or conflict reviews.(1)
The provisions of section 7216(a) and
§301.7216–1 shall not apply to any dis-
closure for the purpose of a quality or
peer review to the extent necessary to ac-
complish the review. A quality or peer
review is a review that is undertaken to
evaluate, monitor, and improve the quality
and accuracy of a taxreturn preparer’s
tax preparation, accounting, or auditing
services. A quality or peer review may
be conducted only by attorneys, certified
public accountants, enrolled agents, and
enrolled actuaries who are eligible to prac-
tice before the Internal Revenue Service.
See Department of the Treasury Circular
230, 31 CFR part 10. Tax return informa-
tion may also be disclosed to persons who
provide administrative or support services
to an individual who is conducting a qual-
ity or peer review under this paragraph
(p), but only to the extent necessary for
the reviewer to conduct the review. Tax
return information gathered in conducting
a review may be used only for purposes of
a review. No tax return information iden-
tifying a taxpayer may be disclosed in any
evaluative reports or recommendations
that may be accessible to any person other
than the reviewer or the tax return preparer
being reviewed. The tax return preparer
being reviewed will maintain a record
of the review, including the information
reviewed and the identity of the persons
conducting the review. After completion
of the review, no documents containing in-
formation that may identify any taxpayer
by name or identification number may be
retained by a reviewer or by the reviewer’s
administrative or support personnel.
(2) The provisions of section 7216(a)
and §301.7216–1 shall not apply to any
disclosure necessary to accomplish a con-
flict review. A conflict review is a review
undertaken to comply with requirements
established by any federal, state, or local
law, agency, board or commission, or by
a professional association ethics commit-
tee or board, to either identify, evaluate, or
monitor actual or potential legal and ethi-
cal conflicts of interest that may arise when
a tax return preparer is employed or ac-
quired by another tax return preparer, or
to identify, evaluate,or monitor actual or
potential legal and ethical conflicts of in-
terest that may arise when a tax return pre-
parer is considering engaging a new client.
Tax return information gathered in con-
ducting a conflict review may be used only
for purposes of a conflict review. No tax
return information identifying a taxpayer
may be disclosed in any evaluative reports
or recommendations that may be accessi-
ble to any person other than those respon-
sible for identifying, evaluating, or moni-
toring legal and ethical conflicts of inter-
est. No tax return information identifying
a taxpayer may be disclosed outside of the
United States or a territory or possession of
the United States unless the disclosing and
receiving tax return preparers have proce-
dures in place that are consistent with good
business practices and designed to main-
tain the confidentiality of the disclosed tax
return information.
(3) Any person (including administra-
tive and support personnel) receiving tax
return information in connection with a
quality, peer, or conflict review is a tax
return preparer for purposes of sections
7216(a) and 6713(a). Tax return informa-
tion disclosed and used for purposes of a
quality, peer, or conflict review shall not
be disclosed or used for any other purpose.
*****
(s)Effective/applicability date. Para-
graphs (n), (o), and (p) of this section ap-
ply to disclosures or uses of tax return in-
formation occurring on or after Decem-
ber 28, 2012. All other paragraphs of this
section apply to disclosures or uses of tax
return information occurring on or after
January 1, 2009.
§301.7216
–2T [Removed]
Par. 5. Section 301.7216–2T is re-
moved.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved December 20, 2012.
Mark J. Mazur,
Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on December 26,
2012, 11:15 a.m., and published in the issue of the Federal
Register for December 28, 2012, 77 F.R. 76400)
January 14, 20132802013–3 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Per Capita Payments From
Proceeds of Settlements of
Indian Tribal Trust Cases
Notice 2013–1
ADDITIONAL SETTLEMENTS
Notice 2012–60, 2012–41 I.R.B. 455,
provides guidance on federal tax treatment
of certainper capitapayments made to
members of Indian tribes. Since publi-
cation of Notice 2012–60, six additional
tribes — Qawalangin Tribe of Unalaska,
Tlingit & Haida Tribes of Alaska, North-
western Band of Shoshone Indians, Hoopa
Valley Tribe, the Ak-Chin Indian Commu-
nity, and the Oglala Sioux Tribe — have
reached tribal trust case settlements with
the United States and have been included
in the Appendix.
PURPOSE
This notice providesguidance concern-
ing the federal income tax treatment of per
capita payments that members of Indian
tribes receive from proceeds of certain set-
tlements of tribal trust cases between the
United States and those Indian tribes.
BACKGROUND
The United States has entered into
settlement agreements with the feder-
ally recognized Indiantribes listed in the
Appendix to this notice, settling litiga-
tion in which the tribes allege that the
Department of the Interior and the De-
partment of the Treasury mismanaged
monetary assets and natural resources the
United States holds in trust for the ben-
efit of the tribes (“Tribal Trust cases”).
Upon receiving the settlement proceeds,
the tribes will dismiss their claims with
prejudice.SeePress Release, U.S. Depart-
ment of Justice, Attorney General Holder
and Secretary Salazar Announce $1 Bil-
lion Settlement of Tribal Trust Account-
ing and Management Lawsuits Filed by
More Than 40 Tribes (April 11, 2012)at
http://www.justice.gov/opa/pr/2012/April/12-ag–460.html.
The United States foresees the possibility
of future substantially similar settlements
of substantially similar claims brought by
other federally recognized Indian tribes.
Most of the Indian tribes that have
reached Tribal Trust case settlements with
the United States have directed that the
settlement proceeds be transferred to ac-
counts at private banks or other third-party
institutions, where the proceeds will be
invested until the tribes use the funds for
various purposes, which may include mak-
ingper capitapayments to their members.
Other Indian tribes have directed that all
or part of the settlement proceeds be paid
into a trust account established or main-
tained by the Secretary of the Interior,
through the Office of the Special Trustee
for American Indians, for the benefit of the
tribes, until the tribes provide instructions
for the disposition of the funds, which
may include makingper capitapayments
to their members.
Although agreeing to settlements, the
United States admits no liability in the
Tribal Trust case settlements and the gov-
ernment has no fiduciary responsibilities
over the Tribal Trust case settlement pro-
ceeds that the tribes receive and that are
deposited into accounts at private banks or
other third-party institutions.
CONSULTATION
Several tribes and other affiliated orga-
nizations requested direct consultation on
the income tax treatment ofper capitapay-
ments from the Tribal Trust case settle-
ments. In response to these requests and
in the spirit of Executive Order 13175, di-
rect consultation and communication oc-
curred. These consultations and conver-
sations were extremely useful in preparing
this notice.
APPLICABLE PROVISIONS OF LAW
Section 61(a) of the Internal Revenue
Code provides that, except as otherwise
provided by law, gross income means all
income from whatever source derived.
Under § 61, Congress intends to tax all
gains and undeniable accessions to wealth,
clearly realized, over which taxpayers
have complete dominion.Commissioner
v. Glenshaw Glass Co., 348 U.S. 426
(1955), 1955–1 C.B. 207. Indians are
citizens subject to the payment of income
taxes.Squire v. Capoeman,351U.S.1,6
(1956), 1956–1 C.B. 605.
The Per Capita Act, Pub. L. No. 98–64,
97 Stat. 365, 25 U.S.C. §§ 117a through
117c, provides authority to Indian tribes to
makeper capitapayments to Indians out
of tribal trust revenue. Under 25 U.S.C.
§ 117a, funds held in trust by the Secretary
of the Interior for an Indian tribe that are
to be distributedper capitato members of
that tribe may be distributed by either the
Secretary of the Interior or, at the request
of the governing body of the tribe and sub-
ject to the approval of the Secretary of the
Interior, the tribe.
The Indian Tribal Judgment Funds Use
or Distribution Act, 25 U.S.C. §§ 1401
through 1408, concerns the distribution of
certain judgment funds to Indian tribes.
Under 25 U.S.C. § 117b(a), funds dis-
tributed under 25 U.S.C. § 117a are subject
to the provisions of 25 U.S.C. § 1407.
Under 25 U.S.C. § 1407, the funds de-
scribed in that section, and all interest and
investment income accrued on the funds
while held in trust, are not subject to fed-
eral income taxes.See alsoH.R. Rep.
No. 98–230 at 3 (1983), which provides
thatper capitadistributions of tribal trust
revenue “shall be subject to the provisions
of [25 U.S.C. § 1407] with respect to tax
exemptions.”
To determine the federal income tax
treatment ofper capitapayments from
Tribal Trust case settlement proceeds, “the
test is not whether the action was one in
tort or contract, but rather the question to
be asked is ’In lieu of what were the dam-
ages awarded?’”See Raytheon Production
Corp.v.Commissioner, 144 F.2d 110, 113
(1
st
Cir. 1944),aff’g1 T.C. 952 (1943).
The fact that a suit ends in a compromise
settlement does not change the nature of
the recovery; the determining factor is the
nature of the underlying claim.Raytheon
Production Corp.at 114. Therefore,
although the United States admits no lia-
bility in the Tribal Trust cases,Raytheon
Production Corp.requires an examination
of the underlyingclaimsasserted by the
tribes. The Tribal Trust case settlements
described in this notice resolve claims, in
relevant part, that the Department of the
Interior and the Department of the Trea-
sury mismanaged trust accounts, lands,
and natural resources. The tribes assert
that, absent this mismanagement of their
2013–3 I.R.B.281January 14, 2013

trust funds and resources, their govern-
ment-administered trust fund accounts
would have substantially larger balances.
See25 C.F.R. §§ 115.002 and 115.702
(which define the trust fund accounts
maintained and held by the Secretary of
the Interior for federally recognized tribes
and the types of payments that must be
accepted into the trust account, which
include those resulting from use of trust
lands or restricted fee lands or trust re-
sources when paid directly to the Secretary
of the Interior on behalf of the tribal ac-
count holder). The settlement proceeds
from the Tribal Trust cases must be viewed
as being in lieu of amounts that would have
been held in a trust fund account for the
tribe that is maintained by the Secretary
of the Interior. Consequently, for federal
income tax purposes,per capitapayments
that an Indian tribe makes from the tribe’s
Tribal Trust case settlement proceeds are
treated the same asper capitapayments
from funds held in trust by the Secretary
of the Interior under 25 U.S.C. § 117a.See
Raytheon Production Corp.at 113–114;
see also25 U.S.C. § 1407 and H.R. Rep.
No. 98–230 at 3 (1983).
FEDERAL INCOME TAX TREATMENT
Under 25 U.S.C. § 117b(a),per capita
payments made from the proceeds of an
agreement between the United States and
an Indian tribe settling the tribe’s claims
that the United States mismanaged mon-
etary assets and natural resources held in
trust for the benefit of the tribe by the Sec-
retary of the Interior are excluded from the
gross income of the members of the tribe
receiving the per capita payments.Per
capitapayments that exceed the amount of
the Tribal Trust case settlement proceeds
and that are made from an Indian tribe’s
private bank account in which the tribe has
deposited the settlement proceeds are in-
cluded in the gross income of the mem-
bers of the tribe receiving theper capita
payments under § 61. For example, if an
Indian tribe receives proceeds under a set-
tlement agreement, invests the proceeds
in a private bank account that earns inter-
est, and subsequently distributes theentire
amount of the bank account asper capita
payments, then a member of the tribe ex-
cludes from gross income that portion of
the member’sper capitapayment attribut-
able to the settlement proceeds and must
include the remaining portion of theper
capitapayment in gross income.
LIMITATION
This notice applies only toper capita
payments from proceeds of the Tribal Trust
case settlements that are described in this
notice and that the United States has en-
tered into with the Indian tribes listed in
the Appendix to this notice or to proceeds
of Tribal Trust case settlements that are
subsequently identified as being subject to
this notice on the Indian Tribal Govern-
ments page on the Internal Revenue Ser-
vice website, www.irs.gov. The federal in-
come tax treatment of other per capita pay-
ments made by the Secretary of the Interior
or Indian tribes to members of Indian tribes
is outside the scope of this notice and may
be addressed in future guidance.
EFFECT ON OTHER DOCUMENTS
Notice 2012–60, 2012–41 I.R.B. 445, is
superseded.
DRAFTING INFORMATION
The principal author of this no-
tice is Sheldon Iskow of the Office of
Associate Chief Counsel (Income Tax &
Accounting). For further information,
please contact Mr. Iskow at (202)
622–4920 (not a toll-free call).
Appendix
Tribes That Have Entered into Settlement Agreements of Tribal Trust Cases
1. Assiniboine and Sioux Tribes of the Fort Peck Reservation
2. Bad River Band of Lake Superior Chippewa Indians
3. Blackfeet Tribe of the Blackfeet Indian Reservation
4. Bois Forte Band of Chippewa
5.
Cachil Dehe Band of Wintun Indians of the Colusa Rancheria
6. Chippewa Cree Tribe of the Rocky Boy’s Reservation
7. Coeur d’Alene Tribe
8. Confederated Salish and Kootenai Tribes
9. Confederated Tribes of Siletz Indians
10. Confederated Tribes of the Colville Reservation
11. Confederated Tribes of the Goshute Reservation
12. Crow Creek Sioux Tribe
13. Eastern Shawnee Tribe of Oklahoma
14. Hualapai Indian Tribe
15.
Iowa Tribe of Kansas and Nebraska
16. Kaibab Band of Paiute Indians of Arizona
17. Kickapoo Tribe of Kansas
18. Lac Courte Oreilles Band of Lake Superior Chippewa Indians
19. Lac du Flambeau Band of Lake Superior Chippewa Indians
20. Leech Lake Band of Ojibwe
21. Lower Brule Sioux Tribe
22. Makah Indian Tribe of the Makah Reservation
23. Mescalero Apache Tribe
24. Minnesota Chippewa Tribe
25.
Nez Perce Tribe
January 14, 20132822013–3 I.R.B.

26. Nooksack Indian Tribe
27. Northern Cheyenne Tribe of Indians
28. Omaha Tribe o Nebraska
29. Passamaquoddy Tribe of Maine
30. Pawnee Nation
31. Prairie Band of Potawatomi Nation
32. Pueblo of Zia
33. Quechan Tribe of the Fort Yuma Reservation
34. Red Cliff Band of Lake Superior Chippewa Indians
35.
Rincon Luiseño Band of Indians
36. Rosebud Sioux Tribe
37. Round Valley Indian Tribes
38. Salt River Pima-Maricopa Indian Community
39. Santee Sioux Tribe of Nebraska
40. Sault Ste. Marie Tribe
41. Shoshone-Bannock Tribes of the Fort Hall Reservation
42. Soboba Band of Luiseno Indians
43. Spirit Lake Dakotah Nation
44. Spokane Tribe of Indians
45.
Standing Rock Sioux Tribe
46. Stillaguamish Tribe of Indians
47. Summit Lake Paiute Tribe
48. Swinomish Indian Tribal Community
49. Te-Moak Tribe of Western Shoshone Indians
50.
Tohono O’odham Nation
51.
Tulalip Tribes
52.
Tule River Indian Tribe
53.
Ute Indian Tribe of the Uintah and Ouray Reservation
54.
Ute Mountain Ute Tribe
55.
Winnebago Tribe of Nebraska
56.
Qawalangin Tribe of Unalaska
57.
Tlingit & Haida Tribes of Alaska
58.
Northwestern Band of Shoshone Indians
59.
Hoopa Valley Tribe
60. Ak-Chin Indian Community
61. Oglala Sioux Tribe
2
6 CFR 301.7216–3: Disclosure or use permitted
o
nly with the taxpayer’s consent.
(
Also: Sections 7216, 6713)
R
ev. Proc. 2013–14
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance to tax return preparers regarding the
format and content of taxpayer consents
to disclose and consents to use tax re-
turn information with respect to taxpayers
filing a return in the Form 1040 series
(e.g., Form 1040, Form 1040NR, Form
1040A, or Form 1040EZ) under section
301.7216–3 of the Regulations on Pro-
cedure and Administration (26 CFR Part
301). This revenue procedure also pro-
vides specific requirements for electronic
signatures when a taxpayer executes an
electronic consent to the disclosure or
c
onsent to the use of the taxpayer’s tax
r
eturn information. This revenue proce-
d
ure modifies and supersedes Revenue
Procedure 2008–35, 2008–29 I.R.B. 132,
to provide guidance pursuant to section
301.7216–3.
SECTION 2. CHANGES
This revenue procedure modifies the
mandatory language required on each tax-
payer consent to disclose or consent to
use tax return information. This revenue
procedure also explains the difference be-
tween tax return preparation services (or
auxiliary services) and other financial or
accounting services. Some taxpayers have
expressed confusion regarding whether
they needed to complete consent forms to
engage a tax return preparer to perform tax
return preparation services. The modified
mandatory language required in consent
forms clarifies that a taxpayer does not
need to complete a consent form to engage
a
tax return preparer to perform only tax
r
eturn preparation services. To allow a
t
ax return preparer to disclose or use tax
return information in providing services
other than tax return preparation, however,
a taxpayer must complete a consent form
as described in this revenue procedure.
Sections 5.04(1)(a) and (c) provide the
modified language that must be included
on each consent to disclose or consent to
use tax return information. The examples
in section 7 reflect the modified language
provided in section 5.04. In addition, a
few nonsubstantive changes have been
made to the revenue procedure to promote
clarity.
SECTION 3. BACKGROUND
.01 In general, section 7216(a) of the
Internal Revenue Code imposes crimi-
nal penalties on tax return preparers who
knowingly or recklessly make unautho-
rized disclosures or uses of information
2013–3 I.R.B.283January 14, 2013

furnished in connection with the prepara-
tion of an income tax return. A violation
of section 7216 is a misdemeanor, with a
penalty of up to one year imprisonment or
a fine of not more than $1,000, or both,
together with the costs of prosecution.
Section 7216(b) establishes exceptions to
the general rule in section 7216(a) and also
authorizes the Secretary to promulgate
regulations prescribing additional permit-
ted disclosures or uses.
.02 Section 6713(a) prescribes a related
civil penalty for unauthorized disclosures
or uses of information furnished in connec-
tion with the preparation of an income tax
return. The penalty for violating section
6713 is $250 for each disclosure or use, not
to exceed a total of $10,000 for a calendar
year. Section 6713(b)provides that the ex-
ceptions in section 7216(b) also apply to
section 6713.
.03 Section 301.7216–3 provides that,
unless section 7216 or § 301.7216–2
specifically permits the disclosure or use
of tax return information, a tax return pre-
parer may not disclose or use a taxpayer’s
tax return information without obtain-
ing a consent from the taxpayer. Sec-
tion 301.7216–3(a) provides that consent
must be knowing and voluntary. Section
301.7216–3(a)(3)(i) prescribes the form
and content requirements that all consents
to disclose or consents to use must in-
clude. Section 301.7216–3(b) provides
timing requirements and other limitations
upon consents to disclose or consents
to use tax return information. Section
301.7216–3(b)(4) provides a limitation
upon consents to disclose a taxpayer’s
social security number to a tax return pre-
parer located outside of the United States.
.04 Section 301.7216–3(a)(3)(ii) pro-
vides that the Secretary may, by publi-
cation in the Internal Revenue Bulletin,
prescribe additional requirements for tax
return preparers regarding the format and
content of consents to disclose and con-
sentstousetaxreturninformationwith
respect to taxpayers filing a return in the
Form 1040 series, as well as the require-
ments for a valid signature on an electronic
consent under section 7216.
Section 301.7216–3(b)(4)(ii) provides
that the Secretary may require, by pub-
lication in the Internal Revenue Bulletin,
additional consent format and content re-
quirements for purposes of consents to dis-
close a taxpayer’s social security number.
This revenue procedure defines an “ade-
quate data protection safeguard” and de-
scribes the requirements of an adequate
data protection safeguard for purposes of
removing the limitation upon consents to
disclose a taxpayer’s social security num-
ber to a tax return preparer located outside
of the United States.
SECTION 4. SCOPE
This revenue procedure applies to
all tax return preparers, as defined in
§ 301.7216–1(b)(2), who seek consent to
disclose or consent to use tax return in-
formation pursuant to § 301.7216–3 with
respect to taxpayers who file a return in
the Form 1040 series. Taxpayers who
are not filers of returns in the Form 1040
series may use language prescribed in this
revenue procedure or consents whose for-
mats and content do not conform to this
revenue procedure as long as the consents
otherwise meet the requirements of Treas.
Reg. § 301.7216–3.
SECTION 5. FORM AND CONTENT
OF A CONSENT TO DISCLOSE OR A
CONSENT TO USE FORM 1040 TAX
RETURN INFORMATION
.01 Separate Written Document. Ex-
cept as provided by § 301.7216–3(c)(1)
(special rule for multiple disclosures or
multiple uses within a single consent
form), and described in section 5.05, be-
low, a taxpayer’s consent to each separate
disclosure or separate use of tax return in-
formation must be contained on a separate
written document, which can be furnished
on paper or electronically. For example,
the separate written document may be pro-
vided as an attachment to an engagement
letter furnished to the taxpayer.
.02 A consent furnished to the taxpayer
on paper must be provided on one or more
sheets of 8
1
/2inch by 11 inch or larger
paper. All of the text on each sheet of
paper must pertain solely to the disclosure
or use the consent authorizes, and the sheet
or sheets, together, must contain all the
elements described in section 5.04 and, if
applicable, comply with section 5.06. All
of the text on each sheet of paper must also
be in at least 12-point type (no more than
12 characters per inch).
.03 A consent furnished in electronic
form must be provided on one or more
computer screens. All of the text placed
by the preparer on each screen must pertain
solely to the disclosure or use of tax return
information authorized by the consent, ex-
cept for computer navigation tools. The
text of the consent must meet the following
specifications: the size of the text must be
at least the same size as, or larger than, the
normal or standard body text used by the
website or software package for direction,
communications, or instructions and there
must be sufficient contrast between the text
and background colors. In addition, each
screen or screens, together, must:
(1) contain all the elements described
in section 5.04 and, if applicable, comply
with section 5.06,
(2)beabletobesignedasrequiredby
section 6 and dated by the taxpayer, and
(3)beabletobeformattedinareadable
and printer-friendly manner.
.04 Requirements for every consent. In
addition to the requirements provided in
§ 301.7216–3, consents to disclose or use
Form 1040 series tax return information
must satisfy the following requirements:
(1) Mandatory statements in the con-
sent. The following statements must be
included in a consent under the circum-
stances described below, except that a tax
return preparer may substitute the pre-
parer’s name where “we” or “our” is used.
(a) Consent to disclose tax return infor-
mation in a context other than tax return
preparation or auxiliary services. Unless
a tax return preparer is obtaining a tax-
payer’s consent to disclose the taxpayer’s
taxreturninformationtoanothertaxre-
turn preparer to perform services that as-
sist in, or to provide auxiliary services (as
defined in § 301.7216–1(b)(2)(iii)) in con-
nection with, the preparation of the tax-
payer’s tax return, any consent to disclose
tax return information must contain the
following statements in the following se-
quence:
Federal law requires this consent
form be provided to you. Unless autho-
rized by law, we cannot disclose your
tax return information to third parties
for purposes other than the preparation
and filing of your tax return without
your consent. If you consent to the dis-
closure of your tax return information,
Federal law may not protect your tax
return information from further use or
distribution.
January 14, 20132842013–3 I.R.B.

You are not required to complete this
form to engage our tax return prepara-
tion services. If we obtain your signa-
ture on this form by conditioning our
tax return preparation services on your
consent, your consent will not be valid.
If you agree to the disclosure of your
tax return information, your consent is
valid for the amount of time that you
specify. If you do not specify the du-
ration of your consent, your consent is
valid for one year from the date of sig-
nature.
(b) Consent to disclose tax return in-
formation in tax return preparation or
auxiliary services context. If a tax return
preparer is otherwise required to obtain
a taxpayer’s consent to disclose the tax-
payer’s tax return information to another
tax return preparer to perform services
that assist in the preparation of, or to
provide auxiliary services (as defined in
§ 301.7216–1(b)(2)(iii)) in connection
with, the preparation of the taxpayer’s tax
return, any consent to disclose tax return
information must contain the following
statements in the following sequence:
Federal law requires this consent
form be provided to you. Unless autho-
rized by law, we cannot disclose your
tax return information to third parties
for purposes other than those related
to the preparation and filing of your
tax return without your consent. If you
consent to the disclosure of your tax
return information, Federal law may
not protect your tax return information
from further use or distribution.
You are not required to complete
this form. Because our ability to dis-
close your tax return information to
another tax return preparer affects the
tax return preparation service(s) that
we provide to you and its (their) cost,
we may decline to provide you with tax
return preparation services or change
the terms (including the cost) of the
tax return preparation services that we
provide to you if you do not sign this
form. If you agree to the disclosure of
your tax return information, your con-
sent is valid for the amount of time that
you specify. If you do not specify the
duration of your consent, your consent
is valid for one year from the date of
signature.
(c) Consent to use. All consents to
use tax return information must contain the
following statements in the following se-
quence:
Federal law requires this consent
form be provided to you. Unless autho-
rized by law, we cannot use your tax
return information for purposes other
than the preparation and filing of your
tax return without your consent.
You are not required to complete this
form to engage our tax return prepara-
tion services. If we obtain your signa-
ture on this form by conditioning our
tax return preparation services on your
consent, your consent will not be valid.
Your consent is valid for the amount of
time that you specify. If you do not
specify the duration of your consent,
your consent is valid for one year from
the date of signature.
(d) All consents must contain the fol-
lowing statement:
If you believe your tax return informa-
tion has been disclosed or used improp-
erly in a manner unauthorized by law or
without your permission, you may con-
tact the Treasury Inspector General for
Tax Administration (TIGTA) by tele-
phone at 1–800–366–4484, or by email
atcomplaints@tigta.treas.gov.
(e) Mandatory statement in any con-
sent to disclose tax return information to a
tax return preparer located outside of the
United States. If a tax return preparer to
whom the tax return information is to be
disclosed is located outside of the United
States, the taxpayer’s consent under
§ 301.7216–3 is required prior to any dis-
closure.See§§ 301.7216–3(a)(3)(i)(D),
301.7216–2(c) and (d).
(i) If the tax return information to be
disclosed does not include the taxpayer’s
social security number or if the social se-
curity number is fully masked or otherwise
redacted, consents for disclosure of tax re-
turn information to a tax return preparer
outside of the United States must contain
the following statement:
This consent to disclose may result in
your tax return information being dis-
closed to a tax return preparer located
outside the United States.
(ii) If the tax return information to be
disclosed includes the taxpayer’s social
security number or if the social security
number is not fully masked or otherwise
redacted, pursuant to the limitations of
§ 301.7216–3(b)(4) and section 5.07, con-
sents for disclosure of the taxpayer’s tax
return information that includes a social
security number to a tax return preparer
outside of the United States must contain
the following statement:
This consent to disclose may result
in your tax return information be-
ing disclosed to a tax return preparer
located outside the United States,in-
cluding your personally identifiable
information such as your Social Se-
curity Number (“SSN”). Both the tax
return preparer in the United States
that will disclose your SSN and the
tax return preparer located outside the
United States that will receive your
SSN maintain an adequate data pro-
tection safeguard (as required by the
regulations under 26 U.S.C. section
7216) to protect privacy and prevent
unauthorized access of tax return infor-
mation. If you consent to the disclosure
of your tax return information, federal
agencies may not be able to enforce
United States laws that protect the pri-
vacy of your tax return information
against a tax return preparer located
outside of the United States to whom
the information is disclosed.
(2) Affirmative consent. All consents
must require the taxpayer’s affirmative
consent to a tax return preparer’s disclo-
sure or use of tax return information. A
consent that requires the taxpayer to re-
move or deselect disclosures or uses that
the taxpayer does not wish to be made (i.e.,
an “opt-out” consent) is not permitted.
(3) Signature. All consents to disclose
or use tax return information must be
signed by the taxpayer.
(a) For consents on paper, the tax-
payer’s consent to a disclosure or use must
contain the taxpayer’s handwritten signa-
ture.
(b) For electronic consents, a taxpayer
must sign the consent by any method pre-
scribedinsection6,below.
(4) Incomplete consents. A tax return
preparer shall not alter a consent form af-
ter the taxpayer has signed the document.
Accordingly, a tax return preparer shall
not present a taxpayer with a consent form
containing blank spaces for the purpose of
completing the spaces after the taxpayer
has signed the document.
.05 Special rule for multiple disclosures
within a single consent form or multiple
uses within a single consent form. Section
301.7216–3(c)(1) provides that a taxpayer
2013–3 I.R.B.285January 14, 2013

may consent to multiple uses within the
same written document or multiple disclo-
sures within the same written document.
Disclosure consents and use consents must
be provided in separate documents. Mul-
tiple disclosure consents and multiple use
consents must provide the taxpayer with
the opportunity, within the separate writ-
ten document, to affirmatively select each
separate disclosure or use. Further, the tax-
payer must be provided the information in
section 5.04 for each separate disclosure or
use. The mandatory statements required in
section 5.04(1) relating to disclosure or use
need only be stated once in a multiple dis-
closure or multiple use consent.
.06 Disclosure of entire return. If, un-
der § 301.7216–3(c)(2), a consent autho-
rizes the disclosure of a copy of the tax-
payer’s entire tax return or all information
contained within a return, the consent must
provide that the taxpayer has the ability to
request a more limited disclosure of tax re-
turn information as the taxpayer may di-
rect.
.07 Adequate data protection safeguard.
Pursuant to § 301.7216–3(b)(4), a tax re-
turn preparer locatedwithin the United
States, including any territory or posses-
sion of the United States, may disclose a
taxpayer’s SSN to a tax return preparer
located outside of the United States or any
territory or possession of the United States
with the taxpayer’s consent only when
both the tax return preparer located within
the United States and the tax return pre-
parer located outside of the United States
maintain an adequatedata protection safe-
guard at the time the taxpayer’s consent is
obtained and when making the disclosure.
An adequate data protection safeguard is a
management-approved and implemented
security program, policy, and practice that
includes administrative, technical, and
physical safeguards to protect tax return
information from misuse, unauthorized
access, or disclosure and that meets or
conforms to one of the following privacy
or data security frameworks:
(1) The United States Department of
Commerce “safe harbor” framework for
data protection (or a successor program);
(2) A foreign law data protection safe-
guard that includes a security component
(e.g., the European Commission’s Direc-
tive on Data Protection);
(3) A framework that complies with
the requirements of a financial or simi-
lar industry-specific standard that is gen-
erally accepted as best practices for tech-
nologyandsecurityrelatedtothatindustry
(e.g., the BITS, Financial Services Round-
table, Financial Institution Shared Assess-
ment Program);
(4) The requirements of the
AICPA/CICA Privacy Framework;
(5) The requirements of the most recent
version of IRS Publication 1075,Tax In-
formation Security Guidelines for Federal,
State and Local Agencies and Entities;or
(6) Any other data security framework
that provides the same level of privacy pro-
tection as contemplated by one or more of
the frameworks described in (1) through
(5).
SECTION 6. ELECTRONIC
SIGNATURES
.01 If a taxpayer furnishes consent
to disclose or consent to use tax return
information electronically, the taxpayer
mustfurnishthetaxreturnpreparerwith
an electronic signature that will verify
that the taxpayer consented to the dis-
closure or use. The regulations under
§ 301.7216–3(a) require that the consent
be knowing and voluntary. Therefore, for
an electronic consent to be valid, it must
be furnished in a manner that ensures affir-
mative, knowing consent of the taxpayer
to each disclosure or use.
.02Ataxreturnpreparerseekingtoob-
tain a taxpayer’s consent to the disclosure
or consent to the use of tax return infor-
mation electronically must obtain the tax-
payer’s signature on the consent in one of
the following manners:
(a) Assign a personal identification
number (PIN) that is at least 5 characters
long to the taxpayer. To consent to the
disclosure or consent to the use of the
taxpayer’s tax return information, the tax-
payer may type in the pre-assigned PIN
as the taxpayer’s signature authorizing
the disclosure or use. A PIN may not be
automatically furnished by the software so
that the taxpayer only has to click a button
for consent to be furnished. The taxpayer
must affirmatively enter the PIN for the
electronic signature to be valid;
(b) Have the taxpayer type in the tax-
payer’s name and then hit “enter” to au-
thorize the consent. The software must not
automatically furnish the taxpayer’s name
so that the taxpayer only has to click a but-
ton to consent. The taxpayer must affir-
matively type the taxpayer’s name for the
electronic consent to be valid; or
(c) Any other manner in which the
taxpayer affirmatively enters 5 or more
characters unique to the taxpayer that the
taxreturnpreparerusestoverifythetax-
payer’s identity. For example, entry of a
response to a question regarding a shared
secret could be the type of information by
which the taxpayer authorizes disclosure
or use of tax return information.
SECTION 7. EXAMPLES
.01 The application of this revenue pro-
cedureisillustratedbythefollowingex-
amples:
(1)Example 1. Preparer P offers tax prepara-
tion services over the Internet. P wishes to use in-
formation the taxpayer provides during tax prepa-
ration of the taxpayer’s Form 1040 to generate tar-
geted banner advertisements (i.e., electronic adver-
tisements appearing on the computer screen based on
the taxpayer’s tax return information). In the course
of advertising services and products, P also wishes to
disclose to other third parties the information that the
taxpayer provides.
(a) P posts, in pertinent part, the following con-
sent on the computer screen for taxpayers to indicate
approval. If a taxpayer does not indicate approval,
the tax return preparation software does not permit
the taxpayer to use the software.
PRIVACY STATEMENT
Your privacy is very important to us at P. We are
providing this statement to inform you about the
types of information we collect from you, and
how we may disclose or use that information in
connection with the services we provide. This
Privacy Statement describes the privacy practices
of our company as required by applicable laws. .
. . During the course of providing our services
to you, we may offer you various other services
that may be of interest to you based on our deter-
mination of your needs through analysis of your
data. Your use of the services we offer constitutes
a consent to our disclosure of tax information to
the service providers. If at any time you wish
to limit your receipt of promotional offers based
upon information you provide, you may call us at
thefollowing....
(b) Beneath this Privacy Statement, the following
acknowledgment line appears next to two button im-
ages stating “yes” and “no:”
“I have read the Privacy Statement and agree to it
by clicking here.”
(c) If the taxpayer clicks “no,” a message ap-
pears on the screen informing the taxpayer that tax
return preparation will not proceed without the tax-
payer agreeing to the company’s Privacy Statement.
(d) P has failed to comply with the requirements
of § 301.7216–3 and this revenue procedure. P has at-
tempted to obtain consent from the taxpayer by mak-
ing the use of the program (i.e., the provision of tax
return preparation services) contingent on the tax-
January 14, 20132862013–3 I.R.B.

payer’s consent to P’s disclosure and use of the tax-
payer’s tax return information for purposes other than
tax preparation (e.g., for use in displaying targeted
banner advertisement). Thus, the consent is not vol-
untary, as required by § 301.7216–3(a). P has also
failed to identify the tax return information that it will
disclose or use, as required by § 301.7216–3(a)(3)(C);
to identify the purposes of the disclosures or uses,
as required by section § 301.7216–3(a)(3)(B); and,
to the extent that P intends to disclose the entire re-
turn based on the consent, P’s consent form has not
provided that the taxpayer has the ability to request a
more limited disclosure of tax return information as
the taxpayer may direct as required by section 5.06.
The single document attempts to have the taxpayer
consent to both disclosures and uses, in violation of
section 5.05. P has not used the mandatory statements
required by section 5.04(1). The consent is not signed
by the taxpayer because P has not provided a means
for the taxpayer to electronically sign the consent in
a form authorized by section 6. Finally, the consent
is not dated as required by section 5.03(2).
(2)Example 2. Preparer Q offers tax preparation
services over the Internet and wishes to use targeted
banner advertisements during tax return preparation.
Q contracts with Bank A regarding the advertisement
of Individual Retirement Accounts (IRAs). Preparer
Q displays advertisements to the taxpayer only if the
taxpayer’s tax return information indicates that the
services are relevant to the taxpayer (e.g.,targeted
banner advertisements). A taxpayer using Q’s soft-
ware must enter a password to begin the process of
preparing a return.
(a) Before the taxpayer starts providing tax return
information, the following screen appears on Q’s tax
preparation program.
CONSENT TO USE OF TAX RETURN
INFORMATION
Federal law requires this consent form be pro-
vided to you. Unless authorized by law, we can-
not use your tax return information for purposes
other than the preparation and filing of your tax
return without your consent.
You are not required to complete this form to
engage our tax return preparation services. If we
obtain your signature on this form by condition-
ing our tax return preparation services on your
consent, your consent will not be valid. Your con-
sent is valid for the amount of time that you spec-
ify. If you do not specify the duration of your con-
sent, your consent is valid for one year from the
date of signature.
For your convenience, Q has entered into ar-
rangements with certain banks regarding the pro-
vision of Individual Retirement Accounts (IRAs).
To determine whether this service may be of in-
terest to you, Q will need to use your tax return
information.
If you would like Q to use your tax return in-
formation to determine whether this service is rel-
evant to you while we are preparing your return,
please check the corresponding box, provide the
information requested below, and sign and date
this consent to the use of your tax return informa-
tion.
I, [INSERT NAME] authorize Q to use the
information I provide to Q during the preparation
of my tax return for 2006 to determine whether to
offer me an opportunity to invest in an IRA.
Signature:[INSERT SIGNATURE AS
PRESCRIBED UNDER
SECTION 6]
Date:
[INSERT DATE]
If you believe your tax return information has
beendisclosedorusedimproperlyinamanner
unauthorized by law or without your permis-
sion, you may contact the Treasury Inspector
General for Tax Administration (TIGTA) by
telephone at 1–800–366–4484, or by email at
complaints@tigta.treas.gov.
(b) If the taxpayer selects the consent above, the
taxpayer is directed to print the screen. Later, after the
taxpayer has entered data to prepare his or her 2006
tax return, the following screen is displayed:
CONSENT TO DISCLOSURE OF TAX
RETURN INFORMATION
Federal law requires this consent form be pro-
vided to you. Unless authorized by law, we can-
not disclose your tax return information to third
parties for purposes other than the preparation and
filing of your tax return without your consent. If
you consent to the disclosure of your tax return in-
formation, Federal law may not protect your tax
return information from further use or distribu-
tion.
You are not required to complete this form to
engage our tax return preparation services. If we
obtain your signature on this form by condition-
ing our tax return preparation services on your
consent, your consent will not be valid. If you
agree to the disclosure of your tax return informa-
tion, your consent is valid for the amount of time
that you specify. If you do not specify the dura-
tion of your consent, your consent is valid for one
year from the date of signature.
You have indicated that you are interested
in obtaining information on IRAs. To provide
you with this information, Q must disclose your
tax return information, as indicated below, to the
bank that provides this service.
If you would like Q to disclose your tax re-
turn information to the bank providing this ser-
vice, please check the corresponding box for the
service in which you are interested, provide the
information requested below, and sign and date
your consent to the disclosure of your tax return
information.
I, [INSERT NAME], authorize Q to dis-
close to Bank A that portion of my tax return in-
formation for 2006 that is necessary for Bank A
to contact me and provide information on obtain-
ing an IRA or altering my contribution to an IRA
for 2006.
Signature:[INSERT SIGNATURE AS
PRESCRIBED UNDER
SECTION 6]
Date:
[INSERT DATE]
If you believe your tax return information has
beendisclosedorusedimproperlyinamanner
unauthorized by law or without your permis-
sion, you may contact the Treasury Inspector
General for Tax Administration (TIGTA) by
telephone at 1–800–366–4484, or by email at
complaints@tigta.treas.gov.
If the taxpayer consents to the disclosure of the
tax return information using the screen above, the tax-
payer is directed to print the screen. Q will then trans-
mit only that portion of the taxpayer’s tax return infor-
mation for 2006 that is necessary for the bank autho-
rized in the consent, Bank A, to provide the service.
(c) These two consent forms, above, satisfy the re-
quirements of § 301.7216–3(c) and this revenue pro-
cedure for the disclosure or use of the information
provided by the taxpayer for the specific purposes
stated in the consent forms.
(3)Example 3. Large corporation C employs 200
expatriated employees who work in Belgium. Pre-
parer R, located in the United States, prepares indi-
vidual income tax returns for C’s expatriated workers
pursuant to a corporate plan for executive tax return
preparation. Preparer R is affiliated with Preparer F,
located in Belgium. Pursuant to the corporate plan for
executive tax return preparation, Preparer R plans to
provide the expatriated employees’ tax return infor-
mation, including the expatriated employees’ SSNs,
located on Preparer R’s US based data servers to Pre-
parer F who then plans to meet with the expatriated
employees to prepare those employees’ 2008 individ-
ual income tax returns. Preparer R obtains informa-
tion electronically from various sources in anticipa-
tion of providing the information to Preparer F. Pre-
parer R developed, adopted, and incorporated into its
operations a data privacy program that meets the re-
quirements of the AICPA/CICA Privacy Framework.
Preparer F also developed, adopted, and incorporated
into its operations a data privacy program, which is
subject to the European Commission’s Directive on
Data Protection. The data privacy programs adopted
by Preparer R and Preparer F are in operation at the
time all consents to disclose are obtained by Preparer
R and disclosures are made by Preparer R to Preparer
F.
(a) Before transmitting or sending any expatriated
employee’s SSN to Preparer F, Preparer R provides
the expatriated employee (taxpayer) with the follow-
ing document.
CONSENT TO DISCLOSURE OF TAX
RETURN INFORMATION
Federal law requires this consent form be pro-
vided to you. Unless authorized by law, we can-
not disclose your tax return information to third
parties for purposes other than the preparation and
filing of your tax return and, in certain limited
circumstances, for purposes involving tax return
preparation without your consent. If you consent
to the disclosure of your tax return information,
Federal law may not protect your tax return infor-
mation from further use or distribution.
You are not required to complete this form.
Because our ability to disclose your tax return in-
formation to another tax return preparer affects
the tax return preparation service(s) that we pro-
vide to you and its (their) cost, we may decline to
provide you with tax return preparation services
or change the terms (including the cost) of the
tax return preparation services that we provide to
you if you do not sign this form. If you agree
to the disclosure of your tax return information,
your consent is valid for the amount of time that
you specify. If you do not specify the duration of
your consent, your consent is valid for one year
from the date of signature.
2013–3 I.R.B.287January 14, 2013

This consent to disclose may result in your tax
return information being disclosed to a tax return
preparer located outside the United States,includ-
ing your personally identifiable information such
as your Social Security Number (“SSN”).Both
the tax return preparer in the United States that
will disclose your SSN and the tax return preparer
located outside the United States that will receive
your SSN maintain an adequate data protection
safeguard (as required by the regulations under 26
U.S.C. Section 7216) to protect privacy and pre-
vent unauthorized access of tax return informa-
tion. If you consent to the disclosure of your tax
return information, Federal agencies may not be
able to enforce US laws that protect the privacy
of your tax return information against a tax return
preparer located outside of the US to which the
information is disclosed.
If you agree to allow Preparer R to disclose
your tax return information, including your SSN,
to Preparer F for purposes of providing assistance
in the preparation of your 2008 individual income
tax return, please check the box below, provide
the information requested below, and sign and
date your consent to the disclosure of your tax re-
turn information.
I, [INSERT NAME], authorize Preparer R
to disclose to Preparer F my tax return informa-
tion, including my SSN, to allow Preparer F to
assist in the preparation of my 2008 individual in-
come tax return.
Signature:
Date:
[INSERT DATE]
If you believe your tax return information has
beendisclosedorusedimproperlyinamanner
unauthorized by law or without your permis-
sion, you may contact the Treasury Inspector
General for Tax Administration (TIGTA) by
telephone at 1–800–366–4484, or by emailat
complaints@tigta.treas.gov.
The taxpayer provides consent by checking the
box and signing and dating the consent form. Pre-
parer R then provides a copy of the signed and dated
consent form to the taxpayer, and then transmits the
taxpayer’s tax return information to Preparer F for
processing of taxpayer’s 2008 individual income tax
return.
(b) The consent above satisfies the requirements
of section 301.7216–3 and this revenue procedure for
the disclosure of the information provided by the tax-
payer for the specific purpose stated in the consent
form.
SECTION 8. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2008–35, 2008–29 I.R.B.
132, is modified and superseded.
SECTION 9. EFFECTIVE DATE
This revenue procedure is effective
on January 14, 2013. Prior to that date,
tax return preparers may use the manda-
tory language provided in section 5.04 of
this revenue procedure or the language
provided in section 4.04 of Rev. Proc.
2008–35. Any consent obtained on or
after January 14, 2013 must contain the
mandatory language provided in section
5.04 of this revenue procedure.
SECTION 10. DRAFTING
INFORMATION
The principal authors of this rev-
enue procedure are Skyler Bradbury and
Emily M. Lesniak of the Office of the
Associate Chief Counsel (Procedure and
Administration). For further information
regarding this revenue procedure, contact
Emily M. Lesniak at (202) 622–4910 (not
a toll-free call).
January 14, 20132882013–3 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Awards for Inf
ormation
Relating to De
tecting
Underpaymen
ts of Tax or
Violations o
ftheInternal
Revenue Law
s
REG–141066–09
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: No
tice of proposed rulemaking.
SUMMARY: These regulations pro-
vide comprehensive guidance for the
award program authorized under Internal
Revenue Code (Code) section 7623, as
amended. The regulations provide guid-
ance on submitting information regarding
underpayments of tax or violations of the
internal revenue laws and filing claims for
award, as well as on the administrative
proceedings applicable to claims for award
under section 7623. The regulations also
provide guidance on the determination
and payment of awards, and provide defi-
nitions of key terms used in section 7623.
Finally, the regulations confirm that the
Director, officers, and employees of the
Whistleblower Office are authorized to
disclose return information to the extent
necessary to conduct whistleblower ad-
ministrative proceedings. The regulations
provide needed guidance to the general
public as well as officers and employees of
the IRS who review claims under section
7623. This document also provides notice
of a request for a public hearing on the
proposed regulations.
DATES: Electronic or written comments
and requests for a public hearing must be
received by February 19, 2013.
ADDR
ESSES: Send submissions to
CC:P
A:LPD:PR(REG–141066–09),
Room
5203, Internal Revenue Service, PO
Box
7604, Ben Franklin Station, Wash-
ing
ton, DC 20044. Submissions may be
han
d-delivered Monday through Friday
bet
ween the hours of 8 a.m. and 4 p.m.
to C
C:PA:LPD:PR (REG–141066–09),
Courier’s Des
k, Internal Revenue Service,
1111 Constitu
tion Avenue, N.W., Wash-
ington, DC, or
sent electronically, via the
Federal eRule
making Portal atwww.regu-
lations.gov(
IRS REG–141066–09).
FOR FURTHER IN
FORMATION
CONTACT: Con
cerning the proposed
regulation,
Meghan M. Howard, at (202)
622–7950; co
ncerning submissions of
comments and
requests for a public hear-
ing, Oluwaf
unmilayo Taylor, at (202)
622–7180 (n
ot toll-free numbers).
SUPPLEMENT
ARY INFORMATION:
Background
Section 406
of the Tax Relief and
Health Care
Act of 2006, Public Law
109–432 (12
0 Stat. 2922), enacted on De-
cember 20,
2006, amended section 7623
of the Code
on the payment of awards to
certain pe
rsons who provide information
to the Inte
rnal Revenue Service relating
to the dete
ction of underpayments of tax
and viola
tions of the internal revenue
laws. Sec
tion 406 redesignated the ex-
isting st
atutory authority to pay awards
at the dis
cretion of the Secretary of the
Treasur
y as section 7623(a), and it added a
new prov
ision regarding awards to certain
individ
uals as section 7623(b). Generally,
section
7623(b) provides that qualifying
individ
uals will receive an award of at
least 1
5 percent, but not more than 30 per-
cent, o
f the collected proceeds resulting
from th
e action with which the Secre-
tary pr
oceeded based on the information
provid
ed to the IRS by the individual.
Secti
on 406 also addressed several award
progr
am administrative issues and estab-
lishe
d a Whistleblower Office within the
IRS, w
hich operates at the direction of
the Co
mmissioner, analyzes information
recei
ved under section 7623, as amended,
and e
ither investigates the information
itse
lf or assigns the investigation to the
appr
opriate IRS office.
In No
tice 2008–4,2008–1
C.B.
253 (January 14, 2008) (see
§601
.601(d)(2)(ii)(b) of this chapter),
the I
RS provided guidance on filing
cla
ims for award under section 7623, as
ame
nded. In the notice, the IRS recog-
niz
ed that the award program authorized
by section 762
3(a) had been previously
implemented t
hrough regulations ap-
pearing at §30
1.7623–1 of the Procedure
and Administr
ation Regulations. The
Internal Reve
nue Manual (IRM) provided
additional g
uidance to IRS officers and
employees on
the award program au-
thorized by s
ection 7623(a). The notice
provided tha
t the IRS would generally
continue to
follow section 301.7623–1
and the IRM p
rovisions for claims for
award withi
n the scope of section 7623(a),
subject to c
ertain exceptions listed in the
notice. Th
e notice also provided, how-
ever, that
the regulations would not apply
to the new a
ward program authorized
under sect
ion 7623(b). Instead, the notice
provided i
nterim guidance applicable to
claims fo
r award submitted under section
7623(b).
On March 2
5, 2008, the Treasury De-
partment
(Treasury) and the IRS published
Temp. Tre
as. Reg. §301.6103(n)–2T,
and corre
sponding proposed regulations,
describ
ing the circumstances and process
in and by
which officers and employees
of the Tr
easury may disclose return infor-
mation t
o whistleblowers (and their legal
represe
ntatives, if any) in connection with
writte
n contracts for services relating to
the det
ection of violations of the internal
revenu
e laws or related statutes. Under
these r
egulations, whistleblowers and legal
repres
entatives who receive return infor-
matio
n are subject to the civil and criminal
penal
ty provisions of sections 7431, 7213,
and 72
13A for the unauthorized inspection
or dis
closure of return information. The
Treas
ury and the IRS finalized the pro-
pose
d regulations on March 15, 2011 (T.D.
9516
, 2011–13 I.R.B. 575).
In De
cember 2008, the IRS revised
IRM P
art 25.2.2, updating policies and
proc
edures concerning the handling of
info
rmation, processing of claims for
awar
ds, and payment of awards under sec-
tio
n 7623, as amended. The IRS also re-
del
egated the authority to approve awards
to t
he Director of the Whistleblower Of-
fic
e. In July 2010, the IRS further revised
IRM
Part 25.2.2 to provide detailed in-
str
uctions to IRS officials and employees
on
the computation and payment of awards
un
der section 7623 and to describe the
ad
ministrative procedures applicable to
2013–3 I.R.B.289January 14, 2013

claims for award under section 7623(b).
The revised IRM introduced many guid-
ance elements that are developed in these
proposed regulations, including defini-
tions of key terms, the whistleblower
administrative proceedings, the fixed per-
centage award framework and criteria for
making award determinations, and rules
on handling multiple and joint claimants.
On January 18, 2011, Treasury and
the IRS published proposed regulations
(REG–131151–10, 2011–8 I.R.B. 519)
clarifying the definitions of the termspro-
ceeds of amounts collectedandcollected
proceedsfor purposes of section 7623 and
providing that the provisions of existing
§301.7623–1(a), concerning refund pre-
vention claims, apply to claims under both
section 7623(a) and section 7623(b). The
proposed regulations further provided that
the reduction of an overpayment credit
balance constitutes proceeds of amounts
collected and collected proceeds for pur-
poses of section 7623. The Treasury and
the IRS finalized the proposed regulations
on February 22, 2012 (T.D. 9580, 2012–16
I.R.B. 801).
Explanation of Provisions
The purpose of these regulations is to
provide comprehensive guidance for the
award program authorized under section
7623, as amended. Accordingly, these reg-
ulations provide guidance on issues relat-
ing to the award program from the filing
of a claim to the payment of an award,
focusing on three major elements of the
program: (i) the submission of informa-
tion and filing of claims for award; (ii) the
whistleblower administrative proceedings
applicable to claims for award under sec-
tion 7623; and (iii) the computational de-
termination and payment of awards. These
proposed regulations also provide defini-
tions of key terms under section 7623 and
provide that the Director, officers, and em-
ployees of the Whistleblower Office are
authorized to disclose return information
to the extent necessary to conduct whistle-
blower administrative proceedings.
These proposed rules apply generally
to claims for award under both section
7623(a) and section 7623(b), unless oth-
erwise stated. Nonetheless, while the
Whistleblower Office will, for example,
conduct whistleblower administrative pro-
ceedings pursuant to the proposed rules of
§301.7623–3 for claims for award under
both section 7623(a) and section 7623(b),
the process applicable to claims under
section 7623(a) differs from that applica-
ble to claims under section 7623(b). The
differences reflect the clear distinction
the statute draws between awards under
section 7623(a) and section 7623(b) and
will avoid placing a heavy administrative
burden on the IRS.
Submitting Information and Filing Claims
for Award
Section 301.7623–1 of these proposed
rules provides guidance on submitting
information to the IRS and filing claims
for award with the Whistleblower Office.
These rules are intended to clarify the
process individuals should follow to be
eligible to receive awards under section
7623. The proposed rules, in large part,
track the rules that Treasury and the IRS
have previously provided, as set forth in
the existing regulations, Notice 2008–4,
and the IRM. This includes, for example,
the general information that individuals
should submit to claim awards and the
descriptions of the type of specific and
credible information regarding taxpayers
that should be submitted. Most notably, an
individual submitting a claim should iden-
tify a person and describe and document
the facts supporting the claimant’s belief
that the person owes taxes or violated the
tax laws. The proposed rules clarify that
the IRS will consider an individual who
identifies a pass-through entity as having
identified the taxpayers with direct or in-
direct interests in the entity. Furthermore,
the proposed rules provide that if an indi-
vidual identifies a member of a firm who
promoted another identified person’s par-
ticipation in an identified transaction, then
the IRS will consider the individual as
having identified both the firm and all the
other members of the firm. These clarify-
ing provisions complement the proposed
rules’ definition of the term related action.
The proposed rules also include eligi-
bility requirements for filing claims for
award and a list of ineligible claimants.
The list of ineligible claimants restates the
list published in Notice 2008–4 in its en-
tirety. For example, the proposed rules
provide that individuals who are or were
required by Federal law or regulation to
disclose information are not eligible to file
claims for award based on the information.
To enable the IRS to administer the
award program, these proposed regula-
tions require individuals to file formal
claims for award. Theproposed rules pro-
vide a process for perfecting incomplete
claims for award and permit claimants to
perfect and resubmit deficient claims after
they are rejected by the Whistleblower
Office. Finally, the IRS is considering
issues relating to the electronic filing of
claims for award, which may be addressed
in other published guidance.
The proposed rules also reaffirm the
practice of Treasury and the IRS to safe-
guard the identity of individuals who sub-
mit information under section 7623 and
these proposed regulations whenever pos-
sible. The informant privilege allows the
Government to withhold the identity of a
person that provides information about vi-
olations of law to those charged with en-
forcing the law. The informant privilege
is held by the Government, not the in-
formant, and is not an absolute privilege.
There may be instanceswhen, after careful
deliberation and high-level IRS approval,
the disclosure of the identity of an infor-
mantmaybedeterminedtobeinthebest
interests of the Government. For example,
an informant’s identity will have to be re-
vealed when a claimant is needed as a wit-
ness in a case in litigation. The IRS will,
however, make every effort to notify an in-
formant before disclosing the informant’s
identity.
Comments are specifically requested
on:
(1) The list of ineligible claimants pro-
vided in paragraph (b)(2) of §301.7623–1
of these proposed regulations and whether
other identifiable groups of individuals
should be treated as ineligible to file claims
for award.
(2) Whether electronic claim filing
would be appropriate and beneficial to
claimants, and, if so, what features should
be included in an electronic claim filing
system.
Definitions of Key Terms
Section 301.7623–2 of these proposed
regulations defines several key terms for
purposes of determining awards under
section 7623 and the proposed regula-
tions. Two other key terms,planned and
January 14, 20132902013–3 I.R.B.

initiatedandfinal determination of tax,
are described and defined, respectively,
in §301.7623–4 of these proposed regu-
lations. The definitions are intended to
facilitate the IRS’s administration of the
award program in a manner that is con-
sistent with the statutory language. As
described below, several of the defini-
tions, including the definition of the terms
proceeds based on,related action,and
collected proceeds, build on definitions
contained in Notice 2008–4, TD 9580, and
the IRM, while other definitions are new.
Generally, section 7623(b) provides
that if the Secretary proceeds with an ad-
ministrative or judicial action (including
any related actions) based on the informa-
tion provided by the individual, then the
individual will receive an award from the
collected proceeds resulting from the ac-
tions. The definition of the termproceeds
based oncontained in these proposed
regulations reflects the ways in which
information provided to the IRS may ul-
timately result in an award under that
standard. Further, the definition reflects
the requirement, under Section 406 of the
2006 Act, that the IRS must analyze and
investigate information received under
section 7623(b) by providing that the IRS
cannot, for purposes of paying an award
under section 7623, proceed based on
information without taking some action
beyond simply analyzing or investigating
the information. The definition provides
that the IRS proceeds based on the in-
formation provided only when the IRS
initiates a new action that it would not
have initiated, expands the scope of an
ongoing action that it would not have ex-
panded, or continues to pursue an ongoing
action that it would not have continued but
for the information provided.
The definition of the termrelated action
contained in these proposed regulations
clarifies which actions may be included
for purposes of computing collected pro-
ceeds by requiring a clear link between
the original action and the other, related
action(s). To enable the IRS to administer
the award program and to strike an ap-
propriate balance between the individual’s
substantial contribution and the IRS’s in-
dependent administration of the tax laws,
this clear link requires: (i) a direct re-
lationship between the person identified
in the information provided and subject
to the original action and the person(s)
subject to the other action(s); and (ii) a
substantial similarity between the specific
facts contained in the information pro-
vided and the relevant facts of the other
action(s). Consistent with the statutory
language, this conjunctive test excludes
from the definition of related action ac-
tions that are merely factually similar to
the original action, for example, actions
against unidentified taxpayers that merely
engaged in substantially similar transac-
tions to the transaction identified in the
information provided. The direct rela-
tionship test of the definition’s first prong
amounts to a one-step rule: the taxpayer
subject to the related action can be no more
than one step removed — in terms of iden-
tification by the IRS — from a taxpayer
identified in the information provided.
For example, under the proposed rules, if
the information provided identifies a party
to a transaction and the facts relevant to
the transaction, then an action against an
unidentified individual or firm that pro-
moted the identified person’s participation
in the transaction may be a related action.
An action against another client of the
unidentified promoter, however, is not a
related action, regardless of whether the
other client engaged ina substantially sim-
ilar transaction or whether the information
provided could be said to have initiated
events that led to all the actions. Simi-
larly, if the information provided identifies
a party to a particular transaction and
the facts relevant to the transaction, then
an action against a second, unidentified
party to the same transaction may be a
related action. An action against another
unidentified person that promoted only the
second, unidentified party’s participation
in the transaction, however, is not a related
action.
The definition ofcollected proceeds
contained in these proposed regulations
builds on the definition contained in the fi-
nal regulations published on February 22,
2012 (TD 9580). The definition restates
the rule from those final regulations that
collected proceeds include: tax, penalties,
interest, additions to tax, and additional
amounts collected because of the informa-
tion provided; amounts collected prior to
receipt of the information provided if the
information results in the denial of a claim
for refund that otherwise would have been
paid; and a reduction of an overpayment
credit balance used to satisfy a tax liability
incurred because of the information pro-
vided.
BasedontheIRS’sexperienceinad-
ministering the award program since the
issuance of the final regulations and on
stakeholder input on those regulations,
the proposed regulations’ definition of
collected proceeds also addresses refund
netting and the treatment of tax attributes
generally, which include net operating
losses (NOLs). The proposed regulations
provide that if any portion of a claim for
refund that is substantively unrelated to
the information provided is (1) allowed
and (2) used to satisfy a tax liability at-
tributable to the information provided
instead of refunded to the taxpayer, then
the allowed but non-refunded amount
constitutes collected proceeds. As to the
treatment of tax attributes such as NOLs,
the proposed regulations provide a com-
putational rule that reflects the discussion
contained in the preamble to T.D. 9580.
There, Treasury and the IRS noted that tax
attributes such as NOLs do not represent
amounts credited to the taxpayer’s ac-
count that are directly available to satisfy
current or future tax liabilities or that can
be refunded. Rather, tax attributes such
as NOLs are component elements of a
taxpayer’s liability. The disallowance of
an NOL claimed by a taxpayer may affect
the taxpayer’s liability and, in the context
of a whistleblower claim, may result in
collected proceeds.
To enable the IRS to administer the
award program, the proposed regulations’
computational rule provides that, after
there has been a final determination of
tax, the IRS will compute the amount of
collected proceeds taking into account all
information known with respect to the
taxpayer’s account (including all tax at-
tributes such as NOLs). For example: a
taxpayer reports an NOL of $10 million
for 2009 and a whistleblower’s informa-
tion results in a reduction of the NOL to
$5 million. If the NOL is unused as of the
date the IRS computes the amount of col-
lected proceeds, then there are no collected
proceeds. If, however, the 2009 NOL was
partially carried back to 2008, initially
generating a $3 million refund, and the
whistleblower’s information reduced the
carryback amount, resulting in a $1.5 mil-
lion reduction in the refund for 2008, then
the amount of the erroneous refund re-
covered and collected would be collected
2013–3 I.R.B.291January 14, 2013

proceeds. The proposed regulations’ def-
inition of collected proceeds, therefore,
does not refer explicitly to NOLs, tax
credits, or any other tax attributes that may
factor into the computation of a taxpayer’s
liability. Furthermore, the proposed reg-
ulations’ computational rule does not
attempt to assign a present value to these
attributes, given that whether, when, or to
what extent they may affect a taxpayer’s
liability or the amount of collected pro-
ceeds cannot be determined in advance
of their actual use. Nor does the compu-
tational rule require the IRS to continue
tracking these taxpayers, who may not be
under examination, and attributes into fu-
ture years, given the significant costs and
heavy administrative burden that would
be required.
Consistent with provisions in the IRM,
these proposed regulations provide that
amounts recovered under the provisions
of non-Title 26 laws do not constitute
collected proceeds, because the plain lan-
guage of section 7623 authorizes awards
for detecting “underpayments of tax” and
violations of the internal revenue laws.
The internal revenue laws are contained in
Title 26, Internal Revenue Code and guid-
ance issued under thattitle. Although the
IRS may collect penalties for violations
of Title 31, Money and Finance, and seize
property under Title 18, Crimes and Crimi-
nal Procedure, those penalties and seizures
do not relate to “underpayments of tax,”
may be imposed independently of whether
a tax underpayment occurs, and are not re-
lated to violations of the internal revenue
laws under Title 26. For example, the IRS
may collect penalties for failure to file
Form 90–22.1, “Report of Foreign Bank
and Financial Accounts” (FBAR), which
is an information reporting requirement
under Title 31 the violation of which does
not necessarily result in an underpayment
of tax. As a result, FBAR penalties do not
constitute collected proceeds. Moreover,
sections 5323(a) and 9703(a) of Title 31
provide independent authority, separate
and apart from section 7623, for the pay-
ment of rewards for information relating
to certain violations of Title 31 or Title 18.
These proposed regulations also pro-
vide that criminal fines that must be de-
posited into the Victims of Crime Fund do
not constitute collected proceeds. Under
the Victims of Crimes Act of 1984, crimi-
nal fines that are imposed on a defendant
by a district court are deposited into the
Victims of Crime Fund. See 42 U.S.C.
§10601(b)(1). Criminal fines imposed for
Title 26 offenses are not exempt from this
requirement. The fines imposed in crim-
inal tax cases that are deposited into the
Victims of Crime Fund are not available to
the Secretary to pay awards under section
7623. These exclusions were previously
explained in the preamble to T.D. 9580 and
are further clarified in the text of these pro-
posed regulations. Restitution ordered by
a court to the IRS, however, is collected by
the IRS as a tax and, therefore, is encom-
passed in the definition of collected pro-
ceeds.
Finally, these proposed regulations pro-
vide a rule for determining collected pro-
ceeds in cases in which the IRS does not
collect the full amount of the assessed li-
abilities. Pursuant to this rule, collected
proceeds, for purposes of paying an award
under section 7623, are determined on a
proratabasisbasedontheratiothatadjust-
ments attributable to the information pro-
vided bear against the total adjustments.
Section 301.7623–2 of these proposed
regulations also defines the termsaction,
administrative action,judicial action,
amount in dispute,andgross income.
Comments are specifically requested
on:
(1) Each of the key terms defined in this
section.
(2) Whether and how the IRS could de-
termine any amount of collected proceeds
that arise as a result of a taxpayer’s use of
tax attributes such as NOLs after the final
determination of tax and the computation
of collected proceeds, as provided in the
proposed regulations.
Whistleblower Administrative
Proceedings
Section 301.7623–3 of these proposed
regulations describes the administrative
proceedings applicable to claims for award
under both section 7623(a) and section
7623(b). For purposes of applying these
procedures, the IRS may rely on the
claimant’s description of the amount owed
by the taxpayer(s). The IRS may, however,
rely on other information as necessary
(for example, when the alleged amount in
dispute is below the $2 million threshold
of section 7623(b)(5)(B), but the actual
amount in dispute is above the threshold).
Administrative proceedings for awards
paid under section 7623(a)
In cases under section 7623(a), these
proposed regulations provide that the
Whistleblower Office will send a prelim-
inary award recommendation letter to the
claimant. Sending this letter marks the
beginning of the whistleblower adminis-
trative proceeding. The claimant will then
have 30 days within which to provide com-
ments to the Whistleblower Office. This
approach is intended to provide claimants
under section 7623(a) with an opportunity
to participate in the award process, both to
add transparency to the proceeding and to
assist the Whistleblower Office in consid-
ering all potentially-relevant information
in paying awards under section 7623(a),
even though those awards are not subject
to Tax Court review.
Administrative proceedings for awards
paid under section 7623(b)
In cases in which the Whistleblower
Office will determine an award under sec-
tion 7623(b), the whistleblower adminis-
trative proceeding more closely resembles
the whistleblower award determination
administrative proceeding contained in the
IRM, which only applies to awards deter-
mined under section 7623(b). In an effort
to both streamline the process and provide
information to whistleblowers as early as
allowable under section 6103, however,
the proposed regulations move the begin-
ning of the proceeding forward. Under the
proposed regulations, the whistleblower
administrative proceeding begins when
the Whistleblower Office sends out the
preliminary award recommendation let-
ter. Accordingly, whistleblowers may
receive opportunities to participate in the
award determination process at the ad-
ministrative level even before there is a
final determination of tax in the underly-
ing taxpayer action. These opportunities
will be provided in connection with all
awards paid under section 7623(b), and
they are in addition to opportunities a
whistleblower may be afforded to assist
the IRS in connection with the underlying
taxpayer action, for example pursuant to
§§301.6103(n)–2 and 301.7623–1(d) of
the proposed regulations.
The Treasury and the IRS emphasize,
however, that the proposed regulations do
January 14, 20132922013–3 I.R.B.

not and cannot move forward a whistle-
blower’s opportunity to appeal an award
determination to Tax Court. Under the pro-
posed regulations, the Whistleblower Of-
fice will issue an appealable determination
or make payment, if a whistleblower has
waived the determination, as soon as pos-
sible after there has been a final determina-
tion of tax (that is, the statutory period for
the taxpayer to claim a refund has expired
or the underlying taxpayer action is other-
wise final).
The whistleblower administrative pro-
ceeding generally consists of four steps: (i)
a preliminary award recommendation; (ii)
a detailed award report; (iii) an opportunity
to review documents supporting the pre-
liminary award recommendation; and (iv)
an award determination. Under the pro-
posed regulations, the first three steps may
occur before the final determination of tax
in the underlying taxpayer matter. Given
that the amount of collected proceeds is not
finally determined until after the final de-
termination of tax, however, the prelimi-
nary award recommendation and the de-
tailed award report, as well as the docu-
ments made available for inspection, will
reflect a tentative or preliminary computa-
tion of the amount of collected proceeds.
The whistleblower administrative pro-
ceeding is intended to foster a transparent
administrative process, to ensure that
claimants have a meaningful opportunity
to participate in the determination process
at the administrative level, to enable the
Whistleblower Office to make award
determinations based on complete infor-
mation, and to ensure a fully-documented
record on appeal to the Tax Court. The
proposed regulations permit claimants to
participate in the whistleblower admin-
istrative proceeding through a structured
process involving correspondence and
other communications with the Whistle-
blower Office. Claimants are afforded
opportunities to review the Whistleblower
Office’s preliminary award recommen-
dation, to provide additional information
regarding their claims that is relevant to
an award determination, and to submit
comments challenging all aspects of the
preliminary findings at the administrative
level. The Treasury and the IRS recog-
nize that, in some cases, claimants may
be able to provide information during the
whistleblower administrative proceeding
that could be critical to the award determi-
nation but that is not already contained in
the administrative claim file. For exam-
ple, a claimant may be able to demonstrate
that a determination is based on a misap-
plication of the lower award percentages
of section 7623(b)(2) by providing infor-
mation that demonstrates that the claimant
was the original source of public source
information.
The Treasury and the IRS recognize
that, while detailed administrative claim
files assist the Whistleblower Office in
making fair and accurate award determi-
nations, steps should be taken to prevent
potential redisclosure or misuse of the
taxpayer’s confidential return informa-
tion contained in those files. Section
6103(h)(4) and §301.6103(h)(4)–1 of
the proposed regulations authorize the
disclosures made by the Whistleblower
Office in the course of the whistleblower
administrative proceeding, but they pro-
vide neither redisclosure prohibitions nor
penalties. Accordingly, the proposed
regulations require claimants to execute
confidentiality agreements before they
may receive a detailed description of the
factors that contributed to the preliminary
award recommendation or view docu-
ments that support the recommendation.
A claimant is not required to execute a
confidentiality agreement before appeal-
ing an award determination to the Tax
Court, and executing an agreement does
not prevent a claimant from seeking Tax
Court review. Moreover, a claimant’s
execution of a confidentiality agreement
would not preclude the claimant from
providing to Congress certain information
about the preliminary award recommen-
dation, but it would preclude the claimant
from providing to Congress information
disclosed to the claimant after the exe-
cution of the agreement and during the
whistleblower administrative proceeding.
Section 6103(f), however, provides a gen-
eral framework for Congress to access tax-
payer return information, and this general
framework may also be used in connection
with whistleblower award claims.
The proposed regulations provide that
the Whistleblower Office, in determin-
ing the award percentage, may treat a
claimant’s violation of the terms of the
confidentiality agreement as a negative
factor and, thus, as a basis for reducing the
amount of an award. Further, while the
proposed regulations provide claimants
with an opportunity to view information
in the administrative claim file that is
not protected from disclosure by one or
more common law or statutory privileges,
the proposed regulations provide rules
intended to safeguard the disclosure of
information to a claimant (for example,
supervised document review and no pho-
tocopying of documents).
Administrative proceedings for denials of
awards under section 7623(b)
Finally, the proposed regulations pro-
vide that in cases in which the Whistle-
blower Office will reject a claim under sec-
tion 7623(b), pursuant to §301.7623–1(b)
or (c), or will deny a claim under section
7623(b), either because the IRS did not
proceed with an action based on the infor-
mation provided or because the IRS did not
collect proceeds, the Whistleblower Office
will send a preliminary denial letter to the
claimant. Sending this letter marks the be-
ginning of the whistleblower administra-
tive proceeding. This notice will be pro-
vided as promptly as possible under the
particular circumstances of a given case.
The claimant will then have 30 days within
which to provide comments to the Whistle-
blower Office. Again, this approach is in-
tended to foster a transparent and accurate
review process. Given the large adminis-
trative burden involved, however, the pro-
posed regulations do not provide prelim-
inary notice and comment procedures ap-
plicable to denials of claims for award un-
der section 7623(a).
Comments are specifically requested
on:
(1) Whether claimants should be af-
forded additional opportunities to partici-
pate in whistleblower administrative pro-
ceedings, and if so, what additional oppor-
tunities would be beneficial to the Whistle-
blower Office and to claimants and why.
(2) Whether additional safeguards
should be adopted to further protect tax-
payer return information disclosed in the
course of whistleblower administrative
proceedings and, if so, what safeguards
would be effective and appropriate.
(3) Whether starting a whistleblower
administrative proceeding before a final
determination of tax in the underlying tax-
payer action provides a meaningful benefit
for whistleblowers.
2013–3 I.R.B.293January 14, 2013

Determining the Amount of Awards and
Paying Awards
Section 301.7623–4 of these proposed
regulations provides the framework and
criteria that the Whistleblower Office will
use in exercising the discretion granted un-
der section 7623 to make awards. The pro-
posed regulations are consistent with, and
build on, the award determination provi-
sions provided in the IRM. The rules of
this section are proposed to apply to claims
for awards under both section 7623(a) and
section 7623(b).
Generally, the proposed regulations
adopt a fixed percentage approach pur-
suant to which the Whistleblower Office
will assign claims for award to one of a
number of fixed percentages within the
applicable award percentage range. The
fixed percentage approach provides a
structure that will promote consistency
in the award determination process by
enabling the Whistleblower Office to
determine awards across the breadth of
the applicable percentage range based on
meaningful distinctions among cases. In
general, the Whistleblower Office will
determine awards at the uppermost end of
the applicable percentage range, for exam-
ple, 30 percent of collected proceeds under
section 7623(b)(1), only in extraordinary
cases. The fixed percentage approach
avoids having to draw fine distinctions
that might seem unfair and arbitrary, given
the differences among claims for award
with respect to both the facts and law of
the underlying actions and the nature and
extent of the substantial contribution of
the claimants.
Under these proposed regulations, the
Whistleblower Office generally will as-
sign the fixed percentages to claims for
award by evaluating the substantial con-
tribution of the claimant to the underly-
ing action(s) based on the Whistleblower
Office’s review of the entire administra-
tive claim file and the application of the
positive factors and negative factors, listed
in §301.7623–4(b), to the facts. After the
application of the positive and negative
factors has been completed, the Whistle-
blower Office will review the planning and
initiating factors, if applicable. The pur-
pose of this criteria-based approach is to
also promote consistency in the award de-
termination process. In addition, this ap-
proach is intended to provide transparency
in the process, and the publication of the
criteria should provide helpful guidance
to claimants when submitting their claims
and in understanding the basis for award
determinations. For claims involving mul-
tiple actions (regardless of the number of
taxpayers involved), the proposed regula-
tions enable the Whistleblower Office to
determine and apply separate award per-
centages on an action-by-action basis in
appropriate cases. The Treasury and the
IRS recognize that a multiple-action deter-
mination may result in a lengthier award
process, but it may be necessary in some
cases.
Section 7623(b)(3) provides for an ap-
propriate reduction of awards to claimants
who planned and initiated the actions that
led to the underpayment of tax or actions
described in section 7623(a)(2) (the un-
derlying acts). Section 7623(b)(3), unlike
section 7623(b)(1) and section 7623(b)(2),
provides no direction to the Whistleblower
Office on what to consider in exercis-
ing this grant of discretion. Accordingly,
the proposed regulations provide slightly
more flexibility to determine the amount
of an appropriate reduction under this sec-
tion than they provideunder the respective
frameworks for determining awards for
substantial and less substantial contribu-
tions.
Under the proposed regulations, the
Whistleblower Office will make a thresh-
old determination of whether a claimant
planned and initiated the underlying acts,
but this determination will not result in
an automatic or fixed reduction of the
award percentage or award amount. A
claimant will only satisfy the threshold
determination if the claimant (i) designed,
structured, drafted, arranged, formed the
plan leading to, or otherwise planned an
underlying act, (ii) took steps to start,
introduce, originate, set into motion, pro-
mote or otherwise initiated an underlying
act, and (iii) knew or had reason to know
that there were tax implications to plan-
ning and initiating the underlying act.
If the Whistleblower Office determines
that a claimant meets the threshold for
planning and initiating, the Whistleblower
Office will then categorize and evaluate
the extent of the claimant’s planning and
initiating of the underlying acts, based
on the application of factors listed in
§301.7623–4(c)(3)(iv) to the facts con-
tained in the administrative claim file,
to determine the amount of the appro-
priate reduction, if any. The proposed
regulations’ use of the categories primary,
significant, and moderate, like the use of
the fixed percentage and criteria approach
for determining awards in substantial con-
tribution and less substantial contribution
cases, is intended to promote consistency,
fairness, and transparency in an award
determination process that is inherently
subjective.
The proposed regulations do not adopt
a “principal architect” approach to the ap-
plication of section 7623(b)(3), based in
part on the plain language of the statu-
tory provision, which does not require a
single planner. More than one individual
may plan and initiate the actions that lead
to a tax underpayment or violation. The
Treasury and the IRS recognize the value
that all whistleblowers may provide, and
the proposed regulations balance the goal
of incentivizing whistleblowers with the
plain language of the statute by providing
foraslidingscaleofreductionstoanaward
for planning and initiating.
The proposed regulations provide rules
for determining awards when two or more
independent claims, based on different in-
formation, relate to the same collected pro-
ceeds. In these situations, the proposed
regulations allow the Whistleblower Of-
fice to determine multiple awards, lim-
ited in aggregate amount to the maximum
amount that could have been awarded to a
single claimant, rather than restricting the
determination to a single award payable to
the first individual that files a claim for
award or payable on some other basis.
The proposed regulations also provide
rules for determining whether affiliated
claimants are eligible for awards and, if
so, for determining the amount of the
awards. The rule covering eligible affili-
ated claimants is intended to apply when
the Whistleblower Office determines that
an eligible individual is attempting to
avoid a reduced award, for example, based
on the application of the rules of section
7623(b)(3) or the application of negative
factors, by having another individual to
whom those rules would otherwise not
apply submit the claim on behalf of the
eligible individual. This rule allows the
Whistleblower Office to put the actual
claimant in the shoes of the purported
claimant for purposes of determining the
amount of the award.
January 14, 20132942013–3 I.R.B.

Comments are specifically requested
on:
(1) The efficacy of the fixed percentage
approach provided under these proposed
regulations.
(2) Whether there are additional posi-
tive factors, negative factors, or planning
and initiating factors that would be useful
for the Whistleblower Office to consider
in determining the amount of awards un-
der these regulations.
(3) The threshold determination of
whether a whistleblower planned and ini-
tiated an underlying act.
(4) Whether the IRS should determine
and pay multiple awards in cases in which
two or more independent claims relate to
the same collected proceeds, as provided
under the proposed regulations, or whether
only the first individual to provide infor-
mation or submit a claim relating to partic-
ular collected proceeds should receive an
award.
(5) The application of the eligible affil-
iated claimant rule.
Information Disclosures in Whistleblower
Administrative Proceedings
Section 6103(h)(4) authorizes the dis-
closure of returns and return information
in administrative or judicial proceedings
pertaining to tax administration in certain
circumstances. This rule provides the
authority to disclose return information
forpurposesofawhistlebloweradmin-
istrative proceeding under section 7623.
Section 301.6103(h)(4)–1 of these pro-
posed regulations specifically authorizes
the Director, officers, and employees of
the Whistleblower Office to disclose re-
turn information to the extent necessary
to conduct whistleblower administrative
proceedings. To minimize the potentially
adverse consequences of the disclosure,
and possible redisclosure, of return in-
formation, these proposed regulations
provide that the Whistleblower Office will
use confidentiality agreements in section
7623(b) whistleblower award determina-
tion administrativeproceedings, as well
as other safeguards, to minimize possible
redisclosures of return information while
still providing meaningful opportunities
for claimants to participate in whistle-
blower administrative proceedings.
Comments are specifically requested on
whether the proposed regulations strike an
appropriate balancebetween minimizing
possible redisclosures of confidential re-
turn information and providing meaning-
ful opportunities for claimants to partic-
ipate in the administrative processing of
their claims.
Proposed Effective Dates
When finalized, §§301.7623–1,
301.7623–2,301.7623–3,and
301.6103(h)(4)–1 are proposed to apply to
information submitted on or after the date
these rules are adoptedas final regulations
in theFederal Register, and to claims
for award under sections 7623(a) and
7623(b) that are open as of that date.
Likewise, §301.7623–4 is proposed to
applytoinformationsubmittedonorafter
that date, and to claims for award under
section 7623(b) that are open as of that
date. Section 301.7623–4 is not proposed
to apply to claims for award under section
7623(a) that are open as of that date. This
exception is intended to allow the IRS to
continue to apply consistent rules to open
claims for award under the discretionary
award program of section 7623(a).
Comments are specifically requested on
whether the proposed effective dates are
appropriate.
Special Analyses
It has been determined that these pro-
posed rules are not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It has also been de-
termined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations, and,
because the 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 sec-
tion 7805(f) of the Code, these regulations
have been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on their impact
on small businesses.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic or writ-
ten comments (a signed original and eight
(8) copies) that are submitted timely to
the IRS. The Treasury and the IRS request
comments on all aspects of the proposed
regulations. All comments that are submit-
ted by the public will be available for pub-
lic inspection and copying atwww.regula-
tions.govor upon request. A public hear-
ing may be scheduled if requested in writ-
ing by a person who timely submits writ-
ten comments. If a public hearing is sched-
uled, notice of the date, time, and place of
the hearing will be published in theFed-
eral Register.
Drafting Information
The principal authors of these reg-
ulations are Meghan M. Howard and
Robert T. Wearing of the Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 is amended by adding entries in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Sections301.7623–1through
301.7623–4 also issued under 26 U.S.C.
7623. * * *
Section 301.6103(h)(4)–1 also issued
under 26 U.S.C. 6103(h)(4) and 26 U.S.C.
6103(q). * * *
Par. 2. Section 301.6103(h)(4)–1 is
added to read as follows:
§ 301.6103(h)(4)–1 Disclosure of returns
and return information in whistleblower
administrative proceedings.
(a)In general. A whistleblower ad-
ministrative proceeding (as described in
§301.7623–3) is an administrative pro-
ceeding pertaining to tax administration
within the meaning of section 6103(h)(4).
(b)Disclosures in whistleblower ad-
ministrative proceedings.Pursuantto
section 6103(h)(4) and paragraph (a) of
2013–3 I.R.B.295January 14, 2013

this section, the Director, officers, and
employees of the Whistleblower Office
may disclose returns and return infor-
mation (as defined by section 6103(b))
to an individual (or the individual’s le-
gal representative, if any) to the extent
necessary to conduct a whistleblower ad-
ministrative proceeding (as described in
§ 301.7623–3), including but not limited
to—
(1) By communicating a preliminary
award recommendation or preliminary de-
nial letter to the individual;
(2) By providing the individual with an
award report package;
(3) By conducting a meeting with the
individual to review documents support-
ing the preliminary award recommenda-
tion; and
(4) By sending an award decision letter,
award determination letter, or award denial
letter to the individual.
(c)Effective/applicability date. Section
301.6103(h)(4)–1 will be effective on the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in theFederal Register.Whenfi-
nalized, this section is proposed to apply
with respect to whistleblower administra-
tive proceedings beginning on or after the
date of publication of the Treasury Deci-
sion adopting these rules as final regula-
tions in theFederal Register.
Par. 3. Section 301.7623–1 is revised
to read as follows:
§301.7623–1 General rules, submitting
information on underpayments of tax or
violations of the internal revenue laws,
and filing claims for award.
(a)In general. In cases in which awards
are not otherwise provided for by law,
the Whistleblower Office may pay an
award under section 7623(a), in a suit-
able amount, for information necessary
for detecting underpayments of tax or
detecting and bringing to trial and pun-
ishment persons guilty of violating the
internal revenue laws or conniving at the
same. In cases that satisfy the require-
ments of section 7623(b)(5) and (b)(6)
and in which the Internal Revenue Service
(IRS) proceeds with an administrative
or judicial action based on information
provided by an individual, the Whistle-
blower Office must determine an award
under section 7623(b)(1), (2), or (3). The
awards provided for by section 7623 and
this paragraph must be paid from collected
proceeds, as defined in § 301.7623–2(d).
(b)Eligibility to file claim for award.
(1)In general. Any individual, other than
an individual described in paragraph (b)(2)
of this section, is eligible to file a claim
for award and to receive an award under
section 7623 and §§ 301.7623–1 through
301.7623–4.
(2)Ineligible claimants. The Whistle-
blower Office will reject any claim for
award filed by an ineligible claimant and
will provide written notice of the rejection
to the claimant. The following individuals
are not eligible to file a claim for award or
receive an award under section 7623 and
§§ 301.7623–1 through 301.7623–4:
(i) An individual who is an employee
of the Department of Treasury or was an
employee of the Department of Treasury
when the individual obtained the informa-
tion on which the claim is based;
(ii) An individual who obtained the in-
formation through the individual’s official
duties as an employee of a Federal, State,
or local Government, or who is acting
within the scope of those official duties as
an employee of a Federal, State, or local
Government;
(iii) An individual who is or was re-
quired by Federal law or regulation to dis-
close the information or who is or was pre-
cluded by Federal law or regulation from
disclosing the information;
(iv) An individual who obtained or was
furnished the information while acting in
an official capacity as a member of a Fed-
eral or State body or commission having
access to materials such as Federal returns,
copies, or abstracts; or
(v) An individual who obtained or had
access to the information based on a con-
tract with the Federal government.
(3)Ineligible affiliated claimants.If
the Whistleblower Office determines
that an affiliated claimant, as defined in
§ 301.7623–2(f), filed a claim for award
based on information obtained from an
ineligible individual for the purpose of
avoiding the rejection of the claim that
would result if the claim was filed by the
ineligible individual, then the Whistle-
blower Office may treat the claim as if it
had been filed by the ineligible individual.
See § 301.7623–4(c)(4) for rules regarding
eligible affiliated claimants.
(c)Submission of information and
claims for award.(1)Submitting informa-
tion. To be eligible to receive an award
under section 7623 and §§ 301.7623–1
through 301.7623–4, an individual must
submit to the IRS specific and credible in-
formation that the individual believes will
lead to collected proceeds from persons
whom the individual believes have failed
to comply with the internal revenue laws.
In general, an individual’s submission
should identify the person(s) believed to
have failed to comply with the internal rev-
enue laws and should provide substantive
information, including all available doc-
umentation, that supports the individual’s
allegations. Information that identifies a
pass-through entity will be considered to
also identify all persons with a direct or
indirect interest in the entity. Information
that identifies a member of a firm who
promoted another identified person’s par-
ticipation in a transaction described and
documented in the information provided
will be considered to also identify the
firm and all other members of the firm.
Submissions that provide speculative in-
formation or that do not provide specific
and credible information regarding tax
underpayments or violations of internal
revenue laws do not provide a basis for
an award. If documents or supporting
evidence are known to the individual but
are not in the individual’s control, then the
individual should describe the documents
or supporting evidence and identify their
location to the best of the individual’s
ability. If all available information known
to the individual is not provided to the IRS
by the individual, then the individual bears
the risk that this information might not be
considered by the Whistleblower Office
forpurposesofanaward.
(2)Filing claim for award.To
claim an award under section 7623 and
§§ 301.7623–1 through 301.7623–4 for
information provided to the IRS, an indi-
vidual must file a formal claim for award
by completing and sending Form 211,
“Application for Award for Original Infor-
mation,” to the Internal Revenue Service,
Whistleblower Office, at the address pro-
vided on the form, or by complying with
other claim filing procedures as may be
prescribed by the IRS in other published
guidance. The Form 211 should be com-
pleted in its entirety and should include
the following information:
January 14, 20132962013–3 I.R.B.

(i) The date of the claim;
(ii) The claimant’s name;
(iii) The claimant’s address and tele-
phone number;
(iv) The date of birth of the claimant;
(v) The taxpayer identification number
of the claimant; and
(vi) An explanation of how the infor-
mation on which the claim is based came
to the attention and into the possession of
the claimant, including, as available, the
date(s) on which the claimant acquired the
information and a complete description of
the claimant’s present or former relation-
ship (if any) to the person(s) identified on
the Form 211.
(3)Under penalty of perjury.Noaward
may be made under section 7623(b) un-
less the information on which the award is
based is submitted to the IRS under penalty
of perjury. All claims for award under
section 7623 and §§ 301.7623–1 through
301.7623–4 must beaccompanied by an
original signed declaration under penalty
of perjury, as follows: “I declare under
penalty of perjury that I have examined
this application, my accompanying state-
ment, and supporting documentation and
aver that such application is true, correct,
and complete, to the best of my knowl-
edge.” This requirement precludes the fil-
ing of a claim for award by a person serv-
ing as a representative of, or in any way on
behalf of, another individual. Claims filed
by more than one individual (joint claims)
must be signed by each individual claimant
under penalty of perjury.
(4)Perfecting claim for award.Ifanin-
dividual files a claim for award that does
not include information described under
paragraph (c)(2) of this section, does not
contain specific and credible information
as described in paragraph (c)(1) of this sec-
tion, or is based on information that was
not submitted under penalty of perjury as
required by paragraph (c)(3) of this sec-
tion, the Whistleblower Office may, in its
sole discretion, reject the claim or notify
the individual of the deficiencies and pro-
vide the individual an opportunity to per-
fect the claim for award. If an individual
does not perfect the claim for award within
the time period specified by the Whistle-
blower Office, then the Whistleblower Of-
fice may reject the claim. If the Whistle-
blower Office rejects a claim, then the
Whistleblower Office will provide written
notice of the rejection to the claimant. If
the Whistleblower Office rejects a claim
for the reasons described in this paragraph,
then the claimant may perfect and resubmit
the claim.
(d)Request for assistance.(1)In
general. The Whistleblower Office, the
IRS or IRS Office of Chief Counsel may
request the assistance of an individual
claimant or the individual claimant’s le-
gal representative. Any assistance shall
be at the direction and control of the
Whistleblower Office, the IRS, or the IRS
Office of Chief Counsel assigned to the
matter. See § 301.6103(n)–2 for rules re-
garding written contracts among the IRS,
whistleblowers, and legal representatives
of whistleblowers.
(2)No agency relationship. Submit-
ting information, filing a claim for award,
or responding to a request for assistance
does not create an agency relationship be-
tween a claimant and the Federal govern-
ment, nor does a claimant or the claimant’s
legal representative act in any way on be-
half of the Federal government.
(e)Identification of whistleblowers.
Under the informant’s privilege, the IRS
will use its best efforts to protect the
identity of whistleblowers. In some cir-
cumstances, the IRS may need to reveal
a whistleblower’s identity, for example,
when it is determined that it is in the
best interests of the Government to use
a whistleblower as a witness in a judi-
cial proceeding. In those circumstances,
the IRS will make every effort to notify
the whistleblower before revealing the
whistleblower’s identity.
(f)Effective/applicability date.When
finalized, § 301.7623–1 is proposed to ap-
ply to information submitted on or after
the date of publication of the Treasury de-
cision adopting these rules as final reg-
ulations in theFederal Registerand to
claims for award under sections 7623(a)
and 7623(b) that are open as of the date of
publication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register.
Par. 4. Section 301.7623–2 is added to
read as follows:
§301.7623–2 Definitions.
(a)Action.(1)In general. For purposes
of section 7623(b) and §§ 301.7623–1
through 301.7623–4, the termaction
means an administrative or judicial action.
(2)Administrative action. For purposes
of section 7623(b) and §§ 301.7623–1
through 301.7623–4, the termadministra-
tive actionmeans all or a portion of an
Internal Revenue Service (IRS) civil or
criminal proceeding against any person
that may result in collected proceeds, as
defined in paragraph (d) of this section,
including, for example, an examination, a
collection proceeding, a status determina-
tion proceeding, or a criminal investiga-
tion.
(3)Judicial action. For purposes
of section 7623(b) and §§ 301.7623–1
through 301.7623–4, the termjudicial ac-
tionmeans all or a portion of a proceeding
against any person in any court that may
result in collected proceeds, as defined in
paragraph (d) of this section.
(b)Proceeds based on.(1)In gen-
eral. For purposes of section 7623(b) and
§§301.7623–1 through 301.7623–4, IRS
proceeds based oninformation provided
by an individual only when the IRS:
(i) Initiates a new action;
(ii) Expands the scope of an ongoing
action; or
(iii) Continues to pursue an ongoing ac-
tion, that the IRS would not have initiated,
expanded the scope of, or continued to pur-
sue, respectively, but for the information
provided by the individual. The IRS does
not proceed based on when the IRS merely
analyzes the information provided by the
individual and investigates the matter.
(2)Example. The provisions of para-
graph (b)(1) of this section may be illus-
trated by the following example:
Example. Information provided to the IRS by
an individual, under section 7623 and §301.7623–1,
identifies a taxpayer, describes and documents spe-
cific facts relating to the taxpayer’s foreign sales in
Country A, and, based on those facts, alleges that the
taxpayer was not entitled to a foreign tax credit relat-
ing to its foreign sales inCountry A. The IRS receives
the information after havingalready initiated an ex-
amination of the taxpayer. The IRS’s audit plan does
not include consideration of the amount of the for-
eign tax credit relating to the taxpayer’s foreign sales
in Country A but, based on the information provided,
the IRS expands the examination to include the for-
eign tax credit issue. For purposes of section 7623
and §§301.7623–1 through 301.7623–4, the portion
of the IRS’s examination of the taxpayer relating to
the foreign tax credit issue is an administrative action
with which the IRS proceeds based on the informa-
tion provided by the individual. If the examination
of the taxpayer included the foreign tax credit issue
before the individual provided the information, then
no portion of the IRS’s examination of the taxpayer
is an administrative action with which the IRS pro-
ceeds based on the information provided, unless the
2013–3 I.R.B.297January 14, 2013

IRS would not have continued to pursue the exami-
nation but for the information provided.
(c)Related action.(1)In general.
For purposes of section 7623(b) and
§§ 301.7623–1 through 301.7623–4, the
termrelated actionis limited to:
(i) A second or subsequent action
against the person(s) identified in the in-
formation provided and subject to the
original action if, in the second or sub-
sequent action, the IRS proceeds based
on the specific facts described and docu-
mented in the information provided; and
(ii) An action against a person other
than the person(s) identified in the infor-
mation provided and subject to the original
action if:
(A) The other, unidentified person is
directly related to the person identified in
the information provided;
(B) The facts relating to the underpay-
ment of tax or violations of the internal
revenue laws by the other person are sub-
stantially the same as the facts described
and documented in the information pro-
vided (with respect to the person(s) subject
to the original action); and
(C) The IRS proceeds with the action
against the other person based on the spe-
cific facts described and documented in the
information provided. For purposes of this
paragraph, an unidentified person is di-
rectly related to the person identified in the
information provided if the IRS can iden-
tify the unidentified person using only the
information provided (without first having
to use the information provided to iden-
tify any other person or having to indepen-
dently obtain additional information).
(2)Examples. The provisions of para-
graph (c)(1) of this section may be illus-
trated by the following examples:
Example 1. Information provided to the IRS by
an individual, under section 7623 and §301.7623–1,
identifies a taxpayer, describes and documents spe-
cific facts relating to the taxpayer’s activities, and,
based on those facts, alleges that the taxpayer owed
additional taxes in Year 1. The IRS proceeds with
an examination of the taxpayer for Year 1 based on
the information provided by the individual. The IRS
discovers that the taxpayer engaged in the same activ-
itiesinYear2andexpandstheexaminationtoYear
2. In the course of the examination, the IRS obtains,
through the issuance of IDRs and summonses, ad-
ditional facts that are unrelated to the activities de-
scribed in the information provided by the individ-
ual. Based on these additional facts, the IRS expands
the scope of the examination of the taxpayer for both
Year 1 and Year 2. For purposes of section 7623
and §§301.7623–1 through 301.7623–4, the portion
of the IRS’s examination of the taxpayer in Year 2 re-
lating to the activities described and documented in
the information provided (with respect to Year 1) is
a related action because it satisfies the conditions of
paragraph (c)(1)(i) of this section. The portions of
the IRS’s examination of the taxpayer in both Year
1 and Year 2 relating to the additional facts obtained
through the issuance of IDRs and summonses are not
related actions (nor are they administrative actions
based on the information provided).
Example 2. Information provided to the IRS by
an individual, under section 7623 and §301.7623–1,
identifies a taxpayer (Taxpayer 1), describes and doc-
uments specific facts relating to Taxpayer 1’s activi-
ties, and, based on those facts, alleges tax underpay-
ments by Taxpayer 1. The information provided also
identifies an accountant (CPA 1) and describes and
documents specific facts relating to CPA 1’s contri-
bution to the activities of Taxpayer 1 that the individ-
ual alleges resulted in tax underpayments. The IRS
proceeds with an examination of Taxpayer 1 based
on the information provided by the individual. Us-
ing only the information provided, the IRS obtains
CPA 1’s client list and identifies two taxpayer/clients
of CPA 1 (Taxpayer 2 and Taxpayer 3) that appear to
have engaged in activities similar to Taxpayer 1. The
IRS proceeds with an examinationofTaxpayer2and
finds that Taxpayer 2 engaged in the same activities
as those described in the information provided with
respect to Taxpayer 1. The IRS proceeds with an ex-
amination of Taxpayer 3 and finds that Taxpayer 3
engaged in different activities from those described
in the information provided with respect to Taxpayer
1. For purposes of section 7623 and §§301.7623–1
through 301.7623–4, the examination of Taxpayer 2
is a related action because it satisfies the conditions of
paragraph (c)(1)(ii) of this section. The examination
of Taxpayer 3 is not a related action because the rel-
evant facts are not substantially the same as the facts
relevant to the examination of Taxpayer 1.
Example 3. Same facts asExample 2. Using only
the information provided, the IRS identifies a co-pro-
moterofCPA1(CPA2)thatappearstohaveengaged
in activities similar to CPA 1. CPA 2 is not a member
of CPA 1’s firm. The IRS subsequently obtains the
client list of CPA 2 and identifies a taxpayer/client
of CPA 2 (Taxpayer 4) that appears to have engaged
in activities similar to Taxpayer 1. The IRS proceeds
with an examination of Taxpayer 4 and finds that Tax-
payer 4 engaged in the same activities as those de-
scribed in the information provided with respect to
Taxpayer 1, and that CPA 2 contributed to the activ-
ities in the same way as described in the information
provided with respect to CPA 1. The IRS proceeds
with an examination of CPA 2’s liability for promoter
penalties under section 6700 in connection with the
activities described in the information provided with
respect to Taxpayer 1 and CPA 1. For purposes of
section 7623 and §§301.7623–1 through 301.7623–4,
the examination of CPA 2 is a related action because it
satisfies the conditions of paragraph (c)(1)(ii) of this
section. The examination of Taxpayer 4 is not a re-
lated action because Taxpayer 4 was not related to a
person identified in the information provided. CPA
2 was not identified in the information provided and
the IRS first had to identify CPA 2 before identifying
Taxpayer 4 and proceeding with the examination of
Taxpayer 4.
Example 4. Same facts asExample 2. An accoun-
tant (CPA 3) is a member of CPA 1’s firm. Using
only the information provided, the IRS obtains the
client list of CPA 3 and identifies a taxpayer/client
of CPA 3 (Taxpayer 5) that appears to have engaged
in activities similar to Taxpayer 1. The IRS proceeds
with an examination of Taxpayer 5 and finds that Tax-
payer 5 engaged in the same activities as those de-
scribed in the information provided with respect to
Taxpayer 1, and that CPA 3 contributed to the ac-
tivities in the same way as described in the informa-
tion provided with respect to CPA 1. For purposes of
section 7623 and §§301.7623–1 through 301.7623–4,
the examination of Taxpayer 5 is a related action be-
cause Taxpayer 5 is related to CPA 3, a person consid-
ered to be identified in the information provided un-
der §301.7623–1(c)(1), and the facts relating to Tax-
payer 5 are substantially the same as the facts de-
scribed and documented in the information provided.
An IRS examination of CPA 3’s liability for promoter
penalties under section 6700, based on the facts de-
scribed and documented in the information provided
with respect to Taxpayer 1 and CPA 1, is an adminis-
trative action based on the information provided.
Example 5. Information provided to the IRS by
an individual, under section 7623 and §301.7623–1,
identifies a taxpayer (Taxpayer 1), describes and doc-
uments specific facts relating to Taxpayer 1’s activi-
ties, and, in particular, Taxpayer 1’s participation in
a transaction. Based on those facts, the individual al-
leges that Taxpayer 1 owed additional taxes. The IRS
proceeds with an examination of Taxpayer 1 based
on the information provided by the individual. The
IRS identifies the other parties to the transaction de-
scribed in the information provided (Taxpayer 2 and
Taxpayer 3). The IRS proceeds with examinations
of Taxpayer 2 and Taxpayer 3 relating to their par-
ticipation in the transaction described in the infor-
mation provided. For purposes of section 7623 and
§§ 301.7623–1 through 301.7623–4, the IRS’s exam-
inations of Taxpayer 2 and Taxpayer 3 relating to the
activities described and documented in the informa-
tion provided are related actions because they satisfy
the conditions of paragraph (c)(1)(ii) of this section.
(d)Collected proceeds.(1)In gen-
eral. For purposes of section 7623 and
§§301.7623–1 through 301.7623–4, the
termsproceeds of amounts collectedand
collected proceeds(collectively,collected
proceeds) include: tax, penalties, interest,
additions to tax, and additional amounts
collected because of the information pro-
vided; amounts collected prior to receipt
of the information if the information pro-
vided results in the denial of a claim for
refund that otherwise would have been
paid; and a reduction of an overpayment
credit balance used to satisfy a tax liability
incurred because of the information pro-
vided. Collected proceeds are limited to
amounts collected under the provisions of
title 26, United States Code.
(2)Refund netting.(i)In general.If
any portion of a claim for refund that is
substantively unrelated to the information
provided is:
January 14, 20132982013–3 I.R.B.

(A) Allowed, and
(B) Used to satisfy a tax liability at-
tributable to the information provided in-
stead of refunded to the taxpayer, then the
allowed but non-refunded amount consti-
tutes collected proceeds.
(ii)Example. The provisions of para-
graph (d)(2)(i) of this section may be illus-
trated by the following example:
Example. Information provided to the IRS by an
individual, under section 7623 and § 301.7623–1,
identifies a corporate taxpayer (Corporation), de-
scribes and documents specific facts relating to
Corporation’s activities, and, based on those facts, al-
leges that Corporation owed additional taxes. Based
on the information provided by the individual, the
IRS proceeds with an examination of Corporation
and determines adjustments that would result in an
unpaid tax liability of $500,000. During the exam-
ination, Corporation informally claims a refund of
$400,000 based on adjustments to items of income
and expense that are wholly unrelated to the informa-
tion provided by the individual. The IRS agrees to
the unrelated adjustments. The IRS nets the adjust-
ments and determines a tax deficiency of $100,000.
Thereafter, Corporation makes full payment of the
$100,000 deficiency. For purposes of section 7623
and §§301.7623–1 through 301.7623–4, the collected
proceeds include the $400,000 informally claimed
as a refund and netted against the adjustments at-
tributable to the information provided, as well as the
$100,000 paid by Corporation.
(3)Criminal fines. Criminal fines de-
posited into the Victims of Crime Fund are
not collected proceeds and cannot be used
for payment of awards.
(4)Computation of collected proceeds.
(i)In general. The Whistleblower Office
will monitor each case for collection of
proceeds. Pursuant to § 301.7623–4(d)(1),
the IRS cannot make an award payment
until there has been a final determination
of tax. For purposes of determining the
amount of an award under section 7623
and §§ 301.7623–1 through 301.7623–4,
after there has been a final determination
of tax as defined in §301.7623–4(d)(2), the
IRS will compute the amount of collected
proceeds based on all information known
with respect to the taxpayer’s account, in-
cluding with respect to all tax attributes, as
of the date the computation is made.
(ii)Partial collection.IftheIRS
does not collect the full amount of taxes,
penalties, interest, additions to tax, and
additional amounts assessed against the
taxpayer, then any amounts that the IRS
does collect will constitute collected pro-
ceeds in the same proportion that the
adjustments attributable to the information
provided bear to the total adjustments.
(e)Amount in dispute and gross income.
(1)In general. Section 7623(b) applies
with respect to any action against any tax-
payer in which the tax, penalties, interest,
additions to tax, and additional amounts in
dispute exceed $2,000,000 but, if the tax-
payer is an individual, then only if the in-
dividual’s gross income exceeds $200,000
in at least one taxable year subject to the
action.
(2)Amount in dispute.(i)In general.
For purposes of section 7623(b)(5) and
§§ 301.7623–1 through 301.7623–4, the
termamount in disputemeans the maxi-
mum total of tax, penalties, interest, ad-
ditions to tax, and additional amounts that
could have resulted from the action(s) with
which the IRS proceeded based on the in-
formation provided, if the formal positions
taken by the IRS had been sustained. The
IRS will compute the amount in dispute,
for purposes of award determinations de-
scribed in § 301.7623–3(c)(6), when there
has been a final determination of tax as de-
fined in § 301.7623–4(d)(2).
(ii)Example. The provisions of para-
graph (e)(2)(i) of this section may be illus-
trated by the following example:
Example. Information provided to the IRS by
an individual, under section 7623 and § 301.7623–1,
identifies a corporate taxpayer, describes and docu-
ments specific facts relating to the taxpayer’s activ-
ities, and, based on those facts, alleges that the tax-
payer owed additional taxes. The IRS proceeds with
an examination of the taxpayer based on the informa-
tion provided by the individual; makes adjustments to
items of income and expenseand allows certain cred-
its; and, ultimately, determines a deficiency against
the taxpayer of $2,100,000 and issues the taxpayer a
statutory notice of deficiency. The taxpayer petitions
the notice to the United States Tax Court. The Tax
Court sustains the IRS’s position, in part, resulting in
a deficiency of $1,500,000. The IRS also computes,
however, that the total of tax, penalties, interest, ad-
ditions to tax, and additional amounts that could have
resulted from the action, if the court had sustained
the IRS’s position, in full, was $2,500,000. For pur-
poses of section 7623 and §§ 301.7623–1 through
301.7623–4, the amount in dispute is $2,500,000.
(3)Gross income. For purposes of
section 7623(b)(5) and §§ 301.7623–1
through 301.7623–4, the termgross in-
comehas the same meaning as provided
under section 61(a). The IRS will compute
the individual taxpayer’s gross income,
for purposes of award determinations de-
scribed in §301.7623–3(c)(6), when there
has been a final determination of tax as
defined in § 301.7623–4(d)(2).
(f)Affiliated claimant. For purposes
of §§ 301.7623–1 through 301.7623–4,
the termaffiliated claimantmeans an
individual that files a claim for award
on behalf of another individual. See
§ 301.7623–1(b)(3) for rules regard-
ing ineligible affiliated claimants and
§ 301.7623–4(c)(4) for rules regarding
eligible affiliated claimants.
(g)Effective/applicability date.When
finalized, § 301.7623–2 is proposed to ap-
plytoinformationsubmittedonorafter
the date of publication of the Treasury de-
cision adopting these rules as final reg-
ulations in theFederal Registerand to
claims for award under sections 7623(a)
and 7623(b) that are open as of the date of
publication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register.
Par. 5. Section 301.7623–3 is added to
read as follows:
§ 301.7623–3 Whistleblower
administrative proceedings and appeals
of award determinations.
(a)In general. The Whistleblower
Office will pay awards under section
7623(a) and determine awards to individu-
als under section 7623(b) in whistleblower
administrative proceedings pursuant to the
rules of this section. The whistleblower
administrative proceedings described in
this section are administrative proceed-
ings pertaining to tax administration for
purposes of section 6103(h)(4). See
§ 301.6103(h)(4)–1 for additional rules re-
garding disclosures of return information
in whistleblower administrative proceed-
ings. The Whistleblower Office may
determine awards for claims involving
multiple actions in a single whistleblower
administrative proceeding. For purposes
of applying the rules of this section, the In-
ternal Revenue Service (IRS) may rely on
the claimant’s description of the amount
owed by the taxpayer(s). The IRS may,
however, rely on other information as
necessary (for example, when the alleged
amount in dispute is below the $2 million
threshold of section 7623(b)(5)(B), but
the actual amount in dispute is above the
threshold).
(b)Awards under section 7623(a).(1)
Preliminary award recommendation.In
cases in which the Whistleblower Office
recommends payment of an award under
section 7623(a), the Whistleblower Office
will communicate a preliminary award
2013–3 I.R.B.299January 14, 2013

recommendation under section 7623(a)
and §§ 301.7623–1 through 301.7623–4
to the claimant by sending a preliminary
award recommendation letter that states
the Whistleblower Office’s preliminary
computation of theamount of collected
proceeds, recommended award percent-
age, recommended award amount (even
in cases when the application of section
7623(b)(2) or section 7623(b)(3) results
in a reduction of the recommended award
amount to zero), and a list of the fac-
tors that contributed to the recommended
award percentage. The whistleblower ad-
ministrative proceeding described in para-
graphs (b)(1) and (2) of this section begins
on the date the Whistleblower Office sends
the preliminary award recommendation
letter. If the claimant believes that the
Whistleblower Office erred in evaluating
the information provided, the claimant has
30 days from the date the Whistleblower
Office sends the preliminary award rec-
ommendation to submit comments to the
Whistleblower Office. The Whistleblower
Office will review all comments submitted
timely by the claimant (or the claimant’s
legal representative, if any) and pay an
award, pursuant to paragraph (b)(2) of this
section.
(2)Decision letter. At the conclusion
of the process described in paragraph
(b)(1) of this section, and when there is a
final determination of tax, as defined in
§ 301.7623–4(d)(2), the Whistleblower
Office will pay an award under sec-
tion 7623(a) and §§ 301.7623–1 through
301.7623–4. The Whistleblower Office
will communicate the amount of the award
to the claimant in a decision letter.
(3)Denials. If the Whistleblower Of-
fice rejects a claim foraward under section
7623(a), pursuant to § 301.7623–1(b) or
(c), or if the IRS either did not proceed with
an action, as defined in § 301.7623–2(b),
or did not collect proceeds, as defined in
§ 301.7623–2(d), then the Whistleblower
Office will not apply the rules of para-
graphs (b)(1) or (2) of this section. The
Whistleblower Office will provide written
notice to the claimant of the denial of any
award.
(c)Awards under section 7623(b).(1)
Preliminary award recommendation.The
Whistleblower Office will prepare a pre-
liminary award recommendation based
on the Whistleblower Office’s review of
the administrative claim file and the ap-
plication of the rules of section 7623 and
§§ 301.7623–1 through 301.7623–4 to the
facts of the case. See paragraph (e)(2) of
this section for a description of the admin-
istrative claim file.
The whistleblower administrative pro-
ceeding described in paragraphs (c)(1)
through (6) of this section begins on the
date the Whistleblower Office sends the
preliminary award recommendation letter.
The preliminary award recommendation
is not a determination letter within the
meaning of paragraph (c)(6) of this sec-
tion and cannot be appealed to Tax Court
under section 7623(b)(4) and paragraph
(d) of this section. The preliminary award
recommendation will notify the individual
that the IRS cannot determine or pay any
award until there is a final determination
of tax, as defined in § 301.7623–4(d)(2).
(2)Contents of preliminary award rec-
ommendation. The Whistleblower Office
will communicate the preliminary award
recommendation under section 7623(b) to
the individual by sending:
(i) A preliminary award recommenda-
tion letter that describes the individual’s
options for responding to the preliminary
award recommendation;
(ii) A summary report that states a
preliminary computation of the amount
of collected proceeds, the recommended
award percentage, the recommended
award amount (even in cases when the ap-
plication of section 7623(b)(2) or section
7623(b)(3) results in a reduction of the
recommended award amount to zero), and
a list of the factors that contributed to the
recommended award percentage;
(iii) An award consent form; and
(iv) A confidentiality agreement.
(3)Opportunity to respond to prelim-
inary award recommendation.Thein-
dividual will have 30 days (this period
may be extended at the sole discretion of
the Whistleblower Office) from the date
of the preliminary award recommendation
letter to respond to the preliminary award
recommendation in one of the following
ways:
(i) If the individual takes no action, then
the Whistleblower Office will make a fi-
nal award determination, pursuant to para-
graph (c)(6) of this section;
(ii) If the individual signs, dates, and
returns the award consent form agreeing
to the preliminary award recommendation
and waiving any and all administrative and
judicial appeal rights, then the Whistle-
blower Office will make an award deter-
mination, pursuant to paragraph (c)(6) of
this section;
(iii) If the individual signs, dates, and
returns the confidentiality agreement, then
the Whistleblower Office will provide the
individual with an opportunity to review
documents supporting the report, and a de-
tailed award report pursuant to paragraphs
(c)(3) and (4) of this section, and any com-
ments submitted by the individual will be
added to the administrative claim file; or
(iv) If the individual submits comments
on the preliminary award recommendation
to the Whistleblower Office, but does not
sign, date, and return the confidentiality
agreement, then the comments will be
added to the administrative claim file and
reviewed by the Whistleblower Office in
making an award determination, pursuant
to paragraph (c)(6) of this section.
(4)Detailed report.(i)Contents of de-
tailed report. If the individual signs, dates,
and returns the confidentiality agreement
accompanying the preliminary award rec-
ommendation under section 7623(b), pur-
suant to paragraph (c)(3) of this section,
then the Whistleblower Office will send
the individual:
(A) A detailed report that states a pre-
liminary computation of the amount of col-
lected proceeds, the recommended award
percentage, and the recommended award
amount, and provides afull explanation of
the factors that contributed to the recom-
mended award percentage;
(B) Instructions for scheduling an ap-
pointment for the individual (and the in-
dividual’s legal representative, if any) to
review information in the administrative
claim file that is not protected by one or
more common law or statutory privileges;
and
(C) An award consent form. The de-
tailed report is not a determination letter
within the meaning of paragraph (c)(6) of
this section and cannot be appealed to Tax
Court under section 7623(b)(4) and para-
graph (d) of this section. The detailed re-
port will notify the individual that the IRS
cannot determine or pay any award until
there is a final determination of tax, as de-
fined in § 301.7623–4(d)(2).
(ii)Opportunity to respond to detailed
report. The individual will have 30 days
(this period may be extended at the sole
discretion of the Whistleblower Office)
January 14, 20133002013–3 I.R.B.

from the date of the detailed report to re-
spond in one of the following ways:
(A) If the individual takes no action,
then the Whistleblower Office will make
an award determination, pursuant to para-
graph (c)(6) of this section;
(B) If the individual requests an ap-
pointment to review information from
the administrative claim file that is not
protected from disclosure by one or more
common law or statutory privileges, then
a meeting will be arranged pursuant to
paragraph (c)(5) of this section;
(C) If the individual does not request
an appointment but does submit comments
on the detailed report to the Whistleblower
Office, then the comments will be added to
the administrative claim file and reviewed
by the Whistleblower Office in making
an award determination pursuant to para-
graph (c)(6) of this section; or
(D) If the individual signs, dates, and
returns the award consent form agreeing
to the preliminary award recommendation
and waiving any and all administrative and
judicial appeal rights, then the Whistle-
blower Office will make an award deter-
mination, pursuant to paragraph (c)(6) of
this section.
(5)Opportunity to review documents
supporting award report recommenda-
tions. Appointments for the individual
(and the individual’s legal representative,
if any) to review information from the ad-
ministrative claim file that is not protected
from disclosure by one or more common
law or statutory privileges will be held at
the Whistleblower Office in Washington,
D.C., unless the Whistleblower Office,
in its sole discretion, decides to hold the
meeting at another location. At the ap-
pointment, the Whistleblower Office will
provide for viewing the pertinent infor-
mation from the administrative claim file.
The Whistleblower Office will supervise
the individual’s review of the documents
and the individual will not be permitted
to make copies of the documents. The
individual will have 30 days (this period
may be extended at the sole discretion of
the Whistleblower Office) from the date of
the appointment to submit comments on
the detailed report and the documents re-
viewed at the appointment to the Whistle-
blower Office. All comments will be
added to the administrative claim file and
reviewed by the Whistleblower Office in
making an award determination, pursuant
to paragraph (c)(6) of this section.
(6)Determination letter. After the indi-
vidual’s participation in the whistleblower
administrative proceeding, pursuant to
paragraph (c) of this section, has con-
cluded, and there is a final determination
of tax, as defined in § 301.7623–4(d)(2),
a Whistleblower Office official will de-
termine the amount of the award un-
der section 7623(b)(1), (2), or (3), and
§§ 301.7623–1 through 301.7623–4, based
on the official’s review of the administra-
tive claim file. The Whistleblower Office
will communicate the award to the indi-
vidual in a determination letter, stating
the amount of the award. If, however, the
individual has executed an award consent
form agreeing to the amount of the award
and waiving the individual’s right to ap-
peal the award determination, pursuant
to section 7623(b)(4) and paragraph (d)
of this section, then the Whistleblower
Office will not send the individual a de-
termination letter and will make payment
of the award as promptly as circumstances
permit.
(7)Denials. If the Whistleblower Of-
fice rejects a claim for award under sec-
tion 7623(b), pursuant to § 301.7623–1(b)
or (c), or if, with respect to a claim for
award under section 7623(b), the IRS ei-
ther did not proceed with an action, as de-
fined in § 301.7623–2(b), or did not collect
proceeds, as defined in §301.7623–2(d),
then the Whistleblower Office will not ap-
ply the rules of paragraphs (c)(1) through
(6) of this section. The Whistleblower Of-
fice will send to the claimant a preliminary
denial letter that states the basis for the de-
nial of the claim. The whistleblower ad-
ministrative proceeding described in this
paragraph begins on the date the Whistle-
blower Office sends the preliminary de-
nial letter. If the claimant believes that the
Whistleblower Office erred in evaluating
the information provided, the claimant has
30 days from the date the Whistleblower
Office sends the preliminary denial letter
to submit comments to the Whistleblower
Office. The Whistleblower Office will re-
view all comments submitted timely by the
claimant and, following that review, the
Whistleblower Office will either provide
written notice to the claimant of the denial
of any award or apply the rules of para-
graphs (c)(1) through (c)(6) of this section.
(d)Appeal of award determination.
Any determination regarding an award
under section 7623(b)(1), (2), or (3) may,
within 30 days of such determination, be
appealed to the Tax Court.
(e)Administrative record.(1)In gen-
eral. The administrative record comprises
all information contained in the adminis-
trative claim file that is not protected by
one or more common law or statutory priv-
ileges that is relevant to the award determi-
nation.
(2)Administrative claim file.Thead-
ministrative claim file will include the fol-
lowing materials relating to the action(s)
with respect to which the IRS proceeded
based on the information provided by the
individual, as applicable, and to which the
determination relates:
(i) The Form 211 filed by the individual
and all information provided by the indi-
vidual (whether provided with the individ-
ual’s original submission or through a sub-
sequent contact with the IRS).
(ii) Copies of all debriefing notes and
recorded interviews held with the individ-
ual (and the individual’s representative, if
any).
(iii) Form(s) 11369, “Confidential
Evaluation Report on Claim for Award,”
including narratives prepared by the rel-
evant IRS office(s), explaining the indi-
vidual’s contributions to the actions and
documenting the actions taken by the IRS
in the case(s). The Form 11369 will refer
to and incorporate additional documents
relating to the issues raised by the claim,
as appropriate, including, for example,
relevant portions of revenue agent reports,
copies of agreements entered into with
the taxpayer(s), tax returns, and activity
records.
(iv) Copies of all contracts entered into
among the IRS, the individual, and the in-
dividual’s legal representative (if any), and
an explanation of the cooperation provided
by the individual (or the individual’s legal
representative, if any) under the contract.
(v) Any information that reflects ac-
tions by the individual that may have had a
negative impact on the IRS’s ability to ex-
amine the taxpayer(s).
(vi) All correspondence and documents
sent by the Whistleblower Office to the
individual.
(vii) All notes, memoranda, and other
documents made by officers and employ-
ees of the Whistleblower Office and con-
2013–3 I.R.B.301January 14, 2013

sidered by the official making the award
determination.
(viii) All correspondence and doc-
uments received by the Whistleblower
Office from the individual (and the indi-
vidual’s legal representative, if any) in the
course of the whistleblower administrative
proceeding.
(ix) All other information considered by
the official making the award determina-
tion.
(f)Effective/applicability date.When
finalized, § 301.7623–3 is proposed to ap-
ply to information submitted on or after
the date of publication of the Treasury de-
cision adopting these rules as final reg-
ulations in theFederal Registerand to
claims for award under sections 7623(a)
and 7623(b) that are open as of the date of
publication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register.
Par. 6. Section 301.7623–4 is added to
read as follows:
§ 301.7623–4 Amount and payment of
award.
(a)In general. The Whistleblower
Office will pay all awards under section
7623(a) and determine all awards under
section 7623(b). For all awards under
section 7623 and §§ 301.7623–1 through
301.7623–4, the Whistleblower Office
will—
(1) Analyze the claim by applying the
rules provided in paragraph (c) of this sec-
tion to the information contained in the
administrative claim file to determine an
award percentage; and
(2) Multiply the award percentage by
the amount of collected proceeds. If the
award determination arises out of a single
whistleblower administrative proceeding
involving multiple actions, the Whistle-
blower Office may determine separate
award percentages on an action-by-ac-
tion basis and apply the separate award
percentages to the collected proceeds at-
tributable to the corresponding actions.
The Internal Revenue Service (IRS) will
pay all awards in accordance with the
rules provided in paragraph (d) of this
section. All relevant factors will be taken
into account by the Whistleblower Office
in determining whether an award will be
paid and, if so, the amount of the award.
No person is authorized under this section
to make any offer or promise or other-
wise bind the Whistleblower Office with
respect to the amount or payment of an
award.
(b)Factors used to determine award
percentage.(1)Positive factors.Theap-
plication of the following non-exclusive
factors may support increasing an award
percentage under paragraphs (c)(1) or (2)
of this section:
(i) The individual acted promptly to in-
form the IRS or the taxpayer of the tax non-
compliance.
(ii) The information provided identified
an issue of a type previously unknown to
the IRS.
(iii) The information provided identi-
fied taxpayer behavior that the IRS was un-
likely to identify or that was particularly
difficult to detect through the IRS’s exer-
cise of reasonable diligence.
(iv) The information provided thor-
oughly presented the factual details of tax
noncompliance in a clear and organized
manner, particularly if the manner of the
presentation saved the IRS work and re-
sources.
(v) The individual (or the individual’s
legal representative, if any) provided ex-
ceptional cooperation and assistance dur-
ing the pendency of the action(s), for ex-
ample by providing a useful technical or
legal analysis of the taxpayer’s records in
response to a request from the Whistle-
blower Office, the IRS, or the IRS Office
of Chief Counsel.
(vi) The information provided identi-
fied assets of the taxpayer that could be
used to pay liabilities, particularly if the as-
sets were not otherwise known to the IRS.
(vii) The information provided identi-
fied connections between transactions, or
parties to transactions, that enabled the IRS
to understand tax implications that might
not otherwise have been understood by the
IRS.
(viii) The information provided had an
impact on the behavior of the taxpayer, for
example by causing the taxpayer to correct
a previously-reported improper position.
(2)Negative factors. The application
of the following non-exclusive factors may
support decreasing an award percentage
under paragraphs (c)(1) or (2) of this sec-
tion:
(i) The individual delayed informing
the IRS after learning the relevant facts,
particularly if the delay adversely affected
the IRS’s ability to pursue an action or is-
sue.
(ii) The individual contributed to the
underpayment of tax or tax noncompliance
identified.
(iii) The individual directly or indirectly
profited from the underpayment of tax or
tax noncompliance identified.
(iv) The individual (or the individual’s
legal representative, if any) negatively af-
fected the IRS’s ability to pursue the ac-
tion(s), for example by disclosing the exis-
tence or scope of an enforcement activity.
(v) The individual (or the individual’s
legal representative,if any) violated in-
structions provided by the IRS, particu-
larlyiftheviolationcausedtheIRStoex-
pend additional resources.
(vi) The individual (or the individual’s
legal representative, if any) violated the
terms of the confidentiality agreement de-
scribed in § 301.7623–3(b)(2).
(vii) The individual (or the individual’s
legal representative, if any) violated the
terms of a contract entered into with the
IRS pursuant to § 301.6103(n)–2.
(viii) The individual provided false
or misleading information or otherwise
violated the requirements of section
7623(b)(6)(C) or § 301.7623–1(c)(3).
(c)Amount of award percentage.(1)
Award for substantial contribution.(i)In
general. If the IRS proceeds with any ad-
ministrative or judicial action based on in-
formation brought to the IRS’s attention by
an individual, such individual shall, sub-
ject to paragraphs (c)(2) and (3) of this sec-
tion, receive as an award at least 15 per-
cent but not more than 30 percent of the
collected proceeds resulting from the ac-
tion (including any related actions) or from
any settlement in response to such action.
The amount of any award under this para-
graph depends on the extent of the indi-
vidual’s substantial contribution to the ac-
tion(s). See paragraph (c)(5) of this section
for rules regarding multiple claimants.
(ii)Computational framework. Starting
the analysis at the statutory minimum of
15 percent, the Whistleblower Office will
analyze the administrative claim file using
the factors listed in paragraph (b)(1) of this
section to determine whether the individ-
ual merits an increased award percentage
of 22 percent or 30 percent. The Whistle-
blower Office may increase the award per-
centage based on the presence and signif-
icance of positive factors. The Whistle-
January 14, 20133022013–3 I.R.B.

blower Office will then analyze the con-
tents of the administrative claim file us-
ing the factors listed in paragraph (b)(2) of
this section to determine whether the indi-
vidual merits a decreased award percent-
age of 15 percent, 18 percent, 22 percent,
or 26 percent. The Whistleblower Office
may decrease the award percentage based
on the presence and significance of nega-
tive factors. Although the factors listed in
paragraphs (b)(1) and (2) of this section are
described as positive and negative factors,
the Whistleblower Office’s analysis can-
not be reduced to a mathematical equation.
The factors are not exclusive and are not
weighted and, in a particular case, one fac-
tor may override several others. The pres-
ence and significanceof negative factors
may offset the presence and significance
of positive factors and, while the presence
and significance of negative factors alone
cannot result in an award percentage of
less than 15 percent, the absence of neg-
ative factors does not mean that an award
percentage will be greater than 15 percent.
(iii)Example. The operation of the pro-
visions of paragraph (c)(1)(ii) of this sec-
tion may be illustrated by the following
example. The example is intended to il-
lustrate the operation of the computational
framework. It is not intended to provide
a standard against which the substantial
contribution of an individual submitting a
claim for award may be compared. The
example provides a simplified description
of the facts relating to the claim for award,
the information provided, and the facts re-
lating to the underlying tax case(s). The
application of section 7623(b)(1) and para-
graph (c)(1)(ii) of thissection will depend
on the specific facts of each case.
Example. Individual A, an employee in Cor-
poration’s sales department, submitted to the IRS a
claim for award under section 7623 and information
indicating that Corporation improperly claimed a
credit in tax year 2006. Individual A’s information
consisted of numerous non-privileged documents
relevant to Corporation’s eligibility for the credit.
Individual A’s original submission also included an
analysis of the documents, as well as information
about meetings in which the claim for credit was
discussed. When interviewed by the IRS, Individual
A clarified ambiguities in the original submission,
answered questions about Corporation’s business and
accounting practices, and identified potential sources
to corroborate the information. Some of the docu-
ments provided by Individual A were not included
in Corporation’s general record-keeping system and
their existence may not have been easily uncovered
through normal IRS examination procedures. Cor-
poration initially denied the facts revealed in the
information provided by Individual A, which were
essential to establishing the impropriety of the claim
for credit. IRS examination of Corporation’s return
confirmed that the credit was improperly claimed by
Corporation in tax year 2006, as alleged by Individ-
ual A. Corporation agreed to the ensuing assessments
of tax and interest and paid the liabilities in full. In
this case, Individual A provided specific and credible
information that formed the basis for action by the
IRS. Individual A provided information that was dif-
ficult to detect, provided useful assistance to the IRS,
and helped the IRS sustain the assessment. Based
on the presence and significance of these positive
factors, viewed against all the specific facts relevant
to Corporation’s 2006 tax year, the Whistleblower
Office could increase the award percentage to 22 per-
cent of collected proceeds.If Individual A violated
instructions provided by the IRS and the violation
caused the IRS to expend additional resources, then
the Whistleblower Office could, based on this nega-
tive factor, reduce the award percentage to 18 percent
or 15 percent (but not to lower than 15 percent of
collected proceeds).
(2)Award for less substantial contribu-
tion.(i)In general. If the Whistleblower
Office determines thatthe action described
in paragraph (c)(1) of this section is based
principallyondisclosures of specific alle-
gations resulting from public source infor-
mation including a judicial or administra-
tive hearing; a government report, hear-
ing, audit, or investigation; or the news
media, then the Whistleblower Office may
determine an award of no more than 10
percent of the collected proceeds resulting
from the action (including any related ac-
tions) or from any settlement in response
to such action. The appropriate amount of
any award under this paragraph depends
on the significance of the individual’s in-
formation and the role of the individual
(and the individual’s legal representative,
if any) in contributing to the action(s). If
the individual is the original source of the
public source information, however, then
the award percentage will be determined
under paragraph (c)(1) of this section.
(ii)Computational framework.The
Whistleblower Office will analyze the
administrative claim file to determine
whether any of the information provided
by the individual contained public source
information and, if it did, whether the ac-
tion described in paragraph (c)(1) of this
section was based principally on the public
source information. The Whistleblower
Office will make this determination based
on the extent to which the public source
information described a tax violation or
facts and circumstances from which a tax
violation reasonably may be inferred. If
the Whistleblower Office determines that
the action was based principally on pub-
lic source information, then, starting at
1 percent, the Whistleblower Office will
analyze the administrative claim file using
the factors listed in paragraph (b)(1) of this
section to determine whether the individ-
ual merits an increased award percentage
of 4 percent, 7 percent, or 10 percent.
The Whistleblower Office will then de-
termine whether the individual merits a
decreased award percentage of zero, 1
percent, 4 percent, or 7 percent using the
factors listed in paragraph (b)(2). The
Whistleblower Office may increase the
award percentage based on the presence
and significance of positive factors and
may decrease the award percentage based
on the presence and significance of neg-
ative factors. Like the analysis described
in paragraph (c)(1)(ii) of this section, the
Whistleblower Office’s analysis cannot
be reduced to a mathematical equation.
The factors are not exclusive and are not
weighted and, in a particular case, one
factor may override several others. The
presence and significance of negative
factors may offset the presence and signif-
icance of positive factors or result in a zero
award, but the absence of negative factors
does not mean that an award percentage
will be greater than 1 percent.
(iii)Example. The operation of the pro-
visions of paragraph (c)(2)(ii) of this sec-
tion may be illustrated by the following
example. The example is intended to il-
lustrate the operation of the computational
framework. It is not intended to provide
a standard against which the substantial
contribution of an individual submitting a
claim for award may be compared. The
example provides a simplified description
of the facts relating to the claim for award,
the information provided, and the facts re-
lating to the underlying tax case(s). The
application of section 7623(b)(2) and para-
graph (c)(2)(ii) of this section will depend
on the specific facts of each case.
Example. Individual A submitted to the IRS a
claim for award under section 7623 and information
indicating that Taxpayer B was the defendant in a
criminal prosecution forembezzlement. Individual
A’s information further indicated that evidence pre-
sented at Taxpayer B’s trial revealed Taxpayer B’s
efforts to conceal the embezzled funds by deposit-
ing them in bank accounts of entities controlled by
Taxpayer B. In this case, Individual A’s information
is based principally on disclosures of specific allega-
tions resulting from a judicial hearing. Absent infor-
mation demonstrating that the investigation leading
2013–3 I.R.B.303January 14, 2013

to the embezzlement charge was based on informa-
tion provided by Individual A, section 7623(b)(2) and
paragraph (c)(2) of this section applies to the deter-
mination of Individual A’s award. In this case, there
is no reason for the Whistleblower Office to increase
the applicable award percentage above 1 percent, the
starting point for its analysis, given the absence of
positive factors. Accordingly, Individual A may re-
ceive an award of 1 percent of collected proceeds.
(3)Reduction in award and denial of
award.(i)In general. If the Whistle-
blower Office determines that a claim for
award is brought by an individual who
planned and initiated the actions, trans-
action, or events (underlying acts) that
led to the underpayment of tax or actions
described in section 7623(a)(2), then the
Whistleblower Office may appropriately
reduce the amount of the award percentage
that would otherwise result under section
7623(b)(1) and paragraph (c)(1) of this
section or section 7623(b)(2) and para-
graph (c)(2) of this section, as applicable.
The Whistleblower Office will deny an
award if the individual is convicted of
criminal conduct arising from his or her
role in planning and initiating the under-
lying acts.
(ii)Threshold determination. An indi-
vidualplanned and initiatedthe underly-
ing acts if the individual:
(A) Designed, structured, drafted, ar-
ranged, formed the plan leading to, or oth-
erwise planned, an underlying act,
(B) Took steps to start, introduce, origi-
nate, set into motion, promote or otherwise
initiate an underlying act, and
(C) Knew or had reason to know that
there were tax implications to planning and
initiating the underlying act. The individ-
ual need not have been the sole person in-
volved in planning and initiating the un-
derlying acts. An individual who merely
furnishes typing, reproducing, or other me-
chanical assistance in implementing one or
more underlying acts will not be treated
as initiating any underlying act. If the
Whistleblower Office determines that an
individual has satisfied this initial thresh-
old of planning and initiating, the Whistle-
blower Office will then reduce the award
amount based on the extent of the individ-
ual’s planning and initiating, pursuant to
paragraph (c)(3)(iii) of this section.
(iii)Computational framework.After
determining the award percentage that
would otherwise result from the applica-
tion of section 7623(b)(1) and paragraph
(c)(1) of this section or section 7623(b)(2)
and paragraph (c)(2) of this section, as
applicable, the Whistleblower Office will
analyze the administrative claim file to
make the threshold determination de-
scribed in paragraph (c)(3)(ii) of this
section. If the individual is determined to
have planned and initiated the underlying
acts, then the Whistleblower Office will
reduce the award based on the extent of
the individual’s planning and initiating.
The Whistleblower Office’s analysis and
the amount of the appropriate reduction
determined in a particular case cannot be
reduced to a mathematical equation. To
determine the appropriate award reduc-
tion, the Whistleblower Office will:
(A) Categorize the individual’s role as
a planner and initiator as primary, signifi-
cant, or moderate; and
(B) Appropriately reduce the award
percentage that would otherwise result
from the application of section 7623(b)(1)
and paragraph (c)(1) of this section or
section 7623(b)(2) and paragraph (c)(2) of
this section, as applicable, by 67 percent
to 100 percent in the case of a primary
planner and initiator, by 34 percent to 66
percent in the case of a significant plan-
ner and initiator, or by 0 percent to 33
percent in the case of a moderate planner
and initiator. If the individual is convicted
of criminal conduct arising from his or
her role in planning and initiating the
underlying acts, then the Whistleblower
Office will deny an award without regard
to whether the Whistleblower Office cate-
gorized the individual’s role as a planner
and initiator as primary, significant, or
moderate.
(iv)Factors demonstrating the extent
of an individual’s planning and initiating.
The application of the following non-ex-
clusive factors may support a determina-
tion of the extent of an individual’s plan-
ning and initiating of the underlying acts:
(A) The individual’s role as a planner
and initiator. Was the individual the sole
decision-maker or one of several con-
tributing planners and initiators?
(B) The nature of the individual’s plan-
ning and initiating activities. Was the indi-
vidual involved in legitimate tax planning
activities? Did the individual take steps
to hide the actions at the planning stage?
Did the individual commit any identifiable
misconduct (legal, ethical, etc.)?
(C) The extent to which the individual
knew or should have known that tax non-
compliance could result from the course of
conduct.
(D) The extent to which the individual
acted in furtherance of the noncompliance,
including, for example, efforts to conceal
or disguise the transaction.
(E) The individual’s role in identifying
and soliciting others to participate in the
actions reported, whether as parties to a
common transaction or as parties to sepa-
rate transactions.
(v)Examples. The operation of the
provisions of paragraphs (c)(3)(ii) and
(iii) of this section may be illustrated by
the following examples. These examples
are intended to illustrate the operation of
the computational framework. They are
not intended to provide standards against
which the planning and initiating of an
individual submitting a claim for award
may be compared. The examples pro-
vide simplified descriptions of the facts
relating to the claim for award, the infor-
mation provided, and the facts relating to
the underlying tax case. The application
of section 7623(b)(3) and paragraph (c)(3)
of this section will depend on the specific
facts of each case.
Example 1. Individual A is employed in the fi-
nance department of a corporation (Corporation 1)
and is responsible for performing research and draft-
ing activities for, and at the direction of, Supervisor
B. Individual A performed research on financial prod-
uctsforSupervisorBthatSupervisorBusedinadvis-
ing Corporation 1 on a financial strategy. After Cor-
poration 1 executed the strategy, Individual A sub-
mitted a claim for award under section 7623 along
with information about the strategy to the IRS. The
IRS initiated an examination of Corporation 1 based
on Individual A’s information, determined deficien-
cies in tax and penalties, and ultimately assessed and
collected the tax and penalties as determined. Indi-
vidual A did nothing to design or set into motion Cor-
poration 1’s activities. Individual A did not know or
have reason to know that there were tax implications
to the research activities. Accordingly, as a thresh-
old matter, Individual A was not a planner and ini-
tiator of Corporation 1’s strategy, and the award that
would otherwise be determined based on the appli-
cation of section 7623(b)(1) and paragraph (c)(1) of
this section is not subject to reduction under section
7623(b)(3) and paragraph (c)(3) of this section.
Example 2. Individual C is employed in the HR
department of a corporation (Corporation 2). Corpo-
ration 2 tasked Individual C with hiring a large num-
ber of temporary employees to meet Corporation 2’s
seasonal business demands. Individual C organized,
scheduled, and conducted job fairs and job interviews
to hire the seasonal employees. Individual C was not
responsible for, had no knowledge of, and played no
part in, classifying the seasonal employees for Fed-
eral income tax purposes. Individual C later discov-
ered, however, that Corporation 2 classified the sea-
sonal employees as independent contractors. After
January 14, 20133042013–3 I.R.B.

discovering the misclassification, Individual C sub-
mitted a claim for award under section 7623 along
with non-privileged information describing the em-
ployee misclassification to the IRS. The IRS initiated
an examination of Corporation 2 based on Individ-
ual C’s information, determined deficiencies in tax
and penalties, and ultimately assessed and collected
the tax and penalties as determined. The award that
would otherwise be determined based on the appli-
cation of section 7623(b)(1) and paragraph (c)(1) of
this section would not be subject to a reduction under
section 7623(b)(3) and paragraph (c)(3) of this sec-
tion because Individual C didnot satisfy the require-
ments of the threshold determination of a planner and
initiator. Individual C did not know and had no rea-
son to know that her actions had tax implications or
that Corporation 2 would misclassify the employees
as independent contractors.
Example 3. Individual D is employed as a su-
pervisor in the finance department of a corporation
(Corporation 3) and is responsible for planning Cor-
poration 3’s overall financial strategy. Pursuant to the
overall financial strategy, Individual D and others at
Corporation 3, in good faith but incorrectly, planned
tax-advantaged transactions. Individual D and others
at Corporation 3 prepareddocuments needed to exe-
cute the transactions. After Corporation 3 executed
the transactions, Individual D submitted a claim for
award under section 7623 along with non-privileged
information about the transactions to the IRS. The
IRS initiated an examination of Corporation 3 based
on Individual D’s information, determined deficien-
cies in tax and penalties, and ultimately assessed and
collected the tax and penalties as determined. The
award that would otherwise be determined based on
the application of section 7623(b)(1) and paragraph
(c)(1) of this section would be subject to an appropri-
ate reduction under section 7623(b)(3) and paragraph
(c)(3) of this section because Individual D satisfies
the requirements of the threshold determination of a
planner and initiator. Individual D planned the trans-
actions, prepared the necessary documents, and knew
the tax implications of the transactions. Individual
D was not the sole planner and initiator of Corpora-
tion 3’s transactions. Individual D did nothing to con-
ceal Corporation 3’s activities. Corporation 3 had a
good faith basis for claiming the disallowed tax ben-
efits. On the basis of those facts, Individual D was
a moderate-level planner and initiator. Accordingly,
the Whistleblower Office will exercise its discretion
to reduce Individual D’s award by 0 to 33 percent.
Example 4. Same facts asExample 3, except that
Individual D independently planned a high-risk tax
avoidance transaction and prepared draft documents
to execute the transaction. Individual D presented
the transaction, along with the draft documents, to
Corporation 3’s Chief Financial Officer. Without the
further involvement of Individual D, Corporation 3’s
Chief Financial Officer, Chief Executive Officer, and
Board of Directors subsequently approved the execu-
tion of the transaction. After Corporation 3 executed
the transaction, Individual D submitted a claim for
award under section 7623 along with non-privileged
information about the transaction to the IRS. The IRS
initiated an examination of Corporation 3 based on
Individual D’s information, determined deficiencies
in tax and penalties, and ultimately assessed and
collected the tax and penalties as determined. The
award that would otherwise be determined based on
the application of section 7623(b)(1) and paragraph
(c)(1) of this section would be subject to an appropri-
ate reduction under section 7623(b)(3) and paragraph
(c)(3) of this section because Individual D satisfies
the requirements of the threshold determination of
a planner and initiator. Individual D planned the
transaction, prepared thenecessary documents, and
knew the tax implications of the transaction. Work-
ing independently, Individual D designed and took
steps to effectuate the transaction while knowing
that the planning and initiating of the transaction
was likely to result in tax noncompliance. Individual
D, however, did not approve the execution of the
transaction by Corporation 3 and, therefore, was not
a decision-maker. On the basis of those facts, Indi-
vidual D was a significant-level planner and initiator.
Accordingly, the Whistleblower Office will exercise
its discretion to reduce Individual D’s award by 34
to 66 percent.
Example 5. Individual E is a financial planner. In-
dividual E designed a financial product that the IRS
identified as an abusive tax avoidance transaction.
Individual E marketed the transaction to taxpayers,
facilitated their participation in the transaction, and,
initially, took steps to disguise the transaction. Af-
ter several taxpayers had participated in the transac-
tion, Individual E submitted a claim for award under
section 7623 along with non-privileged information
to the IRS about the transaction and the participating
taxpayers. The IRS initiated an examination of the
identified taxpayers based on Individual E’s informa-
tion, determined deficiencies in tax and penalties, and
ultimately assessed and collected the tax and penal-
ties as determined. Individual E was not criminally
prosecuted. The award that would otherwise be deter-
mined based on the application of section 7623(b)(1)
and paragraph (c)(1) of this section would be subject
to an appropriate reduction under section 7623(b)(3)
and paragraph (c)(3) of this section because Individ-
ual E satisfies the requirements of the threshold de-
termination of a planner and initiator. Individual E
designed the financial product, marketed and facili-
tated its use by taxpayers, and knew the tax impli-
cations of the transaction. Individual E was the sole
designer of the transaction, solicited clients to partic-
ipate in the transaction, and facilitated and attempted
to conceal their participation in the transaction. Indi-
vidual E knew that the planning and initiating of the
taxpayers’ participation in the transaction was likely
to result in tax noncompliance. On the basis of those
facts, Individual E was a primary-level planner and
initiator. Accordingly, the Whistleblower Office will
exercise its discretion to reduce Individual E’s award
by 67 to 100 percent.
(4)Eligible affiliated claimants.(i)In
general. If the Whistleblower Office de-
termines that an affiliated claimant, as de-
fined in § 301.7623–2(f), filed a claim
for award based on information obtained
from an otherwise eligible individual for
the purpose of avoiding any reduction in
the amount of any award that could result
if the claim was filed by the otherwise el-
igible individual, then the Whistleblower
Office may, for purposes of determining
the amount of an award, treat the claim as
ifithadbeenfiledbytheotherwiseeligi-
ble individual. Any award to the affiliated
claimant that filed the claim for award will
be paid pursuant to paragraph (d)(1) of this
section. See § 301.7623–1(b)(3) for rules
regarding ineligible affiliated claimants.
(ii)Example. Individual A is employed as a su-
pervisor in the finance department of Corporation.
Individual A planned and initiated the actions that led
to an underpayment of tax by Corporation, within the
meaning of section 7623(b)(3) and paragraph (c)(3)
of this section. To avoid the application of section
7623(b)(3) and paragraph (c)(3) of this section, Indi-
vidual A provided non-privileged information to In-
dividual B that described and documented specific
facts relating to Corporation’s tax underpayment. In-
dividual B did not plan and initiate the actions that led
to an underpayment of tax by Corporation. Individual
B submitted to the IRS the information received from
Individual A, alleging that Corporation owed addi-
tional taxes and filing a claim for award under sec-
tion 7623. The IRS proceeded with an examination
of Corporation based on the information provided by
Individual B, determined a deficiency against Corpo-
ration and, ultimately, collected proceeds from Cor-
poration. For purposes of determining the amount of
any award payable to Individual B, as the individual
that filed the claim for award, the Whistleblower Of-
fice may treat the claim as if it had been filed by In-
dividual A.
(5)Multiple claimants.Iftwoormore
independent claims relate to the same col-
lected proceeds, then the Whistleblower
Office may evaluate the contribution of
each individual to theaction(s) that re-
sulted in collected proceeds. The Whistle-
blower Office will determine whether the
information submitted by each individ-
ual would have been obtained by the IRS
as a result of the information previously
submitted by any other individual. If
the Whistleblower Office determines that
multiple individuals submitted informa-
tion that would not have been obtained
based on a prior submission, then the
Whistleblower Office will determine the
amount of each individual’s award based
on the extent to which each individual
contributed to the action(s). The aggregate
award amount in cases involving two or
more independent claims that relate to the
same collected proceeds will not exceed
the maximum award amount that could
have resulted under section 7623(b)(1) or
section 7623(b)(2),as applicable, subject
to the award reduction provisions of sec-
tion 7623(b)(3), if a single claim had been
submitted.
(d)Payment of Award.(1)In general.
The IRS will pay any award determined
under section 7623 and §§ 301.7623–1
through 301.7623–4 to the individual(s)
2013–3 I.R.B.305January 14, 2013

that filed the corresponding claim for
award. Payment of an award will be made
as promptly as the circumstances per-
mit, but not until there has been a final
determination of tax with respect to the
action(s), as defined in paragraph (d)(2) of
this section, the Whistleblower Office has
determined the award, and all appeals of
the Whistleblower Office’s determination
are final or the individual has executed
an award consent form agreeing to the
amount of the award and waiving the indi-
vidual’s right to appeal the determination.
(2)Final determination of tax.For
purposes of §§ 301.7623–1 through
301.7623–4, afinal determination of tax
means that the proceeds resulting from
the action(s) subject to the award deter-
mination have been collected and either
the statutory period for filing a claim
for refund has expired or the taxpayer(s)
subject to the action(s) and the IRS have
agreed with finality to the tax or other
liabilities for the period(s) at issue and the
taxpayer(s) have waived the right to file a
claim for refund.
(3)Joint Claimants. If multiple indi-
viduals jointly submit a claim for award,
the IRS will pay any award in equal shares
to the joint claimants unless the joint
claimants specify a different allocation in
a written agreement, signed by all the joint
claimants and notarized, and submitted
with the claim for award. The aggregate
award payment in cases involving joint
claimants will be within the award per-
centage range of section 7623(b)(1) or
section 7623(b)(2), asapplicable, and sub-
ject to the award reduction provisions of
section 7623(b)(3).
(4)Deceased Claimant. If a claimant
dies before or during the whistleblower
administrative proceeding, the Whistle-
blower Office will substitute an executor,
administrator, or other legal representative
on behalf of the deceased claimant for
purposes of conducting the whistleblower
administrative proceeding.
(5)Tax treatment of award. All awards
are subject to current Federal tax reporting
and withholding requirements.
(e)Effective/applicability date.When
finalized, § 301.7623–4 is proposed to ap-
ply to information submitted on or after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in theFederal Registerand to claims
for award under section 7623(b) that are
open as of the date of publication of the
Treasury decision adopting these rules as
final regulations in theFederal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on December 14,
2012, 4:15 p.m., and published in the issue of the Federal
Register for December 18, 2012, 77 F.R. 74798)
U.S.-Norway Agreement
Regarding the Sourcing of
Remuneration for Government
Services and Social Security
Payments
Announcement 2013–5
The following is a copy of the Com-
petent Authority Agreement entered into
by the competent authorities of the United
States of America and the Kingdom of
Norway clarifying the meaning of “re-
muneration described in Article 17 (Gov-
ernmental Functions)” and “payments
described in Article 19 (Social Security
Payments)” as those phrases are used in
the last sentence of paragraph 6 of Article
24 (Source of Income) of the Convention
Between the United States of America and
the Kingdom of Norway for the Avoidance
of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on
Income and Property, signed on December
3, 1971, and as amended by the Protocol
signed on September 19, 1980.
The text of the Competent Authority
Agreement is as follows:
COMPETENT AUTHORITY
AGREEMENT
The Competent Authorities of the
United States of America and the King-
dom of Norway hereby enter into
the following mutual agreement (the
“Agreement”) clarifying the meaning
of “remuneration described in Arti-
cle 17 (Governmental Functions)” and
“payments described in Article 19
(Social Security Payments)” as those
phrases are used in the last sentence
of paragraph 6 of Article 24 (Source
of Income) of the Convention Be-
tween the United States of America
and the Kingdom of Norway for the
Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Re-
spect to Taxes on Income and Property,
signed on December 3, 1971, and as
amended by the Protocol signed on
September 19, 1980 (the “Treaty”).
This Agreement is entered into under
paragraph 2 of Article 27 (Mutual
Agreement Procedure) of the Treaty.
Article 24 provides, in relevant part:
For purposes of this Convention:
(6) Inco
me received by an
individ
ual for his performance
of labor
or personal services,
whether
as an employee or in
an indep
endent capacity, shall
be trea
ted as income from
source
s within a Contracting
State o
nlytotheextentthat
such se
rvices are performed
in that
Contracting State
... No
twithstanding the
prece
ding provisions of this
parag
raph, remuneration
descr
ibed in Article 17
(Gove
rnmental Functions)
and p
ayments described in
Arti
cle 19 (Social Security
Paym
ents) shall be treated as
inco
me from sources within a
Cont
racting State only if paid
by o
r from the public funds
of t
hat Contracting State or a
pol
itical subdivision or local
aut
hority thereof.
Article 17 provides as follows:
January 14, 20133062013–3 I.R.B.

Wages, salaries, and similar
remuneration, including
pensions or similar benefits,
paid by or from public funds
of one of the Contracting
States, or a political
subdivision or local authority
thereof, to a citizen of that
Contracting State for labor or
personal services performed
for that Contracting State,
or for any of its political
subdivisions or local
authorities, in the discharge of
governmental functions shall
be exempt from tax by the
other Contracting State.
Article 19 provides as follows:
Social Security payments and
other public pensions paid
by one of the Contracting
States to an individual
who is a resident of the
other Contracting State or a
citizen of the United States
shall be taxable only in the
first-mentioned Contracting
State. This article shall not
apply to payments described
in Article 17 (Governmental
Functions).
The Competent Authorities agree that
for purposes of the last sentence of Article
24(6):
(1) The phrase “remuneration described
in Article 17 (Governmental Functions)” is
limited to wages, salaries, and similar re-
muneration, including pensions or similar
benefits, paid by or from public funds of
one of the Contracting States, or a politi-
cal subdivision or local authority thereof,
to a citizen of that Contracting State for la-
bor or personal services performed for that
Contracting State, or for any of its political
subdivisions or local authorities, in the dis-
charge of governmental functions. Thus,
for example, remuneration paid by or from
public funds of Norway to a person who
is not a citizen of Norway is not remuner-
ation described in Article 17 and, conse-
quently, would not be treated as income
from sources within Norway pursuant to
the last sentence of Article 24(6). Under
the first sentence of Article 24(6), such
remuneration would be treated as income
from sources within a Contracting State to
the extent that such services are performed
in that Contracting State.
(2) The phrase “payments described
in Article 19 (Social Security Payments)”
means Social Securitypayments and other
public pensions paid by one of the Con-
tracting States to an individual who is a
resident of the other Contracting State
or a citizen of the United States, without
regard to the location of the performance
of the personal services underlying the
entitlement to the payments. Thus, for ex-
ample, if the United States makes a Social
Security payment to a resident of Norway
based on personal services that were per-
formed partly within the United States and
partly without the United States, the entire
amount of the payment will be treated as
income from sources within the United
States.
The Competent Authorities also con-
firm that remuneration that is not described
in Article 17 is subject to the provisions of
the applicable article,e.g., Article 14 (De-
pendent Personal Services) or Article 18
(Private Pensions and Annuities).
The Competent Authorities also agree
that if remuneration described in Article
17 is paid to a citizen of Norway who is
also either a citizen of the United States or
a lawful permanent resident of the United
States, then the United States may tax the
payment under paragraph 3 of Article 22
(General Rules of Taxation) and, solely
to the extent necessary to alleviate dou-
ble taxation under paragraph 1 of Arti-
cle 23 (Relief from Double Taxation), will
treat the entire amount of the payment as
income from sources without the United
States.
Agreed to by the undersigned Compe-
tent Authorities:
Michael Danilack
United States Competent Authority
Nove
mber 27, 2012
Stig Sollund
Nor
wegian Competent Authority
December 10, 2012
Regulations Regarding the
Application of Section 172(h)
Including Consolidated
Groups; Correction
Announcement 2013–6
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to notice of pro-
posed rulemaking.
SUMMARY: This document contains cor-
rections to a notice of proposed rulemak-
ing (REG–140668–07, 2012–43 I.R.B.
501) that was published in theFederal
Registeron Monday, September 17, 2012
(77 FR 57452). The proposed regulation
provides guidance regarding the treatment
of corporate equity reduction transactions
(CERTs), including the treatment of mul-
tiple step plans for the acquisition of stock
and CERTs involving members of a con-
solidated group.
FOR FURTHER INFORMATION
CONTACT: Amie Colwell Breslow
or Marie C. Milnes-Vasquez at (202)
622–7530 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking
(REG–140668–07) that is the subject of
these corrections are under sections 172
and 1502 of the Internal Revenue Code.
Need for Correction
As published, the notice of proposed
rulemaking (REG–140668–07) contains
2013–3 I.R.B.307January 14, 2013

errors that may proveto be misleading and
are in need of clarification.
Correction of Publication
Accordingly, the notice of proposed
rulemaking (REG–140668–07), that was
the subject of FR Doc. 2012–22838, is
corrected as follows:
1. On page 57452, in the preamble, col-
umn 1, under the caption “ADDRESSES”,
line 10, the language “Service, 1111 Con-
stitution Avenue NW.,” is corrected to
read “Service, 1111 Constitution Avenue,
NW,”.
2. On page 57453, in the preamble, col-
umn 2, under the caption “Background”,
line 16 from the bottom of the page, the
language “return group; (4) application of
these” is corrected to read “group; (4) ap-
plication of these”.
3. On page 57456, in the preamble,
column 3, under the paragraph headingC.
Loss Limitation Years, line 6 from the bot-
tom of the first paragraph, the language
“section 172 and 381 are applied as if the”
is corrected to read “sections 172 and 381
are applied as if the”.
§ 1.172(h)–2 [Corrected]
4. On Page 57462, column 1, under
the paragraph heading§1.172(h)–2 Com-
putation of a CERIL., fourth paragraph
of the column, line 6, the language “addi-
tion, under the principles of section” is cor-
rected to read “addition, under the princi-
ples of”.
§ 1.172(h)–4 [Corrected]
5. On Page 57465, column 1, under the
paragraph heading§1.172(h)–4 Special
rules for predecessors and successors.,
second full paragraph of the column,
line 13, the language “occurred. See
§§1.172(h)–5(a) (defining” is corrected
to read “occurred. See §1.172(h)–5(a)
(defining”.
6. On Page 57465, column 3, under the
same paragraph heading, line 21 from the
top of the column, the language “interest
paid or accrued during the 3 year” is cor-
rected to read “interest paid or accrued dur-
ing the three-year”.
§ 1.1502–72 [Corrected]
7. On page 57471, column 2, un-
der the paragraph heading§ 1.1502–72
Corporate equity reduction transac-
tions., lines 10 and 11 from the top of
the column, the language “[$10,000,000
+ $100,000 + 250,000 + 175,000].
See §1.172(h)–2(b)(3) for rules” is
corrected to read “[$10,000,000 +
$100,000 + $250,000 + $175,000]. See
§1.172(h)–2(b)(3) for rules”.
8. On page 57473, column 1, under
the same paragraph heading, line 22 of the
second paragraph, the language “([$1,400
+ $1,000 + 1,200]/3). Because T is” is
corrected to read “([$1,400 + $1,000 +
$1,200]/3). Because T is”
9. On page 57473, column 1, under the
same paragraph heading, line 2 from the
bottom of the second paragraph, the lan-
guage “([$1,400 + $1,000 + 1,200 + $600
+ $200 +)” is corrected to read “([$1,400 +
$1,000 + $1,200 + $600 + $200 +)”
10. On page 57475, column 3, under
the same paragraph heading, line 11 of the
second full paragraph of the column, the
language “172(h)(3)(C) §1.172(h)–1(c)(3)
and (f), and” is corrected to read
“172(h)(3)(C), §1.172(h)–1(c)(3) and (f),
and”.
Guy Traynor,
Federal Register Liaison,
Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on October 22,
2012, 8:45 a.m., and published in the issue of the Federal
Register for October 23, 2012, 77 F.R. 64768)
Guidance Regarding
Deduction and Capitalization
of Expenditures Related to
Tangible Property
Announcement 2013–7
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Technical amendments.
SUMMARY: This document contains
amendments to temporary regulations
(T.D. 9564, 2012–4 I.R.B. 614) relating to
guidance regarding deduction and capital-
ization of expenditures related to tangible
property. These amendments change the
applicability dates of the temporary reg-
ulations to taxable years beginning on or
after January 1, 2014, while permitting
taxpayers to choose to apply the temporary
regulations for taxable years beginning on
or after January 1, 2012. The amendments
to the temporary regulations will affect
all taxpayers that acquire, produce, or im-
prove tangible property.
DATES: These amendments are effective
December 17, 2012.
FOR FURTHER INFORMATION
CONTACT: Concerning §§ 1.162–3T,
1.162–4T, 1.162–11T, 1.263(a)–1T,
1.263(a)–2T,1.263(a)–3T,and
1.263(a)–6T, Merrill D. Feldstein or Alan
S. Williams, Office of Associate Chief
Counsel (Income Tax & Accounting),
(202) 622–4950 (not a toll-free call);
Concerning §§ 1.165–2T, 1.167(a)–4T,
1.167(a)–7T, 1.167(a)–8T, 1.168(i)–1T,
1.168(i)–7T, 1.168(i)–8T, 1.263A–1T,
and 1.1016–3T, Kathleen Reed or Patrick
Clinton, Office Associate Chief Coun-
sel (Income Tax & Accounting), (202)
622–4930 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
The temporary regulations that are the
subject of these amendments are under
sections 162, 165, 167, 168, 263, 263A,
and 1016 of the Internal Revenue Code.
The temporary regulations (T.D. 9564)
were published in theFederal Regis-
teron Tuesday, December 27, 2011 (76
FR 81060). Because the temporary reg-
ulations are applicable to taxable years
beginning on or after January 1, 2012,
the IRS and the Treasury Department are
concerned that taxpayers are expending
resources to comply with temporary reg-
ulations that may not be consistent with
forthcoming final regulations. For more
information about the temporary regula-
tions and these amendments, see Notice
2012–73, 2012–51 I.R.B. 713.
Taxpayers choosing to apply the provi-
sions of the temporary regulations to tax-
able years beginning on or after January 1,
2012, may continue to rely on the proce-
dures by which a taxpayer may obtain the
automatic consent of the Commissioner
of Internal Revenue to change its meth-
ods of accounting provided in Revenue
January 14, 20133082013–3 I.R.B.

Procedures 2012–19, 2012–14 I.R.B. 689,
and 2012–20, 2012–14 I.R.B. 700, both of
which are available at IRS.gov.
Need for amendments
For the reasons discussed, the IRS and
the Treasury Department have decided to
amend the applicability dates of the tem-
porary regulations.
*****
Amendments ofpublication
Accordingly, 26 CFR Part 1 is amended
by making the following technical amend-
ments.
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.168(i)–1T also issued under
26 U.S.C. 168(i)(4). * * *
Par. 2. Section 1.162–3T is amended
by revising paragraph (j) to read as fol-
lows:
§ 1.162–3T Materials and supplies
(temporary)
*****
(j)Effective/applicability date—(1)In
general. This section generally applies to
amounts paid or incurred (to acquire or
produce property) in taxable years begin-
ning on or after January 1, 2014. How-
ever, a taxpayer may apply paragraph (e)
of this section (the optional method of ac-
counting for rotable and temporary spare
parts) to taxable years beginning on or af-
ter January 1, 2014. Section 1.162–3 as
contained in 26 CFR part 1 edition revised
as of April 1, 2011, applies to taxable years
beginning before January 1, 2014.
(2)Optional early application. Except
for paragraph (e) of this section, a tax-
payer may choose to apply this section to
amounts paid or incurred (to acquire or
produce property) in taxable years begin-
ning on or after January 1, 2012. A tax-
payer may choose to apply paragraph (e)
of this section (the optional method of ac-
counting for rotable and temporary spare
parts) to taxable years beginning on or af-
ter January 1, 2012.
*****
Par. 3. Section 1.162–4T is amended
by revising paragraph (c) to read as fol-
lows:
§ 1.162–4T Repairs (temporary).
*****
(c)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.162–4 as contained in 26
CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 4. Section 1.162–11T is amended
by revising paragraph (c) to read as fol-
lows:
§ 1.162–11T Rentals (temporary).
*****
(c)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.162–11 as contained in 26
CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 5. Section 1.165–2T is amended
by revising paragraph (d) to read as fol-
lows:
§ 1.165–2T Obsolescence of
nondepreciable property (temporary).
*****
(d)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.165–2 as contained in 26
CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 6. Section 1.167(a)–4T is amended
by:
1. Revising paragraph (b)(1).
2. Revising the heading and introduc-
tory text to paragraph (b)(2).
The revisions read as follows:
§ 1.167(a)–4T Leased property
(temporary).
*****
(b) * * *
(1)In general. Except as provided in
paragraphs (b)(2) and (b)(3) of this section,
this section applies to taxable years begin-
ning on or after January 1, 2014.
(2)Application of this section to lease-
hold improvements placed in service after
December 31, 1986, in taxable years be-
ginning before January 1, 2014. For lease-
hold improvements placed in service after
December 31, 1986, in taxable years be-
ginning before January 1, 2014, a taxpayer
may—
*****
Par. 7. Section 1.167(a)–7T is amended
by revising paragraph (f) to read as fol-
lows:
§ 1.167(a)–7T Accounting for depreciable
property (temporary).
*****
(f)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.167(a)–7 as contained in
26 CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 8. Section 1.167(a)–8T is amended
by revising paragraph (h) to read as fol-
lows:
§ 1.167(a)–8T Retirements (temporary).
*****
(h)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.167(a)–8 as contained in
2013–3 I.R.B.309January 14, 2013

26 CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 9. Section 1.168(i)–1T is amended
by:
1. Revising paragraph (m)(1).
2. Redesignating paragraph (m)(3) as
paragraph (m)(4).
3. Redesignating paragraph (m)(2) as
paragraph (m)(3) and adding new para-
graph (m)(2).
4. In redesignated paragraph (m)(3),
last sentence, the language “paragraph
(m)(2)” is removed and “paragraph
(m)(3)” is added in its place.
The revision and addition read as fol-
lows:
§ 1.168(i)–1T General asset accounts
(temporary).
*****
(m) * * *
(1)In general. This section applies
to taxable years beginning on or after
January 1, 2014. Section 1.168(i)–1 as
contained in 26 CFR part 1 edition revised
as of April 1, 2011, applies to taxable
years beginning before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 10. Section 1.168(i)–7T is
amended by:
1. Revising paragraph (e)(1).
2. Redesignating paragraph (e)(3) as
paragraph (e)(4).
3. Redesignating paragraph (e)(2) as
paragraph (e)(3) and adding new para-
graph (e)(2).
The revision and addition read as fol-
lows:
§ 1.168(i)–7T Accounting for MACRS
property (temporary).
*****
(e) * * *
(1)In general. This section applies
to taxable years beginning on or after
January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 11. Section 1.168(i)–8T is
amended by:
1. Revising paragraph (i)(1).
2. Redesignating paragraph (i)(3) as
paragraph (i)(4).
3. Redesignating paragraph (i)(2) as
paragraph (i)(3) and adding new paragraph
(i)(2).
The revision and addition read as fol-
lows:
§ 1.168(i)–8T Dispositions of MACRS
property (temporary).
*****
(i) * * *
(1)In general. This section applies
to taxable years beginning on or after
January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 12. Section 1.263(a)–0T is
amended by:
1. Adding new entries in the table
of contents for § 1.263(a)–1T(g)(1) and
(g)(2).
2. Adding new entries in the table
of contents for § 1.263(a)–2T(k)(1) and
(k)(2).
3. Adding new entries in the table
of contents for § 1.263(a)–3T(p)(1) and
(p)(2).
The additions read as follows:
§ 1.263(a)–0T Table of Contents
(temporary).
*****
§ 1.263(a)–1T Capital expenditures; in
general (temporary).
*****
(g)* * *
(1) In general.
(2) Optional early application.
*****
§ 1.263(a)–2T Amounts paid to acquire or
produce tangible property (temporary).
*****
(k)***
(1) In general.
(2) Optional early application.
*****
§ 1.263(a)–3T Amounts paid to improve
tangible property (temporary).
*****
(p)***
(1) In general.
(2) Optional early application.
*****
Par. 13. Section 1.263(a)–1T is
amended by revising paragraph (g) to read
as follows:
§ 1.263(a)–1T Capital expenditures: in
general (temporary).
*****
(g)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.263(a)–1 as contained in
26 CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 14. Section 1.263(a)–2T is
amended by revising paragraph (k) to read
as follows:
§ 1.263(a)–2T Amounts paid to acquire or
produce tangible property (temporary).
*****
(k)Effective/applicability date—(1)In
general. Except for paragraphs (f)(2)(iii),
(f)(2)(iv), (f)(3)(ii), and (g) of this section,
this section generally applies to taxable
years beginning on or after January 1,
2014. Paragraphs (f)(2)(iii), (f)(2)(iv),
(f)(3)(ii), and (g) of this section apply
to amounts paid or incurred (to acquire
or produce property) in taxable years
beginning on or after January 1, 2014.
Section 1.263(a)–2 as contained in 26 CFR
part 1 edition revised as of April 1, 2011,
January 14, 20133102013–3 I.R.B.

applies to taxable years beginning before
January 1, 2014.
(2)Optional early application.Ex-
cept for paragraphs (f)(2)(iii), (f)(2)(iv),
(f)(3)(ii), and (g) of this section, a taxpayer
may choose to apply this section to tax-
able years beginning on or after January 1,
2012. A taxpayer may choose to apply
paragraphs (f)(2)(iii), (f)(2)(iv), (f)(3)(ii),
and (g) of this section to amounts paid or
incurred (to acquire or produce property)
in taxable years beginning on or after
January 1, 2012.
*****
Par. 15. Section 1.263(a)–3T is
amended by revising paragraph (p) to read
as follows:
§ 1.263(a)–3
T Amounts paid to improve
tangible pr
operty (temporary).
*****
(p)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.263(a)–3 as contained in
26 CFR part 1 edition revised as of April 1,
2011, applies to taxable years beginning
before January 1, 2014.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 16. Section 1.263(a)–6T is
amended by revising paragraph (c) to read
as follows:
§ 1.263(a)–6T Election to deduct
or capitalize certain expenditures
(temporary).
*****
(c)Effective/applicability date—(1)In
general. This section applies to taxable
years beginning on or after January 1,
2014. Section 1.263(a)–3 as contained
in 26 CFR part 1 edition revised as of
April 1, 2011, applies to taxable years
beginning before January 1, 2014. For
the effective dates of the enumerated
election provisions,see those Internal
Revenue Code sections and the regulations
thereunder.
(2)Optional early application.Atax-
payer may choose to apply this section
to taxable years beginning on or after
January 1, 2012.
*****
Par. 17. Section 1.263A–1T is
amended by:
1. Revising paragraph (m)(2).
2. Redesignating paragraph (m)(3) as
paragraph (n).
The revision reads as follows:
§ 1.263A–1T Uniform capitalization of
costs (temporary).
*****
(m) * * *
(2) Paragraph (b)(14), the introduc-
tory phrase of paragraph (c)(4), the last
sentence of paragraphs (e)(2)(i)(A) and
(e)(2)(ii)(E), paragraph (l), and paragraph
(m)(2) of this section apply to amounts
paid or incurred (to acquire or produce
property) in taxableyears beginning on or
after January 1, 2014. Section 1.263A–1
as contained in 26 CFR part 1 edition
revised as of April 1, 2011, applies to
taxable years beginning before January 1,
2014. A taxpayer may choose to apply
paragraph (b)(14), the introductory text of
paragraph (c)(4), the last sentence of para-
graphs (e)(2)(i)(A) and (e)(2)(ii)(E), and
paragraph (l) of this section to amounts
paid or incurred (to acquire or produce
property) in taxableyears beginning on or
after January 1, 2012.
*****
Par. 18. Section 1.1016–3T is amended
by revising paragraph (j)(3) to read as fol-
lows:
§ 1.1016–3T Exhaustion, wear and tear,
obsolescence, amortization, and depletion
for periods since February 13, 1913
(temporary).
*****
(j) * * *
(3)Applicationof
§ 1.1016–3T(a)(1)(ii)—(i)In general.
Paragraph (a)(1)(ii) of this section
applies to taxable years beginning
on or after January 1, 2014. Section
1.1016–3(a)(1)(ii) as contained in 26 CFR
part 1 edition revised as of April 1, 2011,
applies to taxable years beginning before
January 1, 2014.
(ii)Optional early application.Atax-
payer may choose to apply paragraph
(a)(1)(ii) of this section to taxable years
beginning on or after January 1, 2012.
*****
Guy R. Traynor,
Federal Register Liaison,
Publication & Regulation Branch,
Legal Processing Division,
Associate Chief Counsel
Procedure & Administration.
(Filed by the Office of the Federal Register on December 14,
2012, 8:45 a.m., and published in the issue of the Federal
Register for December 17, 2012, 77 F.R. 74583)
Announcement 2013–10
Because of recent changes made by the
American Taxpayer Relief Act of 2012,
the following update has been issued for
Publication 1220,Specifications for Fil-
ing Forms 1097, 1098, 1099, 3921, 3922,
5498, 8935, and W-2G Electronically,re-
vised August 13, 2012.
Payer “A” Record — Record Layout
Positions 28–43 for Form 1098-Mort-
gage Interest Statement (pg 43) –
Amount Code 4, Mortgage Insurance
Premium has been reinstated.
2013–3 I.R.B.311January 14, 2013

Record Name: Payer “A” Record (continued)
Field
Position
Field Title
Length
Description and Remarks
28–43Amount Codes16
Amount Codes
Form 1098— Mortgage Interest
Statement
For Reporting Payments on Form 1098:
A
mountCodeAmountType
1.Mortgage interest received from
payer(s)/borrower(s)
2.Points paid on the purchase of a principal
residence
3.Refund (or credit) of overpaid interest
4.Mortgage Insurance Premium
5.
Blank (Filer’s use)
Effect on Other Documents
Revenue Procedure 2012–30, 2012–33
I.R.B. 165, is updated.
January 14, 20133122013–3 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2013–3 I.R.B.iJanuary 14, 2013

Numerical Finding List
1
Bulletins 2013–1 through 2013–3
Announcements:
2013-1, 2013-1 I.R.B.251
2013-2, 2013-2 I.R.B.271
2013-3, 2013-2 I.R.B.271
2013-5, 2013-3 I.R.B.306
2013-6, 2013-3 I.R.B.307
2013-7, 2013-3 I.R.B.308
2013-10, 2013-3 I.R.B.311
Notices:
2013-1, 2013-3 I.R.B.281
Proposed Regulations:
REG-141066-09, 2013-3 I.R.B.289
Revenue Procedures:
2013-1, 2013-1 I.R.B.1
2013-2, 2013-1 I.R.B.92
2013-3, 2013-1 I.R.B.113
2013-4, 2013-1 I.R.B.126
2013-5, 2013-1 I.R.B.170
2013-6, 2013-1 I.R.B.198
2013-7, 2013-1 I.R.B.233
2013-8, 2013-1 I.R.B.237
2013-9, 2013-2 I.R.B.255
2013-10, 2013-2 I.R.B.267
2013-11, 2013-2 I.R.B.269
2013-14, 2013-3 I.R.B.283
Revenue Rulings:
2013-1, 2013-2 I.R.B.252
Treasury Decisions:
9603, 2013-3 I.R.B.273
9608, 2013-3 I.R.B.274
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin
2012–52, dated December 27, 2012.
January 14, 2013ii2013–3 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2013–1 through 2013–3
Notices:
2012-60
Superseded by
Notice 2013-1, 2013-3 I.R.B.281
Proposed Regulations:
REG-140668-07
Corrected by
Ann. 2013-6, 2013-3 I.R.B.307
Revenue Procedures:
2004-66
Modified and supersended by
Rev. Proc. 2013-11, 2013-2 I.R.B.269
2008-35
Modified and superseded by
Rev. Proc. 2013-14, 2013-3 I.R.B.283
2011-49
Modified by
Rev. Proc. 2013-6, 2013-1 I.R.B.198
2012-1
Superseded by
Rev. Proc. 2013-1, 2013-1 I.R.B.1
2012-2
Superseded by
Rev. Proc. 2013-2, 2013-1 I.R.B.92
2012-3
Superseded by
Rev. Proc. 2013-3, 2013-1 I.R.B.113
2012-4
Superseded by
Rev. Proc. 2013-4, 2013-1 I.R.B.126
2012-5
Superseded by
Rev. Proc. 2013-5, 2013-1 I.R.B.170
2012-6
Superseded by
Rev. Proc. 2013-6, 2013-1 I.R.B.198
2012-7
Superseded by
Rev. Proc. 2013-7, 2013-1 I.R.B.233
2012-8
Superseded by
Rev. Proc. 2013-8, 2013-1 I.R.B.237
2012-9
Superseded by
Rev. Proc. 2013-9, 2013-2 I.R.B.255
Revenue Procedures— Continued:
2012-10
Superseded by
Rev. Proc. 2013-10, 2013-2 I.R.B.267
2012-30
Corrected and carified by
Ann. 2013-3, 2013-2 I.R.B.271
Updated by
Ann. 2013-10, 2013-3 I.R.B.311
Revenue Rulings:
9564
Amended by
Ann. 2013-7, 2013-3 I.R.B.308
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin 2012–52, dated December 27,
2012.
2013–3 I.R.B.iiiJanuary 14, 2013

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