Part III. Administrative, Procedural, and Miscellaneous

No. 599, 105th Cong., 2d Sess. 323 (1998). Accordingly, the Department of the Treasury and the Service request comments with respect to issues relevant to penalties and interest, and in particular, the following:

1. whether the penalty and interest provisions of the Code encourage voluntary compliance (i.e., whether they are effective deterrents to noncompliance, tax avoidance, and fraud);

2. whether administration of these provisions by the Service encourages voluntary compliance;

3. whether the penalty and interest provisions are designed in a manner that promotes efficient and effective administration by the Service;

4. whether and how the Service’s penalty and interest administration should be simplified or the burden modified on taxpayers and other third parties such as tax return preparers;

5. whether the penalty and interest provisions are designed to operate, and are administered by the Service, fairly such that similarly situated taxpayers are treated alike;

6. whether the current penalty and interest provisions allow taxpayers to generate overpayments or underpayments in order to take advantage of disparities between commercial borrowing rates and the rates imposed by § 6621;

7. whether communications from the Service to taxpayers provide an adequate explanation of why penalties and interest were imposed so that taxpayers can avoid penalties and interest in the future;

8. the sources and scope of the Commissioner’s authority to waive or not enforce penalties, and whether such authority should be modified;

9. whether the Commissioner’s authority to abate interest under § 6404 should be modified;

10. whether the Service’s administration of its penalty waiver and interest abatement authority is accomplished uniformly and fairly and the effect of the Service’s administration of its penalty waiver and interest abatement authority (including the effect on compliance);

11. whether certain provisions of the Code should be clarified to identify whether they impose a penalty or tax

Penalty and Interest Study

Notice 99–4

PURPOSE

This notice invites public comment in connection with a study being conducted by the Department of the Treasury and the Internal Revenue Service regarding the administration and implementation of the penalty and interest provisions of the Internal Revenue Code. This study is required by § 3801 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105–206, 112 Stat. 782 (RRA).

BACKGROUND

The Code contains numerous provisions imposing civil tax penalties upon taxpayers and tax return preparers for certain conduct. Chapter 68 divides many of these civil penalties into two categories: Additions to the Tax and Additional Amounts (Subchapter A) and Assessable Penalties (Subchapter B). In addition, many other penalty provisions are contained in other chapters of the Code. Prior to the enactment of the Improved Penalty Administration and Compliance Act of 1989, included as part of the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), the Commissioner established a task force to study civil tax penalties. The task force recommended many improvements to penalty administration that were adopted.

Congress, through OBRA 1989, attempted to simplify the penalty structure and address legislative inconsistencies. Congress also made general administrative recommendations regarding the administration and implementation of the civil tax penalties. H.R. Conf. Rep. No. 386, 101st Cong., 1st Sess. 661 (1989). These general administrative recommendations included requiring the Service to develop a policy statement emphasizing that civil tax penalties exist for the purpose of encouraging voluntary compliance and to develop a handbook on penalties for employees. Id.

Subsequent to OBRA 1989, the Service developed a penalty handbook located in Part XX of the Internal Revenue Manual.

In that handbook, the Service stated that “penalties are used to enhance voluntary compliance.” IRM (20)121. Furthermore, the handbook states that “the Service uses penalties to encourage voluntary compliance by: (1) helping taxpayers understand that compliant conduct is appropriate and that noncompliant conduct is not; (2) deterring noncompliance by imposing costs on [noncompliance]; and (3) establishing the fairness of the tax system by justly penalizing the noncompliant taxpayer.” Id .

Section 6601 of the Code provides that taxpayers who underpay their taxes generally must pay interest to the government for the period of the underpayment. Various other provisions of the Code provide for the payment of interest by the government on tax overpayments ( see § 6611), the abatement of underpayment interest in certain circumstances ( see § 6404), and the payment of interest on erroneous refunds recoverable by suit ( see § 6602). Other provisions allow for crediting or refunding of certain overpayments without interest ( see, e.g., § 6416(b)).

Section 3801 of RRA calls for the Joint Committee on Taxation and the Secretary of the Treasury to each conduct studies: (1) reviewing the administration and implementation by the Internal Revenue Service of the interest and penalty provisions of the Internal Revenue Code of 1986 (including the penalty reform provisions of the Omnibus Budget Reconciliation Act of 1989); and (2) making any legislative and administrative recommendations the Committee or the Secretary deems appropriate to simplify penalty or interest administration and to reduce taxpayer burden. These studies are to be reported to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate not later than July 22, 1999.

REQUEST FOR PUBLIC COMMENT

The Conference Committee Report for RRA with respect to § 3801 states that the “conferees expect that the Joint Committee on Taxation and the Treasury Department will consider comments from taxpayers and practitioners on the issues relevant to the studies.” H.R. Conf. Rep.

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(given that the characterization may effect the determination of when interest accrues thereon);

12. whether and how the penalty and interest regimes of voluntary tax systems of other countries compare to the U.S. federal tax penalty and interest regime; and

13. whether different entities should be subject to different penalty regimes; and whether penalty regimes should align with the four operating units of the Service’s future structure.

The Department of the Treasury and the Service would appreciate written comments on the above issues or other issues relevant to this study, including specific recommendations on ways to (i) simplify the present-law penalty and interest provisions, (ii) make the administration of such provisions more efficient, (iii) reduce inequities and burdens on taxpayers, and (iv) deter noncompliance, tax avoidance and fraud. Comments should be submitted by Friday, February 26, 1999, to:

Internal Revenue Service P.O. Box 7604 Ben Franklin Station Attn: CC:DOM:CORP:T:R:IT&A (Branch 4) Room 5228 Washington, DC 20044 or by submitting comments directly to http://www.irs.ustreas.gov/prod/tax_regs/ comments.html (the IRS Internet site).

The comments you submit will be available for public inspection and copying.

DRAFTING INFORMATION

The principal author of this notice is Charles A. Hall of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this notice contact Mr. Hall at (202) 6224940 (not a toll-free call).

Eligible Rollover Distributions

Notice 99–5

I. PURPOSE

This notice provides transition relief and guidance relating to the exception to the definition of eligible rollover distribu

tion for certain hardship distributions. This exception was added to §§ 402(c)(4) and 403(b)(8)(B) of the Internal Revenue Code (the “Code”) by § 6005(c)(2)(A) and (B) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105–206 (“RRA 98”). The transition relief responds to significant comment activity evidencing the inability of many plan administrators and taxpayers to adjust their systems to accommodate the new exception by January 1, 1999. In general, the relief granted allows both § 401(a) plans and § 403(b) annuities to delay implementation of the exception as it applies to distributions occurring before January 1, 2000.

II. BACKGROUND

Section 401(a)(31) requires a plan to permit distributees to elect to have an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee.

Section 403(b)(10) provides that a § 403(b) annuity must meet requirements similar to the requirements of § 401(a)(31).

Section 402(c)(4) generally provides that any distribution of the balance to the credit of an employee is an eligible rollover distribution. However, as exceptions to this general rule, that section specifies certain distributions of the balance to the credit of an employee that are not eligible rollover distributions.

Prior to amendment by RRA 98, the exceptions to the definition of eligible rollover distribution provided for in § 402(c) were limited to any distribution that is one of a series of substantially equal periodic payments, any distribution to the extent such distribution is required under § 401(a)(9), and any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation described in § 402(e)(4)).

Section 403(b)(8) provides that rules similar to those in § 402(c)(4) apply for purposes of determining the amount eligible for rollover from a § 403(b) annuity. Section 1.403(b)–2, Q&A–1 provides that an eligible rollover distribution from a § 403(b) annuity is an eligible rollover distribution described in § 402(c)(4) and § 1.402(c)–2, except that the distribution

is from a § 403(b) annuity rather than a qualified plan.

Section 401(k)(2)(B)(i) provides that contributions made under a qualified cash or deferred arrangement (“CODA”) are not permitted to be distributed earlier than the occurrence of certain specified events. Under § 401(k)(2)(B)(i)(IV), an employee’s elective contributions may be distributed upon the hardship of the employee. Section 1.401(k)–1(d)(2)(ii) provides that certain amounts, including earnings, credited to an employee’s account as of a date specified in the plan containing the qualified CODA (which date generally was required to be before July 1, 1989) may also be distributed upon the hardship of the employee. Contributions not made under a qualified CODA, such as matching contributions or profit-sharing contributions that are not qualified nonelective contributions or qualified matching contributions, are not described in § 401(k)(2)(B)(i)(IV).

Sections 403(b)(1) and 403(b)(11) provide that amounts contributed pursuant to a salary reduction agreement for years beginning after December 31, 1988, are not permitted to be distributed earlier than the occurrence of certain specified events. Under § 403(b)(11)(B), such amounts may be distributed upon the hardship of the employee. Amounts held in an annuity contract described in § 403(b)(1) as of the close of the last year beginning before January 1, 1989, and amounts contributed to the contract as nonelective employer contributions are generally not subject to distribution restrictions.

Sections 403(b)(7) and 403(b)(11) provide that amounts contributed to a custodial account described in § 403(b)(7) are not permitted to be distributed earlier than the occurrence of certain specified events. Under §§ 403(b)(7) and 403(b)(11), contributions made pursuant to a salary re

Section 6005(c)(2)(A) of RRA 98 added § 402(c)(4)(C) to the Code, which specifies an additional exception to the definition of eligible rollover distribution for any hardship distribution described in § 401(k)(2)(B)(i)(IV), effective for distributions after December 31, 1998. Section 6005(c)(2)(B) of RRA 98 amended § 403(b)(8)(B) of the Code to include a specific reference to § 402(c)(4)(C). Thus, the new exception also applies to distributions from § 403(b) annuities.

January 19, 1999 10 1999–3 I.R.B.

duction agreement, as well as any other amounts held in the custodial account as of the close of the last year beginning before January 1, 1989, may be distributed upon the hardship of the employee.

III. DEFINITIONS

For purposes of this notice, a “§ 403(b) annuity” includes an annuity contract, a custodial account, and a retirement income account described in § 403(b) (see § 1.403(b)–2, Q&A-1) and a “qualified plan” is an employees’ trust described in § 401(a) that is exempt from tax under § 501(a) or an annuity plan described in § 403(a) (see § 1.402(c)–2, Q&A-2).

IV. TRANSITION RELIEF

Concerns have been raised by a significant number of plan administrators and recordkeepers about the infeasibility of changing plan systems in time to comply with the new exception to the definition of eligible rollover distribution. Comments have referred to the fact that frequently an amount that is a hardship distribution described in § 401(k)(2)(B)(i)(IV) or § 403(b) is distributed in combination with other amounts that are eligible for rollover under § 402(c). Many plan administrators and recordkeepers have indicated that it is not possible for them, in time for distributions to be made in 1999, both to develop systems to reflect the change in treatment for the portion of a distribution that is no longer eligible for rollover because it is a hardship distribution described in § 401(k)(2)(B)(i)(IV) and to develop procedures to explain this change to distributees.

In response to these concerns, for distributions during calendar year 1999, the Service and Treasury will allow any distribution from a qualified plan or § 403(b) annuity to be treated as an eligible rollover distribution within the meaning of § 402(c)(4) for all purposes under the Code to the extent that the distribution would have been an eligible rollover distribution under the definition of eligible rollover distribution under § 402(c)(4) immediately prior to its amendment by RRA 98. However, a qualified plan or § 403(b) annuity is permitted to determine the amount of any eligible rollover distribution in 1999 using the definition of eligible rollover distribution in § 402(c)(4)

as amended by RRA 98. The use of the amended definition by the qualified plan or § 403(b) annuity in 1999 will not affect the eligibility of a distributee to determine the portion of the distribution that is an eligible rollover distribution using the definition in effect under § 402(c)(4) prior to its amendment by RRA 98, if the distributee chooses to roll over the distribution within 60 days pursuant to § 402(c) or § 403(b)(8).

V. HARDSHIP DESCRIBED IN SECTION 401(k)(2)(B)(i)(IV)

For distributions after December 31, 1999, the following rules apply to hardship distributions described in § 401(k)(2)(B)(i)(IV):

A. The portion of a distribution from a qualified plan that is ineligible for rollover treatment because it is “a hardship distribution described in § 401(k)(2)(B)(i)(IV)” is the amount described in § 1.401(k)–1(d)(2)(ii). Similarly, the portion of a distribution from a custodial account described in § 403(b)(7) made on account of hardship that is ineligible for rollover treatment is the amount of contributions made pursuant to a salary reduction agreement increased by any other amounts held in the custodial account as of the close of the last year beginning before January 1, 1989. However, in the case of an annuity contract described in § 403(b)(1), the portion of a hardship distribution that is ineligible for rollover treatment is the amount of contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988, and does not include amounts held in the contract as of the close of the last year beginning before January 1, 1989, or amounts attributable to nonelective employer contributions (because both of these amounts are distributable without regard to the hardship of the employee).

This rule applies regardless of whether the qualified plan or § 403(b) annuity characterizes the distribution as a hardship distribution described in § 401(k)(2)(B)(i)(IV), § 403(b)(7) or § 403(b)(11).

C. If a portion of a distribution that includes a hardship distribution is not includible in gross income, the portion of the distribution that is not includible in gross income is first allocated to the hardship distribution and then any remaining portion not includible in gross income is allocated to the portion of the distribution that is not a hardship distribution.

VI. REMEDIALAMENDMENT PERIOD

Some plans may contain provisions that conflict with the definition of eligible rollover distribution in § 402(c)(4) of the Code as amended by § 6005(c)(2) of RRA 98. If these plans choose to comply in operation with the amended definition in 1999, they are not required to conform plan language to the amended definition prior to the date set forth below.

Section 1.401(b)–1T(b)(3) authorizes the Commissioner to designate a plan provision as a disqualifying provision that either (1) results in the failure of the plan to satisfy the qualification requirements of the Code by reason of a change in those requirements or (2) is integral to a qualification requirement that has been changed. Section 1.401(b)–1T(c)(3) authorizes the Commissioner, in the case of a disqualifying provision designated as described in the preceding sentence, to impose limits and provide additional rules regarding the amendments that may be made with respect to that disqualifying provision.

Pursuant to § 1.401(b)–1T(b)(3) and (c)(3), a plan provision is hereby designated as a disqualifying provision if the plan provision is integral to the requirements of § 401(a)(31), but only to the extent such provision is amended to reflect the change made by § 6005(c)(2) of RRA 98, provided that the following conditions are satisfied. First, the plan provision must be amended to reflect the change made by § 6005(c)(2) of RRA 98 by no later than the last day of the first plan year beginning after December 31, 1998. (If an employer or plan administrator files a request for a determination letter on the qualified status of a plan by the last day of

B. If another event occurs, such as the employee’s separation from service or attainment of age 59 ¹ ⁄2, so that distribution of an amount is permitted, without regard to hardship, under § 401(k)(2)(B), § 403(b)(7) or § 403(b)(11), no amount distributed after that event is ineligible for rollover treatment on account of being a hardship distribution described in § 401(k)(2)(B)(i)(IV), § 403(b)(7) or § 403(b)(11).

1999–3 I.R.B 11 January 19, 1999

the first plan year beginning after December 31, 1998, then the date by which the plan provision must be amended shall be extended through the 91st day following the applicable date under § 1.401(b)– 1(e)(3)(i) or (ii).) Second, the plan provision as amended must be effective as of the first day the plan operates in accordance with the change made by § 6005(c)(2) of RRA 98.

VII. DRAFTING INFORMATION

The principal author of this notice is Roger Kuehnle of the Employee Plans Division. For further information regarding this notice, please contact the Employee Plans Division’s taxpayer assistance telephone service at (202) 622-6074/6075 (not toll-free numbers), between the hours of 1:30 and 3:30 p.m. Eastern Time, Monday through Thursday.

Payment of Employment Taxes with Respect to Disregarded Entities

Notice 99–6

PURPOSE

This notice solicits comments from taxpayers and practitioners regarding issues related to employment tax reporting and payment by qualified subchapter S subsidiaries and other entities that are disregarded as entities separate from their owners for federal tax purposes. This notice also discusses two methods of employment tax compliance that will be accepted by the Service until such time as formal reporting procedures are provided in other guidance.

Since the recent enactment of legislation and promulgation of regulations providing that certain wholly owned entities will be disregarded as entities separate from their owners, the Service has received many questions from taxpayers concerning the treatment of disregarded entities for federal employment tax purposes. To help employers comply with the employment tax requirements, the Department of the Treasury and the Internal Revenue Service intend to issue guidance illustrating the proper method for reporting employment taxes with respect to these entities.

BACKGROUND

Under § 1361 of the Internal Revenue Code (as amended by § 1308 of the Small Business Job Protection Act of 1996, Pub. L. No. 104–188, 110 Stat. 1755 and § 1601 of the Taxpayer Relief Act of 1997, Public Law 105–34, 111 Stat. 788), an S corporation may own a qualified subchapter S subsidiary. Section 1361(b)(3)(B) defines the term “qualified subchapter S subsidiary” (QSub) as a domestic corporation that is not an ineligible corporation (as defined in § 1361(b)(2)), if (1) an S corporation holds 100 percent of the stock of the corporation, and (2) that S corporation elects to treat the subsidiary as a QSub. Except as otherwise provided in regulations, a corporation for which a QSub election is made is not treated as a separate corporation for federal tax purposes, and all assets, liabilities, and items of income, deduction, and credit of the QSub are treated as assets, liabilities, and items of income, deduction, and credit of the parent S corporation. Similar rules apply to qualified REIT subsidiaries under § 856(i).

Regulations issued under § 7701 of the Code provide for another type of disregarded entity. Section 301.7701–2(c)(2) of the Procedure and Administration Regulations provides that a business entity that has a single owner and that is not a corporation under § 301.7701–2(b) is disregarded as an entity separate from its owner for all federal tax purposes.

In general, employment tax responsibilities rest with an employer. For federal employment tax purposes, the common law rules for determining the identity of the employer ordinarily apply. Under these rules, the person for whom services are performed as an employee is generally considered the employer for purposes of the employment tax provisions. An employer generally is required to withhold and pay over applicable taxes from employees’ wages, pay employer taxes, make timely tax deposits, file employment tax returns, and issue wage statements to employees (collectively, “employment tax obligations”).

REQUEST FOR COMMENTS

Section 1361(b)(3) and § 301.7701– 2(c)(2) cause the owner of a disregarded entity to be treated as the employer of the

disregarded entity’s employees for federal employment tax purposes. Thus, the owner generally is responsible for complying with all the employment tax obligations related to those employees.

Since enactment of the QSub statute and promulgation of the disregarded entity provision of the regulations, however, many taxpayers have mistakenly interpreted § 1361(b)(3) and § 301.7701– 2(c)(2) as applying only for federal income tax purposes. In addition, the Service has received numerous comments and questions from other taxpayers that have properly interpreted the statute concerning the difficulties that arise from application of these provisions. Some of these taxpayers have expressed a strong preference for the continued recognition for employment tax purposes of the separate state law entities. Other taxpayers have expressed a preference for a literal application of the provisions, resulting in the treatment of the owner of the disregarded entity as the employer.

Prior to issuing formal guidance, the Service is requesting comments concerning employment tax and certain reporting issues relating to disregarded entities that should be addressed in future guidance. This notice solicits comments from taxpayers and practitioners regarding the following issues:

1. Any increase or decrease in the administrative burden on taxpayers created by a system of filing employment tax returns under the owner’s name and taxpayer identification number where employees are actually employed by a state law entity that is disregarded as an entity separate from its owner for federal tax purposes;

2. Whether different rules should apply to newly formed disregarded entities with no previous employment tax history as opposed to entities in existence prior to the time when they became disregarded;

3. Different results (both in amount of tax, type of tax, and time and method of deposits) that arise from filing as one employer as compared to filing as separate employers;

4. Appropriate methods for notifying the service center about changes in employment tax obligations when an entity’s status as a disregarded entity changes;

5. Possible issues arising in situations

January 19, 1999 12 1999–3 I.R.B.

where the owner or the disregarded entity is formed or domiciled in a country other than the United States;

6. Additional issues relating to employment taxes and disregarded entities including, but not limited to, confusion for employees, employers, and state and federal agencies resulting from a single entity reporting structure for employment tax purposes; and

7. Whether any guidance issued should also apply to qualified REIT subsidiaries (as defined in § 856(i)).

Comments are also requested concerning issues related to disregarded entities but outside the employment tax area. Those issues include but are not limited to the following:

1. Information reporting on IRS Form 1099s issued by, or with respect to, disregarded entities and their owners; and

2. Issues related to qualified or nonqualified deferred compensation plans, fringe benefit and welfare plans, and other compensation arrangements.

Written comments should be sent to the following address:

Internal Revenue Service CC:DOM:CORP (NT 99-6; CC:DOM:P&SI:1) P.O. Box 7604, Ben Franklin Station Washington, DC 20044 In the alternative, comments may be hand delivered between the hours of 8:00 a.m. and 5:00 p.m. to the courier’s desk at 1111 Constitution Avenue, NW, Washington, DC, or submitted electronically via the IRS Internet site at http://www.irs.ustreas.gov/prod/tax_regs/comments.html .

Because the Service and Treasury would like to receive comments early in the developmental stages of potential guidance, comments should be forwarded to one of the addresses above prior to April 20, 1999. However, to the extent possible, consideration will be given to comments received after that date.

TEMPORARY EMPLOYMENT TAX PROCEDURES

Until additional guidance is issued, the Service generally will accept reporting and payment of employment taxes with respect to the employees of a QSub or an entity disregarded as an entity separate from its owner under § 301.7701–2(c)(2) if made in one of two ways:

1. Calculation, reporting, and payment of all employment tax obligations with respect to employees of a disregarded entity by its owner (as though the employees of the disregarded entity are employed directly by the owner) and under the owner’s name and taxpayer identification number; or

2. Separate calculation, reporting, and payment of all employment tax obligations by each state law entity with respect to its employees under its own name and taxpayer identification number.

If the second method is chosen, the owner retains ultimate responsibility for the employment tax obligations incurred with respect to employees of the disregarded entity. This method merely permits the employment tax obligations of the owner incurred with respect to the disregarded entity to be fulfilled through the separate calculation, reporting, and payment of employment taxes by the disregarded entity. Accordingly, the Service will not proceed against the owner for employment tax obligations relating to employees of a disregarded entity if those obligations are fulfilled by the disregarded entity using its own name and taxpayer identification number, even if there are differences in the timing or amount of payments or deposits as calculated under the second method. If the first method is selected, a final employment tax return should be filed with respect to a disregarded entity that formerly calculated, reported, and paid its employment tax obligations on a separate basis.

An owner of multiple disregarded entities may choose the first method with respect to some disregarded entities and the second method with respect to its other disregarded entities. The fact that an owner of a disregarded entity chooses to calculate, report, and pay its employment tax obligations under the second method with respect to a given disregarded entity for one taxable year will not preclude the owner from switching to the first method in a subsequent taxable year. However, if the owner uses the first method of calculating, reporting, and paying employment tax obligations with respect to a given disregarded entity for a return period that begins on or after April 20, 1999, the taxpayer must continue to use the first method unless and until otherwise permitted by the Commissioner.

DRAFTING INFORMATION

The principal authors of this notice are Deanna Walton of the Office of Assistant Chief Counsel (Passthroughs and Special Industries) and John Richards of the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this notice contact Ms. Walton at (202) 622-3050 or Mr. Richards at (202) 6226040 (not toll-free calls).

26 CFR 601.702: Publication and public inspection. (Also Part I, section 6103)

Rev. Proc. 99–12

The Internal Revenue Service is continuing its program of reviewing and identifying those revenue procedures that, although not specifically revoked or superseded, are no longer considered determinative. The revenue procedure listed below relates to the manner, time, and place by which employees of Federal, State, and local child support enforcement agencies may obtain return information from the Internal Revenue Service in accordance with section 6103(l)(6) of the Internal Revenue Code for purposes of the administration of part D of title IV of the Social Security Act. The revenue procedure is made obsolete because the Office of Child Support Enforcement (OCSE) of the Department of Health and Human Services (HHS) now acts as a conduit under the authority of section 6103(l)(6) of the Internal Revenue Code (Code) to disclose certain income and address information directly to State and local child support enforcement agencies, to certify applications for the IRS full collection process under section 6305 of the Code, and to administer the Federal Parent Locator Service (FPLS).

Prior to this, each participating Federal, State and local child support enforcement agencies had to enter into a written contractual agreement with the IRS to receive return information under section 6103(l)(6) (Project 419) and/or to receive return information under Project 719 (Parent Locator Service).

Now child support enforcement agencies may receive certain income and address information directly from OCSE

1999–3 I.R.B 13 January 19, 1999

(who secures the information from the IRS), or submit an application to OCSE to participate in the FPLS and/or submit an application for full collection of delinquent child support payment by the IRS. Even though other income sources are actively being sought while the noncustodial parent’s wages and assets are placed in full collection status, refunds from the parent’s income tax return may be offset to pay the delinquent child support.

IRS Publication 1105, Child Support Enforcement Handbook, sets forth the procedures to follow to participate in the IRS full collection process or the FPLS. It also sets forth procedures for child support enforcement agencies to follow when requesting certain return information from OCSE. The current procedures streamline the process of section 6103(l)(6) disclosures to agencies. The State and local child enforcement agen

cies now interact with their Federal counterpart to receive the necessary information to enforce past due obligations. IRS still performs needed safeguarding oversight as required by section 6103(p)(4).

Accordingly, the revenue procedure listed below is obsolete.

Rev. Proc. No. C.B. Citation 78–10 1978–1, 564

January 19, 1999 14 1999–3 I.R.B.