SECTION 2. BACKGROUND

Section 406 of the Act amended section 7623 of the Internal Revenue Code concerning the payment of awards to certain persons who detect underpayments of tax. Prior statutory authority to pay awards at the discretion of the Secretary was re-designated as section 7623(a), and a new section 7623(b) was added to the Code. Additional provisions in section 406 of the Act establish a Whistleblower Office within the IRS and address reward program administration issues. These provisions were not incorporated into the Code.

The award program authorized by section 7623(a) has been previously implemented through regulations appearing at section 301.7623–1 of the Procedure and Administration Regulations, the substance of which is reprinted as IRS Publication 733, with additional administrative guidance appearing in the Internal Revenue Manual. Those regulations and Internal Revenue Manual provisions will continue to be followed for award claims within the scope of section 7623(a), except to the extent Sections 3.02 and 3.03 of this notice provides interim guidance regarding

income equivalent to interest or gains from property that does not give rise to income);

should be considered with respect to these transactions (for example, whether short term transactions should be subject to the accrual regime);

prepaid forward contracts that should be accorded tax treatment similar to that of prepaid forward contracts; and