Notices DEPARTMENT OF THE TREASURY Internal Revenue Service (IRS) Privacy Act of 1974, as Amended; System of Records Tuesday, December 20, 1994 Notice of proposed amendment to Privacy Act system of records. The Treasury Department, Internal Revenue Service, gives notice of a proposed amendment to the system of records entitled Compliance Programs and Projects Files-Treasury/IRS 42.021, which is subject to the Privacy Act of 1974, 5 U.S.C. 552a. Comments must be received no later than January 19, 1995. This revised system of records will be effective January 30, 1995, unless comments are received which result in a contrary determination. Comments should be sent to the Office of Disclosure, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. 20224. Comments will be made available for inspection and copying in the Freedom of Information Reading Room, (202) 622-5164 upon request. FOR FURTHER INFORMATION CONTACT: Larry Faulkner, Compliance 2000 Executive, (202) 622-6900. The Internal Revenue Service is redesigning business and work processes to improve the way we use technology to maximize the availability of information resources. This will require long-term, continuous improvement to product quality, productivity, and customer satisfaction. One of the strategies to implement this change is Compliance 2000. This is a mission-based philosophy of tax administration that emphasizes taxpayer education and assistance coupled with a more focused use of enforcement resources. Compliance 2000 will address making the tax system easier for taxpayers to comply voluntarily, yet recognizes that despite the Service's best efforts some people will not voluntarily respond. One goal of Compliance 2000 is to identify and address causes of noncompliance. This system presently includes records relating to information gathering to identify noncompliance with the Internal Revenue Code. Enhancements are being added to the system to enable the Internal Revenue Service to identify causes of noncompliance. These enhancements will be accomplished by use of an automated information system to form an integrated, on-line resource network. Instead of each function or level within a geographical area addressing isolated or systemic compliance or business issues on its own (National, Regional, District, or Service Center), we will approach business from a more unified perspective to provide one-stop information to compliance personnel within a local area and greatly reduce the need for separate contracts with outside sources. Data will be drawn from the Audit Information Management System (AIMS)-Treasury/IRS 42.008; the Individual Master File (IMF)-Treasury/IRS 24.030; the Business Master File (BMF)-Treasury/IRS 24.046; the Returns Compliance Programs File-Treasury/IRS 26.016; the Taxpayer Delinquent Accounts Files (TDA)-Treasury/IRS 26.019; Taxpayer Delinquency Investigation (TDI) Files-Treasury/IRS 26.020; Wage and Information Returns Processing (IRP) System-Treasury/IRS 22.061; the International Enforcement Program Files-Treasury/IRS 42.017; the Case Management and Time Reporting System-Treasury/IRS 46.002; and from the Centralized Evaluation and Processing of Information Items-Treasury/IRS 46.009. In addition, data will be drawn from other third party sources. As an example, these third party sources may include commercial sources, state and local agencies, construction contract information, license information from state and local agencies, Currency and Banking Reports (CBRS), data regarding assets and financial transactions from state and local agencies, and information on significant financial transactions from reviews of periodicals and local newspapers, and other media sources. The system of records notice is being amended to give a more definitive description of the records that are to be included in the system. This notice will also reflect the change to consolidate this new information within each geographical location and for on-line access to this information on a need-to-know [*65574] basis. There will be additional authorized users within each local area network. Internal Revenue Service will develop and maintain database and retrieval systems accessed through automated local area networks. The purpose of these systems will be to combine information from sources inside and outside the IRS, such as motor vehicle data, business license data, currency and banking data (CBRS), commercial database information, into a centralized processing unit which will serve as a comprehensive compliance network for each district, service center, region, etc. These databases would be available for use by all IRS functions on a need-to-know basis. As an example, a database may be configured to identify a particular grouping or market segment of taxpayers and their assets in a more efficient and effective manner than is presently available. Previously this was not possible because of the format and configuration of the original databases. For example, in addition to taxpayer data from the system of records listed herein, this system may include on-line access to such information as the Currency and Banking Retrieval System (CBRS), any state's Department of Motor Vehicle (DMV), Credit Bureau information, real estate ownership information, and commercial databases. This system of records is currently exempt from certain provisions of the Privacy Act. No amendment to the rule exempting this system from certain provisions of the Privacy Act is being made to the system. The system notice, as revised, is published in its entirety below. Alex Rodriguez, Deputy Assistant Secretary (Administration). Treasury/IRS 42.021 System name: Compliance Programs and Project Files. System location: National Office, Districts, Service Centers, and Austin Compliance Center. (See IRS Appendix A for addresses.) Categories of individuals covered by the system: Any individual who has business and/or financial activities. These may be grouped by industry, occupation, or financial transactions, included in commercial databases, or in information provided by state and local licensing agencies. Taxpayers who may be involved in any area of noncompliance: Such as self-employed persons who don't file income tax returns, businesses who don't file employment tax returns, taxpayers with income reported on information returns who don't file tax returns, withholding noncompliance, migrant workers, and any individuals who may be involved in tax evasion schemes. Categories of records in the system: From the Audit Information Management System (AIMS)-Treasury/IRS 42.008: Tax return status and location, closing information as well as other internal management information (i.e., type of return, adjustment, penalty, occupation code, issue code, etc.). From the Individual Master File (IMF)-Treasury/IRS 24.030 and the Business Master File (BMF)-Treasury/IRS 24.046: Taxpayer entity records (name, address, identification number (TIN), tax modular records which contain all records relative to specific tax returns for each applicable tax period or year. Tax transactions such as tax amount, statements and/or additions, etc. From the Wage and Information Returns Processing (IRP) File-Treasury/IRS 22.061; Records representing certain wages and information returns: For example, Forms W-2, W-2P, and 1087 and 1099 series, currency transaction reports, state tax refunds, statements of sales and equity obligations, and records of agricultural subsidy payments, etc. Information from the Returns Compliance Programs System-Treasury/IRS 26.016. Information from the Taxpayer Delinquent Accounts Files (TDA)-Treasury/IRS 26.019: For example, taxpayers who have outstanding assessments and persons owing child support obligations. From the Taxpayer Delinquency Investigation (TDI) Files-Treasury/IRS 26.020; Taxpayers who may be delinquent in filing Federal tax returns. Information on foreign corporations from International Enforcement Program Files, Treasury/IRS 42.017. From the Centralized Evaluation and Processing of Information Items (CEPII), Treasury/IRS 46.009, and from the Case Management and Time Reporting System, Treasury/IRS 46.002: Information items received by Internal Revenue Service about taxpayers alleging violation of laws. Other information would relate to unreported income and asset situations involving significant financial transactions within the U.S. as well as foreign transactions. Examples of other information would include data from commercial databases, any state's Department of Motor Vehicles (DMV), credit bureaus, state and local real estate records, commercial publications, newspapers, airplane and pilot information, US Coast Guard vessel registration information, any state's Department of Natural Resources information, as well as other state and local records. In addition, Federal government databases may also be accessed, such as, federal employment files, federal licensing data, etc. Authority for maintenance of the system: 5 U.S.C. 301, 26 U.S.C. 7602, 7801, and 7802. Purpose(s): The Internal Revenue Service has adopted a mission-based philosophy to increase voluntary compliance with the tax laws of the Internal Revenue Code. In order to accomplish this, we will be focusing more on research and analysis techniques as opposed to case-by-case enforcement in order to determine key areas of non-compliance. The IRS will approach these areas with a more unified perspective instead of addressing isolated or systemic compliance of business issues on national, regional or local levels. The IRS will also address major broad-based issues that affect compliance and will lead to better tax administration. Routine uses of records maintained in the system including category of users and the purposes of such uses: Disclosure of returns and return information may be made only as provided by 26 U.S.C. 6103. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Paper records, microfilm, and magnetic media. Retrievability: Name and/or taxpayer identification number (social security number or employer identification number), and any personal identifier or characteristic (i.e., document locator number) included in this system. Safeguards: Access controls will not be less than those provided by the Manager's Security Handbook, IRM 1(16)12, and the Automated Information System Security Manual, IRM 2(10)00. Passwords and access codes must be used to access this system. Retention and disposal: Records are maintained in accordance with Records Control Schedule, IRM 1(15)59. System manager(s) and address: Officials prescribing policies and practices-Chief Operations Officer and Compliance 2000 Executive, 1111 Constitution Avenue, NW., Washington, DC 20224. Officials maintaining the system-District Directors, Service and Compliance Center Directors, Regional Commissioners. Refer to Appendix A and addresses. Notification procedure: This system is exempt from the notification provisions of the Privacy Act. Record access procedures: This system is exempt from the access and contest provisions of the Privacy Act. Contesting record procedures: 26 U.S.C. 7852(e) prohibits Privacy Act amendment of tax records. Record source categories: (1) Taxpayer's returns, (2) taxpayer's books and records, (3) informants and third party information, (4) city, state government, (5) other Federal agencies, (6) examinations of related taxpayers, (7) taxpayer's employer, and (8) investigatory material compiled for law enforcement purposes whose sources need not be reported. Exemptions claimed for the system: This system is exempt from 5 U.S.C. 552a(c)(3), (d)(1), (d)(2), (d)(3), (d)(4), (e)(1), (e)(4)(G), (H), and (I), (f) of the Privacy Act pursuant to 5 U.S.C. 552a(k)(2), as published at 31 CFR 1.36.