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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M01364R000700130002-5
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 5
• Document Creation Date: December 27, 2016
• Document Release Date: April 16, 2013
• Sequence Number: 2
• Publication Date: October 3, 1988
• Content Type: MEMO

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Declassified in Part - Sanitized Copy Approved for Release 2013/04/16: CIA-RDP90M01364R000700130002-5
Federal Register / Vol. 53. No. 195 / FriLiay. July 29. 1988 Proposed Rules
28669
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
I-R-135-86)
Proposed Rulemaking; Returns
Relating to Persons Receiving
Contracts From Federal Executive
Agencies
AGENCY: Internal Revenue Service.
Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: Section 6050M of the Internal
Revenue Code ("Code"). which was
added to the Code by the Tax Reform
Act of 1986; requires Federal executive
agencies to make a return to the Internal
Revenue Service reporting the name.
address. and taxpayer identification
number (TIN) of each person with which
the agency enters into a contract.
together with any other information
required by Treasury regulations. This
document contains proposed rules
concerning compliance with the new.
reporting requirements imposed by
section 6050M.
DATES:
Proposed Effective Date
The regulations are proposed to be
effective on the date the Treasury
Decision is published in the Federal
Register and are proposed to apply to
contracts of Federal executive agencies
obligating more than S25.000 entered
into on or after October 1. 1986, or for
which the amount obligated is increased
by more than S25.000 on or after that
date.
Dates For Comments And Requests For
A Public Hearing ?
Written comments and requests for a
public hearing must be mailed by.
August 29. 1988.
ADDRESS: Send comments or requests.
for a public.hearing to: Commissioner of
Internal Revenue. Attention: CC:IR:T
(LR-133-86). Washington. DC 20224.
FOR FURTHERINFORMATION CONTACT:
Keith E. Stanley of the Legislation and
Regulations Division. Office of Chief
Counsel. Internal Revenue Service. 1111
Constitution Avenue. NW.. Washington.
DC 20224 (Attention: CC:LR:T) or
telephone [phone] (not a toll-free
number).
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23670 Federal Register / Vol. 53, No. 146 / Friday. July 29, 1988 I Proposed Rules
SUPPLEMENTARY INFORMATION:
Background
This document proposes regulations
to be added to the Income Tax
Regulations (26 CFR Part 1) and the
Regulations on Procedure and
Administration (26 CFR Part 301) under
section 6050M of the Internal Revenue
Code of 1986. These proposed rules
provide the needed guidance for
complying with the provisions of section
6050M. which was enacted by section
1522 of the Tax Reform Act of 1986 (Pub.
L. 99-514; 100 Stat. 2085).
Explanation f Provisions
Section 6050M requires the head of
every Federal executive agency to file
an information return with the Internal
Revenue Service setting forth the name.
address and TIN of each person with
which that agency enters into a contract.'
as well as any other information
prescribed under Treasury regulations.
The information returns filed under
section 6050M will be used as a source
of information to collect delinquent
Federal tax liabilities of persons who
enter into contracts with Federal
executive agencies.
In addition to the information
specifically required by section 6050M,
the proposed rules require other
information that will facilitate the
collection of delinquent Federal tax
liabilities to be reported to the Internal
Revenue Service. Included in the
category of additional items are the
expected date of completion of the
contract as determined under any
reasonable method (such as the
expected contract delivery date under
the contract schedule) and the total
? amount obligated under the contract
action.
The proposed rules define the term
"contract" to mean an obligation of a
Federal executive agency to make
payment of money (or other property) o
a persornr_the-sale.of
prpaLLI cn_j_e_Linrw..9fsv..ice or
_ot*sslasicler&q.19,1._ e term
contract", however, does not include a
license granted by a Federal executive
agency. an obligation of a contractor
(other than a Federal executive agency)
to subcontractor, a debt instrument of
the United States Government or of a
Federal agency. or an obligation of a
Federal executive agency to lend money.
lease prop erLtylo a lessee, or sell
property.
Pursuant to the authority of section
6050M (d). it is proposed that contracts
or contract actions for which the amoun
obligated is 525.000 or less do nothave
to be reported. Because the pose of
section 6050M is to provide :he Internal
Revenue Service with a source of
information for collection, certain
categories of contracts that will be of
minimal use for this purpose are
proposed to be excluded from the
reporting requirements. Contracts with
another Federal governmental unit or
with a foreign, state, or local
government (or an agency or
instrumentality thereof) would not have
to be reported. Additionally, no
reporting would be required for any
contract the terms of which provide that
all amounts payable under the contract
by any Federal executive agency will be
paid within the 120 days following the
date of the contract action, and for
which it is reasonable to expect that all
amounts will be so paid.
For contracts entered into on or after
October 1. 1988. (or with respect to
which there are contract actions
required to be reported on or after that
date) it is proposed that the information
required to be reported to the internal
Revenue Service under section 6050M
must be reported on a quarterly basis
(calendar quarters). Generally, it is
proposed that.the information with
respect to contracts entered into during
a calendar quarter must be submitted a
magnetic media to the Service on or
before the last day of the calendar
month following the quarter. A special
reporting rule permitting the uof
paper reporting on Form 8594(is
provided for those Federal eikutive .
agencies that reasonably expect(io enter
into fewer than 250 contracts to'be
reported forita-ealafKlimuyea o t .c
extent permitted n future ? idance
relating to section 6050M, those Federal
executive agencies that would be
required to use magnetic media would
be permitted to submit more than one
return per quarter where each separate
submission covers all of the contracts
and contract actions required to be
reported for the quarter for one or more
readily identifiable operating functions
of the Federal executive agency.
If a Federal executive agency reports
all the information that the internal
Revenue Service requires with respect
to one or more contracts to the Federal
Procurement Data System. it is proposed
that the agency may elect to have the
Director of the Federal Procurement
Data Center make, on its behalf, the
return required with respect to all such \
contracts.
These rules are proposed to apply to
Federal executive agencies with respect
to their contracts (and their contract
actions treated as contracts under
paragraph (e) of the regulations) entered
into on or after October 1, 1988. The
Internal Revenue Service proposes to
reserve on the issue of reporting by
Federal executive agencies regarding
th? ir contracts (and their contract
actions treated as contracts under
paragraph (e) of the regulations) entered
into before October 1. 1988.
The reporting requirements proposed
in this document are slightly different
from those set forth in Notice 87-1,
which was published in Internal
Revenue Bulletin 1987-1. dated January
5. 1987. To the extent there is a
difference, the rules proposed in this
document, which are less burdensome
than those in Notice 87-1. would be
controlling, if adopted.
Special Analyses
Although this document is a notice of
proposed rulemaking that solicits public
comment, the Internal Revenue Service
has concluded that the notice and public
procedure requirements of 5 U.S.C. 553
do not apply because the rules provided
herein are interpretative. Accordingly.
these proposed regulations do not
constitute regulations subject to the
. Regulatory Flexibility Act (5 U.S.C.
chapter 6). The Commissioner of
Internal Revenue has determined that
these proposed rules are not major rules
as defined in Executive Order 17_291 a
that a Regulatory Impact Analysis
therefore is not required.
omments and R
Hearing
sts For a Publi
er..4.4f Ct toke
Poi "4'
Before a opting these proposed- p
egulations. consideration will be given ?
koAifi4i
to any written comments that are ty
submitted (preferably eight copies) to O1 'in
the Commissioner of Internal Revenue. 4?h
All comments will be available for
public inspection and copying. A public
hearing will be held upon written
request to the Commissioner by any
person who has submitted written
comments. If a public hearing is held.
notice of time and place will be
published in the Federal Register.
Drafting Information
The principal author of these
proposed regulations is Thomas J. Kane
of the Legislation and Regulations
Division of the Office of Chief Counsel,
Internal Revenue Service. However,
personnel from other offices of the
Internal Revenue Service and Treasury
Department participated in developing
the regulations. both in matters of
substance and style.
List of Subjects
26 CFR Part 1.6001-1-1.6109-2
Income taxes, Administration and
procedures. Filing requirements.
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Federal Register / Vol. 53, No. 146 / Friday. July 29. 1988 / Proposed Rules
28871
26 CFR Part 301
Administrative practice and
procedure. Bankruptcy. Courts. Crime.
Employment taxes, Estate taxes. Excise
taxes. Gift taxes, Income taxes, .
Investigations. Law enforcement.
Penalties. Pensions. Statistics. Taxes.
Disclosure of information. Filing
requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR Parts I and 301
are proposed to be amended as follows:
PART 1?INCOME TAX; TAXABLE.
YEARS BEGINNING AFTER
DECEMBER 31, 1986
Paragraph 1. The authority citation for
Part 1 is amended by adding the
following citation: -
Authority: 26 U.S.C. 7805: ? ? ? 1.8050M-
I also issued under 26 U.S.0 6050M.
Par. 2.. A new ? 1.6050M-1 is added to
read as follows:
? 1.6050M-1 information returns relating
to persons receiving contracts from certain
Federal executive agencies.
(a) General rule. Except as otherwise
provided in paragraph (c) of this section.
the head of every Federal executive
agency or his or her delegate shall make
an information return to the Internal
Revenue Service reporting the following
information with respect to each
contract entered into by that Federal
executive agency: ?
(1) Name and address of the person -
with whom the contract:is made
("contractor"); ?
(2) Contractor's TIN and. if the
contractor is a member of an affiliate/4
group of corporations that ftieeft-i' H112,5
Federal income tax returns on a
consolidated basis, the name and TIN of
the common parent of the affiliated
group:
(3)The date of the contract action:
(4) The expected date of completion of
the contract as determined under any
reasonable method, such as the
expected contract delivery date under
the contract schedule:
(5) The total amount obligated under
the contract action:
(6) Any other information required by
Forms 8596 and 8596A and their
instructions, or by any other
administrative guidance issued by the
Internal Revenue Service (such as a
revenue procedure). . . .
See paragraph (e) ofihis section relating
to the manner in which to report
increases in amounts obligated under
existing contracts. See paragraph (d)(5)
of this section for special rules for
agencies that submit contract ?
ta-77r?,-.. . Ii L,.
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information to the Federal Procurement
Data Center.
(b) Definitions. The following
definitions apply for purposes of this
section?
(1) Federal executive agency. The
term "Federal executive agency"
means?
(i) Any executive agency (as defined
in 5 U.S.C. 105) other than the General
Accounting Office:
(ii) Any military department (as
defined in 5 U.S.C. 102); and
(iii) The United States Postal Service
and the Postal Rate Commission.
(2) Confract?(i) General rule. The
term "contract" means an obligation of a
Federal executive agency to make
payment of money (or other property) to
a person in return for the sale of
property, the rendering of services, or
other consideration. The term "contract"
includes, for example, such an
obligation arising from a written
agreement executed by the agency and
the contractor, an award or notice of
award. a job order or task letter issued
under a basic ordering agreement. a
letter contract, an order that becomes
effective only upon written acceptance
or performance, or a bilateral increase
in amount obligated of a type described
in paragraph (e) of this section.
? (ii) Exceptions. For purposes of this
section, the term "contract" does not
include?
(A) A license granted by a Federal
executive agency:
(B) An obligation of a contractor
? (other than a Federal executive agency)
to a subcontractor ?
(C) A debt instrument of the United
States Government or a Federal agencY,
such as a treasury note, treasury bond,
treasury bill, savings bond, or similar
instrument: or.
(D) An obligation of a Federal
executive agencymi lend money, lease
property to a lefiWe, or sell property.
(iii)Special rule for certain minority
contracts administered by the Small
Business Administration. Any
agreement entered into by the Small
Business Administration ("SBA") as
"prime contractor' on behalf of a - -
procuring agency which is a Federal ?.
executive agency pursuant to the
administration of section 8(a) of the -
Small Business Act (15 U.S.C. 637(a)) .
shall not be treated as a contract of the
procuring agency for purposes of this
section. .
? (iv) Certain schedule contracts. For
purposes of this section?
(A) A Federal Supply Schedule
Contract entered into by the General
Services Administration, -
(B) Anmtomated Data Processing
ScheduleMontract entered into by the
General Services Administration. or
(C) A schedule contract entered into
by the Veterans Administrationjon
behalf of one or more Federal executive
agencies is not a "contract" to be
reported by the General Services
Administration or the Veterans \two r
Administration at the time of execution. woo. "cm,'
Instead, an order placed by a Federal
executive agency. including the General
Services Administration or the Veterans
Administration, under such a schedule
contract is a "contract" for purposes of
this section.
(v)Blanket purchase agreements. For
purposes of this section. the term
"contract" does not include a blanket
purchase agreement between one or
more Federal executive agencies and a
contractor. Instead, an order placed by a
Federal executive agency under the
terms of a blanket purchase agreement
is a "contract" for purposes of this
section.
(3) Contractor. The term "contractor"
Means any person who enters into a
contract with a Federal executive
agency.
(4) Person and TIN. The terms
"person" and "TIN" are defined in
sections 7701(a) (1) and (41).
respectively.
(c) Exceptions to information
reporting requirements. The following
do not need to be reported pursuant to
this section: . --
(1) Any contract or contract action for
which i h the amount obligated is 92.5.000 or
le
(2) Any contract with a contractor .
who:in making the agreement. is acting
in his or her capacity as an employee of
a Federal executive agency (e.g., any
contract of employment under which the
employee is paid wages subject to the
withholding provisions contained in
Chapter 24 of Subtitle C):
(3) Any contract between a Federal
executive agency and another Federal
governmental unit (or agency or
instrumentality thereof):
(4) Any contract with a foreign
government (or any agency or ?
instrumentality thereof); ?
(5) Any contract with a state or.local
governmental unit (or any agency or
instrumentality thereof): . ? .? .
(6 Any convect with a person who is
not required to have a TIN (see, for
example, I 301.6109-1(g));
(7) Any contract the terms of which
provide that all amounts payable under
the contract by any Federal executive
agency will be paid on or before the
120th day following the date of the
contract action, and for which it is
ovsk +0
Itht 01.4,61
h;tiliosAl
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?
28672 Federal Register / Vol. 53. No. 146 / Friday. July 29. 1988 / Proposed Rules
reasonable to expect that all amounts
will be so paid.
(d) Filing requirements?(1)
Frequency and time for filing. The
information returns required by this
section with respect to contracts of a co
Federal executive agency entered intior
after October 1. 1988. must be filed on a
quarterly basis for the calendar quarters
ending on the last day of March. June. .
September and December. Except as
provided in paragraph (d)(5) of this
section. the returns for contracts entered
into during a calender quarter must be
filed on or before the last day of the
month following that quarter.
(2) Form of reporting?(i) General rule
concerning magnetic media. The
information returns required by this
section with respect to contracts of a
Federal executive agency for each
calendar quarter shall be made in one
submission (or in multiple submissions if
permitted by paragraph (d)(4) of this
section). Except as provided in
paragraph (d)(2)(ii) of this section. the
required return shall be made on
magnetic media (within the meaning of
? 301.6011-2) in accordance with any
applicable revenue procedure or other
guidance promulgated by the Internal
Revenue Service for the filing of such
returns under section 6050M.
(ii) Magnetic media exception for low-
volume filers. Any Federal executive
agency that on any October 1 has a
reasonable expectation of entering into.
during the one year period beginning on
that date, fewer than 250 contracts that
are subject to the reporting requirements
under this section may make the
information returns required by this
section for each quarter of that one year
period on the prescribed paper Form
8596 under penalties of perjury in
accordance with the instructions
accompanying such form.
(3) Place of filing?(i) Returns on
magnetic media. Information returns
made under this section on magnetic
media shall be filed with the Internal
Revenue Service at the National
Computer Center, Martinsburg. West
Virginia 25401. in accordance with any
applicable revenue procedure or other
guidance promulgated by the Internal
Revenue Service relating to the filing of
returns under section 6050M.
(ii) Form 8596. Information returns
made on Form 8596 shall be filed with
the Internal Revenue Service at the
location specified in the instructions for
that form.
(4) Special rule concerning multiple
returns. To the extent itiermitted in any
revenue procedure or other guidance
relating to the filing of information
returns under this section. a Federal
executive agency which files
information returns under this section
on magnetic media may make more than
one magnetic media submission for any
quarter, if each submission for that
quarter contains all of the information
required by paragraph (a) of this section
for one or more departments, branches,
bureaus, agencies, or other readily
identifiable operating functions (such as
a geographic region) of the Federal
executive agency.
(5) Special rules for agencies
reporting to the Federal Procurement
Data Center?(i) Election to have the
Director of the Federal Procurement
Data Center make return on behalf of
agency. If, in complying with the
requirements of the Federal Procurement
Data System (FPDS) (as established
under the authority of the Office of
Federal Procurement Policy Act, as
amended. 41 U.S.C. 401 et seq.), a
Federal executive agency submits to the
Federal Procurement Data Center
(FPDC) all the information with respect
to one or more contracts required to be
reported by paragraph (a) of this
section. that Federal executive agency
may, in lieu of making a return directly
to the Internal Revenue Service with
respect to those contracts, elect to have
the Director of the FPDC for his or her
delegate) make the required return with
respect to all of those contracts on its
behalf. In order to make this election for
contracts entered into during a calendar
quarter, the head of a Federal executive
agency (or his or her delegate) shall
attach to its submission to the FPDC for
that quarter a signed statement to the
effect that (A) the Director of the FPDC
(or his or her delegate) is authorized on
the agency's behalf to make the return
required by 26 CFR 1.6050M-1 for that
quarter. and (3) the information .
provided by the agency for use by the
FPDC in making that return is declared,
under the penalties of perjury, to be, to
the best of his or her knowledge and
belief, true. correct. and complete. If the
election is made. the Director of the
FPDC (or his or her delegate) shall, on
the electing agency's behalf, make the
return required by paragraph (a) of this
section with respect to the contracts to
which the election applies. ? ? .
(ii) Time, manner, and place of filing.
The Director of the FPDC (or his or her
delegate) must?
(A) Make the return on or before the
earlier of?
(1) 45 days following the date that the
contract information is required to be
submitted to the FPDC. or
(2) 90 days following the end of the
calendar quarter for which the election
is made, except that, if that calendar
quarter ends September 30, 105 days
following the end of that quarter, and
(B) Comply with paragraphs (d) (2)(i)
and (3)(i) of this section. relating to form
and place of filing.
(iii) Contracts reported directly to the
Internal Revenue Service. Even if the
election is made, all information with
respect to any particular contract
required to be reported under paragraph
(a) of this section must be reported
directly to the Internal Revenue Service
by the electing agency if that
information is not submitted to the
FPDC. An electing agency sh,.11 not
make a direct return to the Internal
Revenue Service of the contract
information subject to the election.
(e)Special rules relating to increases
in amount obligated, if. through the
exercise of an option contained in a
basic or initial contract or under any
other rule of contract law, express or
implied, the amount of money of other
property obligated under the contract is
increased by more than 525.000, then
that action shall be treated as the
entering into of a new contract with
respect to which the information
required by paragraph (a) of this section
is to be reported to the Internal Revenue
Service for the calendar quarter in
which the increase occurs.
(f) Effective dote?fl) Contracts
entered into on or after October 1. 1988.
This section applies to each Federal
executive agency with respect to (i) its
contracts entered into on or after
October 1. 1988, and (ii) its contract
actions occurring on or after October].
1988, that are treated as new contracts
under paragraph (e) of this section.
(2) Contracts entered into before
October 1. 1988. [Reserved)
PART 301?PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for Part
301 is amended by adding the following
citation:
Authority: 26 U.S.C. 7805:' ? ?
301.6050M-1 is also issued under 26 U.S.C.
6050M.
Par. 4.A new ? 301.6050M-1 is added
to read as follows:
301.6050M-1 Information returns
relating to persons receiving contracts
from certain Federal executive agencies
-flomisereity+r?
For provisions relating to the .
requirements of returns of information
relating to persons receiving contracts
from certain Federal executive agencies.
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