SECTION 6050M

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89T00234R000200280066-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 27, 2016
• Document Release Date: February 19, 2013
• Sequence Number: 66
• Publication Date: January 14, 1987
• Content Type: MEMO

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Internal Revenue Service
memorandum
date: JAN 14 1987
to: Doug Mulholland
from: Richard C. Stark
Assistant to the Commissioner
subject: Section 6050M
Attached please find lists of the folks in the intelligence
and law enforcement communities to which a copy of the section
6050M announcement was sent.
As we have previously discussed, we would very much
appreciate your involvement in coordinating an approach to the
problems posed by the announcement with the security community.
Section 6050M and its legislative history, copies of which
are attached, appear to provide us with little or no leeway to
carve out exceptions for certa$n.contracts based on anything
other than a dollar amount.
Assuming that reporting on certain contracts will be
undesirable, it would seem that the following alternatives
could be pursued:
1. Amending the law to provide a statutory exclusion for..
certain types of contracts,
would be highly desired.
2. Repealing the law,
3. Providing for the exclusion of certain contracts based
on a clear legal standard--such as the exclusion of contracts
based on the fact that disclosure of such contracts would
itself violate a statute, or
4. Inclusion by the Staff of the Joint Committee-on
Taxation in the General Explanation of the Act (i.e., the Blue
Book), of language Indicating that authority exists to
interpret the statute by regulation in a manner consistent with
national security and law enforcement needs.
There may be other approaches that make sense to resolve
the problem, and we are certainly not limited to these four.
However, a common approach satisfactory with all concerned
Attachments
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STAT
Defense Intelligence Agency
Room 25238 - The Pentagon
Washington, D.C. 20340-1029
General Counsel
Mr. James Jssinski
Unit Chief
Federal Bureau of Investigation
JBH FBI Building - Room 6875
10th and Pennsylvania Avenues
Washington, D.C. 2053S
Mr. Dews F. Hoffman
Chief Counsel
Drug Bnforr:raent.Administration
1405 I Streit, N.M. - Room 1112
Washington, D.C. 20537
Mr. Mark M. Richard
Deputy Assistant Attorney General
Criminal Division
Department of Justice - Room 2113
10th Street 6 Constitution Ave., N.V.
Washington, D.C. 20S30
Mr. Gary B. Mead
,Associate Director for Administration
United States Marshals Service
1 Tysons Corner Center
McLean, VA 22102
Mr. John Kelleher
Chief Counsel
United States Secret Service - Room 842
1800 G Street, M.M.
Washington, D.C. 20223
Mr. Marvin J. Dessler
Chief Counsel
Bureau of Alcohol. Tobacco and Firearms
Room 5226
1200 Pennsylvania Avenue, N.V.
Washington, D.C. 20226
Mr. Michael T. Schmitz
Chief Counsel
U.S. Customs Service - Room 3305
1301 Constitution Avenue, M.N.
Washington, D.C. 20229
11
61
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Mr. Douglas P. Mulholland
Special Assistant to the Secretary
(National Security)
Department of the ILeasury - Rpoa 2049
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Mr. Selig S. Metier
Assistant General Counsel (Enforcement)
Department of the Treasury - Room 2310
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Ms. Suzanne R. RcLwell
Associate Tax Legislative Counsel
Department of the Tr:asury - Roos 4206
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Mr. William S. Heffelfinger, III
Director, Office of Drug Policy
Department of the Treasury - Room 4328
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Ms. Patricia McClanahan
Attorney Advisor
'Office of Tax Legislative Counsel
Department of the Treasury - Room 4021
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Mr. David P. Doherty
General Counsel
Central Intelligency Agency
Office of the General Counsel
Washington, D.C. 10505
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Ig Provisions
to Transactions
.asury regulations, file infOr-
iranaact for customers (sec.
ulations requiring re
,ties, oomm on red estate
,,a. Reporting g
ender these regulations. The
.,ds ready to effect sales to be
.4).
:ate transactions be reported.
settlement attorney or other
. the person responsible
as localities the stakeholder
company or a bank a
.,e reporting is
ulations.
'. estate transactions occurring
!next
.M that real estate transao-
is the first person responsible
..,ere is no title company, then
;.ortgage lender. If there is nO
:s to be done by the settlement
- for closinc the transaction. If
reporting is to be done by the
broker, the reporting, is to be
~ the re-
is no buyer's pre-
,Ides with regulations to be .ides that real estate transsc-
...holding (sec. 8406) only to the Treasury is to provide
-ac~kup~istobe in-
`e t tohe provision n is
..t with
nuary 1, 987.
Conference Agreement
The conference agreement follows the House bill and the Senate
went pro-
ree
a
res
g
ndment, with modifications. The con erence
is on the person
t
that the primary .responsibility for repor
ing?v title company
condu
ing who
cause it
ey who closes the transaction. -.L-nm
ue regulations specify'
i
ss
Treasury may
the settlement. the person responsible for closing the transaction, be-
ons is the one re-
l
pers
h of severa
y not be clear whic need need not
Th
sponsible
rely upon
Thus, Vreasu
ese
closing the transaction. (
presence or absence of a legal obligation at closing.)
.i?_~ ~ l
t
determine which of
es
o
the persons in
sponsibility for
reporting must be
reon responsible for closing the transaction,
mort-
i
s no
one by the mortgage lender. If there
r
s bro
ll
.
ik~e
e i
rting must be done by the`se
there is no seller's
buyer's broker. If the
done in accordance wi
is no buyer's broker, tree repuruue ss W w
e
* a. Secre-
ibed b
y
to b
prescr
a,.*p of this provision. The
e guidance to taxpayers on how this inn--
n%. q.,-m arv may also exclud
ubject to information reporting.
s
from information reporting certain
where information reporting on
types of real estate u u io ~~a
those transactions would not be
uired on refinancings of
not re
q
otherwise provides. The Secretary 1
ross proceeds required to
the
t
g
o
referees anticipate that this
co
Th
unless the Secretary
estate
,
uld also provide guidance as
ormation reporting. will be
e
done on a Form 1099, similar to that
rules requiring that information returns
_ _ 60 t roll will en'
estate
.
returns on acw
d b ne entity would generally be
n
on returns required
e
to be fi
filing Because the provision
ad together in one
done under the
Ling to brokers
magnetic m
orting on real estate transactions
re
t
d
p
ory
a
man
general information reporting .requirement
tsec. viwaa- ...??.., r-=. --- -
to the general broker reporting requirements also d
ly to report-
_
in real estate transactions.
9on _ with res
provision o tithe contract ftoccuestate rs on or after 1, 17.
to which closing
present Lac
There is no provision of present law that requires information re-
porting on persons receiving Federal contracts.
e information reporting. the
`Z --snticipato_that.the
also
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11-788
Boise Bill
The House bill requires the head of each Federal executive
agency to file an information return indicating the name, address,
and taxpayer identification number (TIN) of each person with
which e agency enters into a contract. The Secretary is given the
authority both to establish minimum amounts for which no report.
ing is necessary as well as to extend the reporting requirements to
Federal license grantors and subcontractors of Federal contracts.
This provision is effective on January 1, 1986. Thus, all contracts
signed on or after that date are subject to information reporting. In
addition, all contracts signed prior to that date are subject to infor-
mation reporting if they are still in effect on that date.
Senate Amendment
The Senate amendment is the same as the House bill, effective
January 1, 1987.
Conference Agreement
The conference agreement follows the House bill and the Senate
amendment, effective January 1, 1987.
3. Information Reporting on Royalties
Present Law
A number of provisions of the Code require that payors of speci-
fied payments report those payments to the IRS and copy
of the information report to the taxpayer receiving the pa a t.
Section 6041 is the broadest of these provisions; this section
quires information reporting on "rent, salaries, wages, premiums,
annuities, compensations, remunerations, emoluments, or other
fixed or determinable gains, profits, and income." The Treasury
regulations for this section specifically require information report,
ing on royalties.
Information reporting under section 6041 applies to payments to-
talling $600 or more during the taxable year. information re-
g provisions, such as those for interest (section 6049), divi-
d s (section on 6042), patronage dividends (section 6044), and unem-
ployment compensation (section 6050B), apply to payments total-
ling $10 or more during the taxable year.
Horse Bill
No provision.
Senate Amendment
The Senate amendment includes a new provision of the Code
that requires that persons who make payments of royalties aggre-
gating $10 or more to any other person in a calendar year must
provide an information report on the royalty payments to the IRS.
A copy of this information report must be supplied to the
If a person makes payments to a nominee, the nominee must
report the information to the taxpayer and to the IRS, as required
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SEC 15Th, RE UIREMENT OF REPORTING FOR REAL ESTATE TRANSAC-
T7ON&
(a) G RUL&-Section 6045 (relating to returns of brokers)
is amended adding at the end thereof the following new subsec-
tion:
`Ye) Al?jrTjjw
UIRED IN THE C4S8 OF REAL ESTATE TRAN3Ac-
TION&-
`Y1) IN GEN In the case of a real estate transaction, the
real estate bro r shall file a return under subsection (a) and a
statement under ubsection (b) with respect to such transaction.
"(8) REAL ESTA BROKER. For purposes of this subsection,
the term `real esta broker' means any of the followingpersons
involved in a real so to transaction in the following order.
`Y A) the person including any attorney or title company)
scribed by the Secretary.
"(B) the mart, a nder,
"(C) the seller's ro r,
"(D) the buyer a bro , or
"(E) such other pe designated in regulations pre.
Any person treated as a real to broker under the preceding
sentence shall be treated as a b ker for purposes of subsection
tion 8406(h) (relating to other defini ns and special rules) is
amended by adding at the end thereof t1 foll
graph. owing new subpara-
(b) BACKUP WnwHOLDING REQ -vugraph (5) of sec-
"(D) REAL ESTATE BROKER NOT TED AS A BROKER.-
elude .!MX real estate broker (as 'defined in section
(e) EFFECTIVE DATE --The amendments made by his section shall
apply to real estate transactions closing after Dwvnlkr 81, 1986.
(a) IN GENERAL. .Subpart B of Part III of subchapter A of chap-
ter 61 (relating to information concerning transactions with other
persons) is amended by adding at the end thereof the following new
section:
"SEC 1I55K RETURNS RELATING TTO PERSONS RECEIVING CONTRACT'S
FROM FEDERAL EIECVTIVE AGENCIR&
"(a) REguiREerzNT of REPORTAvG -The head of every Federal ex-
ecutive agency which enters into any contract shall make a return
(at such time and in such form as the Secretary may by regulations
prescribe) setting forth-
"(1) the name, address, and TIN of each person with which
such agency entered into a contract daring the calendar year,
and
such other information as the Secretary may require.
`Yb) FEDERAL Exacv'rtva AGENcy: For purposes of this section,
the term 'Federal executive agency' means-
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Offing Provisions
Ling to returns of brokers)
the following new subsec-
REAL ESTATE TRANa+c-
real estate transaction, the
under subsection (a) and a
sspect to such transaction.
.,rpow of this subsection,
y of the It the following g oicFer.
Iattorney or le company)
,?tion,
? sated in regulations pre-
-'roker under the preceding
for purposes of subsection
m Panagraph (5) of sec-
)ns and special rules) is
as following new subpara-
TREATED AS A BROZER.-
4 such term shall not in-
(as defined in section
made by this section shall
ter December 11, 1986.
'SONS RECEIVING CONTRACTS
IES
1 of subcha Ater A of chap-
ig transactions with other
. thereof the following new
SONS RECEIVING CONTRACTS
'NCIES
..e hqad of every Federal ex-
,tract shall make a return
cretary may by regulations
of each person with which
daring the calendar year,
Secretary may require
2r purposes of this section,
1-699
"(1) any Executive agency (as defined in section 105 of title 5,
United States Code) other than the General Accounting Office,
"(2) any military department (as defined in section 102 of
such title), and
'Y1) the United States Postal Service and the Postal Rate
Commission.
"(c) AUTHORITY TO EXTEND REPORTING TO LICENSES AND SvBCON-
Ttucis.-To the extent provided in regulations, this section also
shall apply to-
(1) licenses granted by Federal executive agencies, and
'Y1) subcontracts under contracts to which subsection (a) ap-
plies.
"(d) AUTHORITY To PRESCRIBE MINIMUM AMOUNTS.-This section
shall not apply to contracts or licenses in any class which are below
a minimum amount or value which may be prescribed by the Secre-
ts by regulations for such class. "
() CLERICAL AMENDMENT.-The table of sections for such subpart
B is amended by adding at the end thereof the following new item:
'Sec. 6050M Returns relating to persons ~~receiving contracts from .
Federal executive agencies
(c) EFFECTIVE DATE.-The amendments made by this section shall
apply to contracts (and subcontracts) entered into, and licenses
granted, before, on, or after January 1, 1987.
SSG 152& RETURNS REGARDING PAYMENTS OF ROYALTIES
(a) IN GENERAL.-Subpart B of part III of subchapter A of chap-
ter 61 (relating to information concerning transactions with other
persons) is amended by adding at the end thereof the following new
section:
"SEC s665N. RETURNS REGARDING PAYMENTS OF ROYALTIES
"(a) REQUIREMENT OF REPORTING.-Every person-
'(1) who makes payments of royalties (or similar amounts) ag-
gregating $10 or more to any other person during any calendar
year, or
`(2) who receives payments of royalties (or similar amounts)
as a nominee and who makes payments is aggregati ~~~t the
during any calendar year any person
royalties (or similar amounts) so received
shall make a return according to the forms or regulations prescribed
by the Secretary, setting forth the ag negate amount of such pay-
ments and the name and address of t 1l person to whom paid.
"(b) STATEMENTS 7b BE FURNISHED TO PERSONS WITH RESPECT
TO WHOM INFORMATION Is FURNISHED. Every person required to
make a return under subsection (a) shall furnish to each person
whose name is required to be set forth in such" re turn a written
statement showing-
`Y1) the name and address of the person required to make
such return, and
"(2) the aggregate amount of payments to the person required
to be shown on such return.
The written statement required under the preceding sentence shall
be furnished (either in person or in a statement mailing by firs
class mail which includes adequate notice that the statement is en-
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Internal Revenue Service Department of the Treasury
Associate Commissioner Washington, DC 20224
(Operations)
December 17, 1986
Mr. Douglas P. Mulholland
Special Assistant to the Secretary (National Security)
Department of the Treasury - Room 2049
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Mr. Mulholland:
I would like to take this opportunity to share with you
the impact of a recently-enacted provision of the Internal
Revenue Code of 1986. Section 6050W requires the head of every
Federal executive agency to report to the Internal Revenue
Service (IRS) on contracts such agency makes to purchase goods
and services. This applies to all contracts in effect on
January 1, 1987, as well as all contracts entered into after
that date.
The IRS will be issuing regulations early in 1987 to
implement section 6050M, and the information returns will be
processed in early 1988. Enclosed is a copy of our advance
notice which describes the statute and sets forth the specific
items of information which will be reported to the IRS.
The wording of Section 6050W is very broad and the only
exception allowed is for contracts involving payments of
$25,000 when no exception exists for contracts classified for
national security or law enforcement reasons. We recognize
that reporting classified contracts has implications which do
not appear to be addressed by the statute, and we are striving
to achieve a solution which permits us to carry out our mandate
under Section 6050W with a minimum amount of disruptive effect
on competing governmental interests.
Because your department or agency may have contractual
relationships relating to national security or law enforcement
that would be subject to the information reporting system under
section 6050M, we welcome any thoughts or suggestions that you
may have which would assist us during our implementaton process.
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Mr. Douglas P. Mulholland
Please submit these concerns to me at the following
address at your earliest convenience:
Associate Commissioner (Operations)
Internal Revenue Service - Room 3017
1111 Constitution Ave., N.W.
Washington, DC 20224
Si erely,
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