CUNA Regulatory Comment Call


February 26, 2001

IRS Temporary Regulations Permitting Electronic Delivery of Payee Statements

(NOT A MAJOR RULE)

EXECUTIVE SUMMARY

The Internal Revenue Service (IRS) issued temporary and proposed regulations that permit payors, including credit unions, required to furnish certain payee statements the option to do so electronically. As of February 14, 2001, credit unions may furnish IRS Forms W-2, "Wage and Tax Statement," and Form 1098-E, "Education Loan Statement," via a secured Web site rather than sending a paper form through the mail.

The new regulations do not require credit unions and other payors to furnish the forms electronically if they wish to continue to providing paper statements. Payors will not be required to invest in new technology or delivery systems in order to remain in compliance with IRS information reporting requirements. Similarly, payees are not obligated to receive statements electronically if they prefer the paper forms. The new regulations require payees who choose electronically delivery to "opt in" and affirmatively consent to receiving their forms in an electronic format. The provisions, designed to protect payees, specify what disclosures must be provided to the payee before the statement may be delivered electronically, how payee consent must be obtained, the manner in which the electronic payee statement must be delivered, and Web site posting requirements.

Comments on the temporary and proposed regulations are due by May 14, 2001. Please submit your comments to CUNA by May 4, 2001. Please feel free to fax your responses to CUNA at 202-371-8240; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com or to Senior Regulatory Counsel Catherine Orr at corr@cuna.com; or mail them to Mary or Catherine c/o CUNA's Regulatory Advocacy Department, 805 15th Street, NW, Suite 300, Washington, DC 20005. If you would like to submit you comments to the IRS directly, the address is CC:M&SP:RU (REG-107186-00), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, D.C. 20044; to submit comments to the IRS electronically, click here. If you submit comments directly to the IRS, please also forward a copy of your comments to CUNA. The IRS notice was published in the Federal Register on February 14, 2001. You may contact CUNA if you would like a copy of the proposed rule or you may access it on the IRS Web site at the following addresses (the rule is in two parts):

http://ftp.fedworld.gov/pub/irs-regs/td8942.pdf and
http://ftp.fedworld.gov/pub/irs-regs/10718600.pdf

BRIEF DESCRIPTION OF THE PROPOSAL

Consent

Under the new regulations, a member or employee must have affirmatively consented to receive the statement electronically and must not have withdrawn that consent before the statement is furnished. The consent must be made electronically in a manner that reasonably demonstrates that the member or employee can access the statement in the electronic format in which it will be furnished to the member. The consent may be made in a different manner (for example, e-mail or paper document) if it is confirmed electronically in a manner that reasonably demonstrates that the member or employee can access the statement in the electronic format in which it will be furnished to him or her. If a change in hardware or software required to access the statement creates a material risk that the member or employee will not be able to access the statement, the credit union must provide the member or employee with a notice prior to changing the hardware or software. The notice must describe the revised hardware and software required to access the statement and inform the member or employee that a new consent to receive the statement must be provided to the credit union. After implementing the hardware and software changes, the credit ion must obtain from the member or employee a new consent or confirmation of consent to receive the statement electronically.

Required Disclosures

Prior to or at the same time a member or employee consents to receive a statement electronically, the credit union must provide a "clear and conspicuous" statement containing certain disclosures that are similar to the consumer consent provisions in the E-SIGN Act. A credit union wishing to furnish payee statements in electronic format is required to make the following disclosures:

Format

The electronic version of the statement must contain all required information and comply with applicable IRS procedures regarding furnishing substitute statements.

Posting

The credit union must post the statement on a Web site accessible to the member or employee who has consented to receive the statement in electronic format on or before January 31 of the year following the calendar year to which the statement relates (or other such date permitted or required for furnishing the statement).

Notice

A credit union providing electronic payee statements must notify the member or employee that his or her statement is posted on a Web site on or before January 31 of the year following the calendar year to which the statement relates. The notice may be delivered by mail, electronic mail, or in person. The notice must provide instructions to the individual on how to access and print the statement. The notice must include the following statement in capital letters: "IMPORTANT TAX RETURN DOCUMENT AVAILABLE." If the notice is provided by e-mail, that statement should appear on the subject line and be sent with high importance. If the e-mail is returned as undeliverable, and the correct e-mail address cannot be obtained from the credit union's records or from the member, then the credit union must furnish the notice by mail or in person within 30 days after the electronic notice is returned. If a credit union later posts a corrected payee statement on the Web site, it must notify the employee or member of that posting within 30 days.

Retention

Credit unions furnishing electronic payee statements are generally required to maintain access to the statements on the Web site through October 15 of the year following the calendar year to which the statements relate. In addition, those credit unions must maintain access to corrected statements posted on the Web site through October 15 of the year following the calendar year to which the statements relate or for 90 days after the posting, whichever is later.

QUESTIONS REGARDING THE PROPOSAL

  1. With the issuance of the new IRS regulation, will your institution begin to furnish payee statements electronically?
    ____Yes ____No

    Why or why not?














  2. Do you have questions or concerns about electronic delivery of payee statements that are not answered in the new regulations?
    ____Yes ____No

    If so, what are those questions or concerns?














  3. Should the provisions of these temporary regulations apply to statements required to be furnished to members under other sections of the Internal Revenue Code, such as Form 1099-INT, "Interest Income Statement"?













  4. Will your institution use electronic technology other than Web site technology, such as e-mail, to furnish statements to your members?
    ____Yes ____No

    Why or why not?














    If so, will your institution need IRS guidance on the conditions under which those statements will be considered to have been furnished on a timely basis?














  5. Should the final regulations prescribe standards to ensure confidentiality of taxpayer information posted on a Web site?













  6. Other Comments?













Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com