ALTA® Letter John Rosotti - RE: Reporting Requirements
March 28, 2000
Commissioner John Rosotti
Internal Revenue Service
1111 Constitution Avenue
Washington, D.C. 20044
Dear Commissioner Rosotti,
I am writing regarding a clarification to a new reporting requirement under 6045(f), added to the Code by section 1021 of the Taxpayers Relief Act of 1997 (P.L. 105-34). This reporting requirement provides for information reporting of gross proceeds made in the course of a trade or business to attorneys in connection with legal services.
I understand that the Service has proposed rules which would unintentionally affect payments to attorneys made in the course of settlement services. The rules in effect require reporting of the full amount of a mortgage as a proxy for a fee paid to an attorney for a settlement service.
I do not intend to reopen the question of Congressional intent regarding the Taxpayer Relief Act of 1997. However, I hope that you can note that attorneys acting as paying agents in the settlement context perform a ministerial function when disbursing funds at settlement, and that reporting of all settlement disbursements, including payments for attorney fees, has not historically been required because the IRS has not required reporting by those merely acting as paying agents. To my knowledge, we did not consider overturing the paying agent analysis when we considered legislation requiring reporting on payments to attorneys. Further, we hope that you would consider developing an exception to the rule for disbursement of mortgage loans, as reporting of mortgage payments would clearly result in gross over reporting.
Thank you for considering my views.
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