JCT Reports on Confidentiality and Disclosure Provisions [Part 2 of 2]

[595] The Joint Committee staff believes that the general and specific recommendations contained in this Part of the study will improve and rationalize the rules relating to confidentiality of taxpayer information. This Part addresses recommendations with respect to the specific issues raised in the legislative history of the IRS Reform Act. In addition, this Part contains recommendations developed by the Joint Committee staff as a consequence of the research for this study and in response to recommendations received by the Joint Committee staff during the course of the study.

[596] In this Part, the Joint Committee staff makes recommendations that certain exceptions to the general rule of confidentiality contained in section 6103 should be repealed. The Joint Committee staff makes recommendations to clarify the extent of permissible disclosure of returns and return information under certain circumstances. The Joint Committee staff makes recommendations regarding the interactions of present-law disclosure rules and other applicable laws (such as the FOIA and the Privacy Act). This Part also discusses the issue of public disclosure of persons failing to file returns.

I. GENERAL RECOMMENDATIONS RELATING TO SECTION 6103

A. General Recommendations Relating to Exceptions to Section 6103

[597] The staff of the Joint Committee recommends that new access to returns and return information should not be provided unless the requesting agency can establish a compelling need for the disclosure that clearly outweighs the privacy interests of the taxpayer.

[598] The Joint Committee staff also recommends that the IRS continue to monitor disclosures under present law to ensure that the information provided is tailored to the needs of the recipient.

[599] In collecting information for this study, the Joint Committee staff received a number of recommendations seeking to expand further the disclosure of returns and return information. Some of the disclosures related to tax administration purposes, while others were matters of administrative convenience for nontax agencies.

[600] In assessing the need to expand the exceptions to section 6103, the Joint Committee staff believes that, in order to adequately protect taxpayer confidentiality, the requesting agency should be required to establish a compelling need for the disclosure. Such a compelling need generally would not exist unless the requesting agency establishes that the disclosure of returns and return information is the best means by which to satisfy that need.

[601] In conducting the study, the Joint Committee staff also received information indicating that, in some cases, there may be disclosure of returns and return information under present-law rules that is broader than necessary to meet the needs of the requesting agency. For example, the Joint Committee staff learned that some State tax authorities had requested information they could not use. As another example, return information is not as current as it needs to be to assist in the collection of child support and, thus, is not the best means to obtain information for such purposes. The Joint Committee staff believes that it is inconsistent with the objective of protecting taxpayer confidentiality to provide information to a recipient that cannot use the information or does not need the information for the purpose for which it was disclosed. The Joint Committee staff recommends that the IRS continue to assess an authorized recipient's need for the return information and tailor access accordingly.

B. Coordination of Section 6103 with Other Disclosure Provisions

The staff of the Joint Committee recommends that all provisions

C. Matters Made Part of the Public Record

The staff of the Joint Committee recommends that returns and

[604] The Joint Committee staff believes that the principles of taxpayer confidentiality should not extend to returns and return information that have been properly made a part of the public record as a result of Federal tax administration, i.e., the filing of a notice of Federal tax lien or court proceedings. Because such returns and return information are already a part of the public record and available to anyone who chooses to see them, the Joint Committee staff does not believe that further disclosure undermines the general principle of taxpayer confidentiality. Thus, the Joint Committee staff believes that the prohibition on disclosure under section 6103 should not apply to returns and return information properly within the public record as the result of tax administration.

[605] In order for returns and return information to be considered to be properly within the public record, the court filing or lien disclosure that makes the return or return information part of the public record must be authorized. For example, the IRS could not erroneously file a notice of tax lien and then claim public record for its subsequent disclosure of that same information. ⁸⁴⁶

D. Access to Working Law of the IRS

The staff of the Joint Committee recommends that all final

[607] The Joint Committee staff believes that the working law of the IRS should be publicly available. Such interpretations should not be limited to issuances from certain IRS offices (such as the IRS National Office or an IRS district office) but should also include issuances from other offices, such as from District Counsel, which are currently not covered by the definition of Chief Counsel advice. The Joint Committee staff also believes that when one division of the IRS Office of the Chief Counsel requests legal advice on a subject matter within the jurisdiction of another Chief Counsel division, that intra-office advice should be disclosed once the final advice is given if it was incorporated in the outgoing advice. The Joint Committee staff recognizes the necessity of free flow of information and opinions in the decision-making process. However, once a decision is made, it affects a member of the public. The public is entitled to know of the rules being applied in its dealings with the IRS and the underlying rationale for the course of action.

[608] Guidance should be disclosed if it represents the working law of the IRS (informally or formally adopted) in its dealings with taxpayers. For disclosure purposes, it should not matter whether the advice is flowing from the IRS National Office to the IRS district offices, between IRS National Office functions, from District Counsel to IRS district personnel, or from the IRS to the Treasury Department. Similarly, it should not matter what a particular advice vehicle is called. In other words, when guidance is relied upon, could be reasonably expected to be relied upon, or is issued by the IRS for use by any IRS and Treasury Department employee for purposes of their interactions with taxpayers, it should be disclosed. The disclosure should be affirmative and the IRS should not wait for a FOIA request to make the information public. Without such disclosure, advice that is wholly within the IRS might never come to light because the public would be unaware of its existence.

[609] It is not intended that drafts should be subject to disclosure. Nor is it intended that advice given in the course of the decision-making process should be made available prior to the conclusion of that process. However, advice that is provided or written with a belief that it will be used by the recipient (or others with access to such item) in his or her dealings with taxpayers should be disclosed. In addition, disclosure of advice cannot be avoided merely because the advise is labeled as preliminary.

[610] For example, if the Assistant Chief Counsel (Income Tax and Accounting) requests advice from the Assistant Chief Counsel (General Litigation) about a matter within General Litigation's responsibility, it is not anticipated that Income Tax and Accounting would ignore the advice given by General Litigation in formulating its decision. To the contrary, it is anticipated that such advice would be incorporated in the final product. As a result, both the final product issued by Income Tax and Accounting and the advice given by General Litigation should be subject to disclosure at the time the final product is issued.

[611] The Joint Committee staff recognizes that this recommendation represents a significant change to the public's access to internal communications. Nonetheless, the Joint Committee staff believes the public's interest in ensuring the uniform application and interpretation of the law outweighs administrative issues and privacy concerns of particular taxpayers that may arise from such disclosures. In order to address privacy concerns, the Joint Committee staff recommends that taxpayers should be allowed to participate in the redaction process in the manner set forth under present-law section 6110.

E. Application of the FOIA to Returns and Return Information

The staff of the Joint Committee recommends that it should be

[613] The core purpose of the FOIA is to contribute significantly to public understanding of the operations or activities of the government. ⁸⁴⁸ Taxpayer representatives often use the FOIA as an alternate means to obtain information the IRS has collected in building its case against their clients. ⁸⁴⁹ Very little, if any, information about IRS operations, however, is gleaned from the release of a specific taxpayer's return or return information in response to a FOIA request. ⁸⁵⁰ The disclosure of returns and return information of specific taxpayers is not consistent with the main purpose of the FOIA.

[614] In keeping with its general recommendation that all disclosure authority be contained in the Code, the staff of the Joint Committee recommends that it should be clarified that the FOIA does not apply to returns and return information. The substantive rules for disclosure are already contained in section 6103. In addition, section 6103(p)(2) provides for copies of returns and return information to be furnished, upon written request, to any person who is authorized to receive it under section 6103. ⁸⁵¹ Furthermore, the need for persons to make FOIA requests should be diminished by the Joint Committee staff recommendation to broaden the scope of section 6110.

[615] The staff of the Joint Committee recognizes that the FOIA has several important administrative provisions that are not contained in section 6103. These include response time limitations and administrative appeal of the IRS decision to withhold documents. The FOIA also affords a requester the opportunity for de novo judicial review by a U.S. District Court. The staff of the Joint Committee recommends that these provisions should be incorporated into section 6103. This will provide persons seeking disclosure of returns and return information with the same administrative protections and remedies currently available to them under FOIA.

F. Tax Treaties and Tax Information Exchange Agreements

For tax information that is not return information under section

[617] In general, tax treaties and tax information exchange agreements contain secrecy clauses. A tax treaty secrecy clause requires the country requesting information under the treaty to treat any information received as secret in the same manner as information obtained under its domestic laws. Usually a treaty secrecy clause also provides that disclosure is not permitted other than to persons or authorities involved in the administration, assessment, collection or enforcement of taxes to which the treaty applies. ⁸⁵⁴

[618] Exemption 3 of the FOIA exempts from disclosure matters that are:

(3) specifically exempted from disclosure by statute . . .,

[619] The Supremacy Clause of the United States Constitution provides that United States treaties are "the supreme law of the land":

This Constitution, and the Laws of the United States which shall

[620] Section 6110(c)(3) contains a provision similar to FOIA exemption 3. The staff of the Joint Committee recommends that it should be clarified that tax treaties qualify as statutes for purposes of this provision.

[621] Sections 274(h)(6)(C) and 927(e)(3) specifically provide the Secretary of the Treasury the authority to enter into tax information exchange agreements. This eliminated the need for Senate ratification, which is required for a tax treaty. In addition, all tax information exchange agreements are required to include specific non-disclosure provisions which provide that

information received by either country will be disclosed only to

[622] While the Joint Committee staff recommendation only specifically applies to tax treaties and tax information exchange agreements, the Joint Committee staff anticipates that other similar agreements exist which should also receive protection from disclosure. ⁸⁶⁰ The Joint Committee staff requests that the Secretary submit a list and description which should be considered for protection from disclosure.

G. Application of the Privacy Act to

[624] The Joint Committee staff recommends that it should be clarified that section 6103 preempts the Privacy Act as it relates to returns and return information. Applying the rules of section 6103 rather than the Privacy Act to the disclosure of returns and return information will protect the privacy rights sought to be protected by the Privacy Act and will provide clarity in an uncertain area of the law. Both laws have similar purposes, to protect privacy rights. While the Privacy Act has a general set of rules applicable to all types of government records, section 6103 has a specific regime tailored to the disclosure of returns and return information. Thus, the later-enacted section 6103 displaced the need for the application of the more general rules of the Privacy Act to such information.

[625] The Joint Committee staff also recommends that it should be clarified that section 7431 preempts the Privacy Act as it relates to the unauthorized disclosure of returns and return information. Taxpayers can enforce the privacy rights embodied in the provisions of section 6103 through the civil remedy provision of section 7431. This approach is consistent with the legislative history to section 7431, which indicates that the Congress believed it was creating the only remedy for unauthorized disclosure of returns and return information and that the Privacy Act did not apply to such disclosure:

The committee also decided to establish a civil remedy for any

II. REFORMS OF CURRENT EXCEPTIONS UNDER SECTION 6103

[627] In response to concerns that former spouses were not able to obtain information regarding collection activities relating to a joint return, the Taxpayer Bill of Rights 2 added section 6103(e)(8). ⁸⁶⁶ When a deficiency is assessed with respect to a joint return, upon written request, section 6103(e)(8) permits the IRS to disclose: (1) whether the IRS has attempted to collect such deficiency from the other individual; (2) the general nature of such collection activities; and (3) the amount collected. ⁸⁶⁷ This provision applies if individuals who filed the joint return are no longer married or no longer reside in the same household. Requests under this section must be in writing.

[628] To eliminate the discrepancy between these provisions, the Joint Committee staff recommends that the written request requirement under section 6103(e)(8) should be eliminated for disclosure of collection activities with respect to a joint return.

B. Clarification of the Scope of Section 6103(h)(1):

(1) act upon applications for enrollment to practice before the

[630] The Office of the Assistant Chief Counsel (Disclosure Litigation) recently issued an opinion stating that it was appropriate for a local IRS office to examine tax records to determine whether taxpayer representatives who submit Form 2848 (Power of Attorney) are current in their tax obligations. ⁸⁷⁰ The opinion concluded that section 6103(h)(1) permits local IRS employees to access IDRS to determine whether a taxpayer's representative is current in his or her tax obligations:

Here, the local IRS Office will be accessing IDRS to ascertain

[632] An IRS employee should make a referral to the Director of Practice, if the employee has reason to believe the taxpayer's representative has engaged in inappropriate behavior. However, an IRS employee should not affirmatively seek out wrongdoing by the taxpayer's representative in order to make a referral to the Director of Practice.

C. Disclosure of Criminal Investigation

[634] In Gandy, at the beginning of an interview of a third party witness, the IRS special agents introduced themselves by displaying their badges and credentials to the witness. They then stated the following (in similar or substantially similar form):

"My name is * * *, and I am a Special Agent with the Criminal

[635] Section 6103(k)(6) permits IRS employees to disclose return information for investigative purposes as prescribed by regulation. Treasury regulations provide that, in connection with the performance of official duties relating to any criminal investigation, an IRS employee is authorized to disclose taxpayer identity information (as defined in section 6103(b)(2)), the fact that the inquiry pertains to the performance of official duties, and the nature of the official duties in order to obtain necessary information relating to the performance of official duties. ⁸⁷³

[636] The Handbook for Special Agents contains a section on investigative disclosures. Section 348.3, entitled "Disclosures for Investigative Purposes" states:

Special agents are specifically authorized by IRC 6103(k)(6) to

You contact a taxpayer's customer regarding the purchases the

[638] Despite finding that the special agents had made unauthorized disclosures, the court did not hold the government liable for those disclosures. Instead, the court found that the special agents made the disclosures in good faith. Under section 7431, no liability attaches for disclosures made based on a good faith, but erroneous, interpretation of section 6103. ⁸⁷⁵ In determining whether the agents acted in good faith the court articulated standard:

Whether a reasonable IRS agent would be acquainted with the

[639] As a result of this court decision, the IRS has instructed its special agents not to identify themselves as special agents within the judicial Eastern District of Texas. The special agents in the remainder of the country still do so. However, if agents from another part of the country need to contact a witness in that district of Texas, they cannot identify themselves as special agents.

[640] The Joint Committee staff believes a third party witness should know that the IRS agent interviewing them is an employee of the CID. By not identifying them self as such, the IRS agent could potentially mislead the witness about the nature of the investigation. In addition, the witness needs to know that he or she is speaking with a criminal investigator, if only to evaluate how to protect his or her own interests.

[641] The Joint Committee staff recommends that IRS special agents should be required to identify themselves as such and state the nature of their investigation to third parties. Special agents should be especially mindful that disclosure of the taxpayer's identity must be necessary to obtain the information sought as required by section 6103(k)(6). Special agents should pursue reasonable alternative avenues of questioning to avoid identifying the taxpayer whenever possible.

D. Disclosure in Judicial and Administrative Tax Proceedings

[643] Recently, the District Court for the District of Puerto Rico ordered the IRS to produce tax returns of unrelated third parties in a tax case under section 6103(h)(4). ⁸⁷⁷ The plaintiffs had sought to change their taxable year to maximize the benefits accorded by section 936 following the amendment of that provision in 1993. The plaintiffs argued that several similarly situated corporations were successful in their efforts to change taxable years and the IRS had improperly denied them the favorable treatment accorded the other taxpayers. ⁸⁷⁸ The IRS argued that the third party returns could not be disclosed under section 6103.

[644] Following the court's order requiring production, the IRS notified the affected third party taxpayers. The court denied the third party taxpayers' motion to participate amici curiae, as well as the government's motion for the court to reconsider its order. According to the Justice Department's Tax Division, only the pertinent portions of the third party taxpayer returns were disclosed as a result of the court's order. It is the Joint Committee staff's further understanding that several of the third party taxpayers reviewed the material to be released and were satisfied with the redactions.

[645] The Joint Committee staff recommends that when nonparty returns and return information are to be disclosed under section 6103(h)(4)(A) through (C), the taxpayer should be given notice prior to the disclosure. The Joint Committee staff further recommends that only the portions of a nonparty return or return information that directly relate to the resolution of an issue in the proceeding should be disclosed in such proceeding. Finally, the Joint Committee staff recommends that the nonparty taxpayer should be given an opportunity to participate in the redaction process. Such modifications to section 6103(h)(4) would strike a proper balance between taxpayer privacy and the need of other taxpayers for information to resolve disputes with the IRS.

E. Investigative Disclosure Authority

F. Information Related to Offers in Compromise

G. Refund Offset Disclosures

H. Disclosure to Contractors

1. Present law and background

General rules

[649] Employees of the Treasury Department, a State tax agency, the Social Security Administration, and the Department of Justice can disclose returns and return information to contractors for tax administration purposes. ⁸⁸² These disclosures can be made only to the extent necessary to procure contractually equipment, other property, or the providing of services, related to tax administration. ⁸⁸³

[650] The contractors can make redisclosures of returns and return information to their employees as necessary to accomplish the tax administration purposes of the contract, but only to contractor personnel whose duties require disclosure. ⁸⁸⁴ Treasury regulations prohibit redisclosure to anyone other than contractor personnel without the written approval of the IRS. ⁸⁸⁵

Notification requirements

[651] Treasury regulations require that contractors give written notification to the personnel who may handle returns and return information that:

(1) such information is to be used only for the tax

[652] All contracts must provide that the contractor will comply with all applicable restrictions and conditions prescribed by regulation, published rules or procedures, or written communication to the contractor. ⁸⁸⁷ Failure to comply with such restrictions or conditions may cause the IRS to terminate or suspend the duties under the contract or the disclosures of returns and return information to the contractor. ⁸⁸⁸ In addition, the IRS can suspend disclosures to the State tax agency or the Department of Justice until the IRS determines that the conditions are or will be satisfied. ⁸⁸⁹ The IRS may take such other actions as deemed necessary to ensure that such conditions or requirements are or will be satisfied. ⁸⁹⁰

[653] In 1998, to address the concerns of contractor access to returns and return information, the IRS modified its basic agreements with the States. The agreements now require the States to notify the IRS 45 days in advance of a contractor's scheduled receipt of returns and return information. ⁸⁹¹ During this 45-day period, the IRS evaluates whether the contract properly addresses and implements all safeguard requirements prior to a contractor's receipt of returns and return information. ⁸⁹²

[654] The IRS has stated that "the use of contractors by both Federal and State agencies . . . continues to be an area requiring additional attention." ⁸⁹³ During its safeguard reviews, the IRS found that agencies permitted contractors to view returns and return information while setting up agency computer systems. ⁸⁹⁴ Agencies also utilized contractors to dispose of returns and return information without having agency personnel observe the process to ensure that the contractors did not access the information. ⁸⁹⁵

Nontax administration contractors

[655] Section 6103(n) only covers contracts to accomplish a taxadministration purpose. Thus, in order for a Federal or State entity to utilize a contractor for nontax purposes, the Code must explicitly authorize the disclosure. For example, a child support enforcement agency can disclose a limited amount of returns and return information to a contractor of the agency. ⁸⁹⁶ The contractor's duties must be to establish and collect child support obligations from and locate individuals owing such obligations. ⁸⁹⁷ While child support enforcement agencies have limited contractor authority, agencies administering certain need-based programs (such as Temporary Assistance to Needy Families) have no authority to disclose return information to a contractor. This lack of authority has created issues under present law.

[656] The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 gave States the option of administering TANF through contracts with "charitable, religious, or private organizations." ⁸⁹⁸ Section 6103, however, limits disclosure to Federal, State, or local agencies administering such programs. ⁸⁹⁹ The IRS has interpreted the term "agencies" to mean governmental agencies. ⁹⁰⁰

[657] The Wisconsin Works TANF program illustrates the relationship between the Personal Responsibility Act and section 6103. In Wisconsin, a variety of organizations administer the program locally: county governments, private not-for-profit entities, and private for-profit entities. ⁹⁰¹ Each local entity is responsible for operating the programs and designing the services. Wisconsin contends that, to administer Wisconsin's TANF program, these entities need access to the database and network that assists in determining and verifying eligibility. ⁹⁰² Under the Social Security Act, agencies administering TANF programs must request and use return information from the IRS for income and eligibility verification. However, section 6103 does not allow disclosure of returns and return information to nongovernmental agencies.

[658] Similarly, child support agencies contend that to use their contractors effectively, they need to be able to share fully the information they receive from the IRS. The amount of a refund offset and the name and social security number is insufficient, they contend. ⁹⁰³ Forms 1099 and W-2 information cannot be disclosed to contractors.

2. Recommendations

a. State tax administration contractors

The staff of the Joint Committee recommends that States

[660] The Joint Committee staff believes that the review of State contracts important in protecting taxpayer confidentiality. IRS guidelines provide that a State is to perform periodic inspections of a contractor and keep a written record of such inspections. ⁹⁰⁷ The Joint Committee staff believes that this requirement should be strengthened and recommends that the States should be required to take the actions described above.

b. Nontax administration contractors

[662] Agencies are increasingly using contractors to carry out a variety of their functions. Those who argue for increased access to returns and return information for contractors for nontax administration purposes argue that such access would facilitate the use of contractors, which may be the most effective way for agencies to perform their functions. It is also argued that the contractor may be viewed as an extension of the contracting agency and thus should have the same access to returns and return information as the agency.

[663] On the other hand, expanding the number of persons who have access to returns and return information increases the likelihood that confidential information will be unlawfully disclosed. As discussed above, the IRS does not have the resources to fully monitor contractors' safeguards under present law; expanding contractors' access to returns and return information would make it more difficult for the IRS to ensure that adequate safeguards are in place.

[664] If accessible, returns and return information contain a ready source of information that could be useful for a variety of purposes. Section 6103's general principal of confidentiality recognizes that many persons would be interested in obtaining returns and return information, and that restrictions on access to such information are necessary to protect taxpayer privacy. While allowing contractors greater access to returns and return information may make it easier for agencies to perform their functions, a similar argument could be made in almost any case in which access to returns or return information is requested.

[665] Expanding contractors' access to returns and return information for nontax administration purposes is counter to section 6103's principal of confidentiality and would comprise taxpayers' privacy interests. The Joint Committee staff does not recommend expanding the present-law disclosure rules regarding access to such information by contractors for nontax administration purposes.

I. Consent to Authorize Disclosure to Third Parties

1. Present law and background

Overview

[666] Under section 6103(c), a taxpayer may designate a third party to receive his or her return or return information from the IRS. The IRS estimates that it receives more than 800,000 requests from taxpayers directing that their returns or return information be sent to a third party. ⁹⁰⁹ Examples of third party entities to which the IRS provides information include financial institutions (including the mortgage banking industry), colleges and universities, and Federal, State, and local governmental entities.

[667] Usually these entities do not have access to returns and return information under another provision of section 6103. However, in other circumstances, a third party entity receiving information pursuant to section 6103(c) also has access to returns and return information under another subsection of section 6103. For example, the Department of Education has authority under section 6103(1)(13) to obtain return information with respect to student loan recipients. The IRS has interpreted section 6103(l)(13) to exclude access to return information by contractors of the Department of Education. Because the Department of Education uses contractors to conduct its program, it utilizes section 6103(c) to obtain return information, rather than section 6103(l)(13).

[668] The President of the United States and executive agencies are authorized under section 6103(g)(2) to receive certain information for the purpose of performing tax checks of prospective Federal appointees. The information disclosable under section 6103(g)(2) is limited to whether:

(1) an individual has filed income tax returns for the last 3

[669] Unlike other provisions of section 6103 that permit access by a third party, section 6103(c) places no restrictions on the use of information obtained by consent. ⁹¹³ For example, child support agencies can disclose the return information they receive from the IRS, as opposed to by taxpayer consent, "only for purposes of, and to the extent necessary in, establishing and collecting child support obligations from, and locating, individuals owing such obligations." ⁹¹⁴ As another example, section 6103(g) restricts dissemination of returns and return information to persons of specified pay level and provides that information can only be disclosed with the personal written direction of the President or the head of the agency. ⁹¹⁵ It also requires the President or the head of a requesting agency to file quarterly reports with the Joint Committee setting forth the names of the taxpayers, the returns or return information involved, and the reason for the request. ⁹¹⁶

[670] When returns and return information are obtained under section 6103(c), no reports are filed, and the information can be used in any manner. Further, the IRS is not required to keep an accounting for disclosures made under section 6103(c). ⁹¹⁷

[671] Section 6103(c) is often used in connection with mortgage loan applications. Mortgage originators qualify loan applicants as meeting or not meeting the requirements for loan approval. This process involves the verification and investigation of information and conditions. If the loan is granted, the mortgage originator may use its own money to fund the loan. Alternatively, another entity, an "investor," may buy the loan and provide the money. Investors typically perform a re-investigation of loans received for funding. Such re-investigations may include verification through the IRS of the tax return provided by the taxpayer to the mortgage originator.

[672] Usually the mortgage originator does not know which investor will ultimately fund the loan. Thus, at the time of application, the originator asks the borrower/ taxpayer to sign a consent (Form 4506) designating the originator as the third party to receive the taxpayer's returns. Subsequently, at closing, the investor may request that the originator obtain another Form 4506 naming the investor as the third party to receive the taxpayer's return.

[673] Ostensibly to avoid confusion over why the taxpayer would be authorizing a party other than the originator to receive his tax return, the taxpayer may be asked to sign a blank Form 4506 at closing. In some cases, mortgage originators ask taxpayers not to date the Form 4506. This allows the form to be submitted to the IRS at a later date, often months or years later, for purposes of mortgage resale. ⁹¹⁸ This facilitates the re-investigation of the basis for the loan by the investor.

Comparison of restrictions on tax return preparers

[674] Generally, the Code prohibits a tax return preparer from using information furnished to the preparer in the preparation of a tax return (including the client's name and address) for other purposes without advance client consent. ⁹¹⁹ Treasury regulations provide limited exceptions to this rule. ⁹²⁰ Typically, no consent is required for disclosures made within the preparer's legal or accounting firm for tax related services or to solicit additional tax business, to defend the preparer in an IRS investigation or related court proceeding, to report a crime, to respond to a court order, or for other limited reasons.

[675] Advance consent is required to solicit current business in matters unrelated to the IRS by the tax preparer. ⁹²¹ A preparer must obtain the consent at the time the taxpayer receives the completed return. ⁹²² The consent can not be used to solicit business to be furnished at some time in the indefinite future. ⁹²³ For example, the consent could not cover a future sale of mutual fund shares, or life insurance or products in development. ⁹²⁴ The consent can only cover affiliates if the preparer and the person to render the services are members of an affiliated group within the meaning of section 1504. ⁹²⁵ The taxpayer must execute separate written consents for each service. ⁹²⁶

Comparison to restrictions on other financial records

[676] The Gramm-Leach-Bliley Act, relating to financial services modernization, addresses issues relating to consumers' rights to privacy. ⁹²⁷ Under prior law, banks could share a person's name, address, account balance, and payment history with affiliates or sell it to outside firms without prior notification. However, if a bank wanted to share information from a credit report or loan application, it was required to offer the person a chance to say no or to "opt out." The Gramm-Leach-Bliley Act permits a consumer to "opt-out" as to third parties. In other words, banks must let their consumers know if they are selling their personal information to third parties. However, information sharing among affiliates, such as mortgage companies, insurance companies, brokerage houses and credit card companies under one roof, is unrestricted. ⁹²⁸

Coerced consents: Tierney v. Swieker

[677] At least one court has held that a coerced consent by a taxpayer to the sharing of return information is invalid. ⁹²⁹ Prompted by allegations of widespread abuse in the Supplemental Security Income ("SSI") program implemented a new policy to verify the income and assets of SSI recipients. Specifically, through a mass mailing distributed in May 1982, the SSA asked each of four million former and current SSI recipients to sign a consent form that would allow the SSA to obtain copies of otherwise confidential tax return information maintained by the IRS. This tax return information would then be checked against the strict financial limitations that are imposed on SSI recipients, thereby allowing the SSA to eliminate from the program any individuals who are ineligible because their income or assets exceed the maximum allowable levels. ⁹³⁰

[678] The consent provided:

You have a choice about signing the form. But we must have

Since you have not signed the authorization form we can not

[680] The court also found that the consents were coerced. ⁹³⁴ The consents were mailed to four million elderly, blind, and disabled individuals. They contained "poorly-veiled threats that the recipients' benefits would be terminated if they failed to sign the forms." ⁹³⁵ According to the court, that language in the SSA letter was likely to coerce individuals who depend on SSI for their subsistence to give up their right to confidentiality. The court also noted that the SSA failed to explain the substantive and procedural rights of the SSI recipients. Thus, the combination of threats and lack of an explanation of rights prevented the SSI recipients from knowingly and voluntarily consenting to the release of their return information. ⁹³⁶

Electronic delivery of return information

[681] On September 13, 1999, the IRS requested comments on a proposed pilot project that would deliver return information to third parties designated by the taxpayer. The project would be an electronic version of the current paper system. The system may reduce the current delivery time from ten days to 24 hours. ⁹³⁷

[682] Under the pilot project, a taxpayer would fill out the Form 4506, Request for Copy of Transcript of Tax Form, electronically and submit it to the IRS. ⁹³⁸ The proposed system would date lock the electronic request so that it could not be submitted again at a later date. The third party's access to a taxpayer's transcript would expire 30 days from the date of the electronic stamp. ⁹³⁹ The system would also prevent alteration of the form after the taxpayer submits it.

[683] Currently, the IRS delivers a full return transcript (200 lines of information transcribed from the taxpayer's return) in response to a Form 4506. ⁹⁴⁰ Under the proposed system, the amount of information disclosed would be reduced to that information that would aid the specific industry in the processing of an application. ⁹⁴¹

[684] The pilot project would be limited to California tax practitioners, financial institutions, mortgage companies, and credit bureaus. ⁹⁴² In contrast to the current consent procedures, the IRS would place restrictions on what third party recipients could do with information received under the pilot program. These restrictions would require that:

(1) return information be kept confidential;

[686] The pilot program would require the participating businesses to prepare reports for the IRS on the discrepancies between income reported by the taxpayer and the income stated on the application form. ⁹⁴⁶ It would require the participants to track the number of requests processed, the number of discrepancies from the information provided by the taxpayers and the number of loans, grants or subsidies that were declined based on the data provided by the electronic delivery pilot. ⁹⁴⁷ The report would be in statistical form, rather than by individual taxpayer. ⁹⁴⁸

[687] Privacy advocates raised concerns when the pilot project was announced that the ease of obtaining the information will cause a flood of requests to see a taxpayer's return information. ⁹⁴⁹ The IRS estimates that the request for return information to be sent to third parties could increase to more than 50 million. ⁹⁵⁰ Privacy advocates argue that providing return information to third parties is not the role of the IRS. ⁹⁵¹ The IRS argues that it would be performing a customer service to the taxpayer in that it is the taxpayer who consents to the disclosure. Privacy advocates argue that, in situations such as that involving a mortgage application, there is no voluntary consent. ⁹⁵² The taxpayer wants to get the mortgage to buy the home, and so will sign the form. Despite the restrictions on the use of the information, privacy advocates are concerned that the IRS lacks the resources to monitor adequately the use of the information should the pilot go nationwide. ⁹⁵³ The IRS disputes this contention. ⁹⁵⁴

2. Recommendations

[689] The Joint Committee understands that completed consent forms may be difficult or not always possible based upon current financial practices. However, if the test for third parties obtaining tax return information was whether alternative means were more expensive or burdensome, section 6103 would provide very little privacy for taxpayers.

b. Limitations on the use of information obtained by consent

[691] A taxpayer should be able to decide who receives his or her return or return information. However, a taxpayer's consent may not be voluntary if a substantial benefit to the taxpayer hinges on the disclosure of information to a third party. The taxpayer may not be aware that, by consenting, he or she relinquishes the ability to control the dissemination of this information. Thus, the Joint Committee staff recommends restrictions on the use of returns and return information obtained by taxpayer consent.

J. Statistical Disclosure Authority for

III. UNAUTHORIZED DISCLOSURE

The staff of the Joint Committee recommends that the IRS notify

[694] The IRS is required under present law to provide, for disclosure to the public, an annual report to the Joint Committee regarding accountings of authorized disclosures of returns and return information 959 The IRS is not required to report on unauthorized disclosures or inspections of returns and return information. The staff of the Joint Committee recommends that the IRS should provide as part of its public annual report to the Joint Committee information on unauthorized disclosures or inspections of return and return information. Such information will allow review of the enforcement efforts in this area and the extent to which taxpayer privacy is being protected.

IV. PUBLIC DISCLOSURE OF NONFILERS ⁹⁶⁰

A. Overview

[695] Like the Federal government, States have the authority to collect taxes from delinquent taxpayers, including those who have not filed returns. The collection process generally begins with an assessment of taxes owed. The States have a variety of methods by which to collect taxes. Traditional methods include in person visits, telephone calls, placing a lien on the taxpayer's property, levying bank accounts, and the seizure and sale of a taxpayer's property. States are also experimenting with other methods to increase compliance. Such methods include using the Internet to display lists of delinquent taxpayers.

[696] The Congress requested the Joint Committee staff to study whether allowing the public to know who is legally obligated to file returns but does not do so (referred to as "nonfilers") would increase voluntary compliance. To assist the Joint Committee staff, the GAO investigated whether any State or local government currently has such a program in place.

[697] According to the GAO, no State or local government publishes the names of persons based on the failure to file returns. Instead, as of June 1999, the District of Columbia and four States- Connecticut, Illinois, Montana, and New Jersey-publicly list the names of delinquent taxpayers on the Internet. For purposes of this discussion "delinquent taxpayer" means a person who has failed to pay an assessed tax that is due and owing. These jurisdictions treat nonfilers the same as delinquent taxpayers once they determine that the nonfiler owes taxes and those taxes are assessed.

[698] Connecticut began its Internet disclosure program in January 1997, followed by the District of Columbia in October 1997, Montana in April 1998, New Jersey in May 1999, and Illinois in September 1999. ⁹⁶¹ All have statutes protecting the confidentiality of taxpayer information similar to their Federal counterpart, section 6103. Connecticut, Illinois, and the District of Columbia have enacted statutes specifically authorizing the disclosure of public lists of delinquent taxpayers. Montana and New Jersey rely on the fact that delinquency is a matter of public record. ⁹⁶²

[699] All five governments contend that their disclosure programs have successfully increased compliance. Nevertheless, none could identify the amount of revenue generated solely from public disclosure. Below is a description of the various programs.

B. Connecticut ⁹⁶³

[700] Connecticut's program has been the model for the others. In January 1997, Connecticut began publicly revealing the names of its top 100 delinquent taxpayers (both business and individual). The State discloses the names on the Internet, ⁹⁶⁴ in newspapers, and by press release. Connecticut law requires the tax commissioner to prepare a list of delinquent taxpayers and make it available for public inspection. ⁹⁶⁵

[701] Each month, Connecticut sends certified, return receipt letters to the top 200 delinquent taxpayers. These 200 persons have the largest accounts that have been delinquent for more than 90 days. The letter warns them of impending disclosures on the Internet if they do not resolve their delinquencies within ten business days.

[702] The top 100 list that is publicly disclosed includes the taxpayer's name, address, amount owed (including penalties and interest) and the type of tax owed. Connecticut includes nonfilers on the list after assessments have been made and the account becomes delinquent. These accounts are processed in the same manner as other delinquent accounts. The list does not identify them as nonfilers.

[703] The list is to be updated monthly. A review of the list website on August 11, 1999, however, showed the list was last revised on March 22, 1999. The site indicated that it would be updated in April.

[704] Connecticut will remove a taxpayer's name from the list if:

(1) a taxpayer pays, negotiates a payment agreement, or

[706] Revenue officials could not say, however, to what extent to public disclosure spurred these collections. They acknowledged that other factors, such as a strong economy and the use of other collection tools, could have affected compliance. Such collection tools include letters, liens, levies, and seizures. In addition, Connecticut has used three other methods to increase compliance. The tax amnesty program allows nonfilers to come forward and pay their taxes without penalties. The voluntary disclosure project offers noncompliant taxpayers favorable terms to pay their back taxes. Another program, the nexus project, targets taxes owed by nonresident taxpayers.

C. District of Columbia ⁹⁶⁶

[707] In October 1997, the District of Columbia Office of Tax and Revenue (" OTR") began listing the names of delinquent taxpayers owing more than $10,000. ⁹⁶⁷ District of Columbia law specifically authorizes the publication of "delinquent lists" showing the names of taxpayers who have failed to pay their taxes. ⁹⁶⁸

[708] Before publication, the OTR sends certified letters to delinquent taxpayers informing them that failure to resolve the delinquency within 30 days could result in public disclosure. Upon the expiration of 30 days, OTR mails a copy of the Internet screen to the delinquent taxpayer. The delinquent list contains the taxpayer's name (including the name of the responsible officer(s) for a business) and the amount owed. OTR updates the list periodically.

[709] OTR can include a nonfiler on the list once an assessment has been made and the account becomes delinquent. These accounts are processed in the same manner as other delinquent accounts. The list does not identify nonfilers as such.

[710] OTR will remove a taxpayer's name from the list if the taxpayer: (1) makes payment arrangements; (2) enters bankruptcy proceedings; or (3) provides evidence that he or she is not the responsible officer of a business. Additionally, if OTR makes a mistake in calculating the tax, OTR will remove the taxpayer's name from the list.

[711] During fiscal year 1999, the OTR collected $669,912 after sending warning letters and $70,587 after disclosure on the Internet. ⁹⁶⁹ Additional factors, OTR acknowledged, could have influenced a taxpayer's decision to pay. Besides the Internet, OTR uses other collection tools such as telephone calls, letters, liens, and seizures.

[712] OTR reported one instance in which the delinquency list contained inaccurate information. OTR improperly identified an individual as a responsible person for a business. Upon receiving proof of the mistake, OTR removed the name.

D. Illinois ⁹⁷⁰

[713] Illinois began disclosing the names of delinquent taxpayers on the Internet and through press releases in September 1999. ⁹⁷¹ Illinois law specifically provides for public lists of delinquent State taxes. ⁹⁷² The list includes taxpayers, both business and individual, who have final liabilities greater than $10,000 for more than six months.

[714] Illinois sends certified letters to these taxpayers, warning them that if they do not make payment arrangements or resolve their accounts, the State will publish their names on the Internet. The taxpayers have sixty days to respond. If they do not respond, the list will include the taxpayer's name, amount owed, mailing address, type of tax owed, and tax periods. For corporations, the list includes the president's name. New names will be placed on the list only once a year. Names will be removed from the list if the taxpayer pays in full, makes arrangements to pay, or brings old payment agreements into compliance. The State will also remove a name if legal proceedings (such as bankruptcy) are underway.

[715] Nonfilers appear on the list after an assessment is made and the account becomes delinquent. The list does not identify nonfilers as such. The State processes nonfiler accounts in the same manner as other accounts.

[716] Illinois began sending warning letters to taxpayers in March 1999. After sending 5,200 warning letters, $2.9 million was collected before the State published any names. Taxpayers arranged an additional $918,000 in payment agreements. Taxpayers satisfactorily proved that they did not owe $453,000.

[717] Besides the Internet, Illinois uses the traditional tools of liens, levies, seizures, and letters to increase compliance. Illinois also uses private collection agencies and will deny the issuance or renewal of licenses when taxes are in arrears.

E. Montana ⁹⁷³

[718] In April 1998, the Montana Department of Revenue began disclosing the names of Montana's top 50 delinquent taxpayer accounts (including both business and individual accounts). ⁹⁷⁴ The State uses both the Internet and press releases to publicize the lists.

[719] Montana does not have a statute that specifically addresses the publication of delinquent lists. In Montana, a tax delinquency becomes a matter of public record when the clerk of the district court files a warrant of distraint (a judgment lien). ⁹⁷⁵ Montana relies on the fact that the delinquency is a public record to publicize its delinquency lists.

[720] The Department of Revenue sends a warning letter to taxpayers who are 30 days delinquent. The letter provides that if the taxpayer fails to pay within 30 days, the department may issue and file a warrant of distraint in the district court. Once the clerk of the court files the warrant, making the delinquency a fact of public record, Montana can add a taxpayer to its delinquency list. No warning letter of impending disclosure is sent. ⁹⁷⁶ The delinquency list includes the taxpayer's name, city and state of residence, tax type, and amount owed. The list is to be updated monthly.

[721] Nonfilers can be included on the list after an assessment is made and the account becomes delinquent. Once assessment and delinquency occur, the State processes nonfiler accounts in the same manner as other delinquent accounts. The list does not identify non- filers as such.

[722] Montana will remove a taxpayer's name from the list if the taxpayer establishes a payment plan, files for bankruptcy, or files a return affecting the amount owed. The State will also remove a name from the list if the revenue office accepts an offer in compromise or the taxpayer has appeared on the list for six months.

[723] Montana reported that in one instance, its Internet list overstated the tax due. The overstatement resulted from the incorrect application of a tax rate.

[724] Since the program's inception through June 1999, Montana had collected $367,839. Twenty-eight taxpayers paid in full, eighteen negotiated payment plans, twenty-three filed outstanding returns, and two filed amended returns. Revenue officials noted that other factors may have contributed to the taxpayers' decisions to pay. At the time the Internet delinquency list began, Montana also set up an automatic phone system. This new phone system enabled collectors to contact many more taxpayers. Montana also uses other tools to gain compliance, such as liens, levies, and offers in compromise.

F. New Jersey ⁹⁷⁷

[725] In May 1999, New Jersey began using the Internet to disclose the top 100 businesses and top 100 individuals owing taxes. ⁹⁷⁸ New Jersey does not have a provision that expressly authorizes public disclosure. Like Montana, New Jersey relies on the fact that a delinquency is a matter of public record. New Jersey files a certificate of debt with the clerk of the Superior Court. ⁹⁷⁹ The clerk then enters the certificate on the judgment docket.

[726] After the clerk files the certificate, taxpayers may be subject to levies, seizures or referral to the Attorney General. Prior to appearing on the lists, New Jersey affords each taxpayer the opportunity to resolve the outstanding liability to avoid appearing on the lists. New Jersey notifies delinquent taxpayers by certified mail that they have fourteen days to resolve their delinquency or their certificate of debt information may appear on the Internet.

[727] The lists contain the taxpayer's name, trade name (if a business), city, date, amount of the certificate of debt, and the court docket number. ⁹⁸⁰ The information is updated monthly.

[728] New Jersey will remove a taxpayer's name from the lists for several reasons. The State will remove a taxpayer's name from the lists if the taxpayer: (1) shows proof of bankruptcy proceedings; (2) enters into a deferred payment arrangement or closing agreement; or (3) pays all outstanding liabilities. To make room for the posting on new names, the State may remove names from the list. Such taxpayers may be posted again at any time until the taxpayer resolves the delinquency.

[729] Nonfilers can be included on the lists after the State makes an estimated assessment and a certificate of debt is filed. The lists do not identify these accounts as nonfilers.

[730] From May 1999 (the month names began appearing on the Internet) through July 1999, New Jersey had collected $695,991. Nonetheless, New Jersey officials state that it is too early to quantify the full effect of the program.

[731] Besides the Internet, New Jersey uses a variety of other tools to improve compliance and collect unpaid taxes. Such tools include project letters, field investigations, levies, seizures, and office and field audit programs. New Jersey has also used private collection agencies. In addition, a special project group focuses upon noncompliance in the cash economy.

G. Historical Perspective-Federal Level

[732] At the Federal level, public lists have been used in the past, although not recently. Shortly after the passage of the Sixteenth Amendment, Federal law required the Commissioner of Internal Revenue to prepare lists for each district showing the name and address and at one point the amount of tax paid. ⁹⁸¹ The public could inspect the lists at the internal revenue district office of the collector. In 1925, the Treasury Department urged the repeal of the publication provision. ⁹⁸² It asserted that no additional tax had been collected as a result of the provision. Treasury further contended that the provision only served to gratify idle curiosity and to fill newspaper space. ⁹⁸³

[733] The lists were abolished in 1966. ⁹⁸⁴ Instead, the Congress authorized the IRS to say, in response to an inquiry, whether a taxpayer had or had not filed a return for a particular period. Inquiries under that section were made by the news media and commercial concerns. The Congress repealed the fact of filing disclosure in 1976 when it overhauled section 6103.

H. Recommendations

The staff of the Joint Committee does not recommend the

[735] The generally stated rationale for publicly disclosing the identities of persons who do not file tax returns is to increase compliance with the tax laws. Those who support publication of such information believe that nonfilers will pay outstanding tax liabilities rather than face public embarrassment or other possible consequences of disclosure. It is also agrued that payment of taxes is part of the obligations of U.S. citizens and residents, and that the public has a right to know if persons are not complying with such obligations. Disclosure that an individual has not filed his or her tax returns could affect the individual's standing in the community and business relationships. For example, some people may not wish to do business with someone who is not current with regard to Federal taxes. Similar results could apply with respect to publication of the identities of business entities that have not filed returns. It is exactly the fear of these consequences that some believe will increase compliance by providing an incentive for persons to file returns (or pay outstanding liabilities).

[736] However, publicizing a list of nonfilers would not clearly be an effective compliance tool, because such a list would not convey accurate information regarding outstanding tax liabilities. That is, such a list would not target those who willfully fail to pay taxes.

[737] Depending on the particular circumstances, a person who has failed to file a return may not owe taxes. ⁹⁸⁶ A person's allowable deductions, credits, or withholding may reduce the tax liability to zero or generate a refund. ⁹⁸⁷ Thus, a nonfiler may be due money from the Federal government rather than owe money. While not all nonfilers are tax delinquent, a list of nonfilers is likely to carry that presumption in the mind of the general public, possibly causing unjustified and considerable damage to the personal and business reputations of the taxpayers involved. The fact that no States publish a list of nonfilers per se is a reflection of the fact that such information does not accurately reflect tax delinquencies.

[738] Even if a published list were limited to persons who are delinquent in their taxes, it is not clear that compliance would be increased. Because only five U.S. jurisdictions currently publish such information and the publication programs have only recently been adopted, ⁹⁸⁸ there is little data on which to determine whether such programs are effective at increasing compliance. As discussed above, these jurisdictions have been unable to determine the extent to which collections and compliance have increased as a result of their delinquent taxpayer publication programs. In addition, some errors have occurred (e.g., taxpayers were reported as owing more taxes than was correct).

[739] There are a variety of errors that may occur in the publication of a list of nonfilers or delinquent taxpayers. For example, the wrong name could be published, taxpayers with names similar to those on the list could be mistakenly believed to be on the list, and the amount of the delinquency shown could be incorrect or may not be the final determination of liability. ⁹⁸⁹ The possibility for error is greater the larger the list. ⁹⁹⁰

[740] The extent to which publication of a list of nonfilers would increase compliance or serve another public interest is unclear. Any such list is likely to contain inaccuracies that may result in adverse consequences to persons who do not in fact owe Federal taxes. Thus, the Joint Committee staff does not recommend publication of such a list at this time. However, when there is additional experience with such lists at the State level, it may be appropriate to review the issue again. The Joint Committee staff recommends that States with such programs should provide updated information on their programs after they have been in effect for a few years so that the Congress can determine whether such lists prove helpful in increasing compliance and do not harm innocent taxpayers.

V. UNDELIVERED REFUNDS

The staff of the Joint Committee recommends that it be clarified

[741] The National Taxpayer Advocate (" NTA") for the IRS noted in his December 1998 annual report to Congress that the postal service annually returns thousands of refund checks as undeliverable. ⁹⁹¹ Usually, the taxpayer has moved and has not given the IRS his or her new address. In November 1997, the IRS was trying to contact 99,919 taxpayers about undelivered refunds. ⁹⁹² The refunds totaled more than $62 million, averaging $625 per check. ⁹⁹³ Two years later the numbers have increased. In November 1999, the IRS announced that the U.S. Postal Service returned 102,840 more refund checks as undeliverable. ⁹⁹⁴ These checks totaled $72 million, averaging almost $700 per check. ⁹⁹⁵

[742] When the IRS is unable to find a taxpayer due a refund, present law provides that the IRS may use the press or other media to notify the taxpayer of the refund. ⁹⁹⁶ Section 6103(m) allows the IRS to give the press "taxpayer identity information" (name, mailing address and taxpayer identification number, such as social security number). ⁹⁹⁷

[743] Three times a year the IRS generates undeliverable refund lists. ⁹⁹⁸ The IRS breaks the lists down by districts and then forwards them to the respective IRS district Media Relations representative. ⁹⁹⁹ The Media Relations representative forwards the lists to local newspapers for publication. ¹⁰⁰⁰ Most of the larger circulation newspapers do not print the lists, according to the NTA. ¹⁰⁰¹ Further, if taxpayers have moved outside the region or country, they will probably not see the list for their former community. ¹⁰⁰²

[744] The NTA has proposed using the Internet to inform these taxpayers of their undelivered refunds. By utilizing an interactive application, taxpayers could search a database using name, city, State or zip code. ¹⁰⁰³ An Internet site would allow the IRS to reach taxpayers worldwide and would provide a central location for the information. ¹⁰⁰⁴ According to the NTA, such a site would reduce taxpayer burden, enable more taxpayers to receive their refunds and increase confidence in tax administration. ¹⁰⁰⁵

[745] The IRS believes, however, that the current statutory framework of "press and other media" does not permit disclosures via the Internet. The legislative history of the present-law provision does not address the meaning of "press and other media." At the time of the statute's enactment, the press (newspapers and periodicals) and other traditional media were the only means available for the IRS to distribute undelivered refund information to the public. ¹⁰⁰⁶ Thus, the IRS interprets the term "other media" to exclude the Internet. ¹⁰⁰⁷

[746] At least one court has examined the meaning of "press and other media" for purposes of tax refund notification. ¹⁰⁰⁸ Robert Aronson was a lawyer, who specialized in finding persons whom the government owes money. For a contingent fee, he helped persons obtain the money owed them by the government. ¹⁰⁰⁹ Mr. Aronson made a FOIA request for the entire file of undistributed income tax refunds for the years 1981 through 1987. ¹⁰¹⁰ He wanted the name of each taxpayer due a refund, the taxpayer's last known address, taxpayer identification number, and the amount of the refund due. ¹⁰¹¹ The IRS had previously released names and partial addresses (cities, states, and zip codes) to the press as part of its own efforts to find those taxpayers. ¹⁰¹² It provided the same information to Aronson. ¹⁰¹³ Aronson sued the IRS to obtain the rest of the information he sought.

[747] The district court ordered the IRS to provide the full street address, along with the names, cities, and zip codes that it had already supplied. ¹⁰¹⁴ In doing so, the court noted that the IRS's passive efforts at notice had been unsuccessful. ¹⁰¹⁵ Given the absence of legislative history interpreting the term "press or other media," the district court interpreted the term broadly. The district court found that the IRS had abused its discretion in finding that Mr. Aronson was not "other media," given the statute's goal of notifying persons of their refunds. ¹⁰¹⁶ The district court, however, did not allow Aronson to obtain the taxpayers' identification numbers finding that to do so would be an unnecessary invasion of privacy. ¹⁰¹⁷ It also denied Aronson knowledge of the amounts of the refund due. Such information is confidential return information. It is not within the scope of the "taxpayer identity information" the statute permits the IRS to disclose to the press regarding undelivered refunds.

[748] On appeal, the circuit court found that the statute authorizes disclosure only "to the press and other media." ¹⁰¹⁸ The court interpreted the words "other media" to refer to "radio, television, and the like and not to a private citizen who wants to write letters to taxpayers." ¹⁰¹⁹ Thus, the court found that Aronson was not within the category of "other media."

[749] Even if the court could stretch the language to cover Aronson, the court noted that the statute only permits, but does not require, the IRS to disclose "taxpayer identity information." ¹⁰²⁰ Examining whether it was an abuse of discretion not to disclose the street addresses to Aronson, the court found that the decision whether to disclose involved competing interests. Such interests include:

(1) the usefulness of an old address in locating the taxpayer

B. Discussion of Recommendation

[751] The staff of the Joint Committee recommends it be clarified that the IRS should be able to notify taxpayers of undelivered refunds via the Internet. "Media" means "a medium of cultivation, conveyance, or expression . . . members of the mass media." ¹⁰²⁴ "Mass media" is "a medium of communication (as newspapers, radio, or television) that is designed to reach the mass of the people." ¹⁰²⁵ The IRS site on the World Wide Web was designed to reach the "Mass of the people." During the 1997 filing season, the IRS site on the World Wide Web recorded 300,000,000 hits. ¹⁰²⁶

[752] The use of "press or other media" contemplates traditional news media, such as reporters, publishers and broadcasters, but does not necessarily preclude the Internet. The Internet is not unlike television or newspapers, in that it is a means for publishing or broadcasting news. The IRS is expected to use methods calculated to reach a broad range of people. To interpret the current statute to encompass the Internet would be consistent with its goal of public notification.

[753] By limiting the statute's language to traditional news media, the IRS has taken the conservative approach to statutory interpretation. Given that a taxpayer can sue the United States for unauthorized disclosure of return information, the risk of suit arguably warrants such a conservative approach. ¹⁰²⁷ Eliminating the words "press or other media," as proposed by the NTA, would remove any ambiguity about whether the IRS could disclose undelivered refund information on the Internet. It would also accommodate any new methods of mass communication that may subsequently arise. The staff of the Joint Committee recommends that 6103(m)(1) should be modified consistent with the NTA's proposal.

APPENDICIES

APPENDIX A: STATUTORY EVOLUTION OF SECTION 6103

A. Summary

[754] For much of the 100 years preceding the Tax Reform Act of 1976 (the "1976 Act"), tax returns were designated "public records" and were subject to disclosure pursuant to executive order and regulations. The law, in its various forms, required that lists of tax information be made available to the general public. Proponents of publication of this information argued that it kept taxpayers honest, while opponents argued that publication of this information did nothing more than satisfy idle curiosity. Immediately prior to the 1976 Act, the IRS was authorized by statute to tell anyone who asked whether a taxpayer had or had not filed a return.

[755] The Watergate hearings brought out allegations regarding impropriety on the part of the White House regarding return information. This publicity regarding possible misuse of return information on the part of the Administration helped provide impetus for the 1976 Act changes to the disclosure rules. The 1976 Act eliminated executive branch control over access to returns and return information and replaced it with an extensive statutory regime governing disclosure. In general, the 1976 Act provided that returns and return information are confidential. The 1976 Act also included a variety of exceptions to this general rule.

[756] Since the enactment of the 1976 Act, the general rule that returns and return information are confidential has remained. However, additional exceptions to this rule have been added by subsequent changes in the law where the need for returns and return information has been determined to outweigh the taxpayers' interest in privacy and other purposes served by nondisclosure. ¹⁰²⁸

B. 1862-1975: Tax Returns as Public Records

Pre Sixteenth Amendment - 1862-1910

[757] To finance the Civil War, Congress imposed the nation's first income tax in 1861. ¹⁰²⁹ Provisions requiring publication of tax information were included in the Act of July 1, 1862. ¹⁰³⁰ Although returns were designated public records, access to tax returns was, for the most part, limited to those persons authorized by executive order and regulations. That Act required assessors for each district to make a list of the persons liable to pay tax and the amount due. The public could inspect the list for fifteen days. ¹⁰³¹ The law required that the collectors' lists of tax due also be publicized. ¹⁰³² It appears that the purpose of the lists was to notify the taxpayer of his liability and when it would be collected. ¹⁰³³ In 1864, the law required revenue personnel to make the district's annual lists available to anyone who made a request to see the list. ¹⁰³⁴ As a result, newspapers began to publish incomes of leading citizens. ¹⁰³⁵

[758] Opponents of public disclosure argued that disclosure was offensive and objectionable. Among the opponents, Representative (later President) Garfield argued that there was no reason that "the private affairs of individuals should be brought out and paraded in the public papers." ¹⁰³⁶ He did acknowledge that some sort of publicity was necessary "to act as pressure upon men to bring out their full incomes." Nonetheless, he asserted that public inspection of the lists at the county seat was sufficient. ¹⁰³⁷ Proponents contended that publicity prevented collusion between taxpayers and unfaithful collectors. ¹⁰³⁸ For example, the New York Tribune contended that the best way to keep all taxpayers honest was to publicize the amounts reported to the government. ¹⁰³⁹

[759] In 1870, the policy of publication was halted:

. . . no collector, deputy collector, assessor or assistant

[761] Fourteen years later, in 1894, Congress reinstated the income tax. Congress affirmatively prohibited printing and publishing, in any manner, an income tax return unless otherwise provided by law. The following year, however, the Supreme Court declared the income tax unconstitutional, ¹⁰⁴¹ eliminating, for the time being, concerns about publicity of tax returns.

[762] In 1909, Congress enacted the Payne-Aldrich Tariff Act of 1909, which introduced a special excise tax on corporations. Section 38 of this Act made corporate excise tax returns public records. This provision was amended in 1910 to provide that only those authorized by order of the President (and under rules and regulations prescribed by the Secretary of the Treasury and approved by the President), had access to corporate excise tax returns. ¹⁰⁴²

Post Sixteenth Amendment: 1913 to 1975

[763] With the ratification of the Sixteenth Amendment on February 3, 1913, Congress had the authority to lay and collect an income tax. ¹⁰⁴³ The first revenue act after the Sixteenth Amendment, the Revenue Act of 1913, increased the availability of tax information. In addition to inspection upon order of the President, the Revenue Act of 1913 gave State officers the right to inspect returns without the permission of the President. ¹⁰⁴⁴

[764] The requirement of public lists returned with the Revenue Act of October 3, 1917. The lists contained the name and post office addresses of all individuals making a return in an internal revenue district. They were to be prepared annually and made available for public inspection in the office of the district collector. ¹⁰⁴⁵ Besides resurrecting the public lists, the Act also permitted one- percent shareholders to inspect the return of a corporation and its subsidiaries. States continued to have access to corporate returns upon request of the State governor.

[765] Committees of Congress were given access to return information in 1924. Under the Revenue Act of 1924, the House Committee on Ways and Means, the Senate Committee on Finance, or a special committee of the Senate or House, could request returns or data contained therein from the Secretary of Treasury. ¹⁰⁴⁶ Such committees could inspect this information through designated examiners or agents. Further, such committees could submit relevant and useful information obtained by the committee to the House or Senate.

[766] The Revenue Act of 1924 also continued the requirement of public lists. Besides the taxpayer's name and post office address, the Act required that the amount of tax paid be added to such lists. The Supreme Court upheld the right to publish these lists in newspapers in 1925. ¹⁰⁴⁷

[767] The Treasury Department opposed publicity:

The publicity is utterly useless from a Treasury

[769] The Revenue Act of 1926 also established the Joint Committee on Taxation. The Joint Committee had the same right to obtain data and inspect returns as the Committee on Ways and Means and the Committee on Finance. ¹⁰⁵¹

[770] The Revenue Act of 1934 included a controversial "pink- slip" provision. ¹⁰⁵² Under that provision, a taxpayer's gross income, total deductions, net income and tax payable were to be set forth in this slip. The Act required that a taxpayer file the slip with his return. Failure to file the "pink slip" subjected the taxpayer to a five-dollar fine and required that the collector prepare a pink slip for the taxpayer from the return. For three years from the filing date, the pink slip would be available for public inspection. After enactment, the pink slip provisions met with substantial public opposition. The provision was the subject of many debates. ¹⁰⁵³ It was asserted that the slips would only be of use to a person's competitors, the "malicious and idle curious," kidnappers, and blackmailers. ¹⁰⁵⁴ Congress repealed the provision before it took effect. ¹⁰⁵⁵

[771] Between 1934 and 1966, Congress made no substantial revisions to the disclosure provisions. ¹⁰⁵⁶ Accordingly, returns as public records, subject to disclosure by order of the President, remained the general rule.

[772] In 1966, Congress repealed the requirement of public lists. ¹⁰⁵⁷ At that time, the IRS was beginning to maintain returns on microfilm. By making the microfilm available to the public, the taxpayer's social security number would also be available. ¹⁰⁵⁸ This was not a desirable result because a third party could use the social security number to obtain a taxpayer's wage information from the Social Security Administration. ¹⁰⁵⁹ Instead, in response to an inquiry about a taxpayer, Congress authorized the IRS to state whether a taxpayer had or had not filed a return for a particular period. ¹⁰⁶⁰

[773] In 1974, Congress authorized the Pension Benefit Guaranty Corporation to inspect any return filed with respect to a plan of deferred compensation or with respect to wages paid by an employer. ¹⁰⁶¹ Congress also authorized disclosure to the Department of Health, Education, and Welfare to notify a social security claimant of deferred vested benefits. ¹⁰⁶²

[774] Throughout this period Congress classified returns as public records. Nonetheless, other than access specifically permitted by statute, the President, through executive order and by Treasury regulations he approved, controlled access to returns and return information. Generally, the regulations provided access to returns and return information for persons with material interest, ¹⁰⁶³ the heads of departments for official business upon written request detailing why inspection is necessary, and use in legal proceedings where United States was a party to the proceedings.

[775] A number of events led to and influenced Congress' reexamination of the issue of confidentiality. Executive Orders 11697 and 11709, issued by President Nixon in 1973, authorized the Department of Agriculture to inspect the tax returns of all farmers "for statistical purposes." ¹⁰⁶⁴ The orders were the subject of two Congressional committee hearings. ¹⁰⁶⁵ The proposed release of return information on gross receipts and gross income was considered an unacceptable invasion of privacy. ¹⁰⁶⁶ In addition, Agriculture's request caused concern that this was the beginning of a "raid" on the IRS. ¹⁰⁶⁷ The President subsequently revoked the orders in 1974; nonetheless, tax return confidentiality remained in the spotlight. The Watergate Committee hearings revealed that former White House Counsel John Dean had sought to use the IRS to harass political "enemies." ¹⁰⁶⁸ White House Staff requested information and income tax audits from the IRS and IRS personnel complied with such requests. ¹⁰⁶⁹ In addition, the Privacy Protection Study Commission recommended major changes in the dissemination of tax information. ¹⁰⁷⁰

[776] Against this backdrop, in 1976, Congress re-examined the issue of taxpayer confidentiality and prescribed by statute rules regarding access to returns and return information. With the revision of section 6103 in 1976, Congress removed control over the dissemination of returns and return information from the Executive Branch.

C. Tax Reform Act of 1976 -- Returns and Return Information Designated Confidential

General rule

[777] In the Tax Reform Act 1976 (the 1976 Act), Congress entirely rewrote the statutory provisions relating to disclosure of returns and return information. Returns were no longer public records, and returns and return information became confidential. ¹⁰⁷¹ This confidentiality was not absolute, however, as the statute provided exceptions to the general rule of confidentiality. These exceptions allowed disclosure for tax administration purposes, as well as for purposes unrelated to the administration of the tax laws. Congress adopted many of the exceptions from regulations already in existence prior to enactment. Below is a brief discussion of these exceptions both before and after amendment.

Disclosure to State and local governments

[778] Before 1976, section 6103 provided that, upon request of the State governor, return and return information was available to State tax officials for purposes of administering State tax laws. ¹⁰⁷² In stating its reasons for change, the Senate Finance Committee noted that some States had failed to properly safeguard return information. ¹⁰⁷³ However, when brought to the attention of the State, the problems were remedied. As a result, the Committee recommended that the States retain access to return information with certain restrictions:

It has been suggested that tax information that is supplied

Disclosure to taxpayers with a material interest and consent disclosures

[780] Under pre-1976 regulations, returns were open to the filing taxpayer, trust beneficiaries, partners, heirs of the decedent, and similar persons. ¹⁰⁷⁷ Return information was available at the discretion of the IRS. In addition, the statute gave one-percent shareholders access to returns. ¹⁰⁷⁸

[781] Under the 1976 Act, persons with a material interest continued to have access to returns and return information to the same extent as in the prior regulations. ¹⁰⁷⁹ Thus, upon written request, the filing taxpayer, either spouse filing a joint return, the partners of a partnership, the shareholders of an S corporation, the administrator, executor or trustee of an estate, heirs of an estate that have a material interest that may be affected by the information, the trustee of a trust and beneficiaries with a material interest, persons authorized to act for a dissolved corporation, a receiver or trustee in bankruptcy, and the trustee or guardian of an incompetent taxpayer, were given statutory access to return information. The Congress also retained the one-percent shareholder provision. The statute allowed a taxpayer to designate in writing a person to receive the return or return information of that taxpayer. ¹⁰⁸⁰ The requirements of the designation or consent to disclosure were subject to regulation.

Disclosure to the Congress

[782] Before 1976, the statute authorized the House Committee on Ways and Means, the Senate Committee on Finance, and the Joint Committee on Taxation to access tax information in an executive session. ¹⁰⁸¹ Select committees could access tax information by resolution of the appropriate congressional body. Under regulations, standing, select, and subcommittees could obtain access by Presidential order upon adoption of resolution by the full committee. ¹⁰⁸²

[783] In adopting the 1976 Act, the Congress noted that, while it required access to returns and return information to carry out its legislative responsibilities, it could do so under more restrictive disclosure rules. ¹⁰⁸³ The 1976 Act allowed the Ways and Means Committee, the Finance Committee, and the Joint Committee on Taxation, to continue to have access to returns and return information. ¹⁰⁸⁴ Other committees and subcommittees had access to returns and return information upon written request of the Chairman of the committee after (1) a committee action approving a decision to request returns and (2) an authorizing resolution of the House or Senate. ¹⁰⁸⁵ The resolution must specify the purpose of the inspection and that no reasonable alternative source for the information exists. ¹⁰⁸⁶

Disclosure to the President

[784] Before 1976, an executive order permitted tax checks with respect to prospective appointees, and inspection of returns by the President and certain White House employees. ¹⁰⁸⁷ Requests were required to be made in writing, signed personally by the President.

[785] In amending section 6103, the Congress acknowledged that the President and other Federal agencies needed access to return information for tax checks for prospective appointees. ¹⁰⁸⁸ Thus, the 1976 Act essentially codified the then-current practice under executive order. However, the Congress felt that the White House should report to the Congress regarding the disclosures of returns and return information made to it, and so a reporting requirement was added. ¹⁰⁸⁹

[786] Under the 1976 Act, disclosure of returns and return information to the President and certain White House employees continued upon written request of the President, signed by the President personally. ¹⁰⁹⁰ Among other things, the request was to specify the reason for the request. ¹⁰⁹¹ The President and the head of a Federal agency could also request "tax checks" with respect to prospective appointees. ¹⁰⁹² The IRS was to notify the prospective appointee of the tax check request. ¹⁰⁹³ The 1976 Act required the President and agency heads to file quarterly reports with the Joint Committee regarding information requested under this provision. ¹⁰⁹⁴ No report was required for information requested about current executive branch employees. ¹⁰⁹⁵

Disclosure in civil and criminal tax cases

[787] Before 1976, pursuant to regulation, the IRS could furnish return information to the Department of Justice and U. S. Attorneys in cases that the IRS had referred for prosecution or defense. ¹⁰⁹⁶ For cases not referred by the IRS, DOJ had to make a written application for information "necessary in the performance of [] official duties." ¹⁰⁹⁷ DOJ used the returns of potential witnesses and third parties to evaluate credibility and for investigative purposes. Upon request, the IRS would also reveal whether the IRS had investigated a prospective juror. Returns and return information could be disclosed in any proceeding conducted by or before any department of the Federal government or in which the United States is a party. ¹⁰⁹⁸

[788] In adopting the 1976 Act, the Congress recognized the need for DOJ to continue to have access to carry out its responsibilities in the civil and criminal tax area. However, the Congress imposed restrictions on the use of third party returns and return information to balance the potential abuse of privacy:

The committee recognizes the need of the Justice Department to

[790] In response to an inquiry about a prospective juror, the IRS could reveal whether such jurors had been audited by the IRS. ¹¹⁰⁵ The IRS, however, could only respond in the affirmative or negative.

Disclosure to Federal agencies in nontax criminal cases

[791] Before 1976, DOJ and other Federal agencies could obtain information upon written request for nontax official business purposes. ¹¹⁰⁶ As a practical matter, an agency could obtain the information at its own discretion.

[792] In adopting the 1976 Act, the Congress noted that the information provided by taxpayers is compelled by law. The legislative history states that such information should be accorded the same degree of privacy as those private papers contained in their homes. ¹¹⁰⁷ Thus, Congress imposed a court order requirement for disclosure relating to nontax criminal matters.

[793] The 1976 Act required an agency to obtain an ex parte court order before the IRS could give a taxpayer's return or return information provided by the taxpayer to DOJ or another Federal agency for use in nontax criminal cases. ¹¹⁰⁸ No court order was necessary for information that suggests the taxpayer committed a nontax crime that the IRS derives from a source other than the taxpayer. ¹¹⁰⁹ A court order was to be based on a finding that there was reasonable cause to believe that a specific crime has been committed; that such return or return information was probative of the commission of such criminal act; and the information sought to be disclosed could not reasonably be obtained from any other source. ¹¹¹⁰ Disclosure of the return or return information in a proceeding could only be permitted if there was a showing that such return or return information was probative of the commission of a crime. ¹¹¹¹ Thus, information was not available for collateral purposes, such as discrediting a witness on matters unrelated to the crime at issue.

Nontax civil matters

[794] Prior to 1976, DOJ had access to returns and return information for nontax civil matters on the same basis as nontax criminal matters. ¹¹¹² Other Federal agencies were given returns and return information in connection with matters officially before them. ¹¹¹³ After the 1976 Act, generally, no disclosure for nontax civil matters was permitted. ¹¹¹⁴ The Congress noted that alternative sources of information were available to DOJ and the other agencies in these circumstances. ¹¹¹⁵

Disclosure to the GAO

[795] Before 1976, the GAO did not have independent authority to inspect tax returns. It could inspect returns when acting as an agent of the Joint Committee in an audit of IRS operations.

[796] The 1976 Act gave the GAO the authority to access returns and return information in auditing the IRS or the Bureau of Tobacco, Alcohol and Firearms. ¹¹¹⁶ The Joint Committee was given a 30-day period to disapprove any proposed GAO audit. The Congress also gave the GAO authority to review and evaluate the Federal and State agency compliance with the requirements for use and safeguarding returns and return information. ¹¹¹⁷

Disclosure for statistical use

[797] The Bureau of the Census, ¹¹¹⁸ Bureau of Economic Analysis, ¹¹¹⁹ the Federal Trade Commission, ¹¹²⁰ and the Securities and Exchange Commission, ¹¹²¹ had access to return information for statistical purposes prior to the 1976 Act.

[798] Congress found that the potential for abuse of privacy in agency statistical use was minimal:

The committee recognizes the importance to other Federal

Inspection by Federal agencies

[799] By regulation, prior to the 1976 Act, several agencies could inspect returns and return information for general purposes without submitting a written request by the agency head. ¹¹²⁶ The Department of Health, Education and Welfare, the Renegotiation Board /1127/, and the FTC, most frequently used this provision. ¹¹²⁸

[800] Congress determined that inspection on a general basis was not warranted. Instead, Congress decided to limit strictly the types of return information made available, and the circumstances of disclosure, to agencies for nontax purposes:

The committee decided that in many situations, the current use

Miscellaneous disclosures

[802] Before 1976, the statute authorized the IRS to disclose, upon inquiry, whether a taxpayer had or had not filed a return. The regulations authorized other miscellaneous disclosures.

[803] The 1976 Act repealed the provision authorizing disclosure of the fact of filing a return. The Act retained other miscellaneous disclosures. In each situation, Congress decided that either the returns or return information should be disclosed as a matter of policy or that the reasons for limited disclosures outweighed any possible invasion of taxpayer privacy. ¹¹³¹ These situations included disclosure:

(1) to Federal, State, and local child support enforcement

[804] Prior to 1976, the IRS did not have a standardized method for tracking the disclosure of returns and return information. The Congress noted that information had been improperly transferred outside the IRS and inadequate records were kept of transfers to both Federal and State agencies. ¹¹⁴⁴

[805] After the 1976 Act, the IRS was required to maintain a standardized system of permanent records on the use and disclosure of returns and return information. ¹¹⁴⁵ The record keeping requirements do not apply to certain circumstances. For example, the record keeping requirements do not apply to: (1) return or return information open to the public generally (accepted offers-in- compromise, amounts of outstanding liens, etc.); (2) disclosures to the Treasury or Justice Department for tax administration and litigation purposes; (3) disclosures to persons with a material interest; (4) taxpayer consent disclosures; (5) disclosures to the media of taxpayer identity information and (6) disclosure to contractors. ¹¹⁴⁶ For purposes of the Privacy Act, the IRS is not required to account for disclosures with respect to which the record keeping requirements do not apply. ¹¹⁴⁷

[806] Federal and State agencies that receive returns and return information must maintain a standardized system of permanent records on the use and disclosure of that information. ¹¹⁴⁸ Maintaining such records is a prerequisite to obtaining and continuing to obtain returns and return information. ¹¹⁴⁹

[807] Such agencies must also establish procedures satisfactory to the IRS for safeguarding the returns and return information it receives. ¹¹⁵⁰ The IRS must review the safeguards established by such agencies on a regular basis.

Reports to the Congress

[808] The Congress felt it was necessary for it to review very closely the use of returns and return information and the extent to which taxpayer privacy is being protected. ¹¹⁵¹ The 1976 Act requires that the IRS make a confidential report to the Joint Committee each year. ¹¹⁵² All requests for disclosure of returns and return information and the reasons for such requests are covered by the report. A separate section, to be publicly released, includes a listing of all agencies receiving returns and return information, the number of cases in which disclosure was made to that agency and the general purposes of the disclosures. The IRS must also file reports on the procedures established for maintaining the confidentiality of returns and return information disclosed outside the IRS, on the implementation of these procedures, and on any problems that may develop concerning these procedures.

D. Post-1976 Amendments

[809] In the years that have followed the 1976 Act, the Congress has primarily expanded, access to returns and return information. The following is a highlight of the changes made since the 1976 amendment of section 6103.

Revenue Act of 1978: National Institute for Occupational Safety and Health, Department of Education, State, and nontax criminal case changes

[810] The Revenue Act of 1978 (the 1978 Act) amended section 6103 to allow the National Institute for Occupational Safety and Health is allowed to receive disclosure of address information to locate workers exposed to hazardous substances. This disclosure is for the purpose of ascertaining whether the worker is dead or alive and to refer these persons for medical treatment. ¹¹⁵³ The 1978 Act also allows the Commissioner of Education and educational institutions to obtain address information to find individuals who have defaulted on student loans. ¹¹⁵⁴

[811] As noted above, for nontax criminal cases, a court order is needed to obtain information filed by or on behalf of the taxpayer. The court order requirement does not apply to information not filed by or on behalf of the taxpayer. Because the taxpayer gives his or her name and address on the return, arguably this is information filed by the taxpayer. For purposes of 6103(i), the 1978 Act gave the IRS authority to disclose the name and address of a taxpayer without a court order. ¹¹⁵⁵

[812] The 1978 Act also added additional information that could be disclosed to the States. It provided that fuel excise returns could be disclosed to the States. ¹¹⁵⁶

Bankruptcy Tax Act of 1980: modifications to material interest provision

[813] In connection with the addition of section 1398 of the Code (relating to Title 11 cases), the Bankruptcy Tax Act of 1980 modified the rules for material interest disclosures relating to Title 11 cases. 1157 It allowed disclosure of a debtor's tax return for the year in which the bankruptcy case was commenced and prior year returns upon written request by the trustee. ¹¹⁵⁸ It also permitted the debtor to inspect any return of the estate upon written request. A special rule applied to involuntary cases. ¹¹⁵⁹

Excise tax refunds: State audit agencies added

[814] In 1980, Congress allowed State agencies that audit governmental functions to access return information. Such disclosures were subject to the same safeguards, record keeping and reporting requirements that apply to other State agencies. ¹¹⁶⁰

Omnibus Reconciliation Act of 1980: student loan programs

[815] The Omnibus Reconciliation Act of 1980 permitted the IRS to provide mailing addresses of students who are in default on their loans to the holders of the loans. ¹¹⁶¹

Economic Recovery Act of 1981: definition of return information amended

[816] The definition of return information was amended by the Economic Recovery Act of 1981. The 1981Act amended the statute to state that nothing in the law will be construed to require the disclosure of standards used, or to be used, for the selection of returns for examination (or data used or to be used for determining such standards), if the Secretary determines such disclosure will seriously impair assessment, collection or enforcement under the internal revenue laws. ¹¹⁶² This measure was enacted to clarify that data derived by the IRS from its Tax Measurement Compliance Program is protected. The data is used by the IRS to develop variables used to derive scores that are used for the purpose of selecting returns for an audit. Prior to enactment, the Ninth Circuit, in Long v. United States Internal Revenue Service, ¹¹⁶³ or denied the disclosure of TMCP data from which the taxpayers' identifying characteristics had been deleted. The decision was based on the fact that the definition of return information excluded "data in a form which cannot otherwise be associated with, or otherwise identify, directly or indirectly, a particular taxpayer."

Tax Equity and Fiscal Responsibility Act of 1982: nontax criminal disclosures revised; GAO access expanded

[817] The Tax Equity and Fiscal Responsibility Act of 1982 (the 1982 Act) revised the statute with respect to disclosures for nontax criminal purposes. First, it relaxed the standard for obtaining an ex parte order for a taxpayer's return or return information provided by the taxpayer from "probative" to "relevant." ¹¹⁶⁴ The Congress viewed the probative standard as a catch-22 because it could not be proven that the information was probative before it was obtained and it could not be obtained until it was shown that the information was probative. The 1982 Act also eliminated the authority of agency heads to authorize the application for an ex parte order. However, it expanded the number of individuals within the DOJ who could authorize such an application. ¹¹⁶⁵

[818] The 1982 Act also added new disclosure provisions in the nontax criminal area. The IRS could make disclosures for emergency purposes (death or imminent danger). ¹¹⁶⁶ Additionally, it could make disclosures for use in locating Federal fugitives from justice. ¹¹⁶⁷ Disclosures in administrative or judicial proceedings not involving tax administration were expanded. ¹¹⁶⁸ The Act authorized information to be disclosed in such proceedings pertaining to the enforcement of a civil forfeiture related to a nontax Federal criminal statute, or as required by court order under 18 U. S. C. 3500 or rule 16 of the Federal Rules of Criminal Procedure. ¹¹⁶⁹

[819] The 1982 Act also expanded the amount of returns and return information available to the GAO. The GAO could now access return information in the possession of any Federal agency when the GAO is auditing an agency program or activity that involves the use of returns or return information. Further the GAO may access returns and return information of the type that may have been disclosed to the agency for use in the program or activity that is the subject of the GAO audit. ¹¹⁷⁰

Social Security Amendments of 1983: Social Security and Railroad Retirement Board

[820] To assist the Social Security Administration and the Railroad Retirement Board in carrying out their responsibilities for withholding taxes from the social security benefits of nonresident aliens, in 1983, Congress authorized the IRS to disclose the address and status of an individual as a nonresident alien, resident, or citizen of the United States. ¹¹⁷¹

Deficit Reduction Act of 1984: Income and eligibility verification procedures, Windfall Profit Tax and alcohol fuel producers disclosed to States

[821] The Deficit Reduction Act of 1984 (the 1984 Act) increased the type of information available to the States. It added the windfall profit tax to the list of information permitted to be disclosed to the State tax agencies for purposes of administering State tax laws. ¹¹⁷² It also permitted the disclosure of the names, addresses, and business locations of persons producing alcohol for fuel use to State agencies charged with responsibility for administration of State alcohol laws. ¹¹⁷³ The 1984 Act also required, rather than allowed, the IRS to disclose unearned income information upon request of specified agencies for purposes of income and eligibility verification procedures. ¹¹⁷⁴

Tax Reform Act of 1986: large cities allowed access to returns and return information

[822] The Tax Reform Act of 1986 permitted large cities (population in excess of two million) that impose an income tax or wage tax to receive returns and return information in the same manner and with the same safeguards as States are eligible to do. ¹¹⁷⁵ The population threshold of two million was lowered to 250,000 by the Technical and Miscellaneous Revenue Act of 1988. ¹¹⁷⁶

Technical and Miscellaneous Revenue Act of 1988: foreign governments and the Blood Donor Locator Service

[823] The Technical and Miscellaneous Revenue Act of 1988 also made other changes to section 6103. It clarified that returns and return information can be disclosed to a competent authority of a foreign government pursuant to a bilateral agreement relating to the exchange of information with the United States. ¹¹⁷⁷ The Act also authorized disclosures to the Blood Donor Locator Service for purposes of notifying donors that they may have the AIDS virus. ¹¹⁷⁸

Omnibus Reconciliation Act of 1989: Medicare Secondary Payer Program

[824] The Omnibus Budget Reconciliation Act of 1989 added the disclosure of certain taxpayer identity information to the Social Security Administration and the Health Care Financing Administration. ¹¹⁷⁹ This information is used for verification of the employment status of a medicare beneficiary and of a medicare beneficiary's spouse. This data match program is intended to identify situations and recover payments for which Medicare is the secondary rather than the primary payer with respect to health claims. ¹¹⁸⁰

Omnibus Budget Reconciliation Act of 1990: Veteran's Administration

[825] The Veterans Administration was added to the list of agencies receiving return information by the Omnibus Budget Reconciliation Act ("OBRA") of 1990. This Act permitted the disclosure of certain third party and self employment tax return information to the Veterans Administration to verify a recipient's eligibility for need-based veterans' benefits. ¹¹⁸¹ The Congress felt it was appropriate to permit disclosure of otherwise confidential return information to ensure the correctness of government benefits payments. ¹¹⁸²

[826] This Act also clarified that contractors, such as expert witnesses, were subject to the penalty for unauthorized disclosure. No inference was intended that these persons were not subject to these penalties prior to the amendment.

North American Free Trade Agreement Implementation Act

[827] The Congress noted that the Customs Service conducted approximately 200 major import audits annually. In some cases, importers had voluntarily provided return information to the Customs Service. The Customs Service, however, received no voluntary return information in about three-fourths of its 200 annual audits. ¹¹⁸³ Thus, in 1993, section 6103 was amended to permit disclosure to the Commissioner of the Customs Service for (1) the purpose of ascertaining the correctness of any entry in audits as provided for in 19 U. S. C. 1509 (the Tariff Act of 1930), and (2) other actions to recover any loss of revenue, or to collect duties, taxes, and fees, determined to be due and owing pursuant to such audits. ¹¹⁸⁴

Omnibus Reconciliation Act of 1993: Department of Education, HUD, and the States

[828] The Omnibus Reconciliation Act of 1993 (" OBRA 1993") authorized access of certain return information by the Department of Education to establish the appropriate income contingent repayment amount for an applicable student loan. ¹¹⁸⁵ The Department of Education could also receive the mailing address of taxpayers delinquent on Pell grants. ¹¹⁸⁶ The Congress felt that this disclosure was appropriate to carry out modifications to the Federal student loan program. The Ways and Means Committee noted, however, its increasing concern over the number of requests for disclosure of return information for nontax purposes and the effect on voluntary compliance. ¹¹⁸⁷

[829] The Congress believed that the Department of Housing and Urban Development (" HUD") should be provided with access to certain items of return information to assist HUD in determining eligibility for, and establishing correct benefit-levels under, certain HUD programs. Thus, it granted HUD access to return information for purposes of verifying a taxpayer's eligibility for (or the correct amount of benefits under) those HUD programs. ¹¹⁸⁸ The committee report noted:

The committee, however, is also concerned about the increasing

Social Security Independence and Program Improvements Act of 1994: epidemiological research

[831] In 1994, the Social Security Independence and Programs Improvement Act gave the Social Security Administration authority to disclose a limited amount of personally identifiable information for epidemiological research purposes. The Treasury Department was authorized to disclose such information to the SSA for this purpose. ¹¹⁹¹

Taxpayer Bill of Rights 2 (1996): disclosure of collection efforts for joint deficiencies and trust fund recovery penalty; consents; and cash transactions over $10,000

[832] Expanding the available information to individuals, the Taxpayer Bill of Rights 2 permits the IRS to disclose return information to divorced individuals or married individuals no longer living in the same household with respect to collection efforts against the other of a joint deficiency. ¹¹⁹² The IRS can also disclose to a responsible person the collection efforts against other responsible persons of a trust fund recovery penalty. ¹¹⁹³ The Congress felt that "it was appropriate to permit the IRS to disclose to a responsible person whether the IRS is imposing the penalty on any other responsible person and whether the IRS has been successful in collecting the penalty against such a person." ¹¹⁹⁴

[833] The Congress noted that "the IRS' move to a paperless system depends on the ease and functionality of electronic communication systems, e.g. telephones, facsimile machines, computers, communications networks, etc." ¹¹⁹⁵ Thus, the Act eliminated the requirement that consent be in writing in order for there to be a disclosure to the designee of a taxpayer. ¹¹⁹⁶ Congress believed that allowing such a change would expedite and facilitate the development and implementation of Tax System Modernization projects. ¹¹⁹⁷

[834] TBOR2 also makes the Form 8300 information (relating to cash transactions over $10,000) available to State, local and foreign agencies for civil, criminal and regulatory purposes. These forms are to be treated in the same manner as currency transaction reports under the Bank Secrecy Act. ¹¹⁹⁸

Balanced Budget Act of 1997

[835] The Balanced Budget Act of 1997 added a provision for disclosures to administer the District of Columbia Retirement Protection Act of 1997. ¹¹⁹⁹ It also made the medicare secondary payer data match program (SSA-HCFA disclosures) permanent. ¹²⁰⁰

Taxpayer Relief Act of 1997: Financial Management Service, section 6311, and demonstration project disclosure authority added; prospective juror disclosures deleted

[836] Section 6103 was amended again in 1997 by the Taxpayer Relief Act of 1997 (" TRA of 1997"). The IRS could now disclose return information to the Financial Management Service. ¹²⁰¹

[837] TRA of 1997 authorized the IRS to make disclosures in administering section 6311 of the Internal Revenue Code (relating to payment by commercially acceptable means). ¹²⁰²

[838] TRA of 1997 allowed the IRS to disclose taxpayer identities and signatures for purposes of the combined employment tax reporting demonstration project between Montana and the IRS. The demonstration project will assess the feasibility of expanding combined reporting in the future.

[839] After being part of section 6103 since 1976, the TRA of 1997 repealed the provision allowing the IRS to disclose whether a prospective juror had been audited. ¹²⁰³ The Congress found that this provision created significant difficulties in the civil and criminal tax litigation process. ¹²⁰⁴

IRS Restructuring and Reform Act of 1998: Attorney in fact, whistle- blower and NARA disclosure authority added

[840] As noted above, TBOR2 permitted disclosures of collection efforts to separated or divorced individuals regarding joint deficiencies and to responsible persons involving trust fund recovery penalties. The IRS Restructuring and Reform Act of 1998 (" the IRS Reform Act"), extended this authority to allow disclosures to the attorney in fact for such individuals. ¹²⁰⁵

[841] The IRS Reform Act also added a whistle-blower provision. ¹²⁰⁶ This provision allows an individual to disclose return information to the House Committee on Ways and Means, Senate Committee on Finance and the Joint Committee on Taxation for purposes of disclosing taxpayer or employee abuse or mismanagement. The Congress thought it appropriate to have the opportunity to receive return information directly from whistle-blowers.

[842] The IRS Reform Act added a provision allowing disclosures to the National Archives and Records Administration for purposes of appraisal of records for destruction or retention. ¹²⁰⁷

Tax and Trade Relief Extension Act of 1998: Agriculture census

[843] Department of Agriculture personnel are responsible for structuring, preparing, and conducting the census of agriculture in accordance with the Census of Agriculture Act of 1997. Department of Agriculture personnel are entitled to returns and return information for this purpose. This disclosure provision was added by the Tax and Trade Relief Extension Act of 1998. ¹²⁰⁸ Previously, the Bureau of Census had handled this responsibility.

Ticket to Work and Work Incentives Improvement Act of 1999: APAs

[844] The Ticket to Work and Work Incentives Improvement Act of 1999 amended section 6103 to clarify that advance pricing agreements and related background information are confidential return information. ¹²⁰⁹

APPENDIX B: INFORMATION PROVIDED BY THE TAXPAYER IN AN APA REQUEST

[845] Revenue Procedure 96-53 sets forth an extensive list of information the IRS requires the taxpayer to provide as part of an APA request. ¹²¹⁰ That information is listed below. ¹²¹¹

General factual and legal items for all proposed transfer pricing methodologies (" TPMs")

(1) The organizations, trades, businesses, and transactions that

[846] The following information may be appropriate to establish the arm's length basis of the proposed TPM under section 482:

(1) Pertinent measurements of profitability and return on

[847] The taxpayer must apply the cost sharing regulations under section 482 in developing the cost sharing arrangement proposed in the request. The following illustrates information that may be appropriate to establish that the proposed arrangement is a qualified cost sharing arrangement:

(1) The history of the business operations, the geographic

(1) H. Res. 463, 105 Cong., 144 Cong. Rec. 4748 (1998)

In general

[849] The staff of the Joint Committee received a number of responses to a request for comments on the issues of: (1) confidentiality of returns and return information; and (2) increased disclosure of information with respect to tax-exempt organizations described in Code section 501. Joint Committee on Taxation Press Release 99-03, released on August 17, 1999, solicited comments from interested parties on these issues and, in particular, requested comments on the following: (1) the adequacy of present-law protections governing taxpayer privacy; (2) the need, if any, for third parties, including those presently authorized under the Internal Revenue Code (the "Code"), to use taxpayer information; (3) whether greater levels of voluntary compliance can be achieved by allowing the public to know who is legally required to file tax returns but does not do so; (4) the interrelationship of the taxpayer confidentiality provisions in the Code with the Freedom of Information Act, the Privacy Act, and section 6110 of the Code; (5) the impact on taxpayer privacy of sharing tax information for purposes of enforcing State and local laws (other than income tax laws), including the impact on taxpayer privacy intended to be protected at the Federal, State, and local levels under the Taxpayer Browsing Protection Act of 1997, and (6) the extent to which the current disclosure provisions provide taxpayer, exempt organizations, and tax practitioners with sufficient guidance. Regarding the disclosure of information with respect to tax-exempt organizations, the press release specifically solicited comments on: (1) whether the public interest would be served by greater disclosure of information with respect to such organizations; and (2) the extent to which the present-law disclosure provisions assure accountability of tax-exempt organizations to the public, the Internal Revenue Service (the "IRS"), and other agencies that provide oversight.

[850] The comments relating to confidentiality of returns and return information can be divided into five categories. ¹²¹² The first category is comments from State governments either individually or through the Federation of Tax Administrators (the "FTA"). This category represents the majority of comments. Comments in this category relate primarily to return information sharing under present law. The second category of comments is comments from tax professional organizations. The third category is comments relating to disclosure of advance pricing agreements. The fourth category includes a comment from Counsel to the President relating to Administration officials' access to taxpayer information for conducting tax checks on potential appointees. The final category of comments includes comments from private individuals and others.

State governments

[851] The FTA, which represents the tax administration agencies for the 50 States and the District of Columbia submitted comments. Several individual States also provided comments that were generally consistent with the comments of the FTA. The FTA comments focused on the present-law uses of returns and return information and efforts to ensure taxpayer confidentiality.

[852] Regarding the need of State and local governments for returns and return information, the FTA pointed out that 37 of the 42 States which levy a broad-based income tax rely on the taxpayer's Federal income tax calculation as a starting point (i.e., "piggyback income tax systems"). Four types of information were identified as being of primary importance to the States. The four were: (1) Federal data from individual returns, primarily shared through the IRS's Individual Return Master File (data reported on returns); (2) the Individual Return Transaction File (data reported by certain third parties e.g., Form 1099 filers); (3) Federal adjustments made by matching return amounts with those reported by third party filers (known as the "CP2000" data extract); and (4) Revenue Agent Reports that transmit the results of IRS field exams. All such information is provided to State and local governments subject to the requirements of section 6103 of the Code, which requires that certain compliance safeguards are met. ¹²¹³

[853] Most of the States that do not have a broad-based individual income tax also carry on active information exchange programs with the IRS. These information exchanges are used for tax administration purposes and governed by the same compliance safeguards of section 6103. Typically, the information exchanges involve one or more of the following: (1) motor fuels tax information; (2) income tax information used to enforce a related State tax (e.g., interest and dividends taxes); (3) a comparison of income and expense amounts for two different taxes (e.g., gross receipts for income and sales tax purposes); or (4) an exchange of general information for enforcement and administration purposes (e.g., taxpayer address verification). The State of Tennessee as well as the two largest States without a broad-based individual income tax, Florida and Texas, separately commented on the importance to them of the present-law information sharing system.

[854] The FTA took the position that the present-law safeguards substantially and adequately protect taxpayer privacy. It specifically referred to the safeguards enumerated in the IRS Publication 1075, Tax Information Security Guidelines for State, Local and Federal Agencies. The applicable safeguards referred to include the physical security of such information as well as the application and enforcement of guidelines on the access and use of such information by individuals. Another safeguard mentioned by the FTA was the existence of Federal civil and criminal penalties for improper disclosure. The FTA listed applicable State privacy and confidentiality laws as an effective additional deterrent to improper use of taxpayer information.

[855] The FTA referred to the importance of the recently enacted Taxpayer Browsing Protection Act of 1997 in limiting access to confidential taxpayer data not only to appropriate agencies, but also to individual employees with an official business reason to view such data. It noted that both the FTA and individual States worked with the IRS in the development and implementation of this important piece of legislation to further safeguard individual privacy rights.

[856] The FTA pointed out that States also share information with the IRS. The individual States provide both continuous exchanges of information (such as State audit adjustments for fuels and sales tax purposes), and ad hoc exchanges involving sales tax information about particular taxpayers or types of businesses to the IRS. The FTA argued that such information sharing improves the efficiency of tax administration (e.g., by avoiding duplication of audit work at the Federal, State and local levels). Similarly, it suggested that the States' reliance on piggyback income taxes reduces the compliance burden on taxpayers, who might otherwise be required to provide the same or similar information to Federal, State and local governments. If sharing of returns and return were eliminated, the FTA contended, the States would be forced to contact taxpayers and third-party payers directly, possibly by requiring the filing of return information a second time directly with the State tax agency.

[857] The FTA expressed the belief that the present-law compliance system results in the collection of significant revenue (although the actual dollar amount may be difficult to quantify). Several of the individual States, however, did try to quantify revenues, and spoke in terms of hundreds of millions of dollars in additional revenue collections. The FTA also argued that the present- law system is invaluable in maintaining current levels of voluntary compliance. It attributed this compliance effect to a recognition by taxpayers of a high risk of being caught under the combined enforcement efforts of the Federal, State and local governments.

[858] The comments of the FTA and the individual States referred to the importance of returns and return information on the development of State-level analytical models, and its use for State legislative analysis. One comment expressly requested an expansion of section 6103 to non-governmental administrators of the TANF program. Under present law, a State or local government agency but not a third-party administrator may use return information to verify eligibility for TANF benefits under the recently enacted welfare reforms. ¹²¹⁴

Tax professional organizations

[859] Three tax professional organizations provided comments. Those organizations were: (1) the Section of Taxation of the American Bar Association (the "ABA Tax Section"); (2) the National Association of Enrolled Agents (the "NAEA"); and (3) the Tax Executives Institute, Inc. (" TEI"). ¹²¹⁵

[860] In addressing the adequacy of present-law protections governing taxpayer privacy, the Tax Section took the position that the IRS should not allow agents to use return information of one taxpayer in preparing for litigation involving another taxpayer. On the issue of public disclosure of those persons failing to file legally required tax returns, the ABA Tax Section argued that accuracy in reporting as well as the protection of taxpayer's privacy interests direct the public disclosure of only those taxpayers who have been convicted of failure to file. Finally, in response to the question whether current disclosure provisions provide sufficient guidance to taxpayer, tax-exempt organizations, and tax practitioners, the ABA Tax Section called for the disclosure of all internal memoranda of the IRS as long as it is consistent with the mandates of section 6103.

[861] The NAEA responded to all six questions relating to confidentiality of returns and return information in the press release. Regarding the adequacy of present-law privacy protection, the NAEA took the position that present-law use of social security numbers as the sole identification mechanism for tax purposes results in an unacceptably high potential for unauthorized disclosure of such information. It strongly recommended an alternative "identifying number" system to be used in conjunction with social security numbers. Regarding third-party use, the NAEA had two comments. First, it suggested that an original signature of a judge assigned to a specific court proceeding be required on any subpoena for the disclosure of return information. Second, it took the position that no government agency, including the IRS, be allowed to supply return information for income verification purposes. Because of concerns about the accuracy of such information as well as a lack of confidence in improved voluntary compliance as a result of such publication, the NAEA responded negatively to the idea of public disclosure of non-filers. Regarding the issue of the interaction of taxpayer confidentiality and other laws, the NAEA generally supported the operation of these laws, with one exception. It recommended that section 6110 should be amended to require the agreement by affected taxpayers that the IRS has properly deleted all taxpayer identifying information, trade secrets, and similar confidential information prior to the public disclosure. With respect to the impact on privacy by the sharing of return information for purposes other than for tax law enforcement, the NAEA called for harsher penalties for unauthorized disclosures, while generally supporting the need for authorized disclosures. Finally, the NAEA maintained that additional guidance relating to disclosure is not necessary at this time.

[862] The TEI expressed a strong belief that the exceptions provided under section 6103 from the general ban on disclosure of confidential information need to be more narrowly construed. The TEI submission discussed recent court decisions involving what it believes to be inappropriately broad interpretations of the section 6103 exceptions. Like the other tax professional organizations, the TEI argued against public disclosure of non-filers. Its position was that, even if such information were accurate, individuals' privacy rights would be eroded and no improvement in voluntary compliance would be achieved.

Disclosure of APAs

[863] There were three sets of comments received relating to disclosure of APAs. One set of comments was received from the TEI. A second set was received from the ABA Tax Section. The third set was received from the Bureau of National Affairs (the "BNA") and its legal representative, Winston and Strawn.

[864] All of three of these comments responded to an IRS decision in 1999 to treat APAs as "written determinations" under section 6110, and therefore to subject them to disclosure in redacted form. ¹²¹⁶ Disclosure under section 6110 is one of several enumerated exceptions from the prohibition on disclosure of tax return information generally applicable under section 6103. ¹²¹⁷ The comments received from these organizations predated the enactment on December 17, 1999, of the Ticket to Work Act, which included provisions relating to expiring tax provisions and other revenue provisions). That legislation provided that APAs and related background information are confidential return information and are not "written determinations" for purposes of the public disclosure requirements of section 6110. ¹²¹⁸ The Ticket to Work Act requires the Secretary of the Treasury to prepare annually a detailed report regarding APAs and the APA program. These provisions of the Ticket to Work Act became effective upon enactment, and therefore, APAs and their related background files now may not be released to the public, irrespective of the date the APA was executed.

[865] The TEI's comments reviewed the development of the laws regarding disclosure of return information. The comments discussed the natural tension between the general rule of confidentiality under section 6103 and section 6110's policy of public access. The TEI concluded that disclosure of APAs and related background information violated the affected companies' right to privacy, and could affect those companies' ability to compete in the international marketplace. Such concerns could, in turn, lead companies to forego the APA option in favor of expensive and time-consuming litigation. It could be inferred that the level of redaction necessary to preserve the legitimate privacy interests of companies participating in an APA would reduce the usefulness of the disclosed information to similarly situated taxpayers.

[866] The comments of the ABA Tax Section also expressed concern over the IRS decision to disclose redacted versions of APAs and related background material. The ABA Tax Section reiterated the concerns expressed by the TEI that such disclosure threatened the legitimate privacy interests of companies securing an APA and could result in reduced reliance on the APA program in favor of costly and time-consuming litigation. Another concern of the ABA Tax Section was that the redaction process could become a potential source of dispute between the companies and the IRS. The ABA Tax Section took the position that the public's right to know about the administration of the tax laws would be better satisfied by regular summary reports of APAs than by the release of the individual redacted APAs themselves.

[867] The BNA and its legal representative, Winston and Strawn, also provided comments with respect to APAs. These comments strongly supported the disclosure of APAs and related background information in a redacted form. They argued that disclosure of APAs and related background information is the only avenue for taxpayers to determine the application of these tax laws by the IRS. They also argued that such disclosure did not violate taxpayer privacy and that such disclosure was initially intended as part of the APA process. In response to TEI's comments, the BNA argued that taxpayer participation in the APA process has not and would not be adversely effected by disclosure. The BNA also expressed concern that in the absence of such disclosure, only practitioners with libraries of APAs obtained for their clients could have a sense of the tax regulations and procedures that the IRS is following.

Access to taxpayer information for conducting tax checks on potential appointees

[868] The Counsel to the President submitted a comment relating to section 6103(g) (which permits certain Administration officials access to return information of individuals under consideration for appointment to a position in the executive or judicial branch of the Federal government without taxpayer consent). The comment, while acknowledging that the provision has not previously been used, argued for the retention of the provision in the event that it may be necessary (e.g., "in a situation raising national security concerns").

Private individuals and others

[869] Several individuals responded to the request for comments. Some argued that more public disclosure of non-filers would enhance voluntary compliance. Others responded that no return information should be disclosed, including information disclosed under present law to State and local governments, without the prior written permission of each individual taxpayer. Others asserted that under no circumstances should return information be shared with third parties (e.g., State and local governments). Another individual taxpayer expressed concern about the present-law practice of notice of Federal tax liens. The taxpayer was concerned that such notice allows certain tax practitioners to deluge affected taxpayers with offers of assistance in dealing with the IRS in conjunction with the lien process. Another individual commentator represented that an IRS employee had shared the content of communications between the individual and the IRS with another individual who was in litigation with the first individual. To avoid repetition of such behavior, the individual advocated additional protections for confidential communications between the IRS and individuals. Another individual, through his attorney, related his experience with a disability insurer's contractual requirement to disclose the insured's tax return. The individual suggested legislation to forbid access to a taxpayer's Federal tax return by any entity other than an entity permitted under present law, or alternatively, to extend criminal and civil penalties similar to those under present law. Finally, a certified public accountant suggested that a rule should be added making present-law prohibitions on disclosure inapplicable if the taxpayer has voluntarily released his return to the public.

[870] An attorney representing several clients (including an individual and an accounting firm) offered comments arising from perceived misuse of confidential return information by State tax authorities. The attorney recommended that the IRS be directed to cease sharing return information with any State or local tax agency that recklessly disregards safeguards designed to protect taxpayer information (or does not have safeguards), until the abuses are rectified. The attorney recommended that all State and local agencies receiving Federal tax returns and return information be required to adopt the same reforms and taxpayer protections imposed on the IRS under the Internal Revenue Service Restructuring and Reform Act of 1998, in order to obtain the returns and return information. In addition, the attorney recommended that the IRS Taxpayer Advocate address taxpayer complaints regarding breaches of confidentiality by State and local tax agencies relating to Federal tax returns and return information.

[871] The staff of the Joint Committee also received comments from other sources. An IRS taxpayer advocate had two comments. One was to suggest a streamlining of the procedure for disclosure of return information by the IRS to correct certain misstatements of fact concerning taxpayer's returns. The other was to suggest ways to implement public disclosure of non-filers. The Social Security Administration also commented about the critical importance to the administration of the Social Security system of present-law return information sharing. Finally, the University of Michigan Retirement Research Center argued for continued return information sharing to improve research involving proposed public policy initiatives.

APPENDIX E: DISCLOSURE REPORT FOR PUBLIC INSPECTION PURSUANT TO INTERNAL REVENUE CODE SECTION 6103(p)(3)(C) FOR CALENDAR YEAR 1998

[Appendix E (JCX-19-99) was previously published at 1999 TNT 83-16 ]

² Public Law 105-206, signed by the President on July 22, 1998 (H. R. 2676). For legislative history, see H. R. Rep. No. 105-599 (Conference Report), S. Rep. No. 105-174 (Senate Committee on Finance), and H. R. Rep. No. 105-364, Part 1 (House Committee on Ways and Means).

³ Volume I may be cited as follows: Joint Committee on Taxation, Study of Present-Law Taxpayer Confidentiality and Disclosure Provisions as Required by Section 3802 of the Internal Revenue Service Restructuring And Reform Act of 1998, Volume I: Study of General Disclosure Provisions (JCS-1-00), January 28, 2000.

⁴ Volume II may be cited as follows: Joint Committee on Taxation, Study of Present-Law Taxpayer Confidentiality and Disclosure Provisions as Required by Section 3802 of the Internal Revenue Service Restructuring And Reform Act of 1998, Volume II: Study of Disclosure Provisions Relating to Tax-Exempt Organizations (JCS-1-00), January 28, 2000.

⁵ Volume III may be cited as follows: Joint Committee on Taxation, Study of Present-Law Taxpayer Confidentiality and Disclosure Provisions as Required by Section 3802 of the Internal Revenue Service Restructuring And Reform Act of 1998, Volume III: Public Comments and General Accounting Office Reports (JCS-1-00), January 28, 2000.

⁶ References in this study to section or sec. refer to the Code, unless otherwise indicated.

⁷ Courts use two approaches to reach this result. Some courts have held that section 6103 preempts the FOIA. Most courts, however, have held that section 6103 meets the requirements of exemption 3 of the FOIA, which allows the withholding of information prohibited from disclosure by another statute if certain requirements are met.

⁸ A technical correction making this change was included in section 1602(a) of the House version of H. R. 2488, 106 Cong. 1st Sess. (1999).

⁹ Pub. L. No. 105-36.

¹⁰ The House bill required the Joint Committee to conduct a study relating to items (1) - (3) described in the text. H. R. Rep. No. 105-364 (1998). The Senate amendment also required the Treasury Department to conduct a study, and added items (4) and (5). The Senate amendment provided that the studies should examine whether return information should be disclosed to a State unless the State has first notified personally in advance each person with respect to whom information has been requested. This provision was not adopted in conference.

¹¹ Report of the National Commission on Restructuring the Internal Revenue Service, A Vision for a New IRS, 49 (June 25, 1997). The Commission also recommended that media requests to the IRS under the FOIA be given priority for processing and appeals. The Commission recommended that this expedited process mirror the process established by the Department of Justice, which, according to the Commission, provides expedited processing for requests that promote public accountability, particularly when the information sought involves possible questions about the government's integrity which affect public confidence. Id.

¹² These reports may be found in Volume III of this study.

¹³ The comments relating to the general disclosure provisions are summarized in Appendix D of this Volume I. The comments relating to tax-exempt organizations are summarized in Appendix C of Volume II. All comments are reproduced in full in Volume III of this study.

¹⁴ Pub. L. No. 94-455 (1976). Prior to January 1, 1977, tax returns were public records open to inspection by executive order. The Tax Reform Act of 1976 amended section 6103 to exclude "returns" and "return information" from the category of public records and deemed them confidential.

¹⁵ Section 7431 provides a civil remedy for unauthorized disclosure or inspection. Section 7213 makes unauthorized disclosure a felony. Section 7213A makes unauthorized inspection a misdemeanor.

¹⁶ Sec. 6103(p).

¹⁷ Sec. 6103(b)(1).

¹⁸ This would include any schedules, attachments, or lists which are supplemental to, or part of, the filed return. Sec. 6103(b)(1).

¹⁹ Sec. 6103(b)(2)(A).

²⁰ Sec. 6103(b)(2)(B).

²¹ Sec. 6103(b)(2).

²² "Return and return information shall be confidential, except as authorized by this title -- (1) no officer or employee of the United States . . . shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or employee . . ." Sec. 6103(a) (emphasis added). Thus, unless Title 26, i. e., the Code, authorizes the disclosure, no disclosure can be made.

²³ The exceptions are contained in subsections (c) through (o) of section 6103. These exceptions are further discussed in Part Two, II., below.

²⁴ Section 6110(c) provides for the deletion of identifying information, trade secrets, confidential commercial and financial information, and other material.

²⁵ Sec. 6110(d).

²⁶ Sec. 6110(d)(3), (d)(4), (f), and (j).

²⁷ Sec. 6110(l).

²⁸ Section 6103(b)(2)(B) provides that the term "return information" means any part of any written determination or any background file document relating to such written determination (as such terms are defined in section 6110(b)) which is not open to public inspection under section 6110.

²⁹ 5 U.S. C. sec. 552.

³⁰ NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 242 (1978).

³¹ 5 U.S. C. sec. 552a.

³² A system of records is a group of records under the control of an agency from which information is retrieved by the name of the individual or by some other identifier assigned to that individual. 5 U.S. C. sec. 552a(a)(5).

³³ 5 U.S.C. sec. 552a(e)(4)(D).

³⁴ The most recent IRS publication of its systems of records and related routine uses may be found at 63 Fed. Reg. 69,842 et seq. (December 17, 1998).

³⁵ The prohibition against disclosure of returns and return information applies to most, but not all persons who have access to such information under sec. 6103. For example, the prohibition does not apply to persons who receive return information pursuant to the taxpayer's consent under section 6103(c).

³⁶ Sec. 6103(b)(1).

³⁷ Church of Scientology v. IRS, 484 U.S. 9 (1987).

³⁸ Sec. 6103(b)(2)(A)-(C). Section 521 of the Ticket to Work and Work Incentives Improvement Act of 1999, Pub. L. No. 106-170, amended section 6103 to provide that advanced pricing agreements and related background information are confidential return information under section 6103.

³⁹ Sec. 6103(b)(2).

⁴⁰ The IRS is not required to disclose standards used or to be used for the selection of returns for examination or the data used or to be used for determining such standards if the IRS determines that such disclosure would seriously impair assessment, collection or enforcement under the internal revenue laws. Sec. 6103(b)(2).

⁴¹ Stokwitz v. United States, 831 F. 2d 893 (9th Cir. 1987) (taxpayer's copies of his taxth returns not subject to sec. 6103).

⁴² Baskin v. United States, 96-2 USTC paragraph 50,424 (S. D. Tex. 1996); Ryan v. United States, 74 F. 3d 1161 (11th Cir. 1996) (presence of IRS special agents assisting a grand jury does not convert grand jury information into return information). One court has suggested that information collected after the determination of tax liability has been made is not return information. Kamman v. IRS, 75 AFTR2d Par. 95-948, (9 Cir 1995) (holding that the IRS didth not met its burden of proof that jewelry appraisals performed after the IRS had seized the property and the taxpayer had pled guilty to tax evasion constituted return information). This FOIA case suggests that once the taxpayer had pled guilty, the "determination" of tax liability referenced in section 6103(b)(2)(A) had already been made. Thus, the court's language suggests that information generated by the IRS after the determination as part of the collection process may not constitute return information. The case is not conclusive on this issue. The court in ruling for the FOIA requester, finding that the affidavit submitted by the IRS in support of its contention that jewelry appraisals performed after the taxpayer pled guilty was conclusory and, thus, an insufficient basis upon which to sustain the IRS's burden of proof.

⁴³ Sec. 6103(b)(3).

⁴⁴ See Treas. reg. sec. 301.6103(c)-1 for the requirements for a valid consent or designation.

⁴⁵ Sec. 6103(c).

⁴⁶ Sec. 6103(e).

⁴⁷ Sec. 6103(e)(7).

⁴⁸ Id.

⁴⁹ Sec. 6103(e)(1)(A).

⁵⁰ Sec. 6103(e)(1)(B).

⁵¹ Sec. 6103(e)(1)(C).

⁵² Sec. 6103(e)(1)(D).

⁵³ Sec. 6103(e)(1)(E).

⁵⁴ Sec. 6103(e)(3).

⁵⁵ Sec. 6103(e)(1)(F).

⁵⁶ Sec. 6103(e)(4).

⁵⁷ Sec. 6103(e)(5)(A).

⁵⁸ Sec. 6103(e)(5)(B).

⁵⁹ Sec. 6103(e)(5)(C).

⁶⁰ Sec. 6103(e)(8).

⁶¹ Sec. 6103(e)(9).

⁶² Sec. 6103(e)(6). An attorney-in-fact is an attorney or other individual designated by another person in writing to act on behalf of that person in the performance of any act or acts described in the written document.

⁶³ This agreement is executed by the Commissioner of Internal Revenue and the head of a State tax agency. See Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.32.2(4) and 1.3.32.5 (August 19, 1998).

⁶⁴ See Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.32.6 (August 19, 1998).

⁶⁵ Taylor v. United States, 106 F. 3d 833 (8th Cir. 1997); Long v. United States, 972 F. 2d 1174 (10th Cir. 1992); Smith v. United States, 964 F. 2d 630 (7th Cir. 1992).

⁶⁶ This provision does not apply to States that were not party to this type of HHS contract as of July 1, 1993. Sec. 6103(d)(4)(C).

⁶⁷ Pub. L. No. 105-34, sec. 976 (1997).

⁶⁸ Sec. 6103(d)(5).

⁶⁹ Sec. 6103(k)(5). The IRS believes no disclosures are being made under this provision.

⁷⁰ Sec. 6103(h)(2).

⁷¹ Sec. 6103(h)(2)(A) through (C).

⁷² Sec. 6103(h)(3)(A).

⁷³ Sec. 6103(h)(3)(B).

⁷⁴ Id.

⁷⁵ Id.

⁷⁶ Such damage actions include " Bivens actions" for the violation of a taxpayer's constitutional rights. In Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971), the Supreme Court held that a Federal agent who had violated the Fourth Amendment could be held liable for damages despite the absence of a Federal statute authorizing such a remedy. In Bivens, Federal officials, not the Federal government, were held liable under the cause of action from the Constitution.

⁷⁷ Returns and return information are also used by the Tax Division to decide whether to authorize criminal prosecutions in cases not related to tax administration and in conducting trials and related investigations in such cases. In such nontax criminal cases, sec. 6103(i) authorizes access to returns and return information upon a court issuing an ex parte order. Sec. 6103(i) is discussed elsewhere in this section.

⁷⁸ Department of Justice, Tax Division, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 2401.

⁷⁹ Sec. 6103(h)(4)(A) through (D). Returns and return information will not be disclosed under (1), (2), or (3), above, if it is determined that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation. Sec. 6103(h)(4). Under Rule 16 of the Federal Rules of Criminal Procedure a defendant in a criminal trial must be permitted to inspect and copy or photograph books, papers, or documents that are in the government's possession, custody, or control, and which are material to the defendant's defense. Section 3500 of Title 18 ("Jencks Act") concerns pretrial statements of government witnesses in Federal criminal cases. On motion of the defendant, the court will order production of such statements given to the government which are related to the content of the witness' testimony. In Federal criminal tax cases, "Jencks" statements are disclosable under section 6103(h)(4)(D) regardless of whether the "item" or "transactional relationship" tests are met. The statute provides that the court, in issuing the order, is "to give due consideration to congressional policy favoring the confidentiality of returns and return information as set forth in [the Code]." Sec. 6103(h)(4)(D).

⁸⁰ Sec. 6103(h)(2)(b).

⁸¹ Sec. 6103(h)(4)(b).

⁸² Compare First Western Gov't Securities v. United States, 796 F. 2d 356 (10th Cir. 1986) and Nevins v. United States, 88-1 USTC (CCH) paragraph 9919 (D. Kan. 1987) (an audit is an administrative tax proceeding) with Mallas v. United States, 993 F. 2d 1111 (4th Cir. 1993) (an audit is not an administrative proceeding for purposes of subsection (h)(4)).

⁸³ The prefatory language of section 6103(h)(4) provides:

(4) Disclosure in judicial and administrative tax proceedings. A

⁸⁵ Conklin v. United States, 61 F. 3d 915 (table), 1995 U.S. App. LEXIS 20410 (10th Cir. 1995).

⁸⁶ Section 6103(h)(1) provides:

(1) Department of the Treasury. -- Returns and return

⁸⁸ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.22.8(1) (August 19, 1998).

⁸⁹ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.22.8.1 (August 19, 1998).

⁹⁰ Id. at 1.3.22.8.2.

⁹¹ Id.

⁹² Id.

⁹³ Id. at 1.3.22.8.3.

⁹⁴ Id.

⁹⁵ Id. at 1.3.22.10(1).

⁹⁶ Id. at 1.3.22.10(8).

⁹⁷ Id. at 1.3.22.10(10).

⁹⁸ See <http://www.treas.gov/tigta/message_ig.htm> for a description of TIGTA's functions.

⁹⁹ The Taxpayer Browsing Protection Act, (Pub. L. No. 105-35), was enacted on August 5, 1997. It made the willful unauthorized inspection of returns and return information illegal. Sec. 7213A.

¹⁰⁰ Sec. 6103(h)(6). The IRS Oversight Board is not yet in existence. The Board is to be comprised of nine members, six drawn from the private sector. The other three members are to be the IRS Commissioner, the Treasury Secretary (or Deputy Secretary) and one full-time Federal employee or representative of employees. The IRS Reform Act requires that private sector Board members and the Federal employee or employee representative Board member be appointed by the President with the advice and consent of the Senate. The final nomination was announced by the White House on January 27, 2000.

¹⁰¹ Sec. 6103(k)(1).

¹⁰² Sec. 6103(k)(2).

¹⁰³ Sec. 6103(k)(3).

¹⁰⁴ Sec. 6103(k)(6).

¹⁰⁵ Sec. 6103(k)(7).

¹⁰⁶ Sec. 6103(k)(9).

¹⁰⁷ Sec. 6103(k)(4). See Part Two, III., below, for a discussion of section 6103 and tax treaties.

¹⁰⁸ Sec. 6103(h)(5).

¹⁰⁹ Sec. 6103(f)(1).

¹¹⁰ Id.

¹¹¹ Sec. 6103(f)(2).

¹¹² Sec. 6103(f)(4)(A).

¹¹³ The Joint Committee on Taxation also has authority under other provisions of the Code to obtain returns and return information. Under section 6405, the Joint Committee on Taxation reviews proposed refunds in excess of $1 million. The Joint Committee on Taxation receives return information regarding such refund cases to fulfill its obligations under this provision. As necessary for an investigation by the Joint Committee on Taxation of the administration of internal revenue taxes, the Code also authorizes the Chief of Staff of the Joint Committee on Taxation to obtain "tax returns and information" from the IRS. Sec. 8023(a). The IRS is to furnish such returns and information to the Chief of Staff together with a brief report, with respect to each return, as to any IRS action taken or proposed as a result of any audit of the return. Id.

¹¹⁴ Sec. 6103(f)(3). Concurrent resolutions are required for joint committees other than the Joint Committee on Taxation.

¹¹⁵ Id.

¹¹⁶ Id.

¹¹⁷ Sec. 6103(f)(4)(B).

¹¹⁸ Sec. 6103(f)(5).

¹¹⁹ Sec. 6103(f)(5).

¹²⁰ Sec. 6103(i)(7)(A).

¹²¹ Sec. 6103(i)(7)(B)(i).

¹²² Sec. 6103(i)(7)(B)(ii).

¹²³ Sec. 6103(i)(7)(B)(iii).

¹²⁴ Sec. 6103(i)(7)(C)(i).

¹²⁵ Sec. 6103(i)(7)(C)(ii).

¹²⁶ Sec. 6103(g)(2). According to the IRS, no tax check disclosures are being made under this provision. Instead, tax check disclosures are being made pursuant to the consent provisions of section 6103(c)(which allows disclosure of returns and return information pursuant to designation by a taxpayer), discussed above. See, e. g., Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1998 (JCX-19-99) April 29, 1999.

¹²⁷ Sec. 6103(g)(5).

¹²⁸ Sec. 6103(i)(1). Because the order is ex parte, the subject of the investigation has no rights of notice or participation in the process.

¹²⁹ Sec. 6103(i)(1)(B).

¹³⁰ Id.

¹³¹ Sec. 6103(i)(5)(B).

¹³² Id.

¹³³ Sec. 6103(i)(5)(A).

¹³⁴ In addition to the head of a Federal agency, the Inspector General, Attorney General, Deputy Attorney General, Associate and Assistant Attorney Generals, Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Agency, United States Attorney, Independent Counsel or any attorney in charge of a criminal division organized crime strike force may make a written request. Sec. 6103(i)(2).

¹³⁵ Sec. 6103(i)(3)(A).

¹³⁶ Id.

¹³⁷ Sec. 6103(i)(3)(B)(ii).

¹³⁸ Sec. 6103(i)(3)(B)(i).

¹³⁹ Sec. 6103(l)(15).

¹⁴⁰ Id.

¹⁴¹ Treas. reg. sec. 301.6103(j)(1)-1(c). Such information includes Statistics of Income transcript edit sheets regarding designated categories of corporations and microfilm records regarding corporate returns as needed. Treas. reg. sec. 301.6103(j)(1)-1(c)(1). The Social Security Administration can redisclose to the Bureau of Economic Analysis a limited amount of corporate return information that it receives from the IRS. Treas. reg. sec. 301.6103(j)(1) - 1(c)(2).

¹⁴² General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information, (GAO-GGD-99-164, August 1999) at 25.

¹⁴³ Sec. 6103(j)(3).

¹⁴⁴ This Act transferred the responsibility for the Census of Agriculture from the Bureau of the Census to the Department of Agriculture.

¹⁴⁵ Sec. 6103(j)(5).

¹⁴⁶ Sec. 6103(l)(1)(A) and (B). Section 6057 relates to the annual registration, voluntary reports, and notification of change in status made by pension plans. Section 6057(d) provides that the Secretary of the Treasury is to transmit copies of any statements, notifications, reports or other information obtained under this section to the Commissioner of Social Security.

¹⁴⁷ Sec. 6103(l)(8). No disclosures are being made under this provision, instead the Social Security Administration makes disclosures to the Federal Office of Child Support Enforcement on behalf of the IRS. General Accounting Office, Taxpayer Confidentiality: Federal, State and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 37.

¹⁴⁸ Sec. 6103(l)(5)(B).

¹⁴⁹ Sec. 6103(l)(5).

¹⁵⁰ Sec. 6103(l)(7)(D).

¹⁵¹ Sec. 6103(l)(7)(B).

¹⁵² Sec. 6103(l)(7)(C).

¹⁵³ Sec. 6103(l)(12).

¹⁵⁴ Sec. 6103(l)(1)(C).

¹⁵⁵ Internal Revenue Service, Document 6630, Safeguard Review Report-Railroad Retirement Board, 2 (October 1995).

¹⁵⁶ Id.

¹⁵⁷ Id.

¹⁵⁸ Id.

¹⁵⁹ Sec. 6103(l)(2).

¹⁶⁰ Sec. 6103(l)(13).

¹⁶¹ General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 28, n. 2.

¹⁶² Id.

¹⁶³ Sec. 6103(m)(4).

¹⁶⁴ Pub. L. No. 105-244, sec. 483 (1998).

¹⁶⁵ Sec. 6103(a).

¹⁶⁶ Sec. 6103(m)(6)(A).

¹⁶⁷ Sec. 6103(m)(6)(B).

¹⁶⁸ Sec. 6103(m)(6)(C).

¹⁶⁹ Sec. 6103(m)(5)(A).

¹⁷⁰ Sec. 6103(l)(14). See also General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information, (GAO-GGD-99-164, August 1999) at 28.

¹⁷¹ Sec. 6103(l)(17).

¹⁷² Sec. 6103(m)(3).

¹⁷³ Sec. 6103(l)(4).

¹⁷⁴ Pub. L. No. 105-33, sec. 11,001 et. seq. (1997).

¹⁷⁵ Sec. 6103(l)(16)(A).

¹⁷⁶ Sec. 6103(l)(16)(B).

¹⁷⁷ Sec. 6103(l)(16)(A).

¹⁷⁸ Sec. 6103(m)(1).

¹⁷⁹ Sec. 6103(m)(2)(A).

¹⁸⁰ Sec. 6103(l)(3)(A).

¹⁸¹ Sec. 6103(l)(3)(C).

¹⁸² Sec. 6103(l)(3)(B).

¹⁸³ Sec. 6103(l)(6)(A).

¹⁸⁴ Sec. 6103(l)(6)(B).

¹⁸⁵ Sec. 6103(l)(6)(C).

¹⁸⁶ Sec. 6103(l)(10)(A).

¹⁸⁷ Sec. 6103(l)(10)(B).

¹⁸⁸ Sec. 6103(n).

¹⁸⁹ Sec. 6103(o)(1).

¹⁹⁰ Sec. 6103(o)(2).

¹⁹¹ Sec. 6103(p)(3)(A).

¹⁹² Sec. 6103(p)(4).

¹⁹³ Sec. 6103(p)(3).

¹⁹⁴ See, e. g., Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1998 (JCX-19-99), April 29, 1999; Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1997 (JCX-47-98), June 16, 1998; Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1996 (JCX-38-97), July 14, 1997.

¹⁹⁵ Sec. 6103(p)(5).

¹⁹⁶ Sec. 6103(e)(1)(D)(iii) provides permits one-percent shareholders to access corporate returns.

¹⁹⁷ Note, however, that 18 U.S. C. section 3571 authorizes a fine of not more than $250,000 upon an individual being convicted of a felony. 18 U.S. C. sec. 3571(b)(3).

¹⁹⁸ Sec. 7213(a)(1).

¹⁹⁹ 18 U.S. C. sec. 1905 provides:

Disclosure of confidential information

²⁰¹ Sec. 7213A(b)(2).

²⁰² Sec. 7431(a)(1).

²⁰³ Sec. 7431(a)(2).

²⁰⁴ Sec. 7431(b)(1).

²⁰⁵ Sec. 7431(b)(2).

²⁰⁶ Sec. 7431(c)(1).

²⁰⁷ Sec. 7431(c)(2) and (3).

²⁰⁸ Sec. 7431(d).

²⁰⁹ Sec. 7431(e).

²¹⁰ The U.S. competent authority is the Secretary of the Treasury or his delegate. The U.S. competent authority function has been delegated to the Commissioner of Internal Revenue, who has redelegated the authority to the Assistant Commissioner (International). On interpretive issues, the latter acts with the concurrence of the Associate Chief Counsel (International) of the IRS.

²¹¹ The U.S. Senate ratified the Multilateral Mutual Assistance Convention, subject to certain reservations, in September 1990. The Multilateral Mutual Assistance Convention entered into force on April 1, 1995, and has been signed by the following countries: Denmark, Finland, Iceland, the Netherlands, Norway, Sweden, and the United States.

²¹² See Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1998 (JCX-19-99), April 29, 1999.

²¹³ The Convention Between the Untied States of American and Canada with Respect to Taxes on Income and Capital was signed on September 26, 1980, and entered into force on August 16, 1984 (the "U.S.-Canada treaty"). The U.S.-Canada treaty has been amended by the First Protocol (signed June 14, 1983, and entered into force contemporaneously with the treaty on August 16, 1984), the Second Protocol (signed on March 28, 1984, and entered into force contemporaneously with the treaty on August 16, 1984), the Third Protocol (signed on March 17, 1995, and entered into force on November 9, 1995), and the Fourth Protocol (signed on July 29, 1997, and entered into force on December 16, 1997).

²¹⁴ Article XXVI A was added by Article 15 of the Third Protocol to the treaty.

²¹⁵ The U.S. model does not include a separate assistance in collection article similar to Article XXVI A. The assistance in collection article in the U.S.-Canada treaty is similar, however, to the provision on assistance in recovery of tax claims in the Multilateral Mutual Assistance Convention. The United States ratified that convention subject to a reservation that the United States will not provide assistance in the recovery of any tax claim, or in the recovery of an administrative fine for any tax. The special and unusually compatible relationship between the United States and Canada was viewed as justifying the inclusion of such a provision in the U.S.-Canada treaty. See, Report of the Senate Foreign Relations Committee on the Revised Protocol Amending the Income Tax Convention with Canada, S. Exec. Rep. No. 104-9, 104 th Cong., 1st Sess. (1995).

²¹⁶ The Convention Between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes was signed on August 29, 1989, and entered into force on August 21, 1991 (the "U.S.-Germany treaty").

²¹⁷ The Convention Between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed on March 8, 1971, and entered into force on July 9, 1972 (the "U.S.-Japan treaty").

²¹⁸ The Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains was signed on December 31, 1975 and entered into force on April 25, 1980 (the "U.S.-United Kingdom Treaty"). The U.S.-United Kingdom treaty has been amended by the First Protocol (signed August 26, 1976, and entered into force contemporaneously with the treaty on April 25, 1980), the Second Protocol (signed on March 31, 1977, and entered into force contemporaneously with the treaty on April 25, 1980), and the Third Protocol (signed on March 15, 1979, and entered into force contemporaneously with the treaty on April 25, 1980).

²¹⁹ S. Rep. No. 94-938 at 317 (1976).

²²⁰ Sec. 6103(a).

²²¹ Sec. 7431.

²²² See, e. g., sec. 7461 regarding the publicity of U.S. Tax Court proceedings.

²²³ See sec. 6323(f) regarding where to file notices of Federal tax lien.

²²⁴ Lampert v. United States, 854 F. 2d 335, 338 (9th Cir. 1988), cert. denied, 490 U.S. 1034 (1989).

²²⁵ Id.

²²⁶ 87-1 USTC paragraph 9361 (N. D. Cal. 1987), aff'd on other grounds, 854 F. 2d 335, 338 n. 2 (9th Cir. 1988).

²²⁷ 669 F. Supp. 953 (N. D. Cal. 1987), aff'd, 854 F. 2d 335 (9th Cir. 1988).

²²⁸ 662 F. Supp. 515 (N. D. Cal. 1987), aff'd, 854 F. 2d 335 (9th Cir. 1988).

²²⁹ Lampert, 854 F. 2d at 337-38.

²³⁰ Id.

²³¹ 937 F. 2d 1485, 1489 (9th Cir. 1991), cert. denied, 502 U.S. 1066 (1992).

²³² One set of levies was issued in violation of the bankruptcy automatic stay (a bankruptcy petition operates as a stay of any collection, assessment, or recovery of a claim against a debtor arising prior to the commencement of the bankruptcy case). The IRS issued the other set of levies without giving proper notice to the taxpayer.

²³³ "Indeed, the purpose of recording the lien, unlike including the information in court documents, is to place the public on notice of the lien. The act of recording 'provides constructive notice of the contents of the documents creating the [lien]. '" [citations omitted]. Id. The Ninth Circuit felt that the public record status of court documents is incidental to the proceeding, while the purpose of recording a tax lien is to give notice to the public.

²³⁴ See also, Tanoue v. United States, 904 F. Supp. 1161, 1167 (D. Hawaii 1995):

The Ninth Circuit held in Lampert that once return information

²³⁶ Id. at 798.

²³⁷ Id.

²³⁸ Id. at 801.

²³⁹ Id.

²⁴⁰ Id. at 802.

²⁴¹ 993 F. 2d 1111 (4th Cir. 1993).

²⁴² 993 F. 2d at 1120.

²⁴³ Id.

²⁴⁴ 890 F. 2d 18 (7th Cir. 1989).

²⁴⁵ The item stated under the headline "Thomas Loses Appeal in US Tax Court":

Paul F. Thomas, 2509 Nagawicka Road, Hartland, lost his appeal

²⁴⁶ Section 6103(h)(4) permits the disclosure of returns and return information in judicial proceedings pertaining to tax administration.

²⁴⁷ Thomas, 890 F. 2d at 21.

²⁴⁸ The Seventh Circuit noted that it is a legal fiction that "every item of information contained in a public document is known to the whole world, so that further dissemination can do no additional harm to privacy." Thomas, 890 F. 2d at 21.

²⁴⁹ 166 F. 3d 1088 (10th Cir. 1999), cert. denied, 120 S. Ct. 334 (October 12, 1999).

²⁵⁰ Id. at 1091.

²⁵¹ Id.

²⁵² 697 F. 2d 899 (10th Cir. 1983).

²⁵³ Rodgers, 697 F. 2d at 900.

²⁵⁴ Id.

²⁵⁵ At the time this suit was brought, a taxpayer could sue an IRS employee directly under former section 7217.

²⁵⁶ Rodgers, 697 F. 2d at 903.

²⁵⁷ Id.

²⁵⁸ Id.

²⁵⁹ Id.

²⁶⁰ Id. at 906.

²⁶¹ Section 6103(k)(6) provides:

Disclosures by internal revenue officers and employees for

²⁶³ Rice, 166 F. 3d at 1091.

²⁶⁴ Id.

²⁶⁵ 120 F. 3d 1307 (5th Cir. 1997).

²⁶⁶ Johnson, 120 F. 3d at 1319 quoting Demarest v. Manspeaker, 498 U.S. 184, 190 (1991); United States v. Turkette, 452 U.S. 576, 580 (1981) ("absurd results are to be avoided").

²⁶⁷ Johnson, 120 F. 3d at 1321.

²⁶⁸ Sec. 6103(p)(4).

²⁶⁹ Johnson, 120 F. 3d at 1321.

²⁷⁰ S. Rept. No. 94-938, at 343 (1976).

²⁷¹ Johnson, 120 F. 3d at 1321.

²⁷² Id.

²⁷³ Id. at 1322.

²⁷⁴ Johnson, 120 F. 3d at 1323. In an earlier appeal of this case, the Fifth Circuit had explained this view, stating:

Plainly, Congress was not determining that all the information

²⁷⁵ Johnson, 120 F. 3d at 1323.

²⁷⁶ United States Dep't of Justice v. Reporters Committee For Freedom of the Press, 489 U.S. 749, 770 (1989). Reporters Committee involved a third party's Freedom of Information Act request for an individual's "rap sheets" (criminal convictions) that the FBI had compiled as part of a database. In supporting the decision to deny access, the Supreme Court found that the individual had a privacy interest in such information. The Court noted that there was a vast difference in privacy interests between information scattered among various courthouses throughout the country and a centralized database of such information.

²⁷⁷ Johnson, 120 F. 3d at 1322.

²⁷⁸ Id. quoting Mallas, 993 F. 2d 1121.

²⁷⁹ Johnson, 120 F. 3d at 1322.

²⁸⁰ 420 U.S. 469 (1975).

²⁸¹ Cox Broadcasting, 420 U.S. at 471-72.

²⁸² Id. at 472-73.

²⁸³ Id. at 473-74.

²⁸⁴ Id. at 495.

²⁸⁵ Id. at 492 (quoting Craig v. Harney, 331 U.S. 367 (1947)).

²⁸⁶ Johnson, 120 F. 3d at 1324

²⁸⁷ Id.

²⁸⁸ Cox Broadcasting, 420 U.S. at 497 n. 27.

²⁸⁹ Johnson, 120 F. 3d at 1326.

²⁹⁰ Id. at 1325.

²⁹¹ A more detailed factual description of the Johnson case is found in Part Four, V. B., below, regarding the IRS's success and failure in defending unauthorized disclosure lawsuits.

²⁹² The Freedom of Information Act is discussed in brief in Part Two, II. B., above, and in detail in Part Two, VI., below.

²⁹³ Tax Analysts & Advocates v. IRS, 505 F.2d 350 (D.C. Cir. 1974); Fruehauf Corp. v. IRS, 75-2 USTC paragraph 16,189 (6th Cir. 1975).

²⁹⁴ H. R. Rep. No. 94-658, at 314 (1975). For a discussion of FOIA lawsuits involving IRS guidance, both before and after the enactment of section 6110, see Part Two, VI. C., below.

²⁹⁵ Id.

²⁹⁶ Sec. 6110(a). A background file document is available upon written request to any person requesting a copy of the related written determination. Sec. 6110(e).

²⁹⁷ Sec. 6110(c).

²⁹⁸ See S. Rep. No. 94-938, at 307 (1976); H. R. Rep. No. 94- 658, at 316 (1976).

²⁹⁹ Sec. 6110(l)(1). The Treasury regulations deem the following section 6104 material exempt from section 6110 requirements:

Matters within the ambit of section 6104 include: Any

³⁰⁰ Section 6110(l) provides:

(I) Section not to apply. This section shall not apply to-

³⁰¹ Sec. 6110(k)(3).

³⁰² Sec. 6110(m).

³⁰³ FOIA litigation to obtain IRS guidance is discussed in Part Two, VI. C., below.

³⁰⁴ Sec. 6110(b)(1).

³⁰⁵ Treas. reg. sec. 301.6110-2(d).

³⁰⁶ Treas. reg. sec. 301.6110-2(d).

³⁰⁷ Treas. reg. sec. 301.6110-2(f).

³⁰⁸ Treas. reg. sec. 301.6110-2(f).

³⁰⁹ Treas. reg. sec. 301.6110-2(e).

³¹⁰ Sec. 6110(i)(A)(i).

³¹¹ Sec. 6110(i)(A)(ii).

³¹² Sec. 6110(b)(2); Treas. reg. sec. 301.6110-2(g)(1)(ii).

³¹³ Sec. 6110(b)(2).

³¹⁴ Section 6110(c) provides the exemptions for disclosure:

(1) the names, addresses, and other identifying details of the

³¹⁶ Sec. 6110(g)(1)(A).

³¹⁷ Sec. 6110(d)(1).

³¹⁸ Sec. 6110(d)(2).

³¹⁹ Sec. 6110(d)(1).

³²⁰ Treas. reg. sec. 301.6110-4(a).

³²¹ Sec. 6110(d)(3).

³²² Sec. 6110(d)(4).

³²³ Sec. 6110(d)(3).

³²⁴ Id.

³²⁵ Id.

³²⁶ Sec. 6110(f)(1).

³²⁷ Sec. 6110(f)(2) and (3).

³²⁸ Sec. 6110(f)(3)(B).

³²⁹ Sec. 6110(f)(3)(B).

³³⁰ Sec. 6110(f)(4).

³³¹ Section 6110(i)(3)(A) eliminates that applicability of all but one the exemptions of 6110(c)(3). Exemption 1 of section 6110(c)(3) is applicable to Chief Counsel advice. This exemption allows the IRS to remove the name, address, and other identifying details of the person to whom the written determination pertains and of any other person, except a third party contact.

³³² Sec. 6110(i)(3)(B).

³³³ Return information includes "any part of any written determination or background file document relating to such written determination . . . which is not open to public inspection under section 6110." Sec. 6103(b)(2)(B).

³³⁴ Sec. 6110(i)(4)(B).

³³⁵ Sec. 6110(i)(4)(A)(i)

³³⁶ Sec. 6110(i)(4)(A)(ii)

³³⁷ Sec. 6110(j)(1).

³³⁸ Sec. 6110(j)(2).

³³⁹ NLRB v. Robbins Tire & Rubber Co., 437 U.S.214, 242 (1978).

³⁴⁰ Prior to 1976, returns had been generally classified as public records. See Appendix A for a detailed discussion of the legislative history of section 6103.

³⁴¹ 5 U.S.C. sec. 552(a)(1).

³⁴² 5 U.S.C. sec. 552(a)(2).

³⁴³ Id.

³⁴⁴ 5 U.S.C. sec. 552(a)(3).

³⁴⁵ 5 U.S.C. sec. 552(a)(6)(A)(i).

³⁴⁶ 5 U.S.C. sec. 552(a)(4)(A)(ii). The average FOIA to the IRS request takes six months to process and appeals can take nearly a year. National Commission on Restructuring the Internal Revenue Service, Report of the National Commission on Restructuring the Internal Revenue Service: A Vision for a New IRS at 47 (June 25, 1997).

³⁴⁷ 5 U.S.C. sec. 552(a)(4)(A)(ii).

³⁴⁸ 5 U.S.C. sec. 552(b)(1) through (9).

³⁴⁹ These three exclusions authorize Federal law enforcement agencies to treat certain criminal investigatory records as not subject to the FOIA. Exclusion (c)(1) applies to FOIA requests for criminal investigations records if the subject of the investigation is unaware of its pendency and disclosure would interfere with the investigation. 5 U.S.C. sec. 552(c)(1). Exclusion (c)(2) applies to FOIA requests by a third party for records maintained under the name and identifier of a confidential informant. 5 U.S.C. sec. 552(c)(2). Exclusion (c)(3) applies to records generated by the FBI relating to foreign intelligence, counterintelligence, or international terrorism. 5 U.S.C. sec. 552(c)(3).

³⁵⁰ 5 U.S.C. sec. 552(b)(1)-(9).

³⁵¹ Sec. 6103(a).

³⁵² Aronson v. IRS, 973 F.2d 962, 964-65 (1st Cir. 1992) (The tax statute falls squarely within exemption 3); Long v. IRS, 891 F.2d 222, 224 (9th Cir. 1989) (holding that the deletion of taxpayer's identification does not alter confidentiality of section 6103 information); DeSalvo v. IRS, 861 F.2d 1217, 1221 (10th Cir. 1988) (Section 6103, including exceptions is an exemption 3(B) statute); Grasso v. IRS, 785 F.2d 70,77 (3d Cir. 1986) (same); Long v. IRS, 742 F.2d 1173, 1179 (9th Cir. 1984) (same); Ryan v. ATF, 715 F.2d 644, 645 (D.C. Cir. 1983)(same); Currie v. IRS, 704 F.2d 523, 527-28 (11th Cir. 1983)(same); Williamette Indus. v. United States, 689 F, 2d 865, 867 (9 Cir. 1982)(same);th Chamberlain v. Kurtz, 589 F.2d 827, 843 (5 Cir. 1979) (same).th See also, Church of Scientology of California v. IRS, 484 U.S. at 11 (the parties agreed that section 6103 of the Code is the sort of statute referred to by the FOIA in 5 U.S.C. sec. 552(b)(3) relating to matters that are "specifically exempted from disclosure by statute . . ." so the court did not have to rule on the issue); Linsteadt v. IRS, 729 F.2d 998, 1000 (5th Cir. 1984) (holding that sec. 6103 is an exemption statute as described in subpart A of exemption 3).

³⁵³ Sec. 6103(e)(7).

³⁵⁴ Sec. 6103(c).

³⁵⁵ Sec. 6103(b)(2).

³⁵⁶ See, e.g., Gillin v. IRS, 980 F.2d 819, 822 (1st Cir. 1992) (holding that differential function (DIF) scores, used to identify return most in need of audit, are exempt from disclosure).

³⁵⁷ Freuhauf Corp. v. IRS, 566 F.2d 574, 578 n.6 (6 Cir. 1977);th DeSalvo, supra, 861 F.2d at 1221 n.4.

³⁵⁸ Martin v. IRS, 857 F.2d 722 (10th Cir. 1988) (partner not entitled to protests filed by other partners with respect to their individual liabilities).

³⁵⁹ Zale Corp. v. IRS, 481 F. Supp. 486 (D.D.C. 1979); King v. IRS, 688 F.2d 488, 495 (7th Cir. 1982); Green v. IRS, 556 F. Supp. 79, 82-83 (N.D. Ind. 1982) aff'd, 734 F.2d 18 (7th Cir. 1984); Watson v. IRS, 538 F. Supp. 817, 818 (S.D. Tex. 1982).

³⁶⁰ Zale Corp. v. IRS, 481 F. Supp. 486 (D.D.C. 1979).

³⁶¹ Zale Corp, 481 F. Supp. at 487.

³⁶² Id.

³⁶³ With regard to exemption 3, the FOIA initially provided that disclosure was not required for matters that are "specifically exempted from disclosure by statute." 5 U.S.C. sec. 552(b)(3). An amendment of this statute by the Sunshine Act, Pub. L. No. 94-409 (March 13, 1977), narrowed the exemption by adding subparts (A) and (B), stated above, as qualifications as to the requirements of an exempting statute.

³⁶⁴ Zale Corp., 481 F. Supp. at 488.

³⁶⁵ Id. at 489.

³⁶⁶ Id., citing S. Rep. No. 94-938, at 317-318.

³⁶⁷ Zale Corp., 481 F. Supp. at 489.

³⁶⁸ Id. at 490.

³⁶⁹ 5 U.S.C. sec. 706.

³⁷⁰ Zale Corp., 481 F. Supp. at 490.

³⁷¹ Most FOIA cases are resolved through motions for summary judgment, rather than a trial with live witnesses. An example of a case in which the IRS's affidavit did not sustain its burden is Kamman v. IRS, 56 F.3d 46, 49 (9th Cir. 1995)(holding that the IRS affidavit failed to establish that an appraisal of a taxpayer's jewelry done as part of IRS efforts to collect the taxpayer's tax liability was "return information"; the appraisal was ordered disclosed to the third party FOIA requestor).

³⁷² NLRB v. Sears Roebuck & Co., 421 U.S. 132 (1975).

³⁷³ See Coastal States Gas Corp. v. Dep't of Energy, 617 F.2d 854, 867 (D.D.C. 1980).

³⁷⁴ 5 U.S.C. sec. 552(b)(7).

³⁷⁵ The IRS also asserts exemption 3 of the FOIA in these cases. Section 6103(e)(7) is the statutory basis for the exemption 3 assertion. Section 6103(e)(7) allows the IRS to withhold return information relating to the taxpayer requestor when it determines that disclosure would seriously impair tax administration.

³⁷⁶ Internal Revenue Manual, Disclosure of Official Information Handbook, Open Investigatory Files, 1.3.13.6.1(11) (August 19, 1998).

³⁷⁷ However, exceptions may apply when these documents have been marked or highlighted by an IRS agent to show items of importance. In such cases, the document may be partially or wholly withheld under exemption 7.

³⁷⁸ At the time of these cases, section 6103 permitted access to tax returns only upon executive order. No counterpart to present law section 6110 existed. Instead, litigants utilized the FOIA provision that requires agencies to make available to the public "interpretations which have been adopted by the agency." 5 U.S.C. sec. 552(a)(2)(B).

³⁷⁹ Tax Analysts & Advocates v. IRS, 505 F.2d 350 (D.C. Cir. 1974); Fruehauf Corp. v. IRS, 75-2 U.S.T.C. paragraph 16,189 (6th Cir. 1975).

³⁸⁰ In Fruehauf, the court held that technical advice memoranda are open to inspection to the extent intended for issuance to a taxpayer. In Tax Analysts, the court held that a technical advice memorandum was part of a tax return and therefore, not open to inspection under the FOIA.

³⁸¹ Tax Analysts, 505 F.2d at 353 citing Sterling Drug, Inc. v. FTC, 450 F.2d 698 (1971); American Mail Line, Ltd. v. Gulick, 411 F.2d 696 (1968).

³⁸² Pub. L. No. 94-455, sec. 1201 (1976).

³⁸³ H.R. Rep. No. 94-658 at 315 (1975).

³⁸⁴ Id. at 314.

³⁸⁵ Id.

³⁸⁶ Id.

³⁸⁷ Taxation With Representation Fund v. IRS, 646 F.2d 666 (D.C. Cir. 1981).

³⁸⁸ NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 148 (1975).

³⁸⁹ NLRB v. Sears, Roebuck & Co., 421 U.S. at 150.

³⁹⁰ Missouri ex rel. Shorr v. United States Army Corps of Engineers, 147 F.3d 708, 710 (8th Cir. 1998) (exemption permits nondisclosure of documents that are both predecisional and deliberative).

³⁹¹ NLRB v. Sears, Roebuck & Co., 421 U.S. at 152-153.

³⁹² Coastal States Gas Corp. v. Dep't. of Energy, 617 F.2d 854 (D.C. Cir. 1980). In Coastal States, the documents in dispute were memoranda from regional counsel to auditors working in Department of Energy field offices. These memoranda were issued in response to requests for interpretations of regulations with respect to a particular set of facts encountered by field agents while conducting audits. The Department of Energy claimed that these memoranda were protected from disclosure pursuant to exemption 5 of the FOIA because they were not "formal" interpretations of the regulations, nor were the interpretations "binding" on the audit staff. 617 F.2d at 859. The court rejected that argument, finding that the opinions were routinely used by agency staff as guidance in conducting their audits, and were retained and referred to as precedent.

³⁹³ Taxation With Representation Fund, 646 F.2d at 683-684.

³⁹⁴ The court exempted from disclosure GCMs that were never distributed or revised to reflect the final decision, TMs pertaining to regulations never approved, and AODs recommending appeals, finding that these documents retained their predecisional and deliberative character. The court also excluded documents if a final decision had yet to be made. Taxation With Representation Fund, 647 F.2d at 681- 682.

³⁹⁵ Meadows, Peter J. and Dobrovir, William A., Who Killed Guidance, Doc. 96-27723, 96 TNT 201-53 (October 15, 1996).

³⁹⁶ Id.

³⁹⁷ Id.

³⁹⁸ Id.

³⁹⁹ Id.

⁴⁰⁰ Id.

⁴⁰¹ Id.

⁴⁰² Tax Analysts v. IRS, 117 F.3d 607 (D.C. Cir. 1997).

⁴⁰³ For purposes of this discussion "IRS field personnel" means IRS district or service center employees and regional or district employees of the IRS Office of Chief Counsel.

⁴⁰⁴ Tax Analysts v. IRS, 1996 U.S. Dist. LEXIS 3259, 96-1 U.S.T.C. (CCH) paragraph 50,205, (D.D.C. March 15, 1996).

⁴⁰⁵ Sec. 6103(b)(2)(A).

⁴⁰⁶ Tax Analysts v. IRS, 117 F.3d at 615.

⁴⁰⁷ Tax Analysts v. IRS, 117 F.3d at 614.

⁴⁰⁸ Id.

⁴⁰⁹ Id.

⁴¹⁰ Sec. 6110(a), (c).

⁴¹¹ Tax Analysts v. IRS, 117 F.3d at 616.

⁴¹² Id.

⁴¹³ Tax Analysts v. IRS, 117 F.3d at 617-618.

⁴¹⁴ Tax Analysts v. IRS, 117 F.3d at 619.

⁴¹⁵ Tax Analysts v. IRS, 117 F.3d at 620.

⁴¹⁶ Id. The attorney work product privilege protects documents and memoranda prepared by or at the direction of an attorney in contemplation of litigation. See Hickman v. Taylor, 329 U.S.495, 509- 10 (1947).

⁴¹⁷ Tax Analysts v. IRS, 117 F.3d at 620.

⁴¹⁸ Pub. L. No. 105-206, sec. 3509 (1998).

⁴¹⁹ Sec. 6110(i)(1)(A).

⁴²⁰ Sec. 6110(i)(3).

⁴²¹ Tax Analysts v. IRS, 84 AFTR2d paragraph 99-5245 (D.D.C. September 3, 1999).

⁴²² Letter from William A. Dobrovir, Attorney for Tax Analysts, to Margo Stevens, Deputy Assistant Chief Counsel (Disclosure Litigation) (March 30, 1999) reprinted in 24 The Exempt Organization Tax Review 325 (May 1999).

⁴²³ Pub. L. No. 106-170 (1999).

⁴²⁴ This information was previously released in IRS Publication 3218, "IRS Report on Application and Administration of I.R.C. Section 482."

⁴²⁵ For purposes of section 6103(a), the report requirement is treated as part of the Code so as to authorize the disclosure of return information in such report.

⁴²⁶ Pub. L. No. 93-579, sec. 2(a)(1) (1974).

⁴²⁷ Pub. L. No. 93-579, sec. 2(a)(2) (1974).

⁴²⁸ H. R. Rep. No. 93-1416 reprinted in House Comm. on Gov't Operations and Senate Comm. on Gov't Operations, 94th Cong. 2d Sess., Legislative History of the Privacy Act of 1974 -S. 3418 (P.L. 93- 579) Source Book on Privacy at 301 (1976).

⁴²⁹ Pub. L. No. 93-579, sec. 2(b) (1974).

⁴³⁰ S. Rep. No. 94-938 at 318 (1976).

⁴³¹ 5 U.S.C. sec. 552a(b).

⁴³² 5 U.S.C. sec. 552a(d)(1).

⁴³³ 5 U.S.C. sec. 552a(d)(2).

⁴³⁴ 5 U.S.C. sec. 552a(c), (e) and (f).

⁴³⁵ 5 U.S.C. sec. 552a(g).

⁴³⁶ 5 U.S.C. sec. 552a(a)(2).

⁴³⁷ 5 U.S.C. sec. 552a(h).

⁴³⁸ St. Michael's Convalescent Hospital v. California, 643 F.2d 1369, 1373 (9th Cir. 1981).

⁴³⁹ OMB Guidelines, 40 Fed. Reg. 28,948, 28,951 (1975); Crumpton v. United States, 843 F. Supp. 751, 756 (D.D.C. 1994) aff'd on other grounds sub nom., Crumpton v. Stone, 59 F.3d 1400 (D.C. Cir. 1995).

⁴⁴⁰ OMB Guidelines, 40 Fed. Reg. at 28,951; Shermco Industries v. Secretary of the United States Airforce, 452 F. Supp. 306, 314-15 (N.D. Tex. 1978) (accepting "entrepreneurial capacity" distinction) rev'd and remanded on other grounds, 613 F.2d 1314 (5th Cir. 1980); Metadure Corp. v. United States, 490 F. Supp. 1368, 1372-74 (S.D. N.Y. 1980); Florida Med. Ass'n v. HEW, 479 F. Supp. 1291, 1307-11 (M.D. Fla. 1979); St. Michael's Convalescent Hospital, 643 F.2d at 1373 (sole proprietorships are not individuals.).

⁴⁴¹ Agency is defined as "any Executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the [federal] Government (including the Executive Office of the President) or any independent regulatory agency." 5 U.S.C. sec. 552(f) incorporated by reference in Privacy Act sec. 552a(1).

⁴⁴² Ortez v. Washington County, 88 F.3d 804 (9th Cir. 1996); Gilbreath v. Guadelupe Hospital Foundation, 5 F.3d 785, 791 (5th Cir. 1993); Marmarella v. County of Westchester, 898 F. Supp. 236, 237-38 (S.D.N.Y. 1995). Note that section 7 of the Privacy Act (which is part of the public law but not part of Title 5 of the United States Code) places limitations on the ability of State and local agencies to require the disclosure of a social security number as a condition for receiving some legal right, benefit or privilege. Pub. L. No. 93- 579, sec 7.

⁴⁴³ 5 U.S.C. sec. 552a(a)(4).

⁴⁴⁴ 5 U.S.C. sec. 552a(a)(5).

⁴⁴⁵ 5 U.S.C. sec. 552a(d)(1) provides:

Each agency that maintains a system of records shall -- (1) upon

⁴⁴⁷ 5 U.S.C. sec. 552a(h).

⁴⁴⁸ 5 U.S.C. sec. 552a(d)(5). This provision is similar to the work-product privilege. See Martin v. Office of Special Counsel, 819 F.2d 1181, 1187-89 (D.C. Cir. 1987).

⁴⁴⁹ 5 U.S.C. sec. 552a(g)(1)(B), (3)(A).

⁴⁵⁰ 31 CFR sec. 1.26 and 31 CFR Part 1, Subpart C, Appendix B.

⁴⁵¹ 5 U.S.C. sec. 552a(d)(2).

⁴⁵² Note that section 7852(e) precludes the application of the amendment provisions either directly or indirectly to determine the existence or possible existence of liability (or amount thereof) of any person for any tax, penalty interest, fine forfeiture, or other imposition or offense to which the provisions of the Code apply. England v. Comm'r, 798 F.2d 350, 351-52 (9th Cir. 1986).

⁴⁵³ 5 U.S.C. sec. 552a(d)(2)(A).

⁴⁵⁴ 5 U.S.C. sec. 552(d)(2)(B)(i).

⁴⁵⁵ 5 U.S.C. sec. 552a(d)(2)(B)(ii).

⁴⁵⁶ 5 U.S.C. sec. 552a(d)(3).

⁴⁵⁷ 5 U.S.C. sec. 552a(d)(3).

⁴⁵⁸ 5 U.S.C. sec. 552a(d)(3).

⁴⁵⁹ 5 U.S.C. sec. 552a(b).

⁴⁶⁰ 5 U.S.C. sec. 552a(b)(1).

⁴⁶¹ 5 U.S.C. sec. 552a(b)(2). This section of the Privacy Act permits disclosure if "required under section 552 of this title[.]"

⁴⁶² Id.

⁴⁶³ 5 U.S.C. sec. 552a(b)(3).

⁴⁶⁴ 5 U.S.C. sec. 552a(a)(7).

⁴⁶⁵ 5 U.S.C. sec. 552a(e)(4)(D).

⁴⁶⁶ See, e.g., sec. 6103(d) (State taxing authorities), sec. 6103(h)(2) (Department of Justice), and sec. 6103(j) (statistical use by the Departments of Commerce, Agriculture, Treasury and the Federal Trade Commission).

⁴⁶⁷ 5 U.S.C. sec. 552a(b)(4).

⁴⁶⁸ Sec. 6103(j)(4). Title 13 also prohibits the Bureau of the Census from making any publication "whereby the data furnished by any particular establishment or individual can be identified." 13 U.S.C. sec. 9(a); Balridge v. Shapiro, 455 U.S.345 (1982).

⁴⁶⁹ Sec. 6103(j)(1), (2), (3) and (5).

⁴⁷⁰ Sec. 6103(j)(4).

⁴⁷¹ Sec. 6103(l)(17).

⁴⁷² OMB Guidelines, 40 Fed. Reg. 28,948, 28,955 (1975).

⁴⁷³ 5 U.S.C. sec. 552a(b)(7).

⁴⁷⁴ Sec. 6103(h)(2) and (4).

⁴⁷⁵ Sec. 6103(h)(2).

⁴⁷⁶ Sec. 6103(h)(2). Section 6103(h)(4) allows the disclosure of returns and return information in a proceeding pertaining to tax administration if the taxpayer is a party to the proceeding; the treatment of an item on the return is directly related to the resolution of an issue in the proceeding; such return or return information directly relates to a transactional relationship between the taxpayer and a party to the proceeding which directly affects the resolution of an issue in the proceeding; or to the extent required by court order under 18 U.S.C. section 3500 or Rule 16 of the Federal Rules of Criminal Procedure.

⁴⁷⁷ Sec. 6103(i)(1).

⁴⁷⁸ Sec. 6103(i)(2).

⁴⁷⁹ 5 U.S.C. sec. 552a(b)(8).

⁴⁸⁰ Sec. 6103(i)(3)(B)(i).

⁴⁸¹ 5 U.S.C. sec. 552a(b)(9).

⁴⁸² OMB Guidelines, 40 Fed. Reg. 28,948, 28,955 (1975)

⁴⁸³ Sec. 6103(f)(1).

⁴⁸⁴ Sec. 6103(f)(2).

⁴⁸⁵ Sec. 6103(f)(3).

⁴⁸⁶ 5 U.S.C. sec. 552a(b)(10).

⁴⁸⁷ 5 U.S.C. sec. 552a(b)(11). The Court of Appeals for the District of Columbia has ruled that a subpoena routinely issued by a court clerk, such as a Federal grand jury subpoena, is not a "court order" within the meaning of this exception because it is not specifically approved by a judge. Doe v. DiGenova, 779 F.2d 74, 77-85 (D.C. Cir. 1985).

⁴⁸⁸ Sec. 6103(i)(1)(B).

⁴⁸⁹ 5 U.S.C. sec. 552a(c)(1).

⁴⁹⁰ 5 U.S.C. sec. 552a(c)(1).

⁴⁹¹ 5 U.S.C. sec. 552a(c)(1). The accounting requirements also do not apply to certain disclosures of returns and return information made under the authority of specified subsections of section 6103. Sec. 6103(p)(3).

⁴⁹² 5 U.S.C. sec. 552a(c)(2).

⁴⁹³ 5 U.S.C. sec. 552a(c)(2).

⁴⁹⁴ 5 U.S.C. sec. 552a(c)(4).

⁴⁹⁵ 5 U.S.C. sec. 552a(c)(4).

⁴⁹⁶ 5 U.S.C. sec. 552a(j).

⁴⁹⁷ 5 U.S.C. sec. 552a(k).

⁴⁹⁸ 5 U.S.C. sec. 552a(e)(1).

⁴⁹⁹ 5 U.S.C. sec. 552a(e)(2).

⁵⁰⁰ 5 U.S.C. sec. 552a(e)(5).

⁵⁰¹ 5 U.S.C. sec. 552a(e)(6).

⁵⁰² 5 U.S.C. sec. 552a(e)(7).

⁵⁰³ 5 U.S.C. sec. 552a(e)(3).

⁵⁰⁴ 5 U.S.C. sec. 552a(e)(3).

⁵⁰⁵ 5 U.S.C. sec. 552a(g)(1).

⁵⁰⁶ 5 U.S.C. sec. 552a(g)(2)(A) and (3)(A).

⁵⁰⁷ 5 U.S.C. sec. 552a(g)(4). Compare with section 7431, which provides a civil remedy for the unauthorized disclosure or inspection of returns and return information. The disclosure or inspection under section 7431 need only be knowing and negligent, rather than willful. Under section 7431(a), no injunctive relief is available, only damages. Sec. 7431(c).

⁵⁰⁸ 5 U.S.C. sec. 552a(i)(1).

⁵⁰⁹ 5 U.S.C. sec. 552a(i)(2).

⁵¹⁰ 5 U.S.C. sec. 552a(i)(3).

⁵¹¹ 5 U.S.C. sec. 552a(i). Compare the criminal penalty under section 7213 for the unauthorized disclosure of returns and return information under which it is a felony punishable by a fine of up to $5,000 and or five years imprisonment. The unauthorized inspection of returns and return information is a misdemeanor punishable by a $1,000 fine and one year imprisonment. Sec. 7213A.

⁵¹² Lake v. Rubin, 162 F.3d 113 (D.C. Cir. 1999).

⁵¹³ 5 U.S.C. section 552a(d)(1) requires Federal agencies, upon the request of the individual, to furnish information pertaining to that individual contained in the agency's system of records.

⁵¹⁴ 162 F.3d at 114.

⁵¹⁵ The district court dismissed the cases because it felt that section 7852(e) deprived it of jurisdiction. Section 7852(e) provides that certain provisions of the Privacy Act cannot be applied directly or indirectly to the determination of the existence or possible existence of liability (or amount thereof) of any person for any tax, penalty interest, fine forfeiture, or other imposition or offense to which the Code applies. The Privacy Act provisions specified by section 7852(e) are (d)(2), (3) and (4) (amendment provisions), and (g) (civil remedies for an agency's failure to comply with a provision of the Privacy Act). The Lakes, however, made an access, not amendment, request under (d)(1) of the Privacy Act, a provision not mentioned in section 7852(e). The Lakes argued that the section 7852(e) reference to subsection (g) should be read only to preclude suits to enforce the amendment provisions of the Privacy Act. While the D.C. Circuit did not agree with the district court's grounds for dismissal, it did not reverse the district court. Instead it affirmed on the basis that section 6103 is the exclusive means by which individuals may obtain tax records relating to them.

⁵¹⁶ Lake, 162 F.3d at 116.

⁵¹⁷ Cheek v. IRS, 703 F.2d 271 (1983).

⁵¹⁸ Cheek, 703 F.2d at 271.

⁵¹⁹ Cheek, 703 F.2d at 272. The court in Cheek also found that section 6103 preempted the FOIA citing King v. IRS, 688 F.2d 488 (7th Cir. 1982)(disclosure of tax return information isth governed by section 6103 rather than by the FOIA). "[I]t would make no sense to hold that section 6103 was exclusive as regards the Freedom of Information Act but not as regards the Privacy Act. We hold that it is exclusive as to both." Cheek, 703 F.2d at 272.

⁵²⁰ Lake, 162 F.3d at 116.

⁵²¹ Id. at n.3 quoting S. Rep. No. 94-938, at 318 (1976).

⁵²² Id.

⁵²³ Id.

⁵²⁴ Lake, 162 F.3d at 116.

⁵²⁵ Lake, 162 F.3d at 116.

⁵²⁶ Id.

⁵²⁷ Id.

⁵²⁸ Sinicki v. United States Department of Treasury, 1998 U.S. Dist. LEXIS 2015 (S.D. N. Y. February 24, 1998). Ms. Sinicki also alleged that the IRS violated section 6103.

⁵²⁹ "In addition to the provisions of the Internal Revenue Code . . . the Privacy Act of 1974 . . . affect[ s] the disclosure of tax information." Sinicki, 1998 U.S. Dist. LEXIS 2015, *9 (Feb. 24, 1998) quoting S. Rep 94-938 (1976).

⁵³⁰ Secs. 6103(d)(4)(B)(ii), 6103(p)(3)(A), and 7852(e).

⁵³¹ Taylor v. United States, 106 F.3d 833 (8th Cir. 1997); Long v. IRS, 891 F.2d 222 (9th Cir. 1989); and S. R. Mercantile Corp. v. Maloney, 909 F.2d 79, 81 (2d Cir. 1990). See also, Scrimgeour v. IRS, 149 F.3d 318 (4th Cir. 1998).

⁵³² Sinicki, 1998 U.S. Dist. LEXIS 2015, *8 (Feb. 24, 1998).

⁵³³ Statement of William E. Simon, Public Hearings Before the Committee on Finance, United States Senate, on H. R. 10612, Part I, 100 (March 17, 18, 19, and 22, 1976).

⁵³⁴ Sec. 6103(a) (1975).

⁵³⁵ Joint Committee on Taxation, General Explanation of Tax Reform Act of 1976 (H. R. 10612, 94 Cong. P.L. 94-455)th 329 (December 29, 1976) (JCS-33-76).

⁵³⁶ S. Hrg. 98-898, Statement of Donald C. Alexander, Hearing Before the Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs, 98 Cong. (2d Sess.) 51 (June 6, 1984).th

⁵³⁷ Joseph J. Darby, Section IV: Confidentiality and the Law of Taxation, 46 Am. J. Comp. L. 577 (1998).

⁵³⁸ S. Rep. No. 94-938 at 317 (1976).

⁵³⁹ Sec. 6103(a).

⁵⁴⁰ ". . . every American takes upon himself the job of tax reporting and enforcing the law, and 99% of them do a fantastic job. But the minute we tell that individual understand this, you are not only reporting for the purpose of collecting taxes, but for any other reason, believe me the system will start to break down . . . if it is revenue you are concerned about, . . . the greater that confidentiality, the greater the amount of revenue you will collect." Statement of Senator Haskell, 122 Cong. Rec. S 12589 (July 27, 1976).

⁵⁴¹ Testimony of Roscoe L. Egger, Jr., Hearing Before the Subcommittee on Oversight and Government Management of the Committee on Governmental Affairs, S. Hrg. 98-898, 98 th Cong. 2d Sess. 10 (June 6, 1984). Another study, however, stated that these results may have been overstated. General Accounting Office, Refund Offset Program Benefits Appear to Exceed Costs (GAO/GGD-91-64, May 14, 1991) at 3.

⁵⁴² General Accounting Office, Internal Revenue Service: Results of Fiscal Year 1998, Financial Statement Audit (GAO/T-AIMD- 99-103, March 1, 1999) at 8 and 11.

⁵⁴³ The exceptions to the general rule of confidentiality are found in subsections (c) through (o) of section 6103.

⁵⁴⁴ Sec. 6103(m)(4) and (5) (student loans); (l)(8) (child support); and (l)(7) (needs-based programs).

⁵⁴⁵ Sec. 6103(j) (statistical research); (m)(6) (Blood Donor Locator Service).

⁵⁴⁶ Sec. 6103(m)(2).

⁵⁴⁷ General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 5.

⁵⁴⁸ Sec. 6103(h)(1).

⁵⁴⁹ Sec. 6103(f).

⁵⁵⁰ Sec. 6103(h)(1).

⁵⁵¹ The Chief Counsel represents the Commissioner of the Internal Revenue Service in litigation before the United States Tax Court.

⁵⁵² Sec. 6103(h)(2) and (3).

⁵⁵³ Sec. 6103(l)(7).

⁵⁵⁴ For example, the Congressional Budget Office estimated that by disclosing return information to the Veteran's Administration to verify eligibility, the government would save $28 million for fiscal year 1991 and $743 million for fiscal years 1991 through 1995. Conference Committee Report, Pub. L. No. 101-508 (Omnibus Budget Reconciliation Act of 1990).

⁵⁵⁵ ". . . [U] nearned income received by the IRS from banks, . . . can be anywhere from 2 to 14 months old when it's reported to you, the IRS. By the time you complete your processing of the file, that could be another 10 months or so, in the case of unearned income data. The question then becomes whether outdated information is a problem for agencies in determining whether or not someone qualifies for being a recipient of government benefits." Statement of Senator Cohen, Hearing Before the Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs, 98th Cong. (2d Sess.), S. Hrg. 98-898 15 (June 6, 1984).

⁵⁵⁶ Sec. 6103(j).

⁵⁵⁷ S. Doc. 94-266, Report on Administrative Procedures of the Internal Revenue Service to the Administrative Conference of the United States, 98th Cong. 2d Sess., at 884 (October 1975).

⁵⁵⁸ Sec. 6103(l)(6).

⁵⁵⁹ Sec. 6103(m)(6).

⁵⁶⁰ Sec. 6103(m)(3).

⁵⁶¹ Sec. 6103(d).

⁵⁶² See S. Rep. No. 99-313 at 213 (1986).

⁵⁶³ Sec. 6103(i).

⁵⁶⁴ Statement of Senator Long, 122 Cong. Rec. S 12590 (July 27, 1976).

⁵⁶⁵ William J. Anderson, Director, General Government Division, GAO, noted that section 6103 may have inadvertently caused an increase in grand jury cases:

The disclosure statute also appears to be responsible in part

⁵⁶⁶ Sec. 6103(i)(1).

⁵⁶⁷ Sec. 6103(i)(2). Under section 6103(i)(2)(B), the request must state the name and address of the taxpayer, the taxable period to which the return information relates, the statutory authority under which the proceeding or investigation is being conducted, and the specific reason(s) why the disclosure may be relevant to such proceeding or investigation.

⁵⁶⁸ Sec. 6103(i)(3)(A).

⁵⁶⁹ For example, former IRS Commissioner Donald Alexander advocated repealing the following nontax exceptions:

(1) sec. 6103(m)(2)(B) -- disclosure of a taxpayer's identity

⁵⁷⁰ Pub. L. No. 105-206 sec. 3802(2) (1998).

⁵⁷¹ General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 5. (Hereinafter "GAO Fed/State Report").

⁵⁷² Seventy-five percent of the Federal agencies cited this as the purpose for receiving return information. GAO Fed/ State Report at 9.

⁵⁷³ Sec. 6402(c) and (d).

⁵⁷⁴ Treas. reg. sec. 301.6402-6(c)(4).

⁵⁷⁵ Treas. reg. sec. 301.6402(d).

⁵⁷⁶ Sec. 6103(l)(10).

⁵⁷⁷ GAO Fed/State Report at 10.

⁵⁷⁸ 31 C.F.R. sec. 285(k).

⁵⁷⁹ 31 C.F.R. sec. 285.2(d)(2)(i). Nonetheless, an agency can still use IRS address information if they so desire.

⁵⁸⁰ GAO Fed/State Report at 10.

⁵⁸¹ GAO Fed/State Report at 10.

⁵⁸² GAO Fed/State Report at 10. According to the IRS, as of June 1999, the following agencies were still requesting taxpayer address information: Health & Human Services (Parent Locator, Child Support Enforcement); Veteran's Administration; Department of Education; Railroad Retirement Board (last request -- January 1999); Department of Justice (last request -- September 1998); Defense Financial Accounting Service (last request -- August 1998); Air Force Financial Exchange (last request -- August 1998); Navy Financial Exchange (last request -- August 1998); FEMA (last request -- September 1998); U.S. Customs Service (last request -March 1999); Agriculture (Food and Nutrition) (last request August 1998); Agriculture (Rural Management Administration) (last request -- August 1998); Marine Financial Exchange (last request -- September 1998). Telephone interview, IRS Government Liaison and Disclosure, Office of Tax Checks and Safeguards (September 28, 1999).

⁵⁸³ According to the GAO survey responses the following agencies used returns and return information for criminal investigations: Office of Independent Counsel (David Barrett); Office of Independent Counsel (Donald C. Smaltz); Central Intelligence Agency (Counter Intelligence Center -- Financial Investigations Branch); United States Secret Service (Investigative Support Division); U.S. Postal Inspection Service; U.S. Department of Labor (Office of Inspector General/ Office of Investigations); Department of Justice (Office of Professional Responsibility, U.S. Attorneys' Offices, Antitrust Division, Tax Division, and the Federal Bureau of Investigation), U.S. Department of Agriculture (Office of the Inspector General), Social Security Administration (Office of the Inspector General), and U.S. Customs Service (Office of Investigations).

⁵⁸⁴ Sec. 6103(i).

⁵⁸⁵ Sec. 6103(i)(1). Because the order is ex parte, the subject of the investigation has no rights of notice to or participation in the process.

⁵⁸⁶ Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1998 (JCX-19-99) April 29, 1999 (hereinafter "JCX- 19-99"). This report is reprinted in Appendix E.

⁵⁸⁷ See Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.28.2.2, Examples of Other than Taxpayer Return Information (August 19, 1998).

⁵⁸⁸ JCX 19-99, supra.

⁵⁸⁹ Sec. 6103(i)(3)(A).

⁵⁹⁰ Sec. 6103(i)(3)(B)(ii).

⁵⁹¹ JCX-19-99, supra.

⁵⁹² Id.

⁵⁹³ JCX-19-99, supra.

⁵⁹⁴ Id.

⁵⁹⁵ The IRS is not required to keep statistics on requests made under this provision. Sec. 6103(p)(3).

⁵⁹⁶ U.S. Central Intelligence Agency response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 4801. The CIA reported that it receives this information on a monthly basis.

⁵⁹⁷ U.S. Customs Service (Office of Investigations) response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1401. The Customs Service reported that in the past two years it has obtained seven Forms 8300. Id.

⁵⁹⁸ According to the IRS, the Federal Trade Commission no longer performs economic surveys of corporations, making section 6103(j)(2) obsolete. GAO Fed/ State Report at 25. The Department of Agriculture only recently received its disclosure authority as part of the Census of Agriculture Act of 1997. The Department of Treasury has access to returns and return information for its tax administration duties under section 6103(h)(1).

⁵⁹⁹ See <http://www.bea.doc.gov/bea/role.htm>

⁶⁰⁰ Id.

⁶⁰¹ Id.

⁶⁰² Id.

⁶⁰³ Id.

⁶⁰⁴ Id.

⁶⁰⁵ Id.

⁶⁰⁶ Bureau of Economic Analysis, Response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 4501.

⁶⁰⁷ Id.

⁶⁰⁸ Id.

⁶⁰⁹ Id.

⁶¹⁰ Id.

⁶¹¹ Id.

⁶¹² Id.

⁶¹³ U.S. Bureau of the Census, 1998 Financial Report at 2 (July 1999).

⁶¹⁴ Id.

⁶¹⁵ Id.

⁶¹⁶ See Treas. reg. sec. 301.6103(j)(1)-1(b) for a list of return information that can be disclosed to the Census. The Social Security Administration is also permitted under the regulations to disclose all information from the Form SS-4 (Application for Employer Identification Number) and specific information from the Form 1040, Schedule SE (Self-Employment Tax). Treas. reg. sec. 301.6103(j)(1)- 1(b).

⁶¹⁷ Bureau of the Census (Admin. Rec. Res. Planning, Research & Evaluation Division) response to GAO Survey of Federal Agencies Receiving Tax Data, response number 1801.

⁶¹⁸ Id.

⁶¹⁹ Id.

⁶²⁰ Bureau of the Census (Economic Planning and Coordination Division), response to GAO Survey of Federal Agencies Receiving Tax Data, response number 1802.

⁶²¹ Id.

⁶²² Id.

⁶²³ Id.

⁶²⁴ Letter from Director, Bureau of the Census, to Associate Director, Tax Policy and Administration Issues, GAO (May 20, 1999).

⁶²⁵ Id.

⁶²⁶ See <http://www.pbgc.gov/about.htp>

⁶²⁷ Id.

⁶²⁸ See <http://www.pbgc.gov/mission.htp>

⁶²⁹ Id.

⁶³⁰ Id.

⁶³¹ Id.

⁶³² PBGC response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 0901.

⁶³³ Id.

⁶³⁴ Id.

⁶³⁵ Id.

⁶³⁶ Id.

⁶³⁷ Id.

⁶³⁸ Department of Labor (Pension and Welfare Benefits Administration), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 2601.

⁶³⁹ Id.

⁶⁴⁰ Department of Labor (Solicitor of Labor -Plan Benefits Security Division), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 2801.

⁶⁴¹ Id.

⁶⁴² Id.

⁶⁴³ Sec. 6103(l)(1)(A).

⁶⁴⁴ Sec. 6103(l)(1)(B).

⁶⁴⁵ Sec. 6103(l)(5)(A). See also sec. 1106(d) of the Social Security Act.

⁶⁴⁶ Sec. 6103(l)(5)(B). See also sec. 232 of the Social Security Act (42 U.S. C. sec. 432) which authorizes the program.

⁶⁴⁷ GAO Fed/ State Report at 26.

⁶⁴⁸ This is also part of the Combined Annual Wage Program.

⁶⁴⁹ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Tax Data, responses number 1209.

⁶⁵⁰ Id.

⁶⁵¹ GAO Fed/ State Report at 28.

⁶⁵² Id.

⁶⁵³ Id.

⁶⁵⁴ Sec. 6103(l)(12)(A).

⁶⁵⁵ Sec. 6103(l)(12)(B).

⁶⁵⁶ Sec. 6103(l)(12)(C).

⁶⁵⁷ Sec. 6103(m)(7).

⁶⁵⁸ See sec. 1143(c) of the Social Security Act.

⁶⁵⁹ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1204.

⁶⁶⁰ Id.

⁶⁶¹ GAO Fed/ State Report at 25.

⁶⁶² GAO Fed/ State Report at 25-26. See also Privacy Act System of Records Notice Number 09-60-0159, 47 Fed. Reg. 45589 (October 13, 1982). The SSA obtains this information under the authority of section 6103(l)(1) and (5). GAO Fed/ State Report at 25.

⁶⁶³ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1205.

⁶⁶⁴ Id.

⁶⁶⁵ Id.

⁶⁶⁶ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Tax Data, response numbers 1206, 1208, and 1211. The common name for this program is the "1099 program." Section 6103 authorize the IRS to disclose "unearned income" to SSA to assist in administering the "supplemental security income benefits provided under title XVI of the Social Security Act . . ." Sec. 6103(l)(7)(B) & (D).

⁶⁶⁷ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1206.

⁶⁶⁸ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response numbers 1206, 1208, and 1211.

⁶⁶⁹ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1212.

⁶⁷⁰ Sec. 6103(l)(6).

⁶⁷¹ Sec. 6103(l)(6)(C).

⁶⁷² GAO Fed/ State Report at 26. The SSA has direct authority to disclose information to State and local child support agencies, but not to other Federal agencies. Sec. 6103(l)(8).

⁶⁷³ GAO Fed/ State Report at 26. Section 6103(p) authorizes the IRS to make return information available "in the form of written documents, reproductions of such documents, films or photo impressions, or electronically produced tapes, disks, records, or by any other mode or means which the Secretary determines necessary or appropriate . . ." Sec. 6103(p)(2)(B) (emphasis added). The Secretary has interpreted the highlighted language as authority for another Federal agency to make a disclosure of return information on behalf of the IRS when that information is more readily available from the other agency. Treas. Reg. sec. 301.6103(p)(2)(B)-1(a). The Treasury regulation presumes that the disclosing agency has properly received return information from the IRS under a provision of section 6103. Id.

⁶⁷⁴ GAO Fed/ State Report at 26.

⁶⁷⁵ Id.

⁶⁷⁶ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1201.

⁶⁷⁷ Id.

⁶⁷⁸ Department of Health and Human Services (Administration for Children and Families -Office of Child Support Enforcement), response to GAO Survey of Federal Agencies Receiving

Taxpayer Data, response number 0701.

⁶⁷⁹ Id. Under the Directory of New Hires system, every employer must send information about new hires and quarterly wages to State child support agencies. State officials gather the data, along with information on unemployment benefits and child support cases and forward it to the Administration for Children and Families (ACF). ACF then uses its computers to sort and send back to State authorities reports about individuals obligated to pay child support. Robert O'Harrow, Jr., Database Raises Privacy Question, The Washington Post, 26A (June 27, 1999).

⁶⁸⁰ Department of Health and Human Services (Administration for Children and Families -Office of Child Support Enforcement), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 0701.

⁶⁸¹ Id.

⁶⁸² Sec. 6103(l)(7)(A).

⁶⁸³ Sec. 6103(l)(7)(C).

⁶⁸⁴ GAO Fed/ State Report at 27.

⁶⁸⁵ Social Security Administration, response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 1202.

⁶⁸⁶ See <http://www.hud.gov/qaintro.html>

⁶⁸⁷ "Under HUD's Section 8 and Low Rent Public Housing programs and most other HUD rental assistance programs, tenants are generally required to pay 30 percent of their anticipated income towards rent, with HUD providing the balance of the rental payments. New applicants and existing tenants are to provide income information which is used in determining the amount of rent they are to pay. Tenants are also required to recertify their income on an annual basis, and in certain other circumstances, i.e. when there is a significant increase in household income. The applicants' or tenants' failure to disclose all of their income or the housing agencies', owners' or agents' failure to recertify the tenants for rental assistance may result in the Department paying a greater rental subsidy than would be required." Internal Revenue Service, Document 6630, Safeguard Review Report -Department of Housing and Urban Development, at 1(November 1997) quoting U.S. Department of Housing and Urban Development, Nationwide Sample of Assisted Households to Estimate Unreported Income, Excessive Housing Assistance and the Effects of HUD Subsidies Phase I, A Joint Project of the Office of Public and Indian Housing, the Office of Housing, Office of the Chief Financial Officer and the Office of Information Technology (April 17, 1997).

⁶⁸⁸ U.S. Department of Housing and Urban Development (Real Estate Assessment Center), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 2301. Sec. 6103(l)(7)(D)(ix).

⁶⁸⁹ U.S. Department of Housing and Urban Development (Real Estate Assessment Center), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 2301.

⁶⁹⁰ Id.

⁶⁹¹ Id.

⁶⁹² Id.

⁶⁹³ Id.

⁶⁹⁴ Sec. 6103(l)(7)(D)(viii).

⁶⁹⁵ GAO Fed/ State Report at 28; Office of Personnel Management (Office of Systems, Finance and Administration), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 0801.

⁶⁹⁶ Office of Personnel Management (Office of Systems, Finance and Administration), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response number 0801.

⁶⁹⁷ Id.

⁶⁹⁸ Id.

⁶⁹⁹ See <http://www.customs.gov/about/meet.htm>

⁷⁰⁰ Sec. 6103(l)(14). GAO Fed/ State Report at 28.

⁷⁰¹ Department of Treasury (U.S. Customs Service -Regulatory Audit Division), response to GAO Survey of Federal Agencies Receiving Taxpayer Data, response 1301.

⁷⁰² Id.

⁷⁰³ Id.

⁷⁰⁴ Id.

⁷⁰⁵ Id.

⁷⁰⁶ Id.

⁷⁰⁷ Id.

⁷⁰⁸ Id.

⁷⁰⁹ GAO Fed/ State Report at 14.

⁷¹⁰ Id.

⁷¹¹ Section 6103(c).

⁷¹² Treas. reg. sec. 301.6103(c)-1(b).

⁷¹³ The IRS National Director Legislative Affairs provided the following statistics regarding the number of congressional inquiries received by the IRS during the past three years:

_____________________________________________________________________

⁷¹⁴ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.4.2.1(1), Inquiry Accompanied by Taxpayer's Correspondence (August 19, 1998).

⁷¹⁵ Id.

⁷¹⁶ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.4.2.1(2), Inquiry Accompanied by Taxpayer's Correspondence (August 19, 1998).

⁷¹⁷ Id.

⁷¹⁸ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.4.2.2(1), Inquiry Without Taxpayer's Correspondence (August 19, 1998).

⁷¹⁹ Internal Revenue Manual, Disclosure of Official Information Handbook, 1.3.4.2.3(1), Inquiry Accompanied by Taxpayer's Correspondence (August 19, 1998).

⁷²⁰ Sec. 6103(f)(1).

⁷²¹ Id.

⁷²² Sec. 6103(f)(2).

⁷²³ Sec. 6103(f)(4)(A).

⁷²⁴ Sec. 6103(f)(3). Concurrent resolutions are required for joint committees other than the Joint Committee on Taxation.

⁷²⁵ Id.

⁷²⁶ Id.

⁷²⁷ Sec. 6103(f)(4)(B).

⁷²⁸ See Appendix C for a listing of those resolutions.

⁷²⁹ Sec. 8023(a).

⁷³⁰ Id.

⁷³¹ Sec. 6103(f)(5).

⁷³² Sec. 6103(f)(5).

⁷³³ Sec. 6103(i)(7)(A).

⁷³⁴ Sec. 6103(i)(B)(i).

⁷³⁵ Sec. 6103(i)(B)(ii).

⁷³⁶ Sec. 6103(i)(B)(iii).

⁷³⁷ Sec. 6103(i)(C)(i).

⁷³⁸ Sec. 6103(i)(C)(ii).

⁷³⁹ In responding to GAO's survey, many of the agencies either self-identified problems or attached the findings of IRS safeguard inspections. The Joint Committee staff did not independently verify the responses or conduct any safeguard inspections of its own for purposes of the study.

⁷⁴⁰ The following State income taxes use Federal adjusted gross income: Arizona, California, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, New Mexico, New York, Ohio, Oklahoma, Oregon, Virginia, West Virginia, and Wisconsin. The following State income taxes are based on Federal taxable income: Colorado, Hawaii, Idaho, Minnesota, North Carolina, South Carolina, and Utah. In the following States, the State income tax is calculated as a percentage of Federal tax liability: North Dakota, Rhode Island, and Vermont. U.S. Advisory Commission on Intergovernmental Relations, Significant Features of Fiscal Federalism, 1995. Federation of Tax Administrators, Individual Income Tax Starting Points (January 1, 1999).

⁷⁴¹ Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have an income tax. New Hampshire and Tennessee impose taxes on certain interest and dividends. Federation of Tax Administrators, Individual Income Tax Starting Points (January 1, 1999).

⁷⁴² Vermont Department of Taxes, response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 1901.

⁷⁴³ California State Controller's Office (Division of Collections -- Bureau of Tax Administration), response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 0401.

⁷⁴⁴ Id.

⁷⁴⁵ Id.

⁷⁴⁶ Id.

⁷⁴⁷ Id.

⁷⁴⁸ Id.

⁷⁴⁹ See, e.g., Kansas Department of Revenue (Compliance Management), response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 2401.

⁷⁵⁰ See, e.g., Rhode Island Department of Administration (Division of Taxation), response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 3201.

⁷⁵¹ Sec. 6103(k)(5).

⁷⁵² Interview of IRS Office of Government Liaison and Disclosure (August 20, 1999). Other state uses of return information, such as the Montana Demonstration Project, and disclosures for purposes of state alcohol laws are discussed in the overview of section 6103, supra Part Two, II, of this study.

⁷⁵³ See Part Four, II. D. 3, above, for a discussion of the SSA's child support disclosures to OCSE.

⁷⁵⁴ Pub. L. No. 104-193 (1996).

⁷⁵⁵ Id.

⁷⁵⁶ Id.

⁷⁵⁷ Illinois Department of Public Aid (Division of Child Support Enforcement), response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 0601.

⁷⁵⁸ Id.; Florida Department of Children and Families (Child Support Enforcement Program), response to GAO Survey of State and Local Agencies Receiving Taxpayer Data, response number 702.

⁷⁵⁹ E.g., Responses to GAO Survey of State and Local Agencies Receiving Tax Data: Connecticut Department of Social Services (Bureau of Child Support Enforcement), response number 0101; Florida Department of Children and Families (Economic Self-Sufficiency Services -- Program Office Information Systems), response number 701; Nebraska Department of Health and Human Services (Child Support Enforcement Unit and State Child Support Enforcement Program), response number 1601; Nevada State Child Support Enforcement Program, response number 1701; Kentucky Cabinet for Families and children (Community Based Services, Division of Child Support) response number 2501.

⁷⁶⁰ Sec. 6103(l)(7).

⁷⁶¹ Internal Revenue Service, Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies at 17 (1998). These guidelines are based on the Department of Defense Trusted Computer System Evaluation Criteria, DOD 5200.28-STD (commonly called the "Orange Book"), OMB Circular A-130, Appendix III and Treasury Directive 71-10.

⁷⁶² Id.

⁷⁶³ Id. at 19.

⁷⁶⁴ Id.

⁷⁶⁵ Id.

⁷⁶⁶ "EARL" stands for Electronic Audit Research Log. It is an automated tool to monitor and detect unauthorized access to computer data. General Accounting Office, Confidentiality of Tax Data: IRS Implementation of the Taxpayer Browsing Protection Act (GAO/ GGD-99- 43, March 1999) at 3.

⁷⁶⁷ Internal Revenue Service, Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies 23 (1998)("Agencies must evaluate the need for return information before the data is requested or disseminated.").

⁷⁶⁸ The "CP2000 extract" is used to identify under-reported income. It reflects adjustments made by matching return amounts to amounts reported by third party payers.

⁷⁶⁹ See section 6103(l)(6)(B), limiting contractor access to the address, social security number, and amount of tax refund offset due to past due child support.

⁷⁷⁰ See Part Five, II.H. of this study for recommendations regarding contractors.

⁷⁷¹ Internal Revenue Service, Report on Procedures and Safeguards Established and Utilized by Agencies for the Period January 1 through December 31, 1998 at 1 (June 4, 1999).

⁷⁷² A discussion of the programs the IRS uses, such as EARL and ATLAS, on its own computer systems is discussed in Part Four, V. A., below, of this study (concerning unauthorized disclosure and inspection of returns and return information by the IRS).

⁷⁷³ General Accounting Office, Confidentiality of Tax Data: IRS Implementation of the Taxpayer Browsing Protection Act, (GAO/GGD- 99-43, March 1999) at 6.

⁷⁷⁴ General Accounting Office, IRS Information Systems Weaknesses Increase Risk of Fraud and Impair Reliability of Management Information (GAO/AIMD-99-34, Sept. 22, 1993).

⁷⁷⁵ General Accounting Office, Financial Audit: Examination of IRS Fiscal Year 1994 Financial Statements (GAO/ AIMD-95-141, Aug. 4, 1995).

⁷⁷⁶ General Accounting Office, IRS Systems Security: Tax Processing Operations and Data Still at Risk Due to Serious Weaknesses (GAO/ AIMD-97-49, Apr. 8, 1997).

⁷⁷⁷ Pub. L. No. 105-35 (1997).

⁷⁷⁸ Prior to the creation of the TIGTA by the IRS Reform and Restructuring Act, the now-defunct IRS Office of the Chief Inspector handled these investigations.

⁷⁷⁹ "Summons in lieu of arrest" means that a court issued a summons for the violator to appear in court to be charged instead of the police effecting an arrest. Interview, Office of the Inspector General for Tax Administration, Treasury Department (October 8, 1999).

⁷⁸⁰ "Pretrial diversion" means that instead of being tried for the crime, the violator is required to perform some other act. If properly completed, the criminal case will be dropped. Interview, Office of the Inspector General for Tax Administration, Treasury Department (October 8, 1999).

⁷⁸¹ Information for this section was taken from General Accounting Office, Confidentiality of Tax Data: IRS' Implementation of the Taxpayer Browsing Protection Act (GAO/GGD-99-43) and Strategic Plans and Budget of the Internal Revenue Service, 1999 Joint Return, 106th Cong. 1st Sess. (JCS-4-99) May 25, 1999 at 85-87.

⁷⁸² These briefings began in 1998.

⁷⁸³ Of the 5,468 total leads received between October 1, 1997, and November 30, 1998, EARL's match of the first six characters accounted for 3,793. However, of those 3,793, only 67 resulted in a referral for further investigation. General Accounting Office, Confidentiality of Tax Data: IRS Implementation of the Taxpayer Browsing Protection Act (GAO/GGD-99-43, March 31, 1999).

⁷⁸⁴ The Systems Standards and Evaluation Office has the overall responsibility for security and privacy within the IRS.

⁷⁸⁵ The period covered by this summary is January 1, 1994, through April 30, 1999.

⁷⁸⁶ The Privacy Act restricts the ability of the IRS and the Department of Justice to disclose to the public the terms of settlement in cases involving individuals. 5 U.S.C. sec. 552(b). The IRS and the Department of Justice, however, are permitted to disclose this information to the Joint Committee pursuant to 5 U.S.C. sec. 552a(b)(9). The Privacy Act does not place any restrictions on the Joint Committee's use of this information once it is received.

⁷⁸⁷ This figure does not include twenty-three cases that were dismissed by stipulation, voluntarily by the plaintiff, or for lack of prosecution at the district court level. It does include three cases won on appeal.

⁷⁸⁸ Although these and other unauthorized disclosure cases involve the Criminal Investigation Division's special agents, a recent review of the IRS's Criminal Investigation Division found no systematic abuse. "Neither was any evidence found of systematic or repeated disclosure violations (Section 6103) . . ." William H. Webster, Review of the Internal Revenue Service's Criminal Investigation Division, 32 (April 1999).

⁷⁸⁹ Some cases involved employees from more than one IRS function.

⁷⁹⁰ 917 F. Supp. 493 (S. D. Tex. 1995).

⁷⁹¹ Special agents are employees of the Criminal Investigation Division.

⁷⁹² Sec. 6103(k)(6).

⁷⁹³ Barrett v. United States, 795th F. 2d 446 (5th Cir. 1986).

⁷⁹⁴ Barrett v. United States, 93-1 U.S.T.C. (CCH) paragraph 50,291, 1993 U.S. Dist. LEXIS 5114, (S. D. Tex. 1993).

⁷⁹⁵ Barrett v. United States, 51 F. 3d 475 (5th Cir. 1995).

⁷⁹⁶ Sec. 7431(b)(1).

⁷⁹⁷ As discussed in Part Two, II. K. above, section 7431 authorizes statutory damages of $1,000 per each act of wrongful disclosure. Sec. 7431(c).

⁷⁹⁸ Barrett v. United States, 917 F. Supp. 493 (S. D. Tex. 1995).

⁷⁹⁹ Barrett v. United States, 100 F. 3d 35 (5th Cir. 1996). The taxpayer's motion forth rehearing en banc was also denied. Barrett v. United States, 105 F. 3d 335 (5th Cir. 1997). Noth criminal charges or indictments were ever brought against the doctor as the result of the IRS investigation. Barrett v. United States, 51 F. 3d 475, 476 n.3 (5th Cir. 1995).

⁸⁰⁰ 99-8065 (S. D. Fla.).

⁸⁰¹ 117 F. 3d 297 (5th Cir. 1997).

⁸⁰² Marre v. United States, 38 F.3d 823 (5th Cir. 1994).

⁸⁰³ Marre v. United States, 117 F.3d 297 (5th Cir. 1997).

⁸⁰⁴ 93-0725 (D.D.C.).

⁸⁰⁵ 120 F. 3d 1307 (5th Cir. 1997).

⁸⁰⁶ The taxpayer pled guilty to income tax evasion (an underpayment of approximately $3,500 for one year). He was sentenced to six months confinement, suspended, and one-year supervised probation.

⁸⁰⁷ Although the prosecuting Assistant United States Attorney could not recall discussing the release, the special agent testified that he read the release to the Assistant United States Attorney and he approved it.

⁸⁰⁸ Under section 7431's predecessor, former section 7217, a taxpayer could sue a Federal employee directly. In 1982, the law was changed to substitute the United States as the liable party.

⁸⁰⁹ 95-12535EFH (D. Mass.).

⁸¹⁰ IDRS is the primary system that IRS employees use to research and update taxpayer accounts. It gives IRS employees instantaneous visual access to certain taxpayer accounts. The systems' capabilities include: (1) researching account information, (2) entering transactions, such as adjustments and name or address changes, (3) entering collection information for storage or processing in the system, and (4) automatically generating notices to taxpayers and other output. General Accounting Office, Tax Administration: Uses of and Problems With IRS' Non-Master File, (GAO/GGD-99-42 April 1999) at 6 fn. 6.

⁸¹¹ 973 F. Supp. 996 (D. Colo. 1997).

⁸¹² Section 6103(c) provides:

(c) Disclosure of returns and return information to designee of

⁸¹⁴ 149 F. 3d 318 (4th Cir. 1998).

⁸¹⁵ Section 6103(e) permits the disclosure of returns and return information to specifically identified parties deemed to have a material interest in the information.

⁸¹⁶ 92-3499 (S. D. Tex.).

⁸¹⁷ 993 F. 2d 111 (4th Cir. 1993).

⁸¹⁸ Sec. 6103(h)(4)(C).

⁸¹⁹ Mallas, 75 AFTR2d 534 (M. D. N. C. 1994).

⁸²⁰ 9 F. Supp. 2d 1119 (D. Neb. 1998).

⁸²¹ Jones v. United States, 9 F. Supp. 2d at 1119. The court found that this statement was return information because it was tantamount to notifying the informant that the tax returns of the taxpayer and the corporation were "subject to other investigation or processing" as defined by section 6103(b)(2). See Jones v. United States, 898 F. Supp. 1360, 1379-80 (D. Neb. 1995).

⁸²² The staff was reduced from as many as 60 workers to as few as three. Jones, 9 F. Supp. 2d at 1127.

⁸²³ Jones, 9 F. Supp. 2d at 1127.

⁸²⁴ Jones, 9 F. Supp. 2d at 1127.

⁸²⁵ Jones, 9 F. Supp. 2d at 1133-34.

⁸²⁶ Jones, 9 F. Supp. 2d at 1134.

⁸²⁷ Jones v. United States, 898 F. Supp. 1360 (D. Neb. 1995).

⁸²⁸ Id. at 1387-88.

⁸²⁹ Jones v. United States, 97 F. 3d 1121, 1124-25 (8th Cir. 1996).

⁸³⁰ Jones v. United States, 954 F. Supp. 191, 195 (D. Neb. 1997).

⁸³¹ Jones, 9 F. Supp. 2d at 1153.

⁸³² Id. at 1152.

⁸³³ Payne v. United States, No. H-93-1738 slip op. at 24 (S. D. Tex. March 19, 1999).

⁸³⁴ Id. at 18.

⁸³⁵ Id. at 18.

⁸³⁶ Id. at 5, 8, and 19. At trial, the agent could not identify who initially told him the taxpayer sold drugs or whether the revelation occurred in a formal or information interview. Id. at 19.

⁸³⁷ Id. at 18.

⁸³⁸ Sec. 6103(k)(6).

⁸³⁹ Payne, slip op. at 24.

⁸⁴⁰ Id. at 24.

⁸⁴¹ Id. at 25.

⁸⁴² Sec. 6103(k)(6).

⁸⁴³ Payne, slip op. at 25.

⁸⁴⁴ 98-CV-2647 (N. D. Tex.).

⁸⁴⁵ See, e. g., the discussion in Part Two, II.H., of this study regarding the Higher Education Act Amendments. See also Treasury Directive 55-01 section 10(a), which contemplates, among other things, disclosing the status of ongoing investigations to witnesses and victims. The Assistant Commissioner (Criminal Investigation) is identified specifically as one of the officials responsible for implementing this directive. The status of an ongoing criminal tax investigation and the fact of such investigation are confidential return information within the meaning of section 6103(b)(2). Section 6103 contains no exception that would authorize such return information disclosures to a witness or victim.

⁸⁴⁶ The courts are divided on whether an erroneous levy or lien is actionable as both an unauthorized disclosure of return information (section 7431) and an unauthorized collection action (section 7433). Compare Venen v. United States, 38 F. 3d 100 (3d Cir. 1994); Wilkerson v. United States, 67 F. 3d 112 (5th Cir. 1995); Huff v. United States, 10 F. 3d 1440 (9th Cir. 1993); and Farr v. United States, 990 F. 2d 451 (9th Cir. 1993) with Rorex v. Traynor, 771 F. 2d 383 (8th Cir. 1985), and Maisano v. United States, 908 F. 2d 408 (9th Cir. 1990). See also Robert P. Butts, IRS Liability for Wrongful Disclosures Made in the Process of Tax Collection: Should the Validity of the Underlying Collection Activity Be Considered? 102 Dick. L. Rev. 67 (1997)("the tolerance level for wrongful disclosures during the actual collection should be lower than that for IRS mistakes in disclosing taxpayer information during the actual investigative stages").

⁸⁴⁷ This would include the operating division counsels created under the current IRS reorganization.

⁸⁴⁸ United States Department of Defense v. Federal Labor Relations Authority, 510 U.S. 487 (1994).

⁸⁴⁹ When a lawsuit is commenced in court, a taxpayer may use discovery mechanisms, such as interrogatories, document production requests, and depositions, as provided by the Federal Rules of Civil Procedure, Federal Rules of Criminal Procedure, or Tax Court rules. These rules, however, do not apply prior to the commencement of a lawsuit, i.e., to the administrative process before the IRS.

⁸⁵⁰ For example, under the FOIA, the IRS released the returns of computer programmers to a company that disputed whether the programmers had worked for the company as employees or independent contractors. See George Guttman, Confidentiality Collides with Defense in Employment Tax Case, 67 Tax Notes 18 (April 3, 1995); and David Cay Johnston, Privacy Concerning Taxes? Maybe Not in Ohio, New York Times at D4 (March 14, 1995).

⁸⁵¹ Sec. 6103(p)(2).

⁸⁵² Sec. 6103(b)(2)(A).

⁸⁵³ Sec. 6103(b)(2)(B).

⁸⁵⁴ The exchange of information pursuant to tax treaties is discussed at Part Two, III, of this study.

⁸⁵⁵ Sec. 6110(c)(3).

⁸⁵⁶ U.S. Const. Art. VI. cl. 2.

⁸⁵⁷ Tax Analysts v. IRS, No. 1: 94-cv-923 (GK) (D.D.C.) (involving, inter alia, the disclosure of Field Service Advice issued by the IRS Office of the Associate Chief Counsel (International)). This issue is still pending before the district court.

⁸⁵⁸ Sec. 274(h)(6)(C)(i).

⁸⁵⁹ See Banquero v. United States, 93-2 USTC 50,411 at 89,237 (S.D. Tex. 1993), aff'd, 18 F.3d 1311 (5 Cir. 1994) (holding that the Mexico tax information exchange agreement "isth the law of the land and is constitutional").

⁸⁶⁰ For example, tax implementation agreements entered into with U.S. possessions as well as the Convention on Mutual Administrative Assistance in Tax Matters are two agreements which likely should be protected from disclosure.

⁸⁶¹ For a detailed discussion of this issue, see Part Two, VII, above.

⁸⁶² See, e.g., Lake v. Rubin, 162 F.3d 113 (D.C. Cir. 1999); and Cheek v. IRS, 703 F.2d 271 (7th Cir. 1983)(holding that section 6103, although not explicitly amending the Privacy Act, was intended to override any inconsistent provisions of prior statutes, including the Privacy Act).

⁸⁶³ See e.g., Taylor v. United States, 106 F.3d 833 (8th Cir. 1997); Long v. IRS, 891 F.2d 222 (9th Cir. 1989); Scrimgeour v. IRS, 149 F.3d 318 (4th Cir. 1998); and Sinicki v. United States Department of Treasury, 1998 U.S. Dist. LEXIS 2015 (S.D.N.Y. February 24, 1998).

⁸⁶⁴ S. Rep. No. 94-938 at 348 (emphasis added).

⁸⁶⁵ Compare 5 U.S.C. sec. 552a(g)(1)(D) and (g)(4) with sec. 7431(a).

⁸⁶⁶ "The IRS doe not routinely disclose collection information to a former spouse that relates to tax liabilities attributable to a joint return that was filed when married." Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 104 Congressth (JCS-12-6), December 18, 1996 at 29.

⁸⁶⁷ Sec. 6103(e)(8).

⁸⁶⁸ Internal Revenue Manual, Disclosure of Official Information Handbook, sec. 1.3.22.5.1 (August 19, 1998).

⁸⁶⁹ Id. at 1.3.22.5.1(3).

⁸⁷⁰ Disclosure Provisions Don't Bar IRS Access to Integrated Data Retrieval System, Tax Notes Today, 1999 TNT 200-54 (October 18, 1999).

⁸⁷¹ Id. at paragraph 6.

⁸⁷² Gandy v. United States, 1999 U.S. Dist. LEXIS 1029, 99-1 USTC paragraph 50,237 (E. D. Tex. January 15, 1999).

⁸⁷³ Treasury reg. sec. 301.6103(k)(6)-1.

⁸⁷⁴ Gandy v. United States, 1999 U.S. Dist. LEXIS 1029, at *7.

⁸⁷⁵ Sec. 7431(b)(1).

⁸⁷⁶ Gandy, 1999 U.S. Dist. LEXIS 1029, at *12.

⁸⁷⁷ Bristol-Myers Barceloneta, Inc., et al. v. United States of America, Civil No. 97-2567CCC (D.P.R. May 14, 1999).

⁸⁷⁸ The plaintiffs relied on IBM Corp. v. United States, 343 F.2d 914 (Ct. Cl. 1965). After the IRS granted Remington Rand, a direct IBM competitor, an excise tax exemption for its Univac computers, IBM applied for a similar ruling for its competing computer. Several years later, the IRS denied IBM's request, at the same time revoking Remington's exemption. Invoking section 7805(b), the court held that the IRS had abused its discretion by taxing IBM but not Remington in the years prior to the revocation of Remington's exemption. 343 F.2d at 923. "Implicit, too, in the Congressional award of discretion to the [IRS], through Section 7805(b), is the power as well as the obligation to consider the totality of the circumstances surrounding the handing down of a ruling -- including the comparative or differential effect on the other taxpayers in the same class. The Commissioner cannot tax one and not tax another without some rational basis for the difference." 343 F.2d at 920.

⁸⁷⁹ A similar provision was included in the technical corrections title of the House-passed version of H.R. 2488, sec. 1602, 106th Cong. 1st Sess. (1999).

⁸⁸⁰ Sec. 6103(k)(6).

⁸⁸¹ The Railroad Retirement Board made a request in January 1999 and the U.S. Customs Service made a request in March 1999. Telephone interview, IRS Government Liaison and Disclosure, Office of Tax Checks and Safeguards (September 28, 1999).

⁸⁸² Sec. 6103(n) and Treas. reg. sec. 301.6103(n)-1(a).

⁸⁸³ Treas. reg. sec. 301.6103(n)-1(a). Such services include the processing, storage, transmission or reproduction of such returns or return information, the programming, maintenance, repair, or testing of equipment or other property, or the providing of other services for purposes of tax administration.

⁸⁸⁴ Treas. reg. sec. 301.6103(n)-1(a) and (b). A disclosure is necessary if such procurement or the performance of such services cannot otherwise be reasonably, properly, or economically accomplished without such disclosure. Treas. reg. sec. 301.6103(n)- 1(b). The regulations limit the quantity of information to that needed to perform the contract.

⁸⁸⁵ Treas. reg. sec. 301.6103(n)-1(a).

⁸⁸⁶ Treas. reg. sec. 301.6103(n)-1(c).

⁸⁸⁷ Treas. reg. sec. 301.6103(n)-1(d).

⁸⁸⁸ Treas. reg. sec. 301.6103(n)-1(d)(1).

⁸⁸⁹ Treas. reg. sec. 301.6103(n)-1(d)(2).

⁸⁹⁰ Treas. reg. sec. 301.6103(n)-1(d).

⁸⁹¹ IRS Report on Procedures and Safeguards Established and Utilized by Agencies for the Period January 1 through December 31, 1998, enclosure for Letter from Charles O. Rossotti, Commissioner of Internal Revenue, to Lindy L. Paull, Chief of Staff, Joint Committee on Taxation (June 4, 1999).

⁸⁹² Id.

⁸⁹³ IRS Report on Procedures and Safeguards Established and Utilized by Agencies for the Period January 1 through December 31, 1998, enclosure for Letter from Charles O. Rossotti, Commissioner of Internal Revenue, to Lindy L. Paull, Chief of Staff, Joint Committee on Taxation (June 4, 1999).

⁸⁹⁴ General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 14.

⁸⁹⁵ Id.

⁸⁹⁶ The child support agency may disclose, with respect to the individual whom child support obligations are sought to be established or enforced, the address and social security number of that individual and the amount of any refund offset against past-due support. Sec. 6103(l)(6)(B).

⁸⁹⁷ Sec. 6103(l)(6)(B) and (C).

⁸⁹⁸ 42 U.S.C. sec. 604a.

⁸⁹⁹ Sec. 6103(l)(7)(A) and (B).

⁹⁰⁰ See, e.g ., sec. 6103(l)(6)(B) giving contractors of child support agencies the limited right to receive return information.

⁹⁰¹ Letter from Howard I. Bernstein, Legal Counsel, Wisconsin Department of Workforce Development, to Lindy L. Paull, Chief of Staff, Joint Committee on Taxation (October 1, 1999).

⁹⁰² Id. It is the understanding of the Joint Committee staff that there is also a dispute over whether an Indian tribe constitutes a "local agency."

⁹⁰³ See sec. 6103(l)(6)(B).

⁹⁰⁴ General Accounting Office, Taxpayer Confidentiality: Federal, State, and Local Agencies Receiving Taxpayer Information (GAO-GGD-99-164, August 1999) at 13.

⁹⁰⁵ Id.

⁹⁰⁶ These activities include conducting disclosure awareness seminars for State and local agency personnel, processing Freedom of Information and Privacy Act requests, processing ex parte orders for grand jury or Federal criminal investigations, testifying in Federal court to certify that certain documents are true copies of tax return information, and reviewing subpoenas served on IRS personnel to advise them of what they can and cannot testify to in court. GAO Fed/ State Report at 54.

⁹⁰⁷ Internal Revenue Service Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies, at 27 (1998).

⁹⁰⁸ See Part I. A. of this Part Five, above.

⁹⁰⁹ This number is an estimate of requests received by the various IRS service centers' Return Income Verification Services ("RAIV") units. The bulk of third party requests are handled by the RAIV units. Telephone interview, Adjustments Section, Customer Service Compliance & Accounts Division, Internal Revenue Service (October 14, 1999).

⁹¹⁰ Sec. 6103(g)(2).

⁹¹¹ Sec. 6103(g)(2).

⁹¹² Joint Committee on Taxation, Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 1998 (JCX-19-99) April 29, 1999.

⁹¹³ Similarly, no restrictions are placed on third parties contacted by the IRS for investigative purposes. The Code does require, however, that the IRS notify the taxpayer in advance that it intends to contact third parties and that the IRS provide a taxpayer with a record of persons contacted. Sec. 7602(c)(1) and (2). Notice is not required for contacts the taxpayer authorized, if notice would jeopardize collection or involve reprisal against any person, or with respect to a criminal investigation. Sec. 7602(c)(3).

Even with a valid consent, the IRS can refuse to disclose the returns or return information if it determines that the disclosure will seriously impair Federal tax administration. Sec. 6103(c); Treas. reg. sec. 301.6103(c)-1(c).

⁹¹⁴ Sec. 6103(1)(6)(C).

⁹¹⁵ Sec. 6103(g)(3) and (4).

⁹¹⁶ Sec. 6103(g)(5). Requests on current employees are exempt.

⁹¹⁷ Sec. 6103(p)(3)(A). Nonetheless, the IRS does provide the Joint Committee with the number of "tax check" disclosures made every year under section 6103(c).

⁹¹⁸ The IRS will not accept a consent signed by the taxpayer more than 60 days prior to its submission. Treas. reg. sec. 301.6103(c)-1(a).

⁹¹⁹ Secs. 6713(a) (civil penalty) and 7216 (criminal penalty).

⁹²⁰ Treas. reg. sec. 301.7216-2.

⁹²¹ Treas. reg. sec. 301.7216-3(a).

⁹²² Id.

⁹²³ Id.

⁹²⁴ Id.

⁹²⁵ Id.

⁹²⁶ Treas. reg. sec. 7216-3(c) Example 2.

⁹²⁷ Pub. L. No. 106-102, secs. 501-508 (Nov. 12, 1999).

⁹²⁸ Jeri Clausing, Revised Banking Legislation Raises Concerns About Privacy, New York Times (October 25, 1999).

⁹²⁹ Tierney v. Schweiker, 718 F.2d 449, 450 (D.C. Cir. 1983).

⁹³⁰ Id.

⁹³¹ Id. at 452.

⁹³² Id. at 453.

⁹³³ Id. at 455.

⁹³⁴ Id. at 455-56.

⁹³⁵ Id. at 456.

⁹³⁶ Id. at 455-56.

⁹³⁷ 64 Fed. Reg. 49,540-41.

⁹³⁸ 64 Fed. Reg. 49,540.

⁹³⁹ Amy Hamilton, Barr Discusses Proposal for Electronic Disclosure of Tax Data, Tax Notes Today, 1999 TNT 206-3 (October 26, 1999).

⁹⁴⁰ 64 Fed. Reg. 49,541.

⁹⁴¹ Id.; Approximately 26 lines would be sent under the pilot program. Bruce Horovitz, IRS E-sharing Raises Privacy Fears, USA Today (October 1, 1999).

⁹⁴² 64 Fed. Reg. 49,541.

⁹⁴³ 64 Fed. Reg. 49,542.

⁹⁴⁴ 64 Fed. Reg. 49,541.

⁹⁴⁵ Amy Hamilton, Barr Discusses Proposal for Electronic Disclosure of Tax Data, Tax Notes Today, 1999 TNT 206-3 (October 26, 1999).

⁹⁴⁶ 64 Fed. Reg. 49,541.

⁹⁴⁷ Id.

⁹⁴⁸ Id.

⁹⁴⁹ John Schwartz, IRS Looks to E-Mail as A Tool: Plan to Send Tax Data to Lenders Raises Privacy Concerns, The Washington Post, (October 23, 1999) at E1; Bruce Horovitz, IRS E-sharing Raises Privacy Fears, USA Today (October 1, 1999).

⁹⁵⁰ Bruce Horovitz, IRS E-sharing Raises Privacy Fears, USA Today (October 1, 1999) quoting Sherrill Fields, Director for Electronic Program Enhancement.

⁹⁵¹ John Schwartz, IRS Looks to E-Mail as A Tool: Plan to Send Tax Data to Lenders Raises Privacy Concerns, The Washington Post, (October 23, 1999), at E8.

⁹⁵² Telephone Interview of Mary J. Culnan, Professor, Georgetown University School of Business (October 26, 1999).

⁹⁵³ John Schwartz, IRS Looks to E-Mail as A Tool: Plan to Send Tax Data to Lenders Raises Privacy Concerns, The Washington Post, (October 23, 1999) at E8.

⁹⁵⁴ Id.

⁹⁵⁵ Sec. 6103(j)(2).

⁹⁵⁶ GAO Fed/ State Report at 25.

⁹⁵⁷ Sec. 7431(e).

⁹⁵⁸ As discussed above, U.S. Attorneys may not prosecute every substantiated case of unlawful browsing or disclosure, and not every substantiated case will be referred for prosecution.

⁹⁵⁹ See sec. 6103(p)(3)(C).

⁹⁶⁰ Data for this section of the study was taken from a report prepared by the General Accounting Office, Tax Administration: Few State and Local Governments Publicly Disclose Delinquent Taxpayers (GAO/ GGD-99-165, August 1999) (hereinafter GAO Report 99-165).

⁹⁶¹ As of July 1999, Wisconsin and Minnesota were actively considering a public disclosure program. On August 19, 1999, the California Senate Revenue and Taxation Committee approved a bill to place on the Internet the names of the twelve largest violators of the sales tax law. CA A. B. 790.

⁹⁶² See Part Two, IV., of this study, above, for a discussion of the public record exception to the rule of confidentiality.

⁹⁶³ The following information is taken from GAO Report 99-165 at 12-13.

⁹⁶⁴ <http://www.state.ct.us/drs/delinq/mart100.html>

⁹⁶⁵ Conn. Gen. Stat. sec. 12-7a (1999).

⁹⁶⁶ The following information is taken from GAO Report 99-165 at 13-15.

⁹⁶⁷ <http://www.dccfo.com/TopDelinquentTaxpayers1.htm>

⁹⁶⁸ D.C. Code secs. 47-1805.4(c) and 47-2018(b) (1999).

⁹⁶⁹ As of June 1999.

⁹⁷⁰ The following information is taken from GAO Report 99-165 at 15-16.

⁹⁷¹ <http://www.revenue.state.il.us/>. As of November 23, 1999, there were 608 delinquent taxpayers on the Internet list. Id.

⁹⁷² 20 Ill. Comp. Stat. 2505/ 39b54 (1999).

⁹⁷³ Unless otherwise indicated, the following information is taken from GAO Report 99-165 at 16-18.

⁹⁷⁴ <http://www.state.mt.us/revenue/del._tax_accts.html>

⁹⁷⁵ Mont. Code Ann. sec. 15-1-704 (1998).

⁹⁷⁶ GAO Report 99-165 at 6, table 1.

⁹⁷⁷ GAO Report 99-165 at 18-19.

⁹⁷⁸ <http://www.state.nj.us/treasury/taxation/jdgdiscl.htm>

⁹⁷⁹ N.J. Stat. sec. 54:49-12 (1999).

⁹⁸⁰ In August 1999, New Jersey's web site stated that the current amount of tax penalty and interest due may differ from the judgment amount as a result of partial payments made against the judgment amount and/ or accrual of additional penalty and interest. The site also noted that some taxpayers who have resolved their debt since their appearance on the list may still appear on the list. The site noted that these names are in the process of being removed.

⁹⁸¹ E.g., sec. 257 of the Revenue Acts of 1917 and 1924. See also, the legislative history discussion in Appendix A: Statutory Evolution of Section 6103.

⁹⁸² Report on Administrative Procedures of the Internal Revenue Service to the Administrative Conference of the United States, 94 Cong., 2d Sess., S. Rep. No. 94-266 at 1039th n. 51 (1975) quoting Hearings on Revenue Revision 1925 Before the House Ways and Means Comm., 69th Cong., 1st Sess., at 8-9 (1925).

⁹⁸³ Id.

⁹⁸⁴ Pub. L. No. 89-713, sec. 4(a)(2) (1966).

⁹⁸⁵ See Part Five, I.A., above.

⁹⁸⁶ The Congressional Research Service explains this as follows:

The requirement to file a return does not necessarily mean that

⁹⁸⁷ For example, in Commissioner v. Lundy, 516 U.S. 235 (1996), the Federal income taxes withheld from the wages of a husband and wife exceeded the amount of taxes that the couple owed for the year. In September 1990, at which time the couple had not yet filed with the IRS their joint 1987 tax return that was due on April 15, 1988, the IRS mailed the couple a notice of deficiency for 1987. The couple subsequently filed their 1987 return in December 1990, showing a refund due for overpaid taxes. The interplay of the statutes governing the limits on refunds and the Tax Court's ability to determine an overpayment, however, operated to deny the taxpayers their refund.

⁹⁸⁸ As noted above, two programs were started in 1997, one in 1998, and two in 1999.

⁹⁸⁹ States that publish lists of delinquent taxpayers generally do so after a tax is assessed. Under the Federal tax laws, after a tax is assessed, taxpayers still have rights to contest the IRS determination of liability. Thus, the amount shown as assessed may not in fact be the amount for which the taxpayer is ultimately determined to be liable.

⁹⁹⁰ The IRS currently experiences difficulties in tracking unpaid assessments. The GAO reported in August 1999 that the IRS does not have a detailed list, or subsidiary ledger, that tracks and accumulates unpaid assessments and their status on an ongoing basis. Deficiencies in the IRS systems have resulted in pursuit and collection of amounts that had already been paid. General Accounting Office, Internal Revenue Service: Custodial Financial Management Weaknesses, (GAO/AIMD-99-193, August 1999) at 2-3.

⁹⁹¹ Internal Revenue Service, Publication 2104, National Taxpayer Advocate's Annual Report to Congress (December 1998) (hereinafter "NTA Report 12/98").

⁹⁹² NTA Report 12/98 at 121.

⁹⁹³ Id. at 122.

⁹⁹⁴ Internal Revenue Service, Information Release IR-999-91 (November 9, 1999).

⁹⁹⁵ Id.

⁹⁹⁶ Sec. 6103(m)(1). This section provides:

The Secretary may disclose taxpayer identify information to the

⁹⁹⁸ NTA Report 12/ 98 at 122.

⁹⁹⁹ Id .

¹⁰⁰⁰ Id.

¹⁰⁰¹ NTA Report 12/98 at 122.

¹⁰⁰² Id.

¹⁰⁰³ Id.

¹⁰⁰⁴ NTA Report 12/98 at 122. The NTA also proposes having a change of address form available for taxpayers to download at the same location. Id.

¹⁰⁰⁵ NTA Report 12/98 at 122.

¹⁰⁰⁶ Id.

¹⁰⁰⁷ To eliminate this obstacle to an Internet site, the NTA proposes eliminating the "press and other media" limitation. NTA Report 12/98 at 123. As modified under the NTA proposal, section 6103(m)(1) would read:

The Secretary may make public taxpayer identify information for

¹⁰⁰⁸ 973 F.2d 962 (1st Cir. 1992).

¹⁰⁰⁹ 973 F.2d at 963.

¹⁰¹⁰ Id. The FOIA is a Federal statute that provides that agencies are to make available agency records upon request unless those records fall within any of the nine listed exemptions. 5 U.S.C. sec. 552(a)(3) and (b).

¹⁰¹¹ 973 F.2d at 963.

¹⁰¹² Id.

¹⁰¹³ 973 F.2d at 963.

¹⁰¹⁴ Id.

¹⁰¹⁵ Aronson v. Internal Revenue Service, 767 F. Supp. 378, 393 (D. Mass. 1991). IRS methods for notification included press releases, newspapers, and waiting for the taxpayer to file a subsequent return with the proper address.

¹⁰¹⁶ Id . at 385.

¹⁰¹⁷ 973 F.2d at 963.

¹⁰¹⁸ 973 F.2d at 967.

¹⁰¹⁹ Id .

¹⁰²⁰ 973 F.2d at 967. The statute provides that "the Secretary may disclose taxpayer identity information to the press or other media . . ." Sec. 6103(m)(1) (emphasis added).

¹⁰²¹ Id.

¹⁰²² 973 F.2d at 968.

¹⁰²³ 973 F.2d at 968 citing Int's Bhd of Elec. Workers Local Union No. 5 v. Dept. of Hous. And Urban Dev., 852 F.2d 87, 89 (3d Cir. 1988).

¹⁰²⁴ Merriam-Webster's Collegiate Dictionary, 721 (10th ed. 1995).

¹⁰²⁵ Id. at 715.

¹⁰²⁶ NTA Report 12/98 at 122.

¹⁰²⁷ See sec. 7431.

¹⁰²⁸ See Part Three for a discussion of these issues.

¹⁰²⁹ 12 Stat. 309.

¹⁰³⁰ 12 Stat. 436-437, 439.

¹⁰³¹ The Act of July 1, 1862, 12 Stat. 432 directed assessors for each collection district to make lists concerning tax information open for examination for 15 days :

Sec. 14. . . .make two general lists, the first of which shall

¹⁰³⁴ In 1864, legislation provided that the annual lists be made available for inspection by all person who may apply for that purpose:

It shall be the duty of the assessor for each collection

¹⁰³⁵ CRS at 6.

¹⁰³⁶ CRS at 7.

¹⁰³⁷ Id.

¹⁰³⁸ "The apparent view was the such publicity would make every citizen a deputy tax collector, spying on neighbors and looking out for the government's interests." CRS at 6.

¹⁰³⁹ CRS at 6 citing the New York Tribune, page 5 cols. 304 (January 20, 1865).

¹⁰⁴⁰ Act of July 14, 1870, 16 Stat. 256, 259.

¹⁰⁴¹ Pollack v. Farmers Loan and Trust Co., 157 U.S. 429 (1895).

¹⁰⁴² Act of June 17, 1910, 36 Stat. 468, 494.

¹⁰⁴³ The Sixteenth Amendment provides:

The Congress shall have the power to lay and collect taxes on

G.(d)1. When the assessment shall be made, as provided in this

¹⁰⁴⁵ Section 257 of the Revenue Act of October 3, 1917, provided:

Section 257. That returns upon which the tax has been determined

Sec. 257. (A) Returns upon which the tax has been

¹⁰⁴⁷ United States v. Dickey, 268 U.S. 378 (1925).

¹⁰⁴⁸ Report on Administrative Procedures of the Internal Revenue Service to the Administrative Conference of the United States, S. Rep. No. 94-266 at 1039 n. 51 (1975) quoting Hearings on Revenue Revision 1925 Before the House Ways and Means Comm., 69 Cong., 1st Sess., at 8-9 (1925).

¹⁰⁴⁹ Revenue Act of 1926, 44 Stat. 9, 52.

¹⁰⁵⁰ 1939-1 C. B. (Part 2) 321.

¹⁰⁵¹ Section 1203 of the Revenue Act of 1926 provided:

Sec. 1203. (d) The Joint Committee shall have the same right to

(b) Every person required to file an income return shall file

¹⁰⁵³ See CRS at 65 through 228.

¹⁰⁵⁴ See CRS at 64-65 quoting Representative Robert Bacon of New York in the Congressional Record at 2305-2307 (February 30, 1935).

¹⁰⁵⁵ Act of April 19, 1935, 49 Stat. 158.

¹⁰⁵⁶ In 1939, the disclosure provisions were codified at section 55 of the Internal Revenue Code. In 1954, the disclosure provisions moved to their present location in section 6103. No material change was made from existing law.

¹⁰⁵⁷ Pub. L. No. 89-713, sec. 4(a)(2) (1966).

¹⁰⁵⁸ In 1962, Public Law 87-397 added section 6109 to the Internal Revenue Code of 1954. For periods beginning after December 31, 1961, this provision required taxpayers to use an identifying number on income tax returns, statements and other documents required to be filed with the IRS. For individuals, this identifying number is their social security number.

¹⁰⁵⁹ S. Rep. No. 1625, 89 Cong. 2d Sess., 7-8 (1966).th

¹⁰⁶⁰ Section 6103(f) (1966).

¹⁰⁶¹ Employee Retirement Income Act of 1974 (Pub. L. No. 93- 406).

¹⁰⁶² Section 1131 of the Social Security Act (42 U. S. C. sec. 1320b-1).

¹⁰⁶³ Persons with material interest included: return of an individual open to that individual or his attorney in fact; either spouse of a joint return upon satisfactory evidence of such relationship; if deceased, the administrator, executor or trustee of his/ her estate or attorney fact of the administrator, executor or trustee; heir at law or next of kin (or their attorney in fact) upon showing of a material interest affected by info contained in the return at the Commissioner's discretion; partners, estate/ next of kin of a deceased partner having an affected material interest/ partnership returns; return of a trust: trustee, beneficiary, estate of beneficiary, next of kin of beneficiary; corporate returns: president, vice president, secretary, treasurer or any of the principal officers. Treas. reg. sec. 301.6103(a)-1(c) (1975).

¹⁰⁶⁴ Exec. Order No. 11697, 38 Fed. Reg. 1723 (1973); Exec. Order No. 11709, 38 Fed. Reg. 8131 (1973).

¹⁰⁶⁵ See generally, Hearings on Executive Orders 11697 and 11709 Permitting Inspection by the Department of Agriculture of Farmers' Income Tax Returns Before House Subcommittee on Foreign Operations and Government Information of Committee on Government Operations, 93 Cong., 1st Sess. (1973); andrd st Hearings on Inspection of Farmers' Federal Income Tax Returns by the U.S. Department of Agriculture Before the House Subcommittee on Department Operations of the Committee on Agriculture, 93 Cong., 1st Sess. (1973).

¹⁰⁶⁶ Report on Administrative Procedures of the Internal Revenue Service to the Administrative Conference of the United States, S. Rep. No. 94-266 at 878 (1975).

¹⁰⁶⁷ Id. at 879.

¹⁰⁶⁸ Senate Select Committee on Presidential Campaign Activities, The Final Report, S. Rep. No. 93-981, at 7-9 (1974) (hereinafter S. Rep. No. 93-981).

¹⁰⁶⁹ Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1976 (JCS-33-76), December 29, 1976, at 314.("Apparently, tax information had been obtained by the White House pertaining to a number of well known individuals for use for non-tax purposes."); See also S. Rep. No. 93-981 at 9 (" Dean recalled that, after an article was published in Newsday on Charles (" Bebe") Rebozo, one of the President's closest friends, Dean was told that the 'authors of that article should have some problems. '[ footnote omitted] Dean discussed this with John Caufield, who had friends at the IRS. . . . Dean recalls that the IRS did audit the newsman involved.").

¹⁰⁷⁰ The Privacy Protection Study Commission was created as part of the Privacy Act of 1974. The commission was ordered by Congress to report on the proper restrictions that should be placed on the disclosure of Federal income tax information.

¹⁰⁷¹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1667 (1976) [Sec. 6103(a)]. The definition of "return" and "return information" is broad, covering almost all data received by or furnished to the IRS. Sec. 6103(b). Data in a form that cannot be associated with or otherwise identify a particular taxpayer is not return information. Sec. 6103(b)(2).

¹⁰⁷² Sec. 6103(b) (1975).

¹⁰⁷³ The House version of H. R. 10612 did not contain any provisions regarding the disclosure of returns and return information. Section 6103 was a Senate amendment. H. R. Conf. Rep. No. 94-1515 at 475 (1976). The conference agreement generally followed the Senate amendment with minor modifications. Id. at 482- 83.

¹⁰⁷⁴ S. Rep. No. 94-938, at 337 (1976).

¹⁰⁷⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1669 (1976) [Sec. 6103(d)].

¹⁰⁷⁶ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1679 (1976) [Sec. 6103(k)(5)].

¹⁰⁷⁷ Treas. Reg. sec. 301.6103(a)-1(c) (1975).

¹⁰⁷⁸ Sec. 6103(c) (1975).

¹⁰⁷⁹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1669-1671 (1976)[ Sec. 6103(e)].

¹⁰⁸⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1669 (1976) [Sec. 6103(c)].

¹⁰⁸¹ Sec. 6103(d) (1975).

¹⁰⁸² Treas. Reg. sec. 301.6103(a)-101 (1975).

¹⁰⁸³ S. Rep. No. 94-938 at 319-320.

¹⁰⁸⁴ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1671 (1976) [Sec. 6103(f)(1)].

¹⁰⁸⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1671-72 (1976) [Sec. 6103(f)(3)].

¹⁰⁸⁶ Id.

¹⁰⁸⁷ Executive Order 11805, September 20, 1974.

¹⁰⁸⁸ The Senate report provided:

The committee recognizes the President's need for certain tax

¹⁰⁸⁹ Id.

¹⁰⁹⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1672-73 (1976) [Sec. 6103(g)].

¹⁰⁹¹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1673 (1976) [Sec. 6103(g)(1)(D)].

¹⁰⁹² Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1673 (1976) [Sec. 6103(g)(2)].

¹⁰⁹³ Id.

¹⁰⁹⁴ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1673-74 (1976) [Sec. 6103(g)(5)].

¹⁰⁹⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1674 (1976) [Sec. 6103(g)(5)].

¹⁰⁹⁶ Treas. reg. sec. 301.6103(a)-1(h) (1975).

¹⁰⁹⁷ Treas. reg. sec. 301.6103(a)-1(g) (1975).

¹⁰⁹⁸ Treas. reg. sec. 301.6103(a)-1(h) (1975).

¹⁰⁹⁹ S. Rep. No. 94-938 at 324.

¹¹⁰⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1674 (1976) [Sec. 6103(h)(2)].

¹¹⁰¹ Id. [Sec. 6103(h)(2)(B)].

¹¹⁰² Id. [Sec. 6103(h)(2)(C)].

¹¹⁰³ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1674-75 (1976) [Sec. 6103(h)(4)(B) and (C)].

¹¹⁰⁴ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1675 (1976) [Sec. 6103(h)(4)].

¹¹⁰⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1675 (1976) [Sec. 6103(h)(5)]. This provision would be repealed by the Taxpayer Relief Act of 1997 (Pub. L. No. 105-34).

¹¹⁰⁶ Treas. reg. sec. 301.6103(a)-1(f) and (g) (1975).

¹¹⁰⁷ The committee report provides:

The committee decided that the information that the

¹¹⁰⁸ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1675-77 (1976) [Sec. 6103(i)].

¹¹⁰⁹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1676 (1976) [Sec. 6103(i)(2)].

¹¹¹⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1675 (1976) [Sec. 6103(i)(1)(B)].

¹¹¹¹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1675 (1976) [Sec. 6103(i)(1)(B)(ii)].

¹¹¹² Treas. reg. sec. 301.6103(a)-1(g) (1975).

¹¹¹³ Treas. reg. sec. 301.6103(a)-1(f) (1975).

¹¹¹⁴ An exception existed for those instances where DOJ is defending the United States in a suit involving the renegotiation of contracts previously determined by the Renegotiation Board. Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1677 (1976) [Sec. 6103(i)(5) ].

¹¹¹⁵ S. Rep. No. 94-938 at 331. The committee report provides:

The committee decided that the current use by the Department of

¹¹¹⁶ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1677 (1976) [Sec. 6103(i)(6)].

¹¹¹⁷ This provision had been previously included in another bill reported favorably out of the Senate Finance Committee. H. R. 8948, 94 Congress (1976)(a bill to amend the Accountingth and Auditing Act of 1960 to provide for the audit of the IRS, and the Bureau of Alcohol Tobacco and Firearms, by the Comptroller General, reported to the Senate from the Committee on Finance by S. Rep. No. 94-909 (1976)).

¹¹¹⁸ Treas. reg. sec. 301.6103(a)-104 (1975).

¹¹¹⁹ Treas. reg. sec. 301.6103(a)-104 (1975).

¹¹²⁰ Treas. reg. sec. 301.6103(a)-106 (1975).

¹¹²¹ Treas. reg. sec. 301.6103(a)-102 (1975).

¹¹²² S. Rep. No. 94-938 at 333.

¹¹²³ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(j)(1) &(2)].

¹¹²⁴ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(j)(3)].

¹¹²⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(j)(4)].

¹¹²⁶ See, e.g., Treas. reg. sec. 301.6103(a)-100 (1975) (Health, Education, and Welfare); Treas. Reg. sec. 301.6103(a)-105 (1975)(Renegotiation Board); Treas. reg. sec. 301.6103(a)-106 (1975) (FTC).

¹¹²⁷ The Renegotiation Board was charged with administering the laws to renegotiate contracts with government contractors to eliminate excess profits. S. Rep. No. 94-938 at 334.

¹¹²⁸ S. Rep. No. 94-938 at 334.

¹¹²⁹ Id. at 335.

¹¹³⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1677, 1679- 81 (1976) [Sec. 6103(i)(5) and sec. 6103(l)].

¹¹³¹ S. Rep. No. 94-938 at 378.

¹¹³² Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1680 (1976) [Sec. 6103(l)(6)].

¹¹³³ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1681 (1976) [Sec. 6103(m)(2)].

¹¹³⁴ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1680 (1976) [Sec. 6103(l)(3)].

¹¹³⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1681 (1976) [Sec. 6103(n)].

¹¹³⁶ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1681 (1976) [Sec. 6103(m)(1)].

¹¹³⁷ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1680 (1976) [Sec. 6103(l)(4)].

¹¹³⁸ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1680 (1976) [Sec. 6103(l)(4)(A)(ii)].

¹¹³⁹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(k)(3)].

¹¹⁴⁰ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1679 (1976) [Sec. 6103(k)(6)].

¹¹⁴¹ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(k)(1)].

¹¹⁴² Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1679 (1976) [Sec. 6103(k)(4)].

¹¹⁴³ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1678 (1976) [Sec. 6103(k)(2)].

¹¹⁴⁴ S. Rep. No. 94-938 at 343.

¹¹⁴⁵ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1682 (1976) [Sec. 6103(p)(3)].

¹¹⁴⁶ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1682 (1976) [Sec. 6103(p)(3)(A)].

¹¹⁴⁷ Id.

¹¹⁴⁸ Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1683 (1976) [Sec. 6103(p)(4)].

¹¹⁴⁹ Id.

¹¹⁵⁰ Id.

¹¹⁵¹ S. Rep. No. 94-938 at 346.

¹¹⁵² Pub. L. No. 94-455 sec. 1202(a)(1), 90 Stat. 1682-83 (1976) [Sec. 6103(p)(3)].

¹¹⁵³ Pub. L. No. 95-600, sec. 701(bb) (1978).

¹¹⁵⁴ Id.

¹¹⁵⁵ Id.

¹¹⁵⁶ Id.

¹¹⁵⁷ Section 1398 creates a separate taxable bankruptcy estate, which succeeds to various tax attributes of the debtor. Sec. 1398(g).

¹¹⁵⁸ Pub. L. No. 96-589, sec. 3(c) (1980). Such disclosures permit the trustee to determine attribute carryovers to the estate and carry back deductions to the preceding years of the debtor. S. Rep. No. 96-1035, at 31-32 (1980).

¹¹⁵⁹ In involuntary cases, the IRS may not make a disclosure to the trustee until the order for relief has been entered, unless the court having jurisdiction over the case determines that such disclosure is appropriate for purposes of determining whether an order for relief should be entered. Pub. L. No. 96-589, sec. 3(c) (1980).

¹¹⁶⁰ Pub. L. No. 96-598, sec 3 (1980).

¹¹⁶¹ Pub. L. No. 96-499, sec. 302 (1980).

¹¹⁶² Pub. L. No. 97-34, sec. 701 (1981).

¹¹⁶³ 596 F. 2d 362 (9 Cir. 1979).th

¹¹⁶⁴ Pub. L. No. 97-248, sec. 356(a) (1982).

¹¹⁶⁵ Id.

¹¹⁶⁶ Id.

¹¹⁶⁷ Id.

¹¹⁶⁸ Id.

¹¹⁶⁹ Id.

¹¹⁷⁰ Id. at sec. 358.

¹¹⁷¹ Pub. L. No. 98-21, sec. 121 (1983).

¹¹⁷² Pub. L. No. 98-369, sec. 449 (1984).

¹¹⁷³ Id. at sec. 453.

¹¹⁷⁴ Id. at sec. 2651(k)(1).

¹¹⁷⁵ Pub. L. No. 99-514, sec. 1568 (1986).

¹¹⁷⁶ Pub. L. No. 100-647, sec. 6251 (1988).

¹¹⁷⁷ Pub. L. No. 100-647, sec. 1012(bb)(3)(A)(i)-(ii) (1988).

¹¹⁷⁸ Id. at sec. 8008.

¹¹⁷⁹ Pub. L. No. 101-239, sec. 6202 (1989).

¹¹⁸⁰ See H. R. Conf. Rep. No. 101-386, at 823 (1990).

¹¹⁸¹ Pub. L. No. 101-508, sec. 8051 (1990). The Taxpayer Relief Act of 1997 extended disclosure authority to the Veterans Administration to September 30, 2003. Pub. L. No. 105-34, sec. 1023(a) (1997).

¹¹⁸² H. R. Rep. No. 101-881, at 223 (1990).

¹¹⁸³ S. Rep. No. 103-189, at 104 (1993).

¹¹⁸⁴ Pub. L. No. 103-182, sec. 522 (1993).

¹¹⁸⁵ Pub. L. No. 103-66, sec. 4021 (1993).

¹¹⁸⁶ Id. at sec. 13402.

¹¹⁸⁷ H. R. Rep. No. 103-111, at 1034 (1993).

¹¹⁸⁸ Pub. L. No. 103-66, sec. 3003 (1993).

¹¹⁸⁹ H. R. Rep. No. 103-111, at 1035 (1993).

¹¹⁹⁰ Pub. L. No. 103-66, sec. 13444 (1993).

¹¹⁹¹ Pub. L. No. 103-296, sec. 311 (1994).

¹¹⁹² Pub. L. No. 104-168, sec. 403 (1996).

¹¹⁹³ Id. at sec. 902.

¹¹⁹⁴ H. R. Rep. No. 104-506, at 40 (1996).

¹¹⁹⁵ Id. at 49.

¹¹⁹⁶ Pub. L. No. 104-168, sec. 1207 (1996).

¹¹⁹⁷ H. R. Rep. No. 104-506, at 49 (1996).

¹¹⁹⁸ Pub. L. No. 104-168, sec. 1206 (1966).

¹¹⁹⁹ Pub. L. No. 105-33, sec. 11024 (1997).

¹²⁰⁰ Id. at sec. 4313.

¹²⁰¹ Pub. L. No. 105-34, sec. 1026 (1997).

¹²⁰² Id. at sec. 1205.

¹²⁰³ Id. at sec. 1283.

¹²⁰⁴ H. R. Rep. No. 105-148, at 609 (1997). Four reasons were cited for the change. First, it slowed the litigation process because it could take a substantial period of time to compile the requested information. Second, the early release of the list of potential jurors to the defendant provided an opportunity for harassment and intimidation of potential jurors. Third, significant judicial resources were spent interpreting this procedural requirement. Fourth, differing judicial interpretations have caused confusion. In some instances, defendants convicted of criminal tax offenses have obtained reversals based on a failure to fully comply with this provision.

¹²⁰⁵ Pub. L. No. 105-206, sec. 6019(c) (1998).

¹²⁰⁶ Pub. L. No. 105-206, sec. 3708 (1998).

¹²⁰⁷ Id. at sec. 3702.

¹²⁰⁸ Pub. L. No. 105-277, sec. 4006 (1998).

¹²⁰⁹ Pub. L. No. 106-170, sec. 521 (1999).

¹²¹⁰ Rev. Proc. 96-53, Section 482 -Allocations Between Related Parties, secs. 5.03-5.95, 1996-2 C. B. 375(1996).

¹²¹¹ The list is not exhaustive. Other information may be required by the IRS.

¹²¹² See also, the summary of comments relating to increased disclosure of information with respect to tax-exempt organizations in Volume II of this study.

¹²¹³ See Part Four, IV. E., above.

¹²¹⁴ See, Part Five, II. H., above.

¹²¹⁵ Comments from both the ABA Tax Section and the Tax Executive's Institute, Inc, with respect to disclosure of Advance Pricing Agreements are discussed in another section of this summary, below.

¹²¹⁶ BNA had sought the disclosure of APAs in three consolidated lawsuits before the U. S. District Court for the District of Columbia. BNA v. IRS, Nos. 96-376, 96-2820, and 96-1473 (D.D.C.) Prior to this litigation and since the inception of the APA program, the IRS held the position that APAs were confidential return information protected from disclosure by section 6103. See, e.g., Rev. Proc. 91-22, sec. 11, 1991-1 C. B. 526, 534, and Rev. Proc. 96- 53, sec. 12, 1996-2 C. B. 375, 386. On January 11, 1999, the IRS conceded that APAs were "rulings" and therefore were "written determinations" for purposes of section 6110.

¹²¹⁷ See, Part Two, VI. D., above.

¹²¹⁸ Pub. L. No. 106-170, sec. 521 (1999).