IRS Handles Most FOIA Requests Timely and Accurately, TIGTA Says

IMPACT ON TAXPAYERS

The IRS must ensure that the provisions of the Freedom of Information Act (FOIA) and Internal Revenue Code (I.R.C.) Section (§) 6103 are continually followed. Errors can violate taxpayer rights and result in improper disclosures of taxpayer information.

WHY TIGTA DID THE AUDIT

TIGTA is required to conduct periodic audits to determine whether the IRS properly denied written requests for taxpayer information pursuant to the FOIA exemption 5 United States Code (U.S.C.) § 552(b)(7) and I.R.C. § 6103. The overall objective of this audit was to determine whether the IRS improperly withheld information requested by taxpayers in writing based on the FOIA exemption 5 U.S.C. § 552(b)(7) or I.R.C. § 6103 or by replying that responsive records were not available or did not exist. This included determining whether these requests were processed timely and whether the IRS erroneously disclosed sensitive taxpayer information when responding to written FOIA or I.R.C. § 6103 information requests.

TIGTA also evaluated the processing of I.R.C. § 6104 information requests in the Tax Exempt and Government Entities Division related to applications for tax-exempt status and information returns to determine whether the requested information was appropriately provided or if sensitive information was erroneously disclosed.

WHAT TIGTA FOUND

TIGTA reviewed a statistically valid sample of 60 information requests from a population of 2,720 FOIA requests and found seven (11.7 percent) in which taxpayer rights may have been violated. Although the IRS properly released thousands of pages from these documents, taxpayer rights may have been violated because these information requests had some information erroneously withheld. In addition, TIGTA selected a statistically valid sample of 55 I.R.C. § 6103 information requests and found that the IRS adequately provided information to the requestors in all of the requests reviewed.

Even though the number of backlogged FOIA requests increased for the third straight year, TIGTA found that responses to all sampled FOIA requests were timely. While there are no statutory time frames within which the IRS must respond to taxpayers' I.R.C. § 6103 information requests, the IRS requires disclosure specialists to provide a status report to the requestors if their requests are not completed within 30 business days. For nine (16.4 percent) of the 55 I.R.C. § 6103 information requests reviewed, the IRS took more than 30 business days to provide a status report to the requestor. According to the IRS, the cases TIGTA identified in which the requestors were not timely informed of the status of their requests could have resulted from an oversight by the caseworkers when completing their reviews.

Additionally, disclosure specialists inadvertently disclosed sensitive taxpayer information in two instances when responding to FOIA requests. Lastly, based on a judgmental sample of 19 I.R.C. § 6104 information requests received by the Tax Exempt and Government Entities Division, TIGTA found that the information requests were processed timely and did not find any sensitive information that was inadvertently disclosed.

WHAT TIGTA RECOMMENDED

TIGTA made no recommendations in this report. However, key IRS officials reviewed this report prior to its issuance and agreed with the facts and conclusions presented.

The Treasury Inspector General for Tax Administration is required to conduct periodic audits to determine whether the IRS properly denied written requests for taxpayer information. We are also required to include the results in one of our Semiannual Reports to Congress. This is our seventeenth review of denials of FOIA and I.R.C. § 6103 information requests. This review is included in our Fiscal Year 2016 Annual Audit Plan and addresses the major management challenge of Taxpayer Protection and Rights.

Management's complete response to the draft report is included as Appendix VI.

If you have any questions, please contact me or Matthew A. Weir, Assistant Inspector General for Audit (Compliance and Enforcement Operations).

The Internal Revenue Code (I.R.C.) requires the Treasury Inspector General for Tax Administration (TIGTA) to:

The FOIA requires Federal Government agencies to make records available to the public upon request unless specifically exempted.² Information that is "specifically exempted from disclosure by statute" is one of the exemptions. I.R.C. Section (§) 6103 is an example of such a statute; it protects the confidentiality of tax returns and return information. Records or information compiled for law enforcement purposes are also exempt from disclosure under the FOIA. Section 552(b)(7) provides the following exception to the FOIA's general disclosure rules by allowing nondisclosure of records or information compiled for law enforcement purposes, but only to the extent that the production of such law enforcement records or information:

Internal Revenue Service (IRS) processing and reporting of FOIA requests

Effective June 2011, the Office of the Deputy Commissioner for Operations Support (through its Office of Privacy, Governmental Liaison, and Disclosure) became responsible for ensuring the IRS's timely compliance with the FOIA and I.R.C. § 6103. The Disclosure Office within the Office of Privacy, Governmental Liaison, and Disclosure sets IRS policy and issues instructions, guidelines, and procedures to the various IRS functions to ensure compliance with the disclosure statutes.

The Disclosure Office processes FOIA and I.R.C. § 6103 information requests received by the IRS. In the Department of the Treasury 2015 Freedom of Information Act Annual Report to the Attorney General of the United States, the IRS reported that a total of 10,416 FOIA requestswere processed. This is consistent with the 10,415 FOIA requests processed on the Automated Freedom of Information Act (AFOIA) system during Fiscal Year 2015.³

In addition, the report stated that the IRS denied or partially denied information to requestors in 2,825 (27.1 percent) of the 10,416 FOIA requests processed in Fiscal Year 2015. This was a small decrease from the 30.6 percent reported in Fiscal Year 2014. The report further stated that the IRS advised requestors that there were no records responsive to requests in 983 (9.4 percent) of the 10,416 FOIA requests. This was an increase compared to the 6.4 percent reported in the prior fiscal year. The remaining information requests were either granted in full or closed for miscellaneous reasons, such as the request was improper or had been withdrawn.

Audit limitations and standards

Individual IRS disclosure offices or other IRS offices having custody of taxpayer records also process written requests for information made under I.R.C. § 6103. Although TIGTA is required to audit denials of taxpayer requests for information made pursuant to I.R.C. § 6103, the IRS only tracks on its AFOIA system I.R.C. § 6103 information requests worked by its Disclosure Office employees. Requests made under I.R.C. § 6103 that were received and processed by IRS offices, other than the Disclosure Office, are not controlled on the AFOIA system or otherwise inventoried in a centralized location. Consequently, the IRS does not know the volume of all these requests; however, this volume of uncontrolled inventory may be substantially larger than what the Disclosure Office tracks on its AFOIA system.

As a result, for this audit we statistically sampled only the I.R.C. § 6103 information requests processed directly by the IRS's Disclosure Office and tracked on the AFOIA system. We reviewed only those information requests processed by the Disclosure Office that were denied, partially denied, or had no responsive records during the period of October 1, 2014, through September 30, 2015. However, this year we also judgmentally sampled I.R.C. § 6104 information requests in the Tax Exempt and Government Entities (TE/GE) Division related to applications for tax-exempt status and information returns.⁴ We will continue to evaluate other IRS offices and functions that process these types of information requests in future reviews.

This review was performed with information obtained from the Disclosure Office within the Office of Privacy, Governmental Liaison, and Disclosure and at the Determinations Unit in the TE/GE Division's Rulings and Agreements function in Cincinnati, Ohio, during the period September 2015 through May 2016. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.

The IRS was not consistent in its service to individuals who requested information under the FOIA based on the statistically valid sample of information requests reviewed. Specifically, disclosure specialists improperly withheld information on seven (11.7 percent) of the 60 FOIA requests reviewed. The seven cases we identified included improperly withheld information related to the taxpayers' own cases with the IRS, e.g., bank statements, examination materials, and other tax return information. Although the IRS properly released thousands of pages from these documents, taxpayer rights still may have been violated because these information requests had some information erroneously withheld. According to Disclosure Office management, the FOIA cases we identified with improperly withheld information could have resulted from an oversight by the caseworker when completing the review or management in their reviews of the case files. When projected to the population of 2,720 FOIA requests closed during the period October 1, 2014, through September 30, 2015, the sample results indicate that approximately 317 FOIA requests may have had information erroneously withheld. ⁵ See Appendix IV for an explanation of this projection.

In addition, we did not find any instances of information being erroneously withheld in the 55 I.R.C. § 6103 information requests reviewed. Although we did not identify any issues with information being erroneously withheld in the sampled I.R.C. § 6103 information requests, the IRS must ensure that the provisions of the FOIA and I.R.C. § 6103 are continually followed. Errors can violate taxpayer rights and result in improper disclosures of taxpayer information. Figure 1 shows the audit results for Fiscal Years 2011 through 2015. ⁶

 

Figure 1: Improper FOIA and I.R.C. § 6103

 

Information Request Withholdings

 

 

 

The IRS relies on its disclosure personnel to ensure that information requests under the FOIA and I.R.C. § 6103 are properly handled in accordance with laws and regulations. Internal Revenue Manual 11.3 provides guidance to disclosure personnel nationwide.⁷ Procedures throughout the Internal Revenue Manual instruct personnel to properly document in case files all aspects of their work during the receipt, control, research, response, and closing phases of the requests. This documentation is important because it provides the principal evidence that procedures were followed as well as provides the foundation for other control processes such as management reviews.

Disclosure Office management developed the Disclosure Quality Measurement System (DQMS) to monitor the quality of all Disclosure Office work nationwide. The DQMS element that corresponds to FOIA and I.R.C. § 6103 information requests is Accuracy -- Proper Determination Made on Releasibility. This element evaluates whether a caseworker:

• Conducted appropriate and adequate research for all responsive records.

• Located and considered for release all responsive records.

• Disclosed responsive records to the extent legally possible.

• Decided to withhold records based on the correct interpretation and application of exemptions.

• Released all records that were within the scope of the request.

  Figure 2: Fiscal Year 2015 Comparison of the DQMS and TIGTA Accuracy

Inadvertent Disclosures by Disclosure Specialists Have Been Reduced

Casework is reviewed for any inadvertent disclosures during operational and regular managerial reviews. The DQMS also has procedures in place to review casework for inadvertent disclosures and to report those disclosures when discovered.

As a result of our findings in a previous report, Office of Privacy, Governmental Liaison, and Disclosure management developed and implemented a mandatory Disclosure Technical Update training session for all disclosure specialists and managers to review the various types of inadvertent disclosures and stress the need for a careful review of documents prior to release to avoid unauthorized disclosures. The Disclosure Technical Update includes a review of the procedures for reporting any such disclosures. Disclosure Office managers are now required to certify on an annual basis that their employees reviewed this training. The training session is also a permanent part of the disclosure orientation training for new disclosure employees. We found that 133 disclosure specialists and managers had completed this training as of March 2016. A training attendance report showed there were 12 employees who were absent, but Disclosure Office management stated that all employees have since received the training.

This training seems to be effective because during our Fiscal Year 2016 review we identified only two instances in which disclosure specialists inadvertently disclosed sensitive taxpayer information in response to FOIA requests. This is less than the three inadvertent disclosures we found during last fiscal year's review. These inadvertent disclosures included names in a business report, a bank account number, and a credit score.

Disclosure Office management stated that these inadvertent disclosures could have resulted from several contributing factors, such as an oversight by:

• The caseworker when completing the review of responsive records.

• Management in the review of the case files.

Freedom of Information Act Requests Were Responded to Timely

The IRS responded timely to all 60 Fiscal Year 2015 FOIA requests in our statistical sample. The FOIA requires Federal Government agencies to respond within 20 business days of the receipt of an information request or, if the 20 business days are not sufficient, to notify the requestor of the reason why the request cannot or will not be filled. If they are unable to respond to an information request within the time limit, Federal Government agencies are required to immediately notify the requestor of this fact, of the reasons why they are unable to respond, and of the requestor's right to appeal.

The due date for a FOIA request is revised when the IRS sends a letter to the requestor exercising its right for an automatic 10-business-day extension and/or requesting a voluntary extension in excess of the initial statutory 20-business-day period. The requestor must agree to the voluntary extension, and the IRS must notify the requestor of its ability to respond by the end of the extension period. A FOIA request is considered untimely when the IRS responds to the requestor after the due date.

Since Fiscal Year 2001, the IRS has made significant improvement in the timeliness of its responses to FOIA requests. Our audits, including this review, indicate that the percentage of untimely responses was zero for four of the last five years. The results of our last four audits found that the IRS has remained relatively consistent in providing responses to requestors within the statutory time periods. Figure 3 shows the percentages of untimely information requests we have reported since Fiscal Year 2011.

 

Figure 3: Comparison of Untimely FOIA Request Responses

 

 

 

Status Reports Were Not Always Timely Sent to Taxpayers Submitting Internal Revenue Code Section 6103 Information Requests

Although there are statutory time frames in which the IRS must respond to FOIA requests, there are no such requirements for responding to I.R.C. § 6103 information requests. However, in response to our Fiscal Year 2013 report, Office of Privacy, Governmental Liaison, and Disclosure management established guidelines for all disclosure personnel to contact the requestor and either provide an interim response or submit a status report within 30 business days.¹⁰ However, in our review of 55 I.R.C. § 6103 information requests, we identified nine (16.4 percent) requests in which the requestor did not receive a status update within 30 business days.

In a memorandum dated November 7, 2013, all disclosure caseworkers were advised of the following procedural change:

Backlogged Freedom of Information Act Requests Increased for the Third Year in a Row

The IRS relies on its disclosure personnel to ensure that information requests received under the FOIA are handled timely and in accordance with laws and regulations. The IRS supports the FOIA program with a broad policy statement and the Internal Revenue Manual that provides guidance to disclosure personnel. The policy statement, among other things, affirms the IRS's commitment to full compliance with the FOIA and administering it in a manner consistent with "the fundamental values held by our society, including public accountability, safeguarding national security, enhancing the effectiveness of law enforcement agencies and the decision-making processes, protecting sensitive business information, and protecting personal privacy."

In Calendar Year 2005, President George W. Bush signed an Executive Order mandating Federal agencies to identify ways to reduce their FOIA request backlog consistent with resources, case complexity, and volume.¹¹ Overall, national Disclosure Office statistics show that the IRS reduced its backlog of FOIA requests from Fiscal Years 2011 to 2012. In contrast, the number of backlogged requests increased during the last three years.

At the end of Fiscal Year 2015, there was a 15.8 percent increase in the number of backlogged FOIA requests (367 requests) compared to the number of backlogged FOIA requests at the end of Fiscal Year 2014 (317 requests). This increase follows a 46 percent increase for Fiscal Year 2014. Disclosure Office management stated that case complexity, including requests involving the IRS Office of Chief Counsel and multiple business units, as well as a reduction in experienced staffing and the current inability to timely backfill critical vacancies due to budgetary constraints has caused their backlog to increase.

Prior to Fiscal Year 2014, the U.S. Department of the Treasury established a yearly numerical FOIA request backlog goal for the IRS. For example, the IRS's backlog goal in Fiscal Year 2013 was 106 FOIA requests. In Fiscal Year 2014, the U.S. Department of the Treasury eliminated its backlog goal and now requires that only the 10 oldest FOIA requests in its own inventory be worked. While the IRS voluntarily follows the same goal, according to Disclosure Office management, their strategy is to resolve as many of the backlogged cases as resources will allow. Figure 4 shows the inventory of backlogged FOIA requests for Fiscal Years 2011 through 2015.

 

Figure 4: Inventory of Backlogged FOIA Requests

 

 

 

The IRS has tools to effectively manage its FOIA request backlog. For example, the Disclosure Office Headquarters and field office managers review weekly over-age reports and monthly inventory monitoring reports, both of which include FOIA and I.R.C. § 6103 information request inventory and backlog information. Disclosure Office management uses these reports to make informed decisions to better manage their information request inventory.

Based on our review results, this backlog does not currently appear to be causing any significant delays in processing most information requests. However, reducing the number of backlogged requests is particularly important because of the processing time frames that need to be met under the FOIA. In response to a recommendation in last year's review, Office of Privacy, Governmental Liaison, and Disclosure management agreed to develop a plan to reduce the number of backlogged requests. The plan was scheduled to be implemented on January 13, 2016, and its impact will be evaluated during next year's review.

The Tax Exempt and Government Entities Division Properly Processed Taxpayer Information Requests

In an effort to do a more comprehensive review of the IRS's processing of taxpayer information requests, we expanded our review to include additional IRS offices and functions. During this year's review, we evaluated the TE/GE Division's processing of information requests related to applications for tax-exempt status and information returns. The TE/GE Division receives information requests under I.R.C. § 6104, which makes certain tax exempt organization documents available to the public and to State charity officials. In addition, the IRS is required by law to disclose tax exempt organizations' applications to the public.

The TE/GE Division receives information requests by mail and e-fax. Requests are entered into a computerize inventory system, where they are then assigned to be worked. Tax examiners review the information that will be disclosed to the requestors to ensure that any erroneously included Social Security Numbers are not inadvertently disclosed. In the instructions for the application to be recognized as a tax-exempt organization, the TE/GE Division warns taxpayers that their Social Security Numbers could be disclosed. Specifically, the instructions state:

             Figure 5: Volume of I.R.C. § 6104 Information

² 5 United States Code (U.S.C.) § 552.

³ The AFOIA application system meets all Office of Privacy, Governmental Liaison and Disclosure business requirements including data capture for processing disclosure casework under I.R.C. § 6103 and the FOIA. A fiscal year is any yearly accounting period, regardless of its relationship to a calendar year. The Federal Government's fiscal year begins on October 1 and ends on September 30.

⁴ A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.

⁵ The population of 2,720 is a subset of the 10,415 records discussed earlier. They are records with a § 552(b)(7) exemption and a disposition of either denied, partially denied, or no responsive records were available. The point estimate projection is based on a two-sided 90 percent confidence interval, a ± 6.8 percent precision rate, and a 11.7 percent error rate. We are 90 percent confident that the point estimate is between 132 and 502 information requests.

⁶ The population consists of 434 I.R.C. § 6103 information requests closed during the period October 1, 2014, through September 30, 2015. We researched all 434 information requests to identify cases with a disposition of denied, partially denied, or no responsive records were available for our sample of 55 I.R.C. §§ 6103 (c) and (e) information requests. The 55 requests were selected out of 68 I.R.C. §§ 6103(c) and (e) information requests that met our sampling criteria. Out of those 55 information requests, there were no exceptions.

⁷ Contains the policies, procedures, instructions, guidelines, and delegations of authority which direct the operation and administration of the IRS. Topics include tax administration, personnel and office management, and others.

⁸ Formula used by the IRS to calculate the Percentage Met is column Met divided by columns Met plus Not Met (Met / [Met + Not Met]).

⁹ TIGTA, Ref. No. 2015-30-084, Fiscal Year 2015 Statutory Review of Compliance With the Freedom of Information Act p 7 (Sept. 2015).

¹⁰ TIGTA, Ref. No. 2013-30-109, Fiscal Year 2013 Statutory Review of Compliance With the Freedom of Information Act (Sept. 2013).

¹¹ Executive Order 13392 (December 14, 2005).

Internal controls relate to management's plans, methods, and procedures used to meet their mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. We determined that the following internal controls were relevant to our audit objective: IRS policies, operating procedures, laws, and regulations related to the receipt, disposition, and resolution or denials of requests for information made under the FOIA and I.R.C. § 6103. We evaluated these controls by reviewing source materials, interviewing management, and reviewing statistically valid samples of closed FOIA and I.R.C. § 6103 information requests. In addition, we reviewed a judgmental sample of I.R.C. § 6104 information requests related to applications for tax-exempt status and information returns processed by the TE/GE Division.

² A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.

Bryce Kisler, Director

Tina Parmer, Audit Manager

John Chiappino, Lead Auditor

Daniel O'Keefe, Auditor

Office of the Commissioner -- Attn: Chief of Staff

Deputy Commissioner for Operations Support

Commissioner, Tax Exempt and Government Entities Division

Director, Office of Audit Coordination

Type and Value of Outcome Measure:

• Taxpayer Rights and Entitlements -- Potential; 317 responses to FOIA requests for which information may have been improperly withheld during the period October 1, 2014, through September 30, 2015 (see page 4).¹

We reviewed a statistically valid sample of 60 requests from a population 2,720 FOIA requests closed nationally during the period October 1, 2014, through September 30, 2015, as either a:

Type and Value of Outcome Measure:

• Taxpayer Privacy and Security -- Actual; two responses with sensitive taxpayer information inadvertently disclosed (see page 7).

While conducting our review, we identified only two instances in which disclosure specialists inadvertently disclosed sensitive taxpayer information in response to either a FOIA or an I.R.C. § 6103 information request. These inadvertent disclosures included names in a business report, a bank account number, and a credit score.²

² The scope of this audit focused on information being withheld, not on the information that was inadvertently released to the taxpayer. Therefore, due to the nature of the samples, the results of this finding cannot be projected.

TIGTA, Ref. No. 2001-10-112, The Internal Revenue Service Should Continue Taking Action to Improve Compliance With the Freedom of Information Act and Related Procedures (July. 2001).

TIGTA, Ref. No. 2002-10-093, Actions Should Continue to Be Taken to Improve Compliance With the Freedom of Information Act and Related Procedures (May 2002).

TIGTA, Ref. No. 2003-10-164, Opportunity for Improvement Exists for Compliance With the Freedom of Information Act and Related Procedures (Aug. 2003).

TIGTA, Ref. No. 2004-40-064, Improvements Are Needed to Ensure Compliance With the Freedom of Information Act (Mar. 2004).

TIGTA, Ref. No. 2005-10-089, Some Improvements Have Been Made to Better Comply With Freedom of Information Act Requirements (May 2005).

TIGTA, Ref. No. 2006-10-129, Compliance With Freedom of Information Act Requirements Has Increased (Aug. 2006).

TIGTA, Ref. No. 2007-10-133, The Office of Disclosure Can Improve Compliance With the Freedom of Information Act Requirements (Aug. 2007).

TIGTA, Ref. No. 2008-30-164, The Office of Disclosure Continued to Improve Compliance With the Freedom of Information Act Requirements (Aug. 2008).

TIGTA, Ref. No. 2009-30-115, The Office of Disclosure Continues to Improve Upon Its Responses to Taxpayers' Requests Under the Freedom of Information Act (Sept. 2009).

TIGTA, Ref. No. 2010-30-090, The Office of Disclosure Continues to Improve Compliance With the Freedom of Information Act Requirements (Aug. 2010).

TIGTA, Ref. No. 2011-30-093, The Office of Disclosure Continues to Improve Compliance With the Freedom of Information Act Requirements (Sept. 2011).

TIGTA, Ref. No. 2012-30-098, Fiscal Year 2012 Statutory Review of Compliance With the Freedom of Information Act (Aug. 2012).

TIGTA, Ref. No. 2013-30-109, Fiscal Year 2013 Statutory Review of Compliance With the Freedom of Information Act (Sept. 2013).

TIGTA, Ref. No. 2014-30-064, Fiscal Year 2014 Statutory Review of Compliance With the Freedom of Information Act (Sept. 2014).

TIGTA, Ref. No. 2015-30-084, Fiscal Year 2015 Statutory Review of Compliance With the Freedom of Information Act (Sept. 2015).

Although there were no recommendations cited in the report, it is important for the public to understand our offices process and release hundreds of thousands of pages during each fiscal year. The cases identified with errors involved the release of 15,660 pages of records. Of those 15,660 pages, only 124 pages had errors in under or over withholding.

We will continue to ensure that the provisions of the Freedom of Information Act, the Privacy Act and Internal Revenue Code § 6103 are followed. If you have any questions, please contact me at (202) 317-6449, or a member of your staff may contact Maribel De La Rocha, Associate Director, Disclosure at (213) 833-1114.