In the infancy of the blog a few months ago, Les posted on Hom v. Commissioner, 140 TC No. 11, in which Mr. Hom argued his 90-day letter was invalid because it failed to include TAS’s phone number and address. You can see Les’ post here, where he delves into a host of other cases that deal with missing information in 90-day letters and the effect of each (we also recently touched on the Jackson order, which also questioned what constitutes appropriate notice). In the first Hom case, the Tax Court found that Mr. Hom was not prejudiced by this oversight, and the 90-day letter was valid. That case was decided in May of 2013. Well, 2013 was not a good year for Mr. Hom’s novel tax procedure arguments.
At the end of September, Mr. Hom also lost a motion to dismiss before the District Court for the Northern District of California in Hom v. United States, but this case involved a question regarding permissible disclosure of return information under Section 6103(h)(1) and FBAR investigations. During the income tax investigation into Mr. Hom, the Service learned of his gambling activities, and the offshore accounts he used to conduct those gambling activities (reminds me of a Modest Mouse lyric “other people’s lives seem more interesting cause they ain’t mine”). This resulted in the Service opening an FBAR investigation, which Mr. Hom was presumably unhappy about. Mr. Hom took the position that the Service had wrongfully disclosed his tax return information, which is generally confidential under Section 6103 of the Code.
Although the general rule is return information is not disclosable, even within the Service, there are various exceptions, many of which pertain to federal and state tax administration. One exception to that rule is Section 6103(h)(1), which states, “[r]eturns and return information shall, without written request, be open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes.” Section 6103(b)(4) defines tax administration, and states it includes, in pertinent part, “the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes … and includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.” Pretty straightforward, except FBAR investigations are done under Title 31, and specifically 31 USC § 5314, which is not an internal revenue law. Mr. Hom essentially argued just that, stating the FBAR review was not tax administration.
The Northern District of California disagreed, and held that 31 USC § 5314 was a “related statute” under Section 6103(b)(4), and that the Service could allow its employees to share the return and return information it collected in its income tax audit to other employees who would investigate the FBAR issue. I did not find this result surprising, but worth noting especially since we had covered Mr. Hom’s prior tax procedure arguments.
I would also note, this case deals with Section 6103(h)(1), which deals with disclosure to officers and employees of the Department of Treasury, and there do not appear to be a lot of published cases regarding disclosure under this Section. It is not, however, uncommon to see taxpayers questions disclosure under Section 6103(h)(2), which pertains to disclosure to the Department of Justice. The disclosure requirements under that section are more limited, and contain various exceptions. Saltzman and Book, chapter 4.07 discusses both in fairly great detail.