Chief Counsel PROCEDURE & ADMINISTRATION Publication 4639 Catalog Number 50891P (Rev. 10-2012) Department of the Treasury Internal Revenue Service www.irs.gov TABLE OF CONTENTS To the Reader:................................................................................................................ iii CHAPTER 1 ................................................................................................................ 1-1 PART I: HISTORY AND OVERVIEW – I.R.C. § 6103 ........................................... 1-1 PART II: CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION AND DISCLOSURE I.R.C. § 7431................................................................ 1-19 PART III: CRIMINAL LIABILITY FOR WILLFUL UNAUTHORIZED INSPECTION AND DISCLOSURE....................................................... 1-48 CHAPTER 2 ................................................................................................................ 2-1 PART I: DEFINITIONS .......................................................................................... 2-1 PART II: DISCLOSURES TO PERSONS WITH A MATERIAL INTEREST I.R.C. § 6103(e) ................................................................... 2-9 PART III: DISCLOSURES PURSUANT TO TAXPAYER'S CONSENT I.R.C. § 6103(c) .................................................................................... 2-19 PART IV: DISCLOSURE OF INFORMATION AVAILABLE IN THE PUBLIC RECORD................................................................................ 2-28 PART V: DISCLOSURES TO COMMITTEES OF CONGRESS I.R.C. § 6103(f)..................................................................................... 2-33 PART VI: DISCLOSURES TO PRESIDENT AND CERTAIN OTHER PERSONS I.R.C. § 6103(g).................................................... 2-35 CHAPTER 3 TAX ADMINISTRATION DISCLOSURES I.R.C. § 6103(h).................... 3-1 CHAPTER 4 TAX ADMINISTRATION INVESTIGATIVE DISCLOSURES AND DISCLOSURES TO CONTRACTORS I.R.C. § 6103(k)(6) AND (n) ................. 4-1 CHAPTER 5 DISCLOSURES FOR NONTAX CRIMINAL PURPOSES I.R.C. § 6103(i).................................................................................................. 5-1 CHAPTER 6 DISCLOSURE OF RETURNS AND RETURN INFORMATION IN BANKRUPTCY CASES .................................................................................... 6-1 CHAPTER 7 BANK SECRECY ACT, MONEY LAUNDERING, FORFEITURE AND RETURN INFORMATION......................................................................... 7-1 CHAPTER 8 FEDERAL/STATE EXCHANGE PROGRAM I.R.C. ' 6103(d) AND (p)(8)......................................................................................................... 8-1 CHAPTER 9 FREEDOM OF INFORMATION ACT ..................................................... 9-1 i CHAPTER 10 LITIGATION PRIVILEGES ................................................................. 10-1 CHAPTER 11 ............................................................................................................ 11-1 PART I: PERSONNEL AND CLAIMANT REPRESENTATIVE MATTERS I.R.C. § 6103(l)(4)................................................................................. 11-1 PART II: PRIVACY ACT...................................................................................... 11-5 CHAPTER 12 TESTIMONY AUTHORIZATION ........................................................ 12-1 CHAPTER 13 ............................................................................................................ 13-1 PART I: PUBLIC INSPECTION OF WRITTEN DETERMINATIONS I.R.C. § 6110 ........................................................................................ 13-1 PART II: CONFIDENTIALITY OF INFORMATION ARISING UNDER TREATY OBLIGATIONS – I.R.C. § 6105........................................... 13-13 PART III: PUBLICITY OF INFORMATION REQUIRED FROM CERTAIN EXEMPT ORGANIZATIONS – I.R.C. § 6104 .................... 13-16 CHAPTER 14 DISCLOSURE GUIDE FOR TAX-EXEMPT BOND EXAMINATIONS.................................................................................. 14-1 CHAPTER 15 APPENDICES .................................................................................... 15-1 APPENDIX-1 CONSENT TO DISCLOSURE OF TAX INFORMATION .............. 15-2 APPENDIX-2 CONSENT TO DISCLOSURE OF RETURN INFORMATION....... 15-4 APPENDIX-3 TESTIMONY REPORT AND AUTHORIZATION........................... 15-6 APPENDIX-4 POWER OF ATTORNEY AND DECLARATION OF REPRESENTATIVE ............................................................................. 15-8 APPENDIX-5 TAX INFORMATION AUTHORIZATION..................................... 15-10 APPENDIX-6 TAX DISCLOSURES .................................................................. 15-14 APPENDIX-7 CURRENT IRS EMPLOYEE TESTIMONY AUTHORIZATION... 15-16 APPENDIX-8 FORMER IRS EMPLOYEE TESTIMONY AUTHORIZATION..... 15-18 APPENDIX-9 BOND EXAMINATION - CONSENTS ......................................... 15-20 APPENDIX-10 LINKS........................................................................................ 15-22 ii To the Reader: This reference guide updates and replaces the Disclosure Litigation and Reference Book last revised in 2011. It covers the primary disclosure laws that affect the Internal Revenue Service (I.R.C. §§ 6103 and 6110, the Freedom of Information Act (FOIA), and the Privacy Act of 1974), related statutes, and testimony authorization procedures. Together, these laws represent efforts by the Congress to strike a balance between a citizen’s expectation of privacy and an open and effective government. Guidance on legal matters concerning these disclosure laws is provided by the Office of the Associate Chief Counsel (Procedure & Administration). This office is also responsible for defending litigation filed pursuant to I.R.C. §§ 6103 and 6110, FOIA, and the Privacy Act. Electronic distribution of judicial opinions has provided wide access to decisions that the issuing courts did not view as important or precedential. Although this guide cites to "unpublished" cases by reference to the federal reporter’s table citation followed by an applicable electronic or specialized reporter citation number, court rules often instruct that decisions a court has affirmatively designated not to be published should not be cited at all or only under severely limited circumstances. They are included in this guide to elucidate the courts’ reasoning on the various legal issues outlined herein for which there is a relatively sparse body of case law. Before you cite a decision that the deciding court has labeled "unpublished" or "non-precedential" you should consult that court's rules on this point. We have not cited to multiple reporters when there is more than one source for an opinion, but the default preference for electronically available opinions is Westlaw. Obviously, correct legal advice concerning the matters addressed in this guide depends upon the facts of each question. This guide was prepared for reference purposes only; it may not be used or cited as authority for setting or sustaining a legal position. iii CHAPTER 1 PART I: HISTORY AND OVERVIEW – I.R.C. § 6103 I. HISTORY OF TAX CONFIDENTIALITY LAWS1 A. Introduction Except for a few periods in our history, taxpayers’ tax information generally has not been available to the public – disclosure has been restricted. Congress has used two basic approaches in determining whether, and under what circumstances, tax information could be disclosed. Under the first approach, taken prior to 1977, tax information was considered a "public record," but was only open to inspection under Treasury regulations approved by the President or under presidential order. Under this scheme, the Executive Branch essentially created all the rules regarding disclosure. By the mid 1970s, there was increased congressional and public concern about the widespread use of tax information by government agencies for purposes unrelated to tax administration. This concern culminated with the enactment of section 6103, passed as part of the Tax Reform Act of 1976. Pub. L. No. 94-455, 90 Stat. 1520 (1976) (Tax Reform Act codified at scattered sections of 7, 26, and 46 U.S.C.). There, Congress eliminated much of the executive discretion concerning the disclosure of returns or return information. With this second approach, Congress established a new statutory scheme under which returns and return information are confidential and not subject to disclosure except to the extent explicitly provided by the Internal Revenue Code. Although there have been many amendments to the law since that time, the basic statutory scheme established in 1976 remains in place today. B. Publicity of Tax Returns The history of tax information confidentiality may be traced to the Civil War Income Tax Act of 1862,2 when tax information was posted on courthouse doors 1 Much of the information in this chapter was taken from Report on Administrative Procedures of the Internal Revenue Service, S. Doc. No. 94-266, at 821-1028 (1975); HOWARD M. ZARITSKY, CONG. RESEARCH SERV., 74- 211A, LEGISLATIVE HISTORY OF TAX RETURN CONFIDENTIALITY: SECTION 6103 OF THE INTERNAL REVENUE CODE OF 1954 AND ITS PREDECESSORS (1974); Richard F. Janssen, Income Tax Snooping Through History, WALL ST. J., May 6, 1970, at 18; and Mitchell Rogovin, Privacy and Income Tax Returns, WASH.POST, Oct. 13, 1974, at C4. 2 Act of July 1, 1862, ch. 109, 12 Stat. 432, 437. Ambiguities in that provision regarding public inspection led Congress, in 1864, to explicitly permit public inspection of the assessment list: