Report to The Congress on Scope and Use of Taxpayer Confidentiality and Disclosure Provisions Volume I: Study of General Provisions Office of Tax Policy Department of the Treasury October 2000 Table of Contents Part One – Introduction, Background, and Executive Summary I. Introduction.......................................................................................................................... 1 II. Background .......................................................................................................................... 2 A. Congressional Mandate........................................................................................................2 B. Solicitation of Comments ....................................................................................................3 III. Executive Summary............................................................................................................. 3 A. History and Overview of Relevant Laws............................................................................. 3 1. Section 6103............................................................................................................ 3 2. Section 6110............................................................................................................ 4 3. The Freedom of Information Act ............................................................................ 4 4. The Privacy Act....................................................................................................... 4 B. Treasury’s Recommendations Relating to the Confidentiality of Returns and Return Information .......................................................................................................................... 5 Part Two - History and Overview of Relevant Laws I. Introduction........................................................................................................................ 15 II. Section 6103....................................................................................................................... 15 A. Introduction........................................................................................................................ 15 B. Summary of Events Leading to the 1976 Tax Reform Act Rules on Tax Information Confidentiality .................................................................................................................. 15 1. 1866 to 1913.......................................................................................................... 16 2. Revenue Act of 1913............................................................................................. 18 3. 1913 to 1976.......................................................................................................... 18 4. Developments in the 1970’s.................................................................................. 20 5. The Tax Reform Act of 1976 ................................................................................ 21 C. Structure of Section 6103................................................................................................... 22 1. General Rule and Definitions................................................................................ 22 2. Permissible Disclosures......................................................................................... 22 3. Recordkeeping, Safeguards, and Reporting .......................................................... 23 4. Criminal and Civil Enforcement Provisions .........................................................25 III. Section 6110....................................................................................................................... 26 IV. The Freedom of Information Act....................................................................................... 28 V. The Privacy Act ................................................................................................................. 29 v Part Three - Issues Relating to the Confidentiality of Returns and Return Information I. Introduction........................................................................................................................ 33 II. Policy Underlying Section 6103 ........................................................................................ 33 A. The Importance of Privacy................................................................................................. 33 B. The Relationship of Confidentiality to Voluntary Compliance......................................... 34 1. Confidentiality Promotes Compliance ..................................................................34 2. Publicizing Names of Non-filers Would Not Improve Compliance..................... 35 3. Disclosure of Taxpayer Identity Information Related to Accepted Offers-in- Compromise ..........................................................................................................35 4. Public Record Data/Publicity of Criminal Tax Cases........................................... 36 III. Interaction of Section 6103 with Other Statutes ................................................................ 37 A. Non-Title 26 Disclosure Provisions................................................................................... 37 B. Application of the FOIA to Returns and Return Information............................................ 38 C. Application of the Privacy Act to Returns and Return Information .................................. 40 IV. Disclosures Related to Tax Administration ....................................................................... 42 A. Definition of Tax Administration ...................................................................................... 42 B. Section 6103(h) Disclosures .............................................................................................. 42 1. Disclosures to Officers or Employees of the Department of the Treasury ........... 42 2. Disclosures to Justice Department and in Connection with Tax Proceedings ...... 43 C. Investigative Disclosures ................................................................................................... 51 D. Miscellaneous Tax Administration Disclosures ................................................................ 52 1. Disclosures of Levies on Government Employee Wages ..................................... 52 2. Disclosures by TIGTA and Safeguarding ............................................................. 53 3. Disclosures in Connection With Levies on FMS Payments .................................54 4. TIN Matching........................................................................................................ 57 5. Disclosures to Organizations Regulating Tax Practitioners.................................. 57 6. Treasury Personnel and Claimant Representative Matters ................................... 58 E. Disclosure to States............................................................................................................ 59 1. In General.............................................................................................................. 59 2. Joint Filing Programs ............................................................................................60 3. Safeguarding Issues with Respect to States’ Use of Federal Tax Data................. 61 V. Disclosures to Congress..................................................................................................... 62 VI. Disclosures Not Related to Tax Administration ................................................................ 63 A. Nontax Criminal Cases ...................................................................................................... 63 1. In General.............................................................................................................. 63 2. Disclosure in Case of Imminent Threat of Death or Physical Injury.................... 65 3. Civil Forfeiture...................................................................................................... 65 4. Form 8300 Disclosures.......................................................................................... 66 B. Use of Tax Information for Federal Benefit and Loan Programs...................................... 67 vi C. Evaluating Specific Proposals for Governmental Disclosures .......................................... 68 D. Obtaining Returns and Return Information Pursuant to the Taxpayer’s Consent ............. 69 1. Section 6103(c) ..................................................................................................... 69 2. Overview of Consent Process and Proposed Transcript Delivery System............ 70 3. Use of Consents by Government Agencies........................................................... 72 4. Private Sector Uses of Consents............................................................................ 77 5. Treasury’s Recommendations Related to Consents.............................................. 77 E. Child Support Enforcement ............................................................................................... 78 1. Background ........................................................................................................... 78 2 Issues With Respect to Who May Receive Return Information for Section 6103(l)(6) and For What Purposes........................................................................ 81 3. Types of Information Disclosed