February 2019 JD Supra
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Can the IRS release Taxpayer information to a third party? was published by JD Supra on 2/27/19.

Tax Return information is protected from disclosure by the IRS to other parties by the IRC Section 6103

-Confidentiality and Disclosure of Returns and Return information. While Section 6103 is a General Rule of Taxpayer Records confidentiality, there are situations (known as exceptions to Section 6103) in which IRS could be in a position to hand over Tax Records and Documents to the party requesting them.  These are the exceptions of Section 6103:

  1. 6103(c) disclosures with consent
  2. 6103(d) disclosures to state tax officials and law enforcement
  3. 6103(e) disclosures to persons having material interest
  4. 6103(f) disclosures to committees of Congress
  5. 6103(g) disclosures to President/White House
  6. 6103(h) disclosure to Federal employees for tax administration
  7. 6103(i) disclosure to Federal employees for administration of federal laws not relating to tax administration
  8. 6103(j) disclosures for statistical purposes
  9. 6103(k) disclosures for certain miscellaneous tax administration purposes
  10. 6103(l) disclosures for purposes other than tax administration
  11. 6103(m) disclosures of taxpayer identity information
  12. 6103(n) disclosures to contractors for purposes of tax administration
  13. 6103(o) disclosures with respect to certain taxes

According to the U.S. Treasury, there are four components to the Plan of Action of Section 6103:

  • Tax returns and Tax Return information is confidential except as expressly authorized in the Code.
  • Exceptions to the general rule detailing permissible disclosures for purposes other than tax administration are more limited than disclosures for purposes of tax and the need for a particular item of tax information must be balanced against the taxpayer’s reasonable expectation of privacy in information provided to the IRS as well as the effect on continued compliance with the U.S. voluntary system of self-assessment.
  • Technical, administrative, and physical safeguard provisions to prevent the recipients of tax information from using or disclosing the information in an unauthorized manner, and accounting, recordkeeping and reporting requirements that detail what disclosures are made for what purposes to assist in Congressional oversight.
  • Criminal penalties, including a felony for the willful unauthorized disclosure of tax information, a misdemeanor for the unauthorized inspection of tax information, and a civil cause of action for the taxpayer whose information has been inspected or disclosed in a manner not authorized by section 6103

Requesting party needs to demonstrate an exception to section 6103

IRS disclosure of Tax Information and Tax Documents with Taxpayer consent under 6103(c) is an easy exception to demonstrate.  However, the rest of the exceptions are more challenging to prove.

When, if at all, does the IRS have any discretionary disclosure authority?

IRC Section 6103(k), number (3), provides that the IRS has discretionary authority to disclose return information “to the extent necessary for tax administration purposes to correct a misstatement of fact.”  “The Secretary may, but only following approval by the Joint Committee on Taxation, disclose such return information or any other information with respect to any specific taxpayer to the extent necessary for tax administration purposes to correct a misstatement of fact published or disclosed with respect to such taxpayer’s return or any transaction of the taxpayer with the Internal Revenue Service”.         

There can be Disclosure to Committees of Congresses, as noted in Section 6103(f) of the IRC:

“(f) Disclosure to Committees of Congress (1) Committee on Ways and Means, Committee on Finance, and Joint Committee on Taxation Upon written request from the chairman of the Committee on Ways and Means of the House of Representatives, the chairman of the Committee on Finance of the Senate, or the chairman of the Joint Committee on Taxation, the Secretary shall furnish such committee with any return or return information specified in such request, except that any return or return information which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer shall be furnished to such committee only when sitting in closed executive session unless such taxpayer otherwise consents in writing to such disclosure”