11.3.21  Investigative Disclosure

11.3.21.1  (03-28-2008)
Background

  1. Internal Revenue Service (IRS) and TIGTA employees are authorized by IRC §6103(k)(6) and Treasury Regulation 301.6103(k)(6)-1 to disclose return information to the extent necessary to gather data relating to their official tax administration duties or to accomplish properly any activity connected with such official duties. It is also possible for IRS to allow IRC §6103(n) contractors to make IRC §6103(k)(6) disclosures as part of their contractual responsibilities.

  2. Situations in which IRS employees may make investigative disclosures arise daily. with few exceptions, no special permission or authorization is needed to make investigative disclosures under the circumstances and conditions described in Treasury Regulation 301.6103(k)(6)-1, so long as the IRS employees are performing official duties relating to:

    1. An administrative appeal

    2. A ruling or prefiling activity

    3. A negotiated agreement

    4. An examination

    5. Collection activity

    6. Civil or criminal investigation

    7. Enforcement activity or other offense under the internal revenue laws

    8. Certain personnel or claimant representative matters

    9. Preparation for or investigation leading to an IRC §6103(h)(2) proceeding

  3. It is important to note that IRC §6103(k)(6) and Treasury Regulation 301.6103(k)(6)-1 permit the disclosure of return information in the investigatory process, but do not authorize the disclosure of the taxpayer’s tax return. Also, any taxpayer's information, not just the information of the taxpayer who is the subject of the IRS action, may be disclosed if the conditions of IRC §6103(k)(6) are met.

    Example:

    Fact of filing or the existence of a criminal investigation are items of return information that could be subject to investigative disclosures.

  4. When soliciting information from a third party during a tax investigation, an IRS employee may not show a taxpayer’s tax return to the third party. However, pertinent data (such as the nature and amount of income, deductions and expenses) may be extracted as necessary from the tax return and used in questions to third parties. See IRM 11.3.2, Disclosure to Persons with a Material Interest, for the rules relating to disclosures of returns to preparers.

  5. To the extent that sufficiently reliable information may be secured in a timely manner without disclosing return information and without seriously impairing a tax investigation, this should be done.

  6. IRC §7602(c) does not alter the rules and requirements under which IRC §6103(k)(6) disclosures can be made. However, IRC §7602(c) prohibits the IRS from contacting any person other than the taxpayer regarding the determination or collection of the tax liability of the taxpayer without providing reasonable advance notice to the taxpayer that IRS may contact persons other than the taxpayer. Additionally, IRC §7602(c) requires the IRS to periodically provide to the taxpayer a record of persons contacted by the IRS regarding the determination or collection of that taxpayer's tax liability during the report period. The taxpayer may also be provided a copy of the record upon request. A taxpayer making such a request need not do so under the FOIA. He or she may directly request a copy of the record of contact listings under the authority of IRC §7602(c). IRC §7602(c) does not apply to criminal tax cases or instances where:

    1. Collection of the tax liability is in jeopardy,

    2. The Secretary determines for good cause shown that disclosure may involve reprisal against any person, or

    3. The taxpayer authorized the contact

      Note:

      Requests for contact listings while the case is open should be handled by an office appointed coordinator. See IRM 11.3.13 , Freedom of Information Act, for procedures on how the FOIA is to be followed on these requests.

  7. Certain violations of Title 18 and Title 31 of the United States Code can be statutes related to tax administration as defined in IRC §6103(b)(4) in some situations, thus allowing access to tax information. See IRM 11.3.22 , Disclosure to Federal Officers and Employees for Tax Administration Purposes. IRC §6103(k)(6) disclosures may be made in connection with these investigations as well.

  8. Some situations in which investigative disclosures may be made, while enforcing the internal revenue laws include:

    1. Disclosures to third parties when attempting to locate a taxpayer or a taxpayer’s assets

    2. Disclosures when interviewing parties to whom IRS has been referred by a taxpayer

    3. Disclosures to the Small Business Administration (SBA), e.g., taxpayer name, address, and liability to collect a delinquent account on an SBA financed taxpayer. SBA will be able to advise IRS if the taxpayer is in a precarious financial position so enforcement action can be expedited, if necessary

    4. With appropriate management approval, mailing multiple letters to third parties, to solicit information for tax investigations

      Note:

      See IRM 9.3.1.3.3, Multiple Letters to Third Parties, for more comprehensive guidelines.

    5. Disclosing outstanding balances of delinquent accounts to third parties when the third party demonstrates a willingness and the means to pay and

    6. Disclosures to an attorney when a debtor in a collection related matter indicates representation by an attorney, but will not give any information other than the name of the attorney. The employee may contact the attorney and make disclosures within the limitations imposed by IRC §6103(k)(6) and Treasury Regulation 301.6103(k)(6)-1, assuming the attorney has not already made a written entry of appearance by signing the bankruptcy petition. See IRM 11.3.3.1.6(4), Disclosure to an Attorney-in-Fact

  9. IRS and TIGTA employees may identify themselves, their organizational affiliation with the IRS (e.g., Criminal Investigation (CI)) or TIGTA (e.g., Office of Investigations (OI)), and the nature of their investigation, when making an oral, written, or electronic contact with a third party witness. This identification may include the use and presentation of any identification media (including, but not limited to, an IRS or TIGTA badge, credential, or business card) or the use of an information document request, summons, or correspondence on IRS or TIGTA letterhead or which bears a return address or signature block that reveals affiliation with the IRS or TIGTA.

  10. Disclosures under IRC §6103(k)(6) do not require accounting.

  11. As discussed in Rev. Rul. 2004-53, Federal, State, and local government employees who receive return information under IRC §6103(k)(6) ARE NOT SUBJECT TO THE DISCLOSURE RESTRICTIONS OF IRC §6103(a) with regard to such information.

11.3.21.2  (03-28-2008)
Explanation of Terms

  1. Disclosure is defined as the making known of tax returns and return information to any person in any manner. See IRC §6103(b)(8).

  2. Return information includes any information, other than the taxpayer’s return itself, which IRS has obtained from any source or developed through any means, and which relates to a taxpayer’s return or to the liability or potential liability of any person under the Internal Revenue Code for any tax, penalty, interest, fine, forfeiture, or other imposition or offense. See IRC §6103(b)(2).

    Note:

    The information typically found in examination reports, special agents’ reports, taxpayer delinquent accounts, and data contained in transcripts of account and the Integrated Data Retrieval Systems (IDRS) is return information.

  3. Disclosure of return information to the extent necessary means a disclosure of return information that an IRS or TIGTA employee, based on the facts and circumstances at the time of the disclosure, reasonably believes is necessary to obtain information to properly perform the official duties described by this IRM, or to properly accomplish the activities associated with those official duties. The term "necessary" in this context does not mean essential or indispensable, but rather appropriate and helpful in obtaining the information sought. Nor does "necessary " in this context refer to the necessity of conducting an investigation of the appropriateness of the means or methods chosen to conduct the investigation.

  4. Disclosure of return information to accomplish properly an activity connected with official duties means a disclosure of return information to carry out a function associated with official duties generally consistent with established practices and procedures.

  5. Information not otherwise reasonably available means information that an IRS or TIGTA employee reasonably believes, under the facts and circumstances at the time of the disclosure, cannot be obtained in a sufficiently accurate or probative form, or in a timely manner, and without impairing the proper performance of the official duties described by this IRM, without making the disclosure. This definition does not require or create the presumption or expectation that an IRS or TIGTA employee must seek information from a taxpayer or authorized representative prior to contacting a third party witness in an investigation. Moreover, an IRS or TIGTA employee may make a disclosure to a third party witness to corroborate information provided by a taxpayer.

11.3.21.3  (03-28-2008)
Requirements for Investigative Disclosures

  1. The provisions of Treasury Regulation 301.6103(k)(6)-1 may be summarized as follows:

    IRS employees, in connection with their official tax administration duties, may disclose return information to the extent necessary in order to obtain information which is not otherwise reasonably available in an accurate and sufficiently probative form or in a timely manner, or to accomplish properly any activity connected with such official duties.

  2. Return information may be disclosed to someone other than the taxpayer or the taxpayer’s representative in order to obtain facts needed during an investigation. However, such disclosures of information will be limited only to the extent required to obtain the information.

    Example:

    A revenue agent or special agent contacts a taxpayer’s customer regarding the purchases the customer made from the taxpayer during the year under investigation. The agent can normally obtain the needed purchase information only by disclosing the taxpayer’s identity and the fact of investigation. However, depending on the facts and circumstances, the agent may also have to inform the customer of the dates of the purchases and the types of merchandise involved.

    Example:

    A tax examiner in a Campus is processing a return where no checkbox consent has been executed, noticed that the return is missing a schedule. The taxpayer has not responded to repeated contacts about the matter. In this situation, the tax examiner can contact the preparer to secure the schedule without the taxpayer’s authorization, even if the employee has to divulge return information such as the taxpayer’s address or social security number to the preparer.

  3. An investigative disclosure must be made solely to obtain information. Return information may not be divulged solely for the benefit of the recipient or negotiated in some form of quid pro quo arrangement where the intent is that both parties benefit from the information exchanged.

  4. Disclosures of return information in investigative situations may be made only if the information cannot otherwise be reasonably obtained in accurate and sufficiently probative form, or in a timely manner, without impairing the proper performance of official duties. As a general rule, when the taxpayer is aware of the investigation, is cooperating, and is believed to have the needed information, IRS employees should obtain such information directly from the taxpayer or the taxpayer’s representative unless doing so would impair the investigation.

  5. Situations in which information generally will not be available from the taxpayer or will not be in a usable form include:

    1. When corroboration of a taxpayer’s statement or records is necessary;

    2. When the taxpayer’s records are in the possession of a third party and the taxpayer is unwilling or unable to obtain the records;

    3. When it is necessary to disclose return information to persons possessing special expertise in areas such as handwriting analysis, photographic development, sound recording enhancement, and voice identification, and use of an IRC §6103(n) contract is not feasible.

  6. If the accuracy of the information provided by the taxpayer or the taxpayer’s representative needs to be verified, investigative disclosures may be made to third parties to obtain missing or corroborating information.

  7. When determining whether an investigative disclosure under IRC §6103(k)(6) is appropriate, be certain that the disclosure is consistent with the requirements of IRC §6103(k)(6) and the related regulation.

    Caution:

    Depending upon a variety of factors, even information that may already be "public" may still be protected by IRC §6103. Thus, any disclosures of information for investigative purposes should meet the requirements of IRC §6103(k)(6).

  8. Questions concerning investigative disclosures should be brought to the attention of one’s manager or the Disclosure Manager.

11.3.21.4  (03-28-2008)
Contractual Disclosures for Investigative Purposes

  1. Situations arise when it becomes necessary to secure the services of qualified experts to assist the IRS during an investigation, examination, or other enforcement activity. Often, such experts will be called as witnesses to testify in tax cases. On occasion, we seek the assistance of:

    1. Outside fee appraisers

    2. Non-IRS court reporters and stenographers

    3. Engineers

    4. Actuaries and

    5. Other persons possessing special expertise

  2. Authority to disclose return information to obtain such services is contained in Treasury Regulations 301.6103(n)-1, 301.6103(k)(6)-1(a)(1)(v), and, in the case of individual records, 5 USC 552a(b).

  3. Whenever possible, the services of experts for investigative purposes should be engaged under IRC §6103(n) and its implementing regulation, rather than IRC §6103(k)(6) and its implementing regulation, because safeguard and Privacy Act provisions apply to the former whereas the statutory confidentiality protection provisions of the IRC do not apply to the latter. Revenue Ruling 2004-53 has additional information.

  4. See IRM 11.3.21.5 for information regarding contractors engaged by the IRS under IRC §6103(k)(6).

  5. See IRM 11.3.24, Disclosures to Contractors, for information regarding contractors engaged by the IRS under IRC §6103(n).

  6. Contracts for expert services under IRC §6103(k)(6) do not require the safeguard provisions that are applicable to contracts under IRC §6103(n), nor are they subject to the Privacy Act provisions regarding contracts, See IRM 11.3.21.5, Limitation on Redisclosure By Contractors.

11.3.21.5  (03-28-2008)
Limitation on Redisclosure By Contractors

  1. Experts engaged by the IRS under IRC §6103(k)(6) are not subject to the civil and/or criminal penalties for unauthorized accesses or disclosures of return information.

  2. In the case of individual records, criminal penalties may be imposed for unauthorized disclosures under 5 USC 552a(i)(1) which is made applicable by 5 USC 552a(m)(1) when a contractor operates an entire system of records.

  3. When the Privacy Act does not apply, a provision in the contracts with IRC §6103(k)(6) contractors explicitly subjecting those contractors to consequences for unauthorized accesses or disclosures of return information may be the only effective means available to the IRS to utilize civil remedies for limiting possible accesses and disclosures by individuals having special expertise. This includes those individuals described in IRM 11.3.21.3(5)(c) and IRM 11.3.21.4(1) where a contract pursuant to IRC §6103(n) is not made.

  4. The Office of the Associate Chief Counsel (General Legal Services) should be consulted on contract drafting issues involving services of experts under IRC §6103(k)(6).

  5. Contracts may include language which will limit further disclosure of return information furnished under the contract.

    Example:

    A contract for the services of an appraiser may stipulate that further disclosure of the identity of a taxpayer and/or the legal description of the property to be appraised is permitted if necessary to obtain information not otherwise reasonably available to complete the appraisal. However, the reason for the appraisal may not be further disclosed. Written approval for disclosures in addition to those authorized in the contract may be provided by the contracting officer. Such written approval shall be requested in writing and shall be given only when it is clearly shown that the additional disclosures are essential to successfully perform the contract.

  6. If it is determined that an expert should be precluded from making further disclosures, due to the nature of the information disclosed or the services involved, contractual provisions may be utilized to achieve this result. The appropriate nondisclosure of information clause for this purpose could be similar to that provided for appraisal services as contained in IRM 1.14, Real Estate and Facilities Management.

  7. Contracts containing limitations on further disclosures should also state that failure to abide by disclosure limitations will result in a material breach of the contract subjecting the contractor to damages and/or adversely affecting the contractor’s eligibility to receive future contracts with the IRS.

  8. The possibility that the terms of the default clause contained in Part 49 of the Federal Acquisition Regulation (FAR) may be invoked, should be referenced in contracts.

11.3.21.6  (03-28-2008)
Information Gathering

  1. It is not necessary to obtain investigatory information directly from a taxpayer or the taxpayer’s representative if doing so would impair an IRS investigation.

  2. The third party notification requirements of IRC §7602(c) does not apply when the IRS is seeking information about groups of taxpayers (e.g., airline pilots). Accordingly, taxpayers who are included in an approved information gathering activity or project need not be notified of this fact. Information concerning these taxpayers may be obtained by IRS employees from third parties without soliciting such information directly from the taxpayer or the taxpayer’s representative. However, if the focus of the investigation shifts to determining or collecting an individual taxpayer's tax liability, then all requirements of IRC §7602(c) must be met.

11.3.21.7  (03-28-2008)
Use of Return Information on Mailings

  1. The use of a taxpayer's name and address to send a document or package (including courier services) is an inherent part of the mailing process. Displaying other information (e.g., Taxpayer Identification Number or revealing the fact that the contents relate to an installment agreement) on the cover of the mailing would not ordinarily meet the standards of IRC §6103(k)(6) and its regulation. Since the mail is simply a means to effect delivery, revealing information beyond name and address would ordinarily not be necessary.

    Note:

    IRS is required to simply use prudent and reasonable care in its mailings. For example, use of a window envelope to mail a document would be consistent with policy, as long as no confidential information could be easily viewed by normal manipulation of the "window." It is not necessary to worry about what might be disclosed through candling or turning enclosed correspondence within the envelope.

  2. IRC §6103(k)(6) and its regulation permit disclosures of return information when it is determined that the disclosure is necessary for the IRS's tax administration function. Every effort should be made to ensure that all activities (e.g., modernization efforts, tax forms redesign) implement the practice of removing/concealing TINs or other confidential information from IRS mailings.

  3. Determinations involving uses of any information other than name and address will be made on a case by case basis in order to prevent any unauthorized disclosures of confidential data. Alternatives to disclosure should be considered whenever feasible.

11.3.21.8  (03-28-2008)
Internet Research

  1. Internet research is a powerful technique available to investigators in today's electronic environment.

  2. Research of the internet for compliance purposes can involve disclosures of tax information. It is important to ensure that such investigative disclosures comply with the requirements of IRC §6103(k)(6) and Treas. Reg. 301.6103(k)(6)-1. Additional information can be found at IRM 4.2.5.3, Investigative Disclosures.

  3. Following are guidelines for the application of IRC §6103(k)(6) and Treas. Reg. 301.6103(k)(6)-1 to internet research:

    1. A taxpayer's name and address is "return information" (IRC §6103(b)) protected from disclosure (IRC §6103(a))

    2. Entering on the internet a taxpayer's name and/or address obtained from IRS files constitutes a disclosure of return information

    3. A "disclosure of return information to the extent necessary " may be made in order to obtain "information not otherwise reasonably available"

      1. Disclosure of return information to the extent necessary (Treas. Reg. 301.6103(k)(6)-1(c)(1)) means a disclosure of return information which an employee, based on the facts and circumstances at the time of the disclosure, reasonably believes is necessary to obtain information to perform properly the official duties described by this section, or to accomplish properly the activities connected with carrying out those official duties. The term necessary in this context does not mean essential or indispensable, but rather appropriate and helpful in obtaining the information sought.

      2. Information not otherwise reasonably available (Treas. Reg. 301.6103(k)(6)-1(c)(3)) means information that an employee reasonably believes, under the facts and circumstances at the time of a disclosure, cannot be obtained in a sufficiently accurate or probative form, or in a timely manner, and without impairing the proper performance of the official duties described by this section, without making the disclosure. This definition does not require or create the presumption or expectation that an employee must seek information from a taxpayer or authorized representative prior to contacting a third party witness in an investigation.

    4. Disclosure of a taxpayer identification number, which is return information (IRC §6103(b)), is sensitive as well and should be carefully considered.

    5. The decision to disclose return information while conducting internet research for an official purpose should be made on a case by case basis.


More Internal Revenue Manual