4.2.5  Disclosure of Official Information

Manual Transmittal

July 29, 2011

Purpose

(1) This transmits revised IRM 4.2.5, General Examination Procedures, Disclosure of Official Information.

Material Changes

(1) This IRM provides the instructions, guidelines, and procedures specific to Examination under the disclosure laws. Various subsections have been edited to update website addresses, legal references, and IRM cross references. Significant changes made to this IRM are summarized in the table below:

IRM Description
IRM 4.2.5.3 (7) Modified to clarify functional guidance.
IRM 4.2.5.3 (8) Clarified functional guidance and referenced IRM 4.11.55, Power of Attorney Rights and Responsibilities.
IRM 4.2.5.5 (7) Clarified use of Form 2848, Form 8821, and advised examiners to document oral authorizations on the history sheet Form 9984.
IRM 4.2.5.6 Added e-mail as an option for providing subpoenas to Counsel and Disclosure. Also clarified language regarding request for employees to testify in court.
IRM 4.2.5.7 Clarified information regarding workpaper and FOIA requests.
IRM 4.2.5.9 Changed section title and added information regarding the one hour requirement for reporting certain disclosures and thefts. Removed instructions regarding intentional and inadvertent disclosures and referenced employees to new IRM 10.5.4, Privacy, Information Protection and Data Security, Incident Management Program for specifics.

Effect on Other Documents

IRM 4.2.5, dated 10/1/2003 is superseded.

Audience

Small Business and Self Employed (SB/SE) and Large Business and International (LB&I) Examiners

Effective Date

(07-29-2011)

Duane Gillen
Director, Examination Policy
SE:S:E:EP
Small Business/Self-Employed Division

4.2.5.1  (07-29-2011)
General Information

  1. The general rule of disclosure advises that no return or return information can be disclosed by employees of the United States. Information provided to or gathered by Internal Revenue Service employees is to be considered confidential and may not be disclosed except under limited circumstances. Congress recognized that it might be necessary for tax information to be disclosed in order to effectively administer the tax laws of the United States. Therefore, they have carefully crafted exceptions to the general rule.

  2. A knowledge of disclosure laws and procedures will assist employees in understanding what those limitations are and help them to be able to balance the need to protect taxpayer confidentiality while being able to make disclosures of tax information to complete your assigned duties. IRM 11.3Disclosure of Official Information, provides detailed instructions relating to disclosure procedures.

  3. See the Disclosure website for guidance and contact information at http://mysbse.web.irs.gov/Disclosure/Reference/default.aspx.

4.2.5.2  (07-29-2011)
Purpose

  1. The purpose of this section is to provide examiners with a brief explanation of the more commonly encountered disclosure issues which may arise in the course of the examination process. More detailed disclosure procedures are set forth in IRM 11.3, Disclosure of Official Information.

  2. The Office of Disclosure (hereinafter referenced as Disclosure) provides advice and guidance on a variety of technical issues to employees servicewide. Contact information for disclosure issues and personnel is available on the Disclosure website at http://mysbse.web.irs.gov/Disclosure/Office/default.aspx. This website provides the disclosure help desk telephone number, employee contact phone numbers, and employee e-mail addresses.

    Reminder:

    The contact information listed on this site is for IRS employee internal use only.

4.2.5.3  (07-29-2011)
Investigative Disclosures

  1. Whenever practical, information should be obtained directly from taxpayers or their authorized representatives. However, in certain situations the information needed cannot be obtained from the taxpayer in an accurate, useful, or timely manner. For example:

    1. The service of an outside appraiser for income, estate, or gift tax cases meeting specific requirements (generally in the Internal Revenue Manual) is required.

    2. The taxpayer is unwilling or unable to obtain or provide the requested records.

    3. The examiner needs to corroborate a taxpayer’s statements or information.

  2. Examiners, in connection with their official duties, may disclose return information to a third party to the extent that such disclosure is necessary to obtain information which is not otherwise reasonably available. IRC 6103(k)(6), Disclosure by Certain Officers and Employees for Investigative Purposes, and its implementing Treas. Reg. 6103(k)(6)-1, allows examiners to make certain investigative disclosures to third parties to obtain information, but only when specific conditions are met.

  3. Investigative disclosure rules apply under various circumstances, including the performance of official duties relating to examinations by employees.

  4. Only return information, not the return itself, may be disclosed. Return information includes:

    1. Taxpayer’s identity data (name, address, social security number).

    2. Fact of tax investigation.

    3. Information taken from a return. Pertinent data (sources and amounts of income, deductions, expenses, etc.), may be extracted from a return and used to solicit information for investigative disclosure purposes.

      Note:

      See IRC 6103(b)(2) for a definition of return information.

  5. Examiners should disclose only the minimum amount of information necessary to secure the facts needed for their investigation. Investigative disclosures must be initiated solely to obtain information. This investigative tool may be used to make a disclosure in person, by mail, or to establish search terms to access data from the Internet or electronic databases. Disclosures to third parties should only be made when necessary to secure data examiners cannot otherwise obtain, or to make initial contact in acquiring the services of a qualified expert (e.g., handwriting analysis or appraisals).

  6. An investigative disclosure does not provide for an exchange of information.

    Example:

    The examiner requests copies of invoices from a third party regarding sales made to a specific taxpayer. After providing the invoices, the third party solicits the current address of the taxpayer to collect a debt. The examiner may not provide the address because that disclosure would be for the benefit of the third party and is not necessary to obtain the invoices.

  7. Investigative disclosures may be subject to the third party contact rules as required by IRC 7602(c). See Treas. Reg. 301.6103(k)(6)-1(a)(4) which advises IRC 7602(c) does not address or affect the requirements under IRC 7602(c) (relating to contact of third parties).

  8. IRM 4.11.57, Examining Officers Guide - Third Party Contacts and IRM 11.3.21, Investigative Disclosure provides additional guidance.

  9. Suspicious Activity Report (SAR) data from the Web Currency and Banking Retrieval System (WebCBRS) must be afforded the same protection as information from a confidential informant and cannot be disclosed. See IRM 4.26.14, Bank Secrecy Act - Disclosure, for disclosure rules for the Title 31 data from WebCBRS.

4.2.5.4  (07-29-2011)
Contractual Disclosure for Investigative Purposes

  1. When the service of a qualified expert is needed during an examination or other enforcement activities, disclosure of return information may be required. For example, if such expert is needed to provide testimony in court.

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

  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. Safeguard and Privacy Act provisions apply to IRC 6103(n), whereas statutory confidentially protection provisions of the IRC do not apply to IRC 6103(k)(6). IRM 11.3.21.4, Contractual Disclosures for Investigative Purposes provides additional information.

4.2.5.5  (07-29-2011)
Powers of Attorney, Designees, and Oral Authorizations

  1. IRC 6103(c) and Treas. Reg. 301.6103(c)-1 allow examiners to make disclosures of federal tax returns or return information to persons or organizations designated by the taxpayer. The designation is typically provided by the taxpayer in writing.

  2. A Form 2848, Power of Attorney and Declaration of Representative, may be used by a taxpayer to authorize disclosure of tax information and to permit a representative to act on behalf of the taxpayer.

  3. A Form 8821, Tax Information Authorization, authorizes any individual, corporation, firm, organization, or partnership the taxpayer designates to inspect and/or receive their confidential information. It does not authorize the appointee to advocate the taxpayer's position with respect to the Federal tax laws; to execute waivers, consents, or closing agreements; or to otherwise represent the taxpayer before the IRS. See IRM 4.11.55.1.7.2, Form 8821 - Tax Information Authorization.

  4. Disclosure authority is limited to only those tax years listed on the authorization (Form 2848 or Form 8821). Should the examiner need to expand the scope of the examination to include additional tax years or types of returns, the examiner should contact the taxpayer to determine if they want the representative to act on their behalf for the expanded coverage and then secure an authorization with the expanded coverage.

  5. Examiners can obtain an oral authorization from the taxpayer allowing them to discuss tax matters for any periods not covered by an authorization form. See IRM 11.3.3.2.1, Requirements for Oral Authorization, for a complete discussion of the requirements for oral authorization.

  6. Details of the oral authorization should be recorded on Form 9984Examining Officer's Activity Record, or equivalent form for LB&I examiners. Remember, the examiner must take reasonable steps to confirm the identity of the taxpayer and the designee before disclosing any return information to a third party. The disclosure of return information must be limited to the information covered in the authorization and in these instances, disclosure can only be made to third parties helping taxpayers resolve a federal tax matter. Additional guidance is provided in IRM 11.3.3.2.1, Requirements for Oral Authorization, IRM 4.11.55.1.4.2.4, Verbal Requests, and IRM 11.3.2.3.2, Requirements for Verbal or Electronic Requests.

  7. Oral authorizations do not take the place of a power of attorney authorizing a third party to represent the taxpayer before the IRS. If you are dealing with a power of attorney with the taxpayer giving you verbal authorization to conduct or expand your examination, you will still need to secure a Form 2848 that includes the additional years or types of returns to allow the power of attorney to practice before the IRS. Additional information concerning verbal authorizations can be found at http://mysbse.web.irs.gov/CLD/GLD/Disclosure/Reference/HotTopics/POA/15048.aspx on the Disclosure website. Other information about disclosures to designees and practitioners can be found at IRM 11.3.3, Disclosure to Designee and Practitioners. See also the Access and Authentication section on the Disclosure website at http://mysbse.web.irs.gov/cld/gld/disclosure/reference/hottopics/irc6103/6541.aspx.

4.2.5.6  (07-29-2011)
Testimony

  1. If the examiner receives a subpoena or is asked to testify, there are certain requirements that must be met prior to being authorized to testify or produce IRS records. An examiner cannot agree to testify or produce records without consulting with Counsel (contact counsel servicing your area) or with Disclosure. The employee can obtain contact information for Disclosure from the Disclosure help desk at http://mysbse.web.irs.gov/Disclosure/Reference/default.aspx.

  2. If the IRS is a party in the matter, that is, the examiner is being asked to testify for the government in a tax case, the examiner must immediately contact Counsel and follow their directions.

  3. If the IRS is not a party to the matter, but the subpoena requests IRS records or testimony, the examiner must immediately contact Disclosure and follow Disclosure's directions. A common situation might be where an examiner is subpoenaed to testify or produce IRS records in a divorce proceeding.

  4. Most subpoenas have a short response time, so time is always of the essence. The Counsel or Disclosure employee assigned will ask the examiner for the information contained in the subpoena, as well as the examiner's involvement in the matter. If Counsel or Disclosure personnel needs to be involved, they will request the examiner hand carry, fax, or e-mail (secure mail if taxpayer information or personally identifiable information) a copy of the subpoena to them.

  5. Counsel or Disclosure will contact the individual who issued the subpoena to explain IRS's procedure and the disclosure provisions of IRC 6103, Confidentiality and Disclosure of Returns and Return Information. They will also determine if the IRS can substitute certified documents in lieu of an appearance by an IRS employee. If an appearance is required, either Counsel or Disclosure as appropriate will coordinate the necessary testimony authorizations. Without this authorization, employees may not testify or even discuss the case with the requesting party.

  6. If the examiner must testify in court or give a deposition, an attorney from Counsel or the Office of the United States Attorney will typically accompany the examiner. When testifying or presenting documents, the examiner must keep the disclosure restrictions in mind. Testimony should be limited to the issue at hand and stay within the bounds of the testimony authorization. For additional advice on testimony see IRM 11.3.35, Requests and Demands for Testimony and Production of Documents, Treas. Reg. 301.9000-1, 26 CFR 301.9000-1, and the Disclosure website at http://mysbse.web.irs.gov/CLD/GLD/Disclosure/Reference/HotTopics/Other/3082.aspx/.

4.2.5.7  (07-29-2011)
Requests for File and Workpapers

  1. During the course of an examination, the examiner may be asked by a taxpayer or representative for a copy of the examiner's files or workpapers. IRC 6103(e), Disclosure to Persons Having Material Interest, provides for the release of information to the taxpayer or their representative. This section advises that the Service shall give taxpayers access to their returns or return information unless the Secretary determines that the release of the information would seriously impair tax administration.

  2. If approached to provide copies of administrative files, the examiner should be sure the person requesting access has a legal right to the information. The examiner must also review the information prior to its release to determine that the release of the information would not seriously impair tax administration. IRC 6103(e)(7) allows the IRS to withhold return information (administrative file and workpapers) if that release would impair tax administration. Requests involving complex or unusual circumstances should be coordinated with the appropriate Disclosure personnel.

  3. Listed below are instances where the examiner may need to request assistance from Disclosure:

    1. The file contains informant information.

    2. The file contains sensitive information that could hamper the investigation (for example development of badges of fraud).

    3. The file contains third party tax information that cannot be disclosed.

      Note:

      DIF scores found on charge out sheets are not to be released unless they are "000" . The release of DIF scores could feasibly reveal how returns may be selected for audit and are prohibited from being released by IRC 6103(b)(2).

  4. A taxpayer has the right to information used in determining his or her tax liability, so impairment determinations should not be so narrowly construed to prevent the release of all information. Impairment determinations are generally made at the supervisory level. If the examiner has any concerns about whether something in the file should be released, contact should be made with Disclosure.

  5. At times the IRS is required to summons documents as well as contact third parties to obtain necessary information. Any summoned document and/or third party contact information is return information. Such information can be withheld if the IRS determines that its release would:

    1. Jeopardize collection of any tax,

    2. Involve reprisal against any person, or

    3. Jeopardize any pending criminal investigation.

  6. Sometimes a Freedom of Information Act (FOIA) request is necessary for the employee to provide the requester with information being sought. If a FOIA request is required, it must be processed by the Disclosure office that has jurisdiction over the records being sought. FOIA requirements are provided in IRM 11.3.13, Freedom of Information Act and on the IRS.gov website at http://mysbse.web.irs.gov/Disclosure/Reference/default.aspx type FOIA in the search box.

  7. IRM 11.3.2, Disclosure to Persons with a Material Interest, provides additional information concerning who may be authorized to receive return information, including copies of files or workpapers.

4.2.5.8  (07-29-2011)
Federal/State Exchanges

  1. The IRS provides tax information to the states for their use in administering state tax laws. IRC 6103(d), Disclosure to State Tax Officials and State and Local Law Enforcement Agencies, provides the requirements for states to receive tax information. Although it is not common for examination employees to be involved in the actual exchanges of information under these provisions, examiners need to be aware that they can receive information directly from a state taxing agency, but they cannot disburse any information. All requests from state agencies should be referred to Disclosure. See IRM 11.3.32, Disclosure to States for Tax Administration Purposes. If assistance is needed with securing information from a state agency, the examiner should contact Disclosure.

4.2.5.9  (07-29-2011)
Reporting Losses, Thefts and Disclosures of Sensitive Information

  1. Employees may become aware of an unauthorized disclosure and/or inspection of records during the course of their examination. Actions to be taken by the employee and time frames are as follows:

    1. Information Loss - All information losses or thefts must be reported within one hour. See IRM 10.5.4.3.1, Timely Reporting: Within One Hour.

    2. Intentional Unauthorized Disclosure - If the employee becomes aware of an intentional unauthorized disclosure, the incident must be reported to the Treasury Inspector General for Tax Administration (TIGTA) as soon as possible. See IRM 10.5.4.3.2, Intentional Unauthorized Disclosures.

    3. Inadvertent Disclosure - If the employee becomes aware of an inadvertent disclosure of sensitive information, or the loss or theft of an IT asset or hardcopy record or document containing sensitive information, the employee is required to report the incident within one hour. See IRM 10.5.4.3.3, Inadvertent Disclosures.

  2. The Incident Management Breach/Data Loss Notification Process website page at http://irweb.irs.gov/AboutIRS/bu/pipds/pip/itim/victim_notification/default.aspx assists IRS employees in understanding and applying their disclosure responsibilities.


More Internal Revenue Manual