- 11.3.22 Disclosure to Federal Officers and Employees for Tax Administration Purposes
- 126.96.36.199 General
- 188.8.131.52 Authority for Disclosure
- 184.108.40.206 Explanation of Terms
- 220.127.116.11 Disclosure to Agencies and Offices Within the Department of Treasury
- 18.104.22.168.1 Access by IRS Employees Based on "Need to Know"
- 22.214.171.124.2 Use of Tax Returns in Training Material
- 126.96.36.199.3 Trainees and Volunteers
- 188.8.131.52.4 Maintaining Tax Return Information in Employee Performance Files
- 184.108.40.206.5 Disclosure to the Internal Revenue Service Oversight Board
- 220.127.116.11 Disclosure in Claimant Representative Matters
- 18.104.22.168 Access by Employees of the Office of Chief Counsel
- 22.214.171.124 Obtaining Taxpayer Address Information for Collecting Outstanding Debts
- 126.96.36.199 Disclosures to Officers and Employees of Main Treasury
- 188.8.131.52.1 Alcohol, Tobacco and Firearms
- 184.108.40.206.2 Financial Management Service
- 220.127.116.11.3 Customs
- 18.104.22.168 The Treasury Inspector General for Tax Administration
- 22.214.171.124 U.S. Secret Service
- 126.96.36.199 Other Treasury Bureaus, Agencies and Offices
- 188.8.131.52 Disclosure to the Department of Justice in Tax Administration Matters
- 184.108.40.206.1 What May be Disclosed
- 220.127.116.11.2 Referred Cases
- 18.104.22.168.3 Non-referred Cases "(Reverse Referrals)"
- 22.214.171.124 Disclosure Channels
- 126.96.36.199.1 Requests for Grand Jury Investigations
- 188.8.131.52 Use of Tax Information in Grand Jury Investigations
- 184.108.40.206.1 Joint Title 18/26 Grand Jury Investigations
- 220.127.116.11.2 Use of Tax Information in Joint Tax-Non-tax Grand Jury Investigations
- 18.104.22.168 Disclosure of Tax Information in Possession of the Social Security Administration (SSA)
- 22.214.171.124 Requests for Additional Records and/or Information
- 126.96.36.199 Disclosure of Returns and Return Information in Judicial and Administrative Tax Proceedings
- 188.8.131.52 Proceedings in Criminal Tax Cases
- 184.108.40.206 Disclosures of Third Party Tax Information in Administrative Proceedings
- 220.127.116.11 Use and Disclosure of Third Party Returns and Return Information Relating to Transactions - "Comparables"
- 18.104.22.168 Disclosures of Address and Alien Status Information for Withholding Tax from Social Security Benefits
- 22.214.171.124 Disclosure Provisions for Bank Secrecy Act and Money Laundering Cases
- 126.96.36.199.1 Use of Tax Information in Tax or Tax-Related Bank Secrecy Act and Money Laundering Investigations
- 188.8.131.52.2 Pure Money Laundering Investigations (Not Related to a Tax Investigation)
- 184.108.40.206 Use and Disclosure of Title 31 Report Information
Part 11. Communications and Liaison
Chapter 3. Disclosure of Official Information
Section 22. Disclosure to Federal Officers and Employees for Tax Administration Purposes
This section deals primarily with disclosure of returns and return information for tax administration purposes under IRC §6103(h).
The Internal Revenue Service (IRS) is responsible for administering and enforcing the internal revenue laws, except those laws relating to alcohol, tobacco, firearms, and explosives, which are administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) in DOJ and Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB).
Although tax administration activities are performed primarily by IRS and TTB personnel, other Federal officers and employees also engage in tax administration activities. Generally, these are officers and employees of other Treasury offices and agencies, whose duties relate to IRS or Alcohol, Tobacco, and Firearms tax administration, or officers and employees of the Department of Justice (including United States Attorneys) who represent the IRS and TTB in Federal tax litigation matters. Another large Treasury recipient of IRC §6103(h)(1) information is the Financial Management Service which issues tax refunds and administers the offset provisions of IRC §6402(c), IRC §6402(d) and IRC §6402(e).
IRC §6103(h) governs disclosures of returns and return information to Federal officers and employees for tax administration, unless more stringent conditions of disclosure apply, for example, IRC §6103(o)(2) and IRC §4424 (relating to wagering tax).
Federal employees who have inspected or gained access to returns or return information under IRC §6103(h) are subject to the criminal penalties and civil liability provided by IRC §7213, IRC §7213A and IRC §7431 for unauthorized inspection or disclosures of returns and return information.
IRC §6103(h)(1) provides for disclosure of returns and return information to officers and employees of the Department of the Treasury (including the Internal Revenue Service) whose official duties require access for tax administration. See IRM 220.127.116.11.
IRC §6103(h)(2) provides for disclosure of returns and return information to officers and employees of the Department of Justice (including United States Attorneys) personally and directly engaged in any proceeding before a Federal grand jury or preparation for any proceeding before a Federal grand jury or any Federal or State court in a matter involving tax administration, but only under certain circumstances. Any investigation which may result in such a proceeding is included.
IRC §6103(h)(3) describes how the Department of Justice can get returns and return information, if IRC §6103(h)(2) permits the disclosure. See IRM 18.104.22.168.
IRC §6103(h)(4) permits disclosure of returns and return information in Federal and state judicial or administrative tax proceedings under specified conditions. This section authorizes further disclosure of information previously disclosed under IRC §6103(h)(2). See IRM 22.214.171.124. It also authorizes further disclosure of information previously disclosed to State tax officials under IRC §6103(d).
IRC §6103(h)(5) permits disclosure of address and alien status information to the Social Security Administration and the Railroad Retirement Board for purposes of withholding income tax from social security benefits of nonresident aliens. See IRM 126.96.36.199.
IRC §6103(h)(6) permits certain limited disclosures of returns and return information to the IRS Oversight Board. See IRM 188.8.131.52.5.
An understanding of certain terms is necessary for the proper application of IRC §6103(h).
Most of the activities of the Internal Revenue Service, as well as certain activities of other Federal agencies, constitute "tax administration." As defined in IRC §6103(b)(4), the term encompasses not only administration of the internal revenue laws, but to an extent, administration of certain other related Federal or State civil and criminal statutes.
The term means the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes, equivalent laws and statutes of a State, and tax conventions between the United States and foreign jurisdictions. It includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.
The term "State" is defined in IRC §6103(b)(5) and IRM 184.108.40.206(2), Disclosure to States for Tax Administration Purposes.
Certain bankruptcy cases may also be considered proceedings pertaining to tax administration if the bankruptcy court properly invokes jurisdiction in any manner to determine a tax matter.
The government has formally appeared in the case and put a tax matter in issue by filing a proof of claim for Federal taxes. See Document 9225, Bankruptcy Disclosure Handbook, for additional examples of bankruptcy issues involving tax administration matters.
Cases involving employee conduct violations by Federal or State revenue employees related to the employees' tax administration activities and their own tax violations are generally considered tax administration matters. However, IRC §6103(l)(4) generally will apply in IRS disciplinary matters.
The term "related statutes" in IRC §6103(b)(4) is not defined in the Code. However, it generally includes those sections of the U.S. Code, other than Title 26 (Internal Revenue Code), which, if violated, impede the administration of the internal revenue laws, and which directly relate to a tax matter.
Certain investigations by the IRS are inherently tax related. Examples include 18 USC 1001 (Statements or Entries Generally), when the underlying violation is a false statement on an income tax return, or 18 USC 371 (Conspiracy), when there is a conspiracy to commit a Title 26 violation or to defraud the United States of tax revenues in a refund claim.
In Bank Secrecy Act and Money Laundering investigations, CI can make a related statute determination or "call," information received or prepared by the IRS after a related statute determination is made is return information protected by IRC §6103.
See IRM 9.3.1, Disclosure and Publicity - Disclosure, for further discussion of related statutes.
"Judicial tax proceeding" means a proceeding before a Federal or State Court or magistrate (including the U.S. Tax Court) regarding tax administration.
It includes any proceeding about tax matters under the authority of a court.
A probationary proceeding or investigation conducted by the U.S. Probation Service under the authority of a court concerning an individual convicted of tax violations is considered a judicial tax proceeding.
IRC §6103(h)(1) authorizes disclosures to Treasury employees, including IRS employees, for tax administration purposes.
Contractors are not Treasury employees for purposes of IRC §6103(h)(1). See IRM 11.3.24, Disclosures to Contractors, and IRC §6103(n).
5 USC 3111(c), as amended by P.L. 97-437, provides that a student performing voluntary or Federally uncompensated service in the IRS as part of an agency program providing educational experiences for the student will be considered a Treasury employee for disclosure related matters. See IRM 11.3.24 regarding contracts and a discussion of student service. Also see IRM 220.127.116.11.3.
Federal, state, or local government employees who are "appointed" to the IRS under the Intergovernmental Personnel Act (IGPA), 5 USC 3371-3376 are considered IRS employees for Privacy Act and IRC §6103 purposes. See 5 USC 3374(a)(1). IGPA " detailees" under 5 USC 3374(a)(2) are not considered IRS employees for confidential information access/disclosure.
IRC §6103(h)(1) does not require written requests. However, to assist the IRS in maintaining controls over access to returns and return information, requests from non-IRS employees not usually involved in tax administration matters generally should be in writing.
The duties performed by IRS employees generally involve tax administration. However, IRS personnel should not have unlimited access to returns and return information.
IRS employees may access returns and return information only when there is a "need to know" the information for their tax administration duties. This is important in maintaining the confidentiality of information in the custody of the IRS.
The IRS decides on a case by case basis whether an employee has a need to know. IRS employees must follow established procedures and not access tax accounts pertaining to relatives or other prohibited entities. See IRS's Unauthorized Access (UNAX) materials.
Before disclosing returns or return information to other IRS personnel, employees should satisfy themselves that the proposed recipient has an official tax administration need for the information. A manager or Disclosure employee should be consulted if there is any question whether disclosures are proper.
IRS employees are not prohibited from disclosing return information to seek advice about legal, technical, or procedural issues in a specific case: for example, when employees consider similar issues about unrelated taxpayers. The disclosures may be between individual employees, or between offices such as in industry-wide examinations under the Coordinated Examination Program. However, a "need to know" must be established on a case by case basis. Universal access by an IRS function's employees to tax files would generally fail the need to know requirement.
Generally, return information may not be published in internal management documents or posted to unsecure intranet sites.
When return information is appropriately disclosed to obtain legal, technical or procedural assistance, or to demonstrate investigative or enforcement techniques, IRS employees should not disclose taxpayers’ identities unless it is necessary. In some cases, withholding the taxpayer’s name would be sufficient, while in others, it may be necessary to withhold certain case facts which identify the taxpayer. Deleting identities doesn't change the nature of the information (i.e., it remains tax information protected by IRC §6103) but it does further compliance with the need to know requirement.
The Internal Revenue Restructuring and Reform Act of 1998 (P.L. 105–206 Section 1001(a)(4)) prohibits ex-parte communications between appeals officers and other IRS employees to the extent that such communications appear to compromise the independence of the appeals officers.
Should such communications occur, they would probably fail the IRC §6103(h)(1) standards for disclosure and possibly subject the initiator to the penalty provisions of IRC §7213, IRC §7213A and IRC §7431.
The IRC §6103(h)(1) need to know access even extends to Federal tax information disclosed to other agencies under Title 26.
An IRS employee who meets IRC §6103(h)(1) requirements may access Federal tax information protected by IRC §6103 in the hands of SSA or a State child support agency to fulfill tax administration duties.
IRC §6103(h)(1) permits the disclosure of returns and return information to IRS employees for the purposes of tax administration. Tax administration includes the education of employees.
Guidance for material that is subject to publication and/or public release may be obtained from the embedded Learning and Education staff. Learning and Education has written guidelines for creating acceptable fictitious taxpayer identification numbers, names, and addresses for training material. This information is available on the IRS intranet.
On rare occasions, it may be necessary to use returns or return information to illustrate key points, and to assist students in understanding tax law or procedure. Once a determination is made that the use of "live" returns or return information is appropriate, care must be taken to withhold taxpayer identifying information. This includes items such as the name, address, TIN, DLN, signature, and any other information which would identify a specific taxpayer on any part of the tax return, including schedules, being used in the training material.
Numeric information should be changed where possible, but, if necessary, may remain unchanged. However, the mere removal of personal identifiers from returns or return information does not cause the remaining information to lose its confidential return information status. Therefore, if copies of sanitized returns or return information are distributed during local training and the numeric fields contain unaltered original return information, students must safeguard them in the same way as any return information. This includes precautions such as storing the information in locked cabinets and shredding the information, when it is no longer needed. Alternatively, the instructor may collect the returns or return information at the end of the class and dispose of them properly. If possible, return information in training materials needs to be marked clearly as IRC §6103 material and segregated from the rest of the material, because of the affirmative obligations to disclose training materials under the FOIA. Questions about developing training material using tax return or return information may be directed to your local training coordinator.
Occasionally, the desire to provide general educational material or to publicize an IRS matter on the intranet may be identified. The release of SBU data in such circumstances is prohibited under applicable disclosure laws and computer security standards. However, GLD can usually assist functions in identifying or developing alternatives that will comply with all legal and procedural requirements.
There are several IRS programs providing opportunities for educational and work experiences to qualifying students. The students offered employment through these programs are considered to be " direct-hire" trainees, unpaid student volunteers, or " hosting" trainees.
"Direct-hire" trainees are employees of the Department of the Treasury. Therefore, IRC §6103(h)(1) authorizes them to have access to returns or return information when required to carry out tax administration duties.
Returns and return information cannot be disclosed to student volunteers or host trainees because they are not Department of the Treasury employees qualifying for IRC §6103(h)(1) access, unless they qualify for the exception for student volunteers meeting all the conditions specified in 5 USC 3111 which concerns acceptance of volunteer service by students. IRC §6103(n) is not applicable in the absence of a qualifying contract. Privacy Act protected information also cannot be disclosed to a student volunteer or host trainee because that person does not qualify as an IRS employee under section (b)(1) of the Privacy Act, unless the person qualifies for the exception for student volunteers as defined in 5 USC 3111.
For purposes of 5 USC 3111, a student must be "an individual who is enrolled, not less than half-time, in a high school, trade school, technical or vocational institute, junior college, college, university, or comparable recognized educational institution." One of the 5 USC 3111 requirements is that individuals from high schools or vocational schools must participate in a formal program with the IRS as part of their curriculum.
Students who qualify under the 5 USC 3111 exception are treated as IRS and/or Treasury employees by statute for the purposes of both the Privacy Act and IRC §6103. Qualifying students may have access to return information to the extent necessary to perform their tax administration duties. Qualifying students must obtain the approval of the institution where they are enrolled as part of a program to provide educational experiences for students. They must be uncompensated and may not be used to displace any Federal employee. Student volunteers compensated by other than Federal funds may be considered "uncompensated" for 5 USC 3111 purposes and qualify as Treasury employees for IRC §6103 and Privacy Act purposes. This does not cover volunteers from other organizations such as AARP or welfare to work programs.
"Hosting" trainees are hired and paid by non-Treasury Department organizations and assigned by these organizations to the IRS for training. Since the "hosting" trainees are not Treasury Department or IRS employees, they may not have access to returns or return information or information governed by the Privacy Act, such as certain personnel information, unless they are students who meet the criteria of 5 U.S.C. 3111.
There is nothing in the Privacy Act System of Records Notice for personnel records (Treas/IRS 36.003) that either requires or prohibits the inclusion of third party return information in an Employee Performance File (EPF). However, pursuant to the Privacy Act, third party return information in an EPF should be limited to information that is relevant and necessary to the purposes of the EPF.
Employee performance appraisals are a tool for executing basic management and supervisory responsibilities, and of improving individual and organizational effectiveness in accomplishing the IRS's mission and objectives. Many of the activities of IRS employees involve the handling of specific taxpayer matters. In the process of reviewing and evaluating the performance of an employee against prescribed performance standards, it may be necessary to discuss with some specificity how the employee handled a particular taxpayer's case to provide an accurate, fair, and objective evaluation. The inclusion of return information in the EPF, under these circumstances, would be appropriate. Obviously, non-inclusion of confidential tax information best protects the IRS and employee from UNAX or unauthorized disclosure concerns.
Deleting (or failing to include) taxpayer identifiers does not change the character of return information. Even without taxpayer identifying information, return information continues to be subject to all confidentiality, retention, and security provisions of IRC §6103. See IRM 11.3.20, Personnel Records.
The System of Records Notice 36.003 authorizes disclosure of information in the EPF to certain entities for certain purposes. However, disclosure of any third party return information in the EPF must be authorized under IRC §6103. If IRC §6103 does not authorize disclosure of the third party return information to that entity for the intended purpose, then the EPF must be sanitized of third party return information before any disclosure is made. For example, an employee reviewing his/her own EPF may see third party return information in the EPF, if the employee's review is for the purpose of improving his/her performance handling tax administration duties. An employee may not see third party return information in his/her own EPF for purposes of use in a personnel action (such as a grievance) unless the requirements of IRC §6103(l)(4) have been met.
No employee is authorized by IRC §6103(l)(4) to make a disclosure to himself/herself or to anyone else for purposes of that employee's personnel action. See IRM 11.3.20 and IRM 6.751.1, Discipline and Disciplinary Actions - Policies, Responsibilities, Authorities, and Guidance, for procedures employees must follow to obtain authorized access to third party return information for use in personnel actions.
IRC §6103(h)(6) allows the Internal Revenue Service Oversight Board to have limited access to returns and return information.
To qualify for disclosure to the Oversight Board, returns and return information must be provided within the context of a report prepared by the Commissioner or the Treasury Inspector General for Tax Administration (TIGTA) to assist the Board in carrying out its duties, and its inclusion in the report must have been deemed necessary by the Commissioner or TIGTA.
The information disclosed to the Board may not include personal identifying data such as taxpayer:
Taxpayer identification number (social security number or employer identification number)
Other than as permitted above, no return or return information may be disclosed to any member of the Oversight Board or to any IRS employee or detailee of the Board by reason of their service to the Board.
Any request for information not permitted to be disclosed and any contact regarding a specific taxpayer, made by an individual as described in (4) above to an officer or employee of the IRS must be reported by the employee to the Secretary, TIGTA, and to the Joint Committee on Taxation.
The Board members and other individuals described in (4) above are subject to the anti-browsing rules (IRC §7213A) which apply to IRS employees.
This section contains information on disclosure in claimant representative matters.
Employees of the Office of Professional Responsibility (OPR) are IRS employees.
Acts upon applications for enrollment to practice before the IRS and
Institutes disciplinary proceedings when claimant representatives, i.e., attorneys, Certified Public Accountants, enrolled agents and others, have engaged in prohibited conduct or are believed to have violated any laws or regulations governing practice before the IRS.
See Treasury Department Circular 230 for regulations governing practice before the IRS, and Notice of Proposed Rulemaking, 69 FR 75887-01, for proposed amendments to Circular 230.
Activities which the OPR conducts relating to claimant representation before the IRS constitute tax administration.
Returns and return information will be disclosed to the OPR in accordance with the appropriate IRM procedures.
The penalty provisions of IRC §7213, IRC §7213A and IRC §7431 are applicable.
Officials of other Treasury bureaus or Treasury agencies who require returns and return information in claimant representative matters undertaken in accordance with 31 USC 330, may have access to such information under IRC §6103(l)(4)(B).
Requests must be in writing and must include the following:
The taxpayer’s name, address and social security number (SSN), if available.
The taxable period(s) covered by the request, if known.
Sufficient information to identify the desired tax information if the name, address, SSN, or taxable period(s) cannot be furnished.
The kind of tax reported on the return(s).
A brief explanation of the action or proceeding to which the return(s) and/or return information relates.
The specific reason(s) why the return(s) or return information is or may be relevant and material to the action or proceeding.
Disclosure requests from other Treasury bureaus and agencies will be forwarded to the Director, GLD for processing. Contact will be made with the appropriate functions to obtain the information required to comply with the request.
Treasury officials to whom disclosures are made should be informed of the penalty provisions of IRC §7213, IRC §7213A and IRC §7431 relating to unauthorized disclosure and inspection of returns and return information.
The Office of Chief Counsel provides legal advice and services to the Commissioner in the administration and enforcement of the internal revenue laws and related statutes, as well as in all non-tax legal matters, including representing the Commissioner in the United States Tax Court.
Chief Counsel employees are Treasury employees who are authorized to access returns and return information in matters referred to that office by the IRS or in matters relating to the IRS’s activities, pursuant to IRC §6103(h)(1).
Access by Chief Counsel employees to returns and return information occurs through IRS referrals pursuant to established procedures, or upon oral or written requests for information for tax administration duties.
As with IRS employees, Chief Counsel employees must have a "need to know" and are subject to the penalty provisions of IRC §7213, IRC §7213A and IRC §7431.
The Office of the Chief Counsel, through its General Legal Services (GLS) and Area Counsel offices, provides legal assistance in collecting non-tax debts owed to the IRS which are collectible under Sections 3711, 3717, and 3718 of Title 31 of the U.S. Code.
In processing referred claims collection cases, Chief Counsel employees may obtain addresses of indebted persons from IRS tax files.
Taxpayer address information will be disclosed under IRC §6103(m)(2) although it is not required that the IRS follow the procedures of IRM 18.104.22.168, Disclosure to Federal Agencies for Administration of Nontax Laws.
Requests for addresses will generally be submitted to the appropriate Disclosure Manager. GLS requests will be signed by the Associate Chief Counsel, GLS, or designee.
Each request should contain:
Taxpayer’s name, former address, social security number (if available), and name of former employer (if available).
Any other pertinent information which may assist in locating the taxpayer’s address.
Explanation of the debt.
Statutory authority for the disclosure, i.e., IRC §6103(m)(2).
The Disclosure Manager will initiate a thorough file search for the current address, and will respond to the requester.
Main Treasury officials will send requests for returns and return information to IRS Headquarters.
Most Main Treasury requests are from the Office of the Assistant Secretary (Tax Policy) and its subordinate offices which need returns and return information to formulate tax policy.
The requests generally are written, and they should be signed by the Assistant Secretary or his/her designee.
The designees must be on a list of people in the Office of the Assistant Secretary or the Office of Computer Science who are authorized to receive, inspect, or otherwise process returns and return information for their official duties. The Assistant Secretary must provide this list to the Commissioner before requested return information may be disclosed.
Written requests should include:
The name, address, and taxpayer identification number (SSN or EIN), if available, or a description of the tax information needed.
The type of tax involved, i.e., income, excise, employment, etc.
The taxable period covered by the return or return information.
A brief explanation of the tax administration purpose for which the information is required.
Headquarters officials described below are responsible for compiling the information and transmitting it to the requestor or the designee.
If the Request is For: Office responsible for Compiling the Information: returns and return information related to Statistics of Income and statistical tabulations of the return information Director, Research, Analysis, and Statistics of Income extracts of return information from the master file systems and for statistical tabulations of such information Director, Research, Analysis, and Statistics of Income. letter rulings and determinations, rulings requests, and technical advice memorandums about employee plans or exempt organizations Commissioner, Tax Exempt and Governmental Entities letter rulings and determinations, rulings requests, and technical advice memorandums not covered above Appropriate Associate Chief Counsel returns and return information not covered above Director, Office of Governmental Liaison and Disclosure
Requests from the Office of the Assistant Secretary (Tax Policy) and other Main Treasury officials should be expedited.
If the office which receives the request must retrieve material from field offices, the field should be told the request is to be expedited.
The reasons for the request and the fact that it originated with Treasury should not be disclosed to the field office. To avoid possible compromise of governmental deliberations, the instructions to the field should merely indicate that the material is required for tax administration and should be charged out to the requesting Headquarters division or function.
Original documents generally will not be released. Instead, copies should be released.
The requesting Treasury official or the designee should acknowledge receipt of the material. The receipt should list the items disclosed and briefly describe the tax administration use of the information. Receipt may be acknowledged on a copy of the transmittal letter.
In an emergency, Main Treasury officials, who are authorized to make written requests, may make a request by telephone. This should be confirmed in writing as soon as possible.
After the material has served its purpose, the copies provided to Treasury should be returned. Main Treasury officials are responsible for destroying any additional copies that they may have made.
The Director, GLD, should be contacted if there are any questions.
See IRM 22.214.171.124 (5) for penalty provisions.
The Treasury Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for administering and enforcing the tax administration functions of:
Chapters 51, 52, and 53 (subtitle E) of the Internal Revenue Code, relating to alcohol, tobacco, and firearms.
IRC §7652 and IRC §7653 as they relate to commodities subject to tax under chapters 51-53.
Chapters 61–80 whenever these provisions relate to administration and enforcement of chapters 51-53.
When returns and return information relating to taxes administered by the IRS (such as income tax returns) are needed by TTB employees for tax administration purposes, written requests should be submitted to the IRS office having custody of the records, to the attention of the Disclosure Manager.
Requests should be signed by an official not lower than a Special Agent in Charge (SAC), and should include:
Name, address and identification number (SSN or EIN of the taxpayer).
Description of the tax information needed.
Type of tax and taxable period.
Explanation of the tax administration use of the information.
The Disclosure Manager will process the requests and transmit the material to the requester or the designee. The Disclosure Manager should:
Review the request to confirm the tax administration need. If necessary, contact the requester for additional information.
Ask the affected offices (e.g., Wage and Investment, SB/SE) whether disclosure would interfere with an open examination or investigation. If disclosure could jeopardize an ongoing investigation, the Disclosure Manager should attempt to reconcile the needs of the IRS/TTB. If necessary, the disclosure should be postponed until it does not impair the IRS’s investigation.
Secure the requested material.
Determine whether any material should not be disclosed. Any relevant data, whether from IRS investigative files, third party witnesses, or the taxpayer may be disclosed. If there is doubt as to the relevancy of the information requested, or the extent of information needed, the requester, or the designee, should be contacted for clarification.
Reproduce the pertinent documents and prepare a transmittal letter. The transmittal letter should advise the recipient of the penalties in IRC §7213 , IRC §7213A, and IRC §7431.
In emergency situations, telephone requests may be made by TTB officials authorized to initiate written requests. A telephone request must be confirmed in writing by TTB within 24 hours. Telephone requests will be processed expeditiously; however, nothing should be disclosed until the written confirmation is received.
The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) is part of the Department of Justice. Since the revenue functions regarding excise taxes remained at Treasury, it is not anticipated that IRC §6103(h)(1) disclosures will need to be made to ATF. However, should ATF be involved with tax administration relative to alcohol, tobacco, firearms, and explosives, the law has been written in such a way, that for disclosure purposes, ATF falls under DOJ and is considered as if it was a Treasury component. Any request for tax information by ATF should be submitted to the Director, GLD using the format prescribed in IRM 126.96.36.199.1(3).
When TTB makes IRC §6103 disclosures (e.g., to States under IRC §6103(d) for taxes it administers), TTB is responsible for any necessary administrative IRC §6103 requirements (e.g., IRC §6103(p)(3) and IRC §6103(p)(4)).
IRM Part 21, Customer Account Services and IRM 13.1.7, Taxpayer Advocacy, contain procedures for disclosures to the Financial Management Service (FMS) concerning undelivered, lost or stolen tax refund checks.
In settling refund claimant matters referred by the IRS, FMS may need returns or more information than was initially released. Generally, FMS will submit written requests to the appropriate campus or field office.
When a copy of a return is needed, only the portions actually required should be disclosed. Generally, these are the portions showing the name, address, and social security number, and the portion showing the signature(s).
In expedited and hardship cases, FMS may make requests by telephone. Calls should be directed to the Headquarters Office of the National Taxpayer Advocate.
Before releasing information either in writing or by telephone, Taxpayer Advocate employees should confirm the caller’s identity. This may entail a telephone call to the FMS supervisor of the employee making the request. Telephone requests should be documented. The caller’s identity, the information requested, and the documents or information disclosed should be recorded.
IRC §6103(h)(1) also authorizes disclosures to FMS to carry out other IRS programs. For example, FMS receives tax information to issue tax refund checks and to administer the IRC §6402 Tax Refund Offset Program.
See IRM 188.8.131.52 (5) for penalty provisions.
Prior to the Homeland Security Act, the U.S. Customs Service collected excise taxes levied under subtitle E (chapters 51 and 52) of the Internal Revenue Code on imports of tobacco products and paraphernalia, distilled spirits, rectified products, wine, and beer. While the U.S. Customs Service has moved from Treasury to the Department of Homeland Security, the revenue (tax) function of these Chapters technically remains with Treasury. However, via delegation (T.O. 165-09), Treasury has given this taxing authority to Homeland Security Border and Transportation Security. For reference purposes, we will refer to this Homeland Security component as "Customs. "
Generally, Customs’ tax administration functions will not require access to returns and return information obtained under other provisions of the Code.
If tax information is required for subtitle E responsibilities, written requests should be submitted as described in subsections 22.8.1(1) and (2) and signed by the appropriate agency official. The requests will be processed as described in IRM 184.108.40.206.1(4).
Customs or import duties on goods entering the United States are not internal revenue taxes. Therefore, the collection of customs duties does not constitute a tax administration activity for purposes of IRC §6103(h)(1).
See IRM 220.127.116.11(5) for penalty provisions. Under IRC §6103(h)(1), Customs has access to the IRS Business Master file data base (BMF) for verification of Employer Identification Numbers (EINs), that are in their Automated Commercial System data base.
On a monthly basis, the Martinsburg Computing Center can provide Customs with a tape that contains the BMF EIN Primary Name Line, State and ZIP Code for every EIN in the BMF. This information can be matched against the Automated Commercial System data base, and if the EIN does not match, or is not issued by the IRS, Customs can void the number in the Automated Commercial System.
See IRM 18.104.22.168, Disclosure of Return Information - U.S. Customs Service, for disclosure authority to Customs under IRC §6103(l)(14).
The Inspector General Act Amendments (IGAA) of 1988 (P.L. 100–504), amended the Inspector General Act of 1978, and statutorily established a Presidentially-appointed Inspector General within the Department of Treasury. The Restructuring and Reform Act of 1998, enacted July 22, 1998, abolished the IRS' Office of the Chief Inspector and created within the Department of Treasury, an independent Office of Treasury Inspector General for Tax Administration (TIGTA). The new TIGTA has all the responsibilities of an Inspector General of the Department with respect to the Department of the Treasury and the Secretary of the Treasury on all matters relating to the Internal Revenue Service. TIGTA has sole authority to conduct an audit or investigation of the IRS Oversight Board and the Office of Chief Counsel of the Internal Revenue Service.
TIGTA may initiate, conduct, and supervise such audits and investigations within the IRS which the TIGTA considers appropriate.
The RRA of 1998 requires the TIGTA to review and certify whether or not the Secretary is in compliance with the disclosure requirements of IRC §6103(e)(8). Additionally, IRC §7803(d)(3)(A) requires that the Inspector General must periodically audit a statistically valid sample of IRS denials of taxpayer requests on the basis of IRC §6103 or 5 USC 552(b)(7).
Treasury Order 115-01 sets out the functions of the Office of TIGTA. Section 5.d states: "In carrying out their official duties, TIGTA personnel shall have the full cooperation of employees of the Department of the Treasury and shall have full and prompt access to facilities, property, electronic or paper records, documents, correspondence, data, and computer systems...." IRC §6103(h)(1) provides that disclosures of tax information can be made to Treasury employees with a "need to know" for tax administration purposes. The legislative history of RRA 1998 states "the Treasury IG for Tax Administration has the same access to taxpayer returns and return information as does the Chief Inspector under present law."
For access for nontax criminal purposes, see IRM 11.3.28, Disclosure to Federal Agencies for Administration of Nontax Criminal Laws.
IRC §6103(h)(1) does not require a written request, nor are disclosures under IRC §6103(h)(1) subject to accounting under IRC §6103(p)(3). However, the IRS and TIGTA have established standardized procedures for TIGTA audits and all IRS functions must observe those specific procedures developed by Legislative Affairs. For current information, go to http://www.hq.irs.gov/la/BranchC/GAOTIGTA/ARC/handbook/toc.htm . For TIGTA investigations, IRS employees should cooperate as fully as possible after having the TIGTA requester show proper identification. If employees have questions, they should consult their managers or the Disclosure function for guidance. If desired, IRS employees may use Form 11377, Taxpayer Data Access, or Form 11377-E (electronic Adobe fillable form) to record accesses made to provide information for TIGTA investigations.
IRS does not oversee disclosures made by TIGTA under IRC §6103. To the extent such disclosures are made and they are subject to IRC §6103(p)(3) and/or IRC §6103(p)(4), TIGTA and not IRS will ensure statutory compliance.
See IRM 22.214.171.124(5) for penalty provisions.
Under the Homeland Security Act of 2002, the U.S. Secret Service has moved from Treasury to the Department of Homeland Security. Therefore, at face value, the Secret Service no longer qualifies for IRC §6103(h)(1) access to tax information. However through a combination of the savings clause, Section 1512 of the Homeland Security Act of 2002, IRC §6103(n) and, where appropriate under the facts and circumstances, IRC §6103(k)(6), the disclosure rules will permit SS involvement in refund check investigations. See IRM 11.3.21, Investigative Disclosure, for discussion pursuant to IRC §6103(k)(6). It is our understanding that the Secret Service is still involved in 18 USC 495 refund check investigations. The procedures below applied to the Secret Service prior to the enactment of the Homeland Security Act and will continue to apply to these types of investigations.
Under 18 USC 495, the Secret Service investigates stolen, forged, altered and fraudulently negotiated tax refund checks. These investigations constitute tax administration.
Generally, Secret Service requests for returns and return information are written.
The requests should be signed by the Special Agent in Charge (SAC) of the originating field office or, in the case of requests from the headquarters office, by an employee of equivalent or higher rank.
Written requests should be submitted to the field or campus Disclosure Manager.
The request must contain:
Name, address and taxpayer identification number of the taxpayer involved
Taxable period or periods
Specific information or document(s) needed
The nature of the investigation and the statutory authority, i.e., 18 USC 495
The statutory authority for requesting disclosure, i.e., IRC §6103(h)(1)
The Disclosure Manager will secure the requested information and transmit it to the requesting official or his/her designee. The Disclosure Manager should follow the procedures in IRM 126.96.36.199.1(4).
Criminal Investigation cases concerning forged tax refund checks (including refund checks issued to fictitious payees) should be handled in accordance with IRM 9.5.4.
Criminal Investigation may disclose to the Secret Service any relevant information concerning the forged refund checks, whether the information was obtained from the taxpayer, informants or other sources.
The procedures in IRM 9.5.4 also apply to U.S. Treasury checks other than refund checks. However, return information may only be released for this purpose pursuant to IRC §6103(i)(1), (2), or (3).
When the Taxpayer Advocate staff handles cases involving forgery of refund checks under investigation by the Secret Service, they may contact the Secret Service as necessary;
If the Secret Service needs information such as an address to locate the payee, or other information concerning the refund check, it may be requested and disclosed orally
The requester’s identity should be confirmed before disclosure is made, and the information disclosed should be documented
Generally, original returns and documents will not be released to the Secret Service. However, where an original return is needed for ink, handwriting or other laboratory analysis, access is permitted:
The original document should be hand-carried to the Secret Service office by an IRS employee who should remain with the original document during the analysis
The original document may not be left with the agency for retrieval later
See IRM 188.8.131.52(5) for penalty provisions.
Requests for inspection or disclosure of returns and return information by other Treasury components for tax administration should be handled in the manner described in IRM 184.108.40.206.1.
Requests should be signed by the head of the bureau, agency or office, or by a designated official not lower than a division director.
The penalty provisions as outlined in IRM 220.127.116.11(5) apply.
Except for cases before the U.S. Tax Court, the Department of Justice represents the Government in all tax litigation to which the United States is party.
To carry out this responsibility, the Department of Justice must have access to returns and return information and the penalty provisions of IRC §7213, IRC §7213A and IRC §7431 apply.
The IRS may disclose returns and return information (including taxpayer return information) to officers and employees of the Department of Justice (including United States Attorneys) personally and directly engaged in, and solely for their use in, any Federal grand jury proceeding, or preparation for any proceeding (or investigation which may result in such proceeding) before a Federal grand jury or any Federal or State court.
Returns and return information may be disclosed under the following conditions:
The returns or return information pertain to a taxpayer who is or may be a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer’s civil or criminal liability, or the collection of such civil liability in respect of any tax imposed under the Internal Revenue Code (IRC §6103(h)(2)(A)).
The treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding or investigation (IRC §6103(h)(2)(B)) or
The return or return information relates or may relate to a transactional relationship between a person who is or may be a party to the proceeding and the taxpayer which affects, or may affect, the resolution of an issue in the proceeding or investigation (IRC §6103(h)(2)(C)).
Disclosures under IRC §6103(h)(2)(A), are straightforward as they involve the returns and return information of the taxpayer(s) whose tax liability is at issue.
Disclosures under IRC §6103(h)(2)(B) and (C) involve third parties’ returns and return information, so careful analysis is required.
The "item" test in IRC §6103(h)(2)(B) is satisfied, for example, if the returns of corporations, partnerships, estates and trusts reflect the treatment of items relevant to resolving the liability of a taxpayer who is a shareholder, partner, or beneficiary.
In trust fund recovery penalty cases involving failure to pay withholding taxes, items on a corporate return such as wages paid, taxes withheld and the corporate office held by a "responsible officer" may be relevant to determining liability for the penalty. (See IRM 11.3.40, Disclosures Involving Trust Fund Recovery Penalty Assessments, for discussion of disclosure in trust fund recovery penalty cases.)
The "transactional relationship " test in IRC §6103(h)(2)(C) is satisfied, for example, if the treatment on a buyer’s return regarding the purchase of a business is relevant to the seller’s tax liability resulting from the sale of the business. The buyer may have amortized a "covenant not to compete, " whereas the seller may have claimed capital gain treatment of a sale of "goodwill."
In considering the "item" and "transactional relationship" tests, Congress specifically noted that certain third party return information used by the IRS for investigative purposes (termed "comparables" ) does not satisfy the tests of either IRC §6103(h)(2)(B) or (C). Thus, the IRS may not disclose such information to the Department of Justice in judicial or administrative proceedings.
Common "comparable transactions " involve reasonable compensation cases and IRC §482 cases (involving the reallocation of profits and losses among related companies). See IRM 18.104.22.168.
The IRS will not disclose returns and return information concerning witnesses for the sole purpose of impeachment of the witness and/or his or her testimony unless the "item" and/or " transaction" tests set forth in IRC §6103(h)(2)(B) and (C) are satisfied. IRS employees making IRC §6103(h)(2) disclosures should be alert to this criteria.
Tax information obtained under IRC §6103 for use in a federal grand jury tax investigation generally may be disclosed by the Department of Justice to Federal officers and employees personally and directly engaged in the investigation.
IRC §6103 generally prohibits disclosure of tax information to State and local law enforcement personnel assisting the attorney for the government in such investigations.
State and local government personnel can be considered Federal employees for disclosure purposes as long as those personnel are formally appointed as Federal employees (rather than merely detailed), are assisting in a Federal investigation, and are supervised by a Federal employee.
Such personnel would include Special Assistant U.S. Attorneys, Special Deputy U.S. Marshals, and other persons formally appointed as Federal employees under the Intergovernmental Personnel Act. Special Deputy U.S. Marshals are deputized by the U.S. Marshals Service. Other appointments are made by the U.S. Attorney’s Office directing the grand jury investigation.
State and local personnel deputized under Title 21, United States Code, Section 878 (21 USC 878) by the Drug Enforcement Administration or the U.S. Attorney’s Office in a narcotics investigation may not have access to tax information because they are not considered Federal employees for purposes of the disclosure laws.
Once State or local personnel are formally appointed, they become subject to all the prohibitions on use and disclosure of tax information in the IRC and, therefore, subject to the penalties for unauthorized disclosures.
When State and local personnel are formally appointed, they will be advised in writing of the disclosure restrictions and penalties for unauthorized disclosures and inspections. See IRM 9.3.1, Exhibits 1-3.
IRC §6103(h)(3) prescribes the procedural prerequisites for disclosures to the Department of Justice in tax matters under IRC§ 6103(h)(2).
IRC §6103(h)(3)(A) permits disclosure by the IRS on its own motion in cases that have been "referred " by the Secretary to the Department of Justice or the U.S. Attorney.
The term "referred" case is not defined in IRC §6103. However, the legislative history of IRC §6103 indicates that Congress intended a broad interpretation of the term and acceptance of the definition traditionally used by the IRS and the Department of Justice.
Referral has traditionally included all tax cases where the Secretary has requested the Department of Justice to prosecute, defend, or take other action regarding a criminal matter before a Federal grand jury, or in civil and criminal Federal or State judicial proceedings. If the Secretary has analyzed a case, decided that the Department of Justice should take action, and requested that action be taken, it is a referred case.
A referral for purposes of IRC §6103(h)(3)(A) may include a request for pre-referral advice. The IRS may make disclosures to the Department of Justice in connection with the necessary solicitation of advice and assistance with respect to a case prior to the formal referral. The referral for procedural advice must be made by a person with delegated authority to refer. The referral terminates once the advice or assistance is rendered.
The term is not limited to cases involving violations of the Internal Revenue Code. "Referred" cases also may include violations of related statutes which have been investigated by the IRS.
IRC §6103(h)(3)(B) provides for disclosure of returns and return information to the Department of Justice in non-referred cases. These requests are called "reverse referrals."
The statute requires a written request signed by the Attorney General, the Deputy Attorney General, or an Assistant Attorney General. The authority cannot be redelegated. Therefore, a request from a United States Attorney in these circumstances cannot be honored.
Generally, such requests are made by the Assistant Attorney General (Tax Division), since the Tax Division must authorize any Department of Justice tax investigation.
Written requests should be sent to the Associate Chief Counsel, Criminal Tax, in Headquarters. The requests should identify the specific information required and explain the need for it.
Disclosure to the Department of Justice in tax cases generally will be made by Chief Counsel employees, and the Special Agent in Charge (SAC), Criminal Investigation, as described in IRM 9.3, and CCDM Part 31, Criminal Tax.
The routing of cases within the IRS and the referral to the Department of Justice, Tax Division, or directly to the United States Attorney depends on the type of case involved.
Except as otherwise indicated in this section, the Disclosure Manager’s role generally consists of providing advice about what can be disclosed.
Under certain circumstances, the IRS may seek to develop a tax case through the grand jury process rather than the administrative process. IRM 9.5 describes the referral procedure.
See IRM 11.3.27, Disclosure of Returns and Return Information to Grand Juries, for information on the disclosure of returns and return information to grand juries.
Tax information obtained under IRC §6103 for use in a Federal grand jury tax investigation generally may be disclosed by the Department of Justice to Federal officers and employees personally and directly engaged in the investigation.
IRC §6103 generally prohibits disclosure of tax information to State and local law enforcement personnel assisting the attorney for the Government in such investigations, except as detailed in subsections 22.214.171.124(8) through (11).
During an on-going Title 18 grand jury investigation, tax or tax related violations may surface. As a result, the United States Attorney, strike force attorney or the Department of Justice may request IRS participation in the investigation.
Grand jury information may be given to the IRS with a request that the IRS determine whether it wishes to commit personnel to assist the grand jury.
If the IRS determines that a Title 26 grand jury investigation is warranted, such recommendation will be made, and the IRS will commit personnel to the investigation.
The referral channels for IRS initiated grand jury referrals also apply to requests to the IRS for grand jury participation. See IRM 9.5, The Investigative Process.
IRS concurrence in the joint Title 18/26 investigation constitutes a referral under IRC §6103(h)(3)(A).
Treasury Regulation 301.6103(h)(2)-1 describes the use and further disclosure of tax information disclosed to the Department of Justice under IRC §6103(h)(2). Tax information can be used in a joint tax/nontax grand jury investigation if the nontax investigations arises out of the particular facts and circumstances of the tax investigation, and the tax administration portion of the investigation has been approved by the Assistant Attorney General (Tax Division) at the request of the IRS.
In a joint Title 18/26 investigation which has been approved by the Assistant Attorney General for Tax Division of DOJ, if the tax administration portion of a Federal grand jury proceeding, etc., is terminated, further use or disclosure of returns or return information in the proceeding, etc., requires an ex-parte order as provided by IRC §6103(i)(1)(A).
The regulation does not require the Department of Justice to notify the IRS of the intended use of return information other than taxpayer return information. However, DOJ employees should be asked to notify the Director of Governmental Liaison and Disclosure or the GLD Area Manager for the office in which the referred tax case originated, so that the appropriate official can determine, under IRC §6103(i)(4), if the use will identify a confidential informant or impair tax administration.
The above restrictions apply to litigation cases when the Title 18/26 cases have been severed during litigation (e.g., an acquittal on Title 26 counts and a retrial on Title 18 counts.)
Return information that has been publicly disclosed as evidence in the Title 26 action may be used in subsequent actions without regard to these restrictions as long as the public record is the source. See IRM 126.96.36.199, Information Which Has Become Public Record .
During the investigation of a referred tax case or for use at trial, the Department of Justice attorney or United States Attorney may require returns or return information in the possession of the Social Security Administration (SSA).
In these cases, the IRS will determine whether the requirements of IRC §6103(h)(2) or (h)(4) have been satisfied before permitting disclosure of the information.
Specific procedures for obtaining this information are contained in IRM 188.8.131.52.2.
United States Attorneys and other Department of Justice employees involved in IRS tax cases should go through Chief Counsel attorneys or Criminal Investigation to obtain additional returns and return information required to work the cases.
Generally, telephone requests should not be made directly to field or Campus employees or other IRS employees to obtain information.
Returns and return information disclosed to officers and employees of Treasury, attorneys of the Department of Justice (including United States Attorneys), and State tax officials pursuant to IRC §6103(h)(1), (h)(2) and (d), respectively, may be disclosed by such persons in judicial or administrative tax proceedings under IRC §6103(h)(4). (See IRM 184.108.40.206.3 for definition of judicial tax proceeding.)
The information that can be disclosed is as follows:
IRC §6103(h)(4)(A) - the return or return information relates to a taxpayer who is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer’s civil or criminal liability, or the collection of such liability in respect of any tax imposed under the Internal Revenue Code;
IRC §6103(h)(4)(B) - the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding; or
IRC §6103(h)(4)(C) - such return or return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding.
IRC §6103(h)(2) uses more general " is or may be" language in applying standards for disclosure.
Under IRC §6103(h)(4), the taxpayer must be the party; and the item must either be directly related to the resolution of an issue; or the third party information must directly relate to a transactional relationship between the third party and the taxpayer, and must directly affect the resolution of an issue in the proceeding. IRC §6103(h)(4) permits disclosures in a judicial or administrative tax proceeding but does not give an independent right of access to the taxpayer outside of the proceeding.
The statute requires that returns and return information be withheld if the IRS determines that disclosure would identify if a confidential informant or seriously impair a civil or criminal tax investigation even the conditions of IRC §6103(h)(4)(A), (B), or (C) have been satisfied.
Persons outside of the IRS who receive returns and return information under IRC §6103(h)(1), (h)(2) or (d) should notify the IRS of the intent to use the records pursuant to IRC §6103(h)(4) in a judicial or administrative tax proceeding so that the IRS may determine whether it objects to the use on the basis of (5) above.
In addition to the conditions of IRC §6103(h)(4)(A), (B), and (C); IRC §6103(h)(4)(D) provides that a return or return information may be disclosed "to the extent required by order of a court pursuant to section 3500 of Title 18, United States Code, or rule 16 of the Federal Rules of Criminal Procedure, such court being authorized in the issuance of such order to give due consideration to congressional policy favoring the confidentiality of returns and return information as set forth in this title. "
18 USC 3500 (Jencks Act) concerns pretrial statements of government witnesses in Federal criminal cases. On motion of the defendant, the court will order production of such statements given to the government which are related to the content of the witness’ testimony. In Federal criminal tax cases, "Jencks" statements are disclosable under IRC §6103(h)(4)(D) regardless of whether the "item " or "transactional relationship" tests are met.
Under Rule 16(a)(1)(A) and (C), a defendant may request the government to permit inspection of relevant statements made by the defendant, of any documents obtained from or belonging to the defendant, and any results or reports of any physical or mental examination and of any scientific test or experiment. Discovery of tax information only applies to information provided by the taxpayer or his/her representative (i.e., returns and taxpayer return information). Rule 16 does not apply to third party information such as reports, memoranda, or other internal government documents prepared by government agents in connection with the case. It also does not apply to statements made by witnesses (other than the defendant) to agents of the government except as provided in 18 USC 3500.
If the government is ordered to produce returns or return information which the IRS wishes to withhold, the court should be requested to inspect the information in camera to determine its relevance and materiality to the proceeding. Where production of the information is required, government counsel generally will seek a protective order such as that entered in U.S., et al. v. Moriarity, 69-1 USTC 9169 and 69-1 USTC 9212. In the order, defense counsel agrees to restrict disclosure of the material to people who are parties to the tax case and their counsel. Defense counsel also agrees not to make copies, unless necessary for proper presentation of the case.
The section contains instructions for proceedings in Criminal Tax Cases.
Rule 32(c) of the Federal Rules of Criminal Procedure provides that the U.S. Probation Service, an arm of the court, investigates defendants, and it reports to the court before defendants are sentenced or granted probation.
With court permission, the defendant may waive the pre-sentence investigation and report. Also, the court may determine that it does not need an investigation and report.
The pre-sentence report includes the defendant’s:
Personal background and individual characteristics
Any circumstances affecting behavior which may be helpful when imposing sentence or granting probation, or in the correctional treatment of the defendant
The report may not be submitted to the court or disclosed to anyone until the defendant has pleaded guilty or nolo contendere, or has been found guilty. The judge may inspect a pre-sentence report at any time if the defendant consents in writing.
Generally, pre-sentence investigative reports should not be solicited by IRS employees for use in tax cases. These reports are subject to confidentiality considerations imposed by the Federal Rules of Criminal Procedure and the court. They may be disclosed only where a compelling, particularized need for disclosure has been shown.
In the absence of such a need, it is doubtful that the court would waive the confidentiality of these reports, even for a tax matter.
The preparation of a pre-sentence report is part of the judicial process. In a criminal tax case, returns and return information pertaining to the defendant may be disclosed to the Probation Service under IRC §6103(h)(4).
IRC §6103(h)(4) is the authority for the disclosure whether the information is released directly to the probation officer assigned to the pre-sentence investigation, or to the United States Attorney who will transmit the information to the probation officer.
The probation officer generally will contact the special agent assigned to the tax investigation for information about the defendant’s cooperation during the investigation:
Whether the defendant made payments on the tax deficiencies involved in the criminal tax case or on other tax obligations.
Any other pertinent information which would assist the court in imposing sentence.
Any information from the taxpayer’s tax file which is material and relevant in determining sentence may be disclosed whether the information relates to the conviction year(s), or to other tax year(s).
Generally, the Disclosure Manager will not be involved but should be contacted if questions arise.
Third party tax information may be disclosed for purposes of sentencing when the information relates to conduct not the subject of the indictment or conviction ("uncharged conduct" ) if the court can consider such conduct for sentencing purposes. Such third party information must meet the IRC §6103(h)(4)(B) or (C) tests to be disclosed.
An individual convicted of a criminal tax violation may be granted probation conditioned on payment or settlement of his/her civil tax liability.
Generally, Criminal Investigation, and/or the appropriate IRS compliance function will monitor the taxpayer’s account(s) in these cases to ensure that the court is notified of noncompliance.
Criminal Investigation will generally prepare a report for the court as provided in IRM 220.127.116.11.1. The reports generally will be transmitted to the Probation Service through the United States Attorney to whom the report is released.
In some situations, the probation officer may contact the IRS directly for information concerning the defendant’s compliance with the conditions of probation in a criminal tax case.
These requests generally will be directed to the field Disclosure Manager who will obtain the information from the affected functions and respond to the inquiry.
The request from the Probation Service should contain:
A statement that the probation officer who will receive the information is responsible for determining the taxpayer’s compliance with the conditions of probation which relate to internal revenue laws.
The probation period and
The conditions of probation regarding settlement of tax obligations for the conviction years, and for subsequent years, if any.
If a request omits any of the above items, the information should be obtained from the probation officer before disclosure is made.
Information concerning the taxpayer’s filing status for years specified in the conditions of probation may be disclosed under IRC §6103(h)(4).
Information about other tax years generally will not be disclosed without written consent from the taxpayer. However, if the probation officer shows that the information is material and for consideration of the court in revoking or extending probation, it may be disclosed under IRC §6103(h)(4)(A).
IRC §6103(h)(4) permits disclosure to a probation officer only in connection with a criminal tax case for which the defendant is on probation. The Disclosure Manager or other responding official should confirm this before information is disclosed.
Probation Officers may submit taxpayer consents under IRC §6103(c) to permit disclosures. This is especially true where tax information is sought for nontax case probation proceedings. In such cases, the procedures of IRM 11.3.3, Disclosure to Designees and Practitioners should be followed.
IRC §6103(h)(4) authorizes the use of returns and return information to Federal and State employees in judicial tax proceedings, and also permits disclosure to taxpayers involved in administrative tax proceedings, under certain circumstances.
Third party tax information may be disclosed if such disclosures satisfy the item test of IRC §6103(h)(4)(B) or the transactional relationship test of IRC §6103(h)(4)(C).
The statute does not define "administrative proceeding." However, the term generally includes any proceedings regarding proposed or actual actions against a person(s) that are enforceable under agency laws or regulations.
Following are examples of disclosures of third party tax information in administrative proceedings which satisfy the conditions of IRC §6103(h)(4)(B) or (C).
Disclosure of a corporate Form 941, Employer's Quarterly Federal Tax Return, (for a period for which the trust fund recovery penalty is assessed) to a "responsible person" who can not obtain the return under IRC §6103(e). See IRM 11.3.40, Disclosures Involving Trust Fund Recovery Penalty Assessments,for additional discussion of trust fund recovery penalty assessment disclosures.
Whipsaw situations where there is a transaction between two parties and, depending on how it is characterized, the transaction will benefit one and hurt the other from a tax standpoint. In such cases, each party reports the transaction in a way which provides him/her with the most beneficial tax results.
Common whipsaw situations include:
Goodwill versus covenant not to compete
Alimony versus child support
Allocation of purchase price between buyer and seller
In certain cases, third party return information may be useful in establishing a standard or average by which to compare salaries, commissions, selling prices, profit margins, or other specific items about a taxpayer under examination or investigation.
These "comparables" are the measures of the economic value of a transaction or of services performed.
Comparables are used in reasonable compensation cases where the IRS determines the average compensation of similar third party taxpayers in arriving at reasonable compensation which the taxpayer should have reported.
Comparables are also used in IRC §482 cases involving the allocation of gross income, deductions and credits among members of controlled organizations, trades, or businesses (i.e., organizations, etc., as defined in Treas. Regs. 1.482-1(a), owned or controlled directly or indirectly by the same interests).
The standard applied in IRC §482 cases is that of an uncontrolled taxpayer dealing at arm’s length with another uncontrolled taxpayer.
IRC §6103(h)(1) permits the IRS’s internal access and use of comparables for tax cases. However, the IRS is prohibited from disclosing this information to the Department of Justice under IRC §6103(h)(2) or in tax proceedings under IRC §6103(h)(4) since neither the " item" nor the "transactional relationship" test is met. The comparable taxpayer must consent in writing to the disclosure.
When the IRS has used comparables to determine reasonable compensation, the IRS can neither advise the taxpayer under investigation nor the Department of Justice what comparables were used and how they were analyzed, without the unrelated parties’ consent. Further, the information may not be used in resulting litigation.
To satisfy IRC §6103(h)(2) and (h)(4), the IRS may employ other means of obtaining similar information which can be disclosed to the Department of Justice and used in tax proceedings.
Information may be obtained directly from a third party as a witness even though the information may be the same as or similar to comparable return information already in the IRS’s possession. Information obtained this way is return information of the taxpayer under examination or investigation, and may be disclosed under IRC §6103(h)(2)(A) or (h)(4)(A).
IRC §6103(h)(5) provides for the disclosure of address information and the status of an individual as a nonresident alien or as a citizen or resident of the United States to the Social Security Administration or the Railroad Retirement Board for purposes of withholding income tax from social security benefits of nonresident aliens.
Inquiries about such disclosures should be referred to the Director, Office of Governmental Liaison and Disclosure.
Money laundering is the process of converting illegal or "dirty" money into money or assets that appear to be from legitimate or "clean" sources. People launder money to avoid suspicion and detection by law enforcement officials, and/or to avoid paying income taxes.
Narcotics trafficking, illegal gambling, extortion and political corruption are all crimes that involve large, illegal cash transactions. Money is laundered to hide the source.
"Legitimate" business/professional people may be laundering money to hide income and thus evade taxes.
Purchasing cars, boats, furs and houses for cash instead of check or credit is one method used to hide income. (It is easier for enforcement agencies to trace check and credit purchases because they leave a "paper trail" behind.)
Another method used to evade the law is smuggling cash into foreign countries that have very lenient banking laws. The funds are then transferred to a U.S. bank. This makes it difficult for U.S. authorities to track the money back to its source.
To provide information on large cash transactions, Congress enacted laws to allow law enforcement and regulatory agencies to receive data regarding the movement of cash.
The Bank Secrecy Act, Title 31 USC, requires that certain reports be made to the Secretary of the Treasury.
FinCEN Form 101, Suspicious Activity Report by the Securities and Futures Industries;
FinCEN Form 102, Suspicious Activity Report by Casinos and Card Clubs;
FinCEN Form 103, Currency Transaction Report by Casinos (CTRC)-[formerly Form 8362];
FinCEN Form 104, Currency Transaction Report (CTR)-[formerly Form 4789];
FinCEN Form 105, Report of International Transportation of Currency or Monetary Instruments (CMIR)-[formerly Form 4790];
FinCEN Form 105-N, Currency Transaction Report by Casinos Nevada (CTRC-N)-[formerly Form 8262];
TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR);
TD F 90-22.47, Suspicious Activity Report (SAR) for Depository Institutions;
TD F 90-22.53, Designation of Exempt Person;
TD F 90-22.55, Registration of Money Services Business (MSB);
TD F 90-22.56, Suspicious Activity Report by Money Services Business; and
Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, elements as required by 31 USC 5331.
Even though Treasury regulations and instructions provide that CTRs and FBARs are to be filed with the IRS, neither CTRs, FBARs nor CMIRs (which are filed with U.S. Customs and Border Protection) are "returns" as defined in IRC §6103(b)(1) because they are not filed under provisions of Title 26, but under Title 31. The Currency and Banking Retrieval System (CBRS) provides online access to Title 31 reports and is maintained at the Detroit Computing Center.
Information from these reports, or copies of the reports themselves, are "return information" as defined by IRC §6103(b)(2) only when they are used in tax or tax-related investigations. As such, they are protected by IRC §6103 when used in a tax context.
Title 31 report information which is " return information" is not "taxpayer return information " because the information was not information submitted by or on behalf of the taxpayer in connection with a Title 26 matter.
Returns and return information include tax information returns and other tax information secured from IRS sources/files or developed by the IRS in determining a person's tax liability.
Form 8300 is a return protected by IRC §6103. However, for transactions occurring after 12/31/2001, there is a virtually identical reporting requirement in Title 31, 31 USC 5331. The new Form 8300 will be used to report under both IRC §6050I and 31 USC 5331. The Title 31 information is loaded to CBRS and is given to FinCEN. The Form 8300 entered into IRS information return files is protected under Title 26. For information on redisclosure of Form 8300 see the "New Re-Dissemination Guidelines for Bank Secrecy Act (BSA) Info" link on the CL/GLD/Disclosure IRC §6103 website.
The money laundering provisions of Title 18 do not involve the filing of reports.
Returns and return information may be used or disclosed to initiate or conduct a money laundering investigation if the investigation is considered tax administration according to IRC §6103(b)(4).
The key test is whether, under the facts and circumstances of the particular case, the money laundering provisions meet the " related statute" test.
A money laundering or Bank Secrecy Act provision(s) will be deemed a "related statute" if the money laundering or Bank Secrecy Act violation:
Was committed in furtherance of a violation of the internal revenue laws or
Is part of a pattern of violations of the internal revenue laws.
It is not necessary to establish a Title 26 violation or a "numbered" Title 26 investigation to meet the related statute test. Large amounts of currency being deposited and concealed from the IRS provide indications that income has been earned that has not been, or may not be, reported on an income tax return.
The related statute determination, or " call," is within the good faith judgments of the Special Agent in Charge (SAC) Criminal Investigation (CI) or Area Director/Territory Manager for the appropriate function. The appropriate official will make such determination in memorandum form, with his/her signature, for placement in the administrative investigative file.
Returns and return information (including Forms 8300) cannot be used to evaluate information related to a money laundering investigation to determine whether a related statute call should be made. (Note that FinCEN has data from most Forms 8300 filed after 12/31/2001, that are not protected by IRC §6103), as they are now required under 31 USC 5331, as well as IRC §6050l.
If the related statute call is made, the disclosure of returns and return information to Treasury Department employees, including IRS employees, for use in the criminal investigation is permissible under IRC §6103(h)(1).
Returns and return information may also be disclosed to Department of Justice employees personally and directly engaged in the investigation once the investigation has been referred from IRS to the Department of Justice according to IRC §6103(h)(2) and (3).
Appropriate referral procedures should be followed based on the nature and type of alleged violations. (See IRM 18.104.22.168.2, IRM 9.3.1 and IRM 9.5.5, The Investigative Process - Money Laundering and Currency Crimes.)
The SAC, Criminal Investigation, has the authority to directly refer matters involving 18 USC 1956 and 1957 and Title 31 to the U.S. Attorney, pursuant to IRS Delegation Order No. 11-2.
Information received or collected by the IRS in the money laundering or Bank Secrecy Act investigation after the related statute call is made is return information protected by IRC §6103, regardless of whether or not the information is ever used for Title 26 prosecution purposes. If the related statute investigation progresses to a grand jury investigation, information obtained from other than IRS sources will usually be solely protected by Rule 6(e) Secrecy. Rule 6(e) does not override the protection of IRC §6103, if IRC §6103 applies to the information.
In a multi-agency money laundering or Bank Secrecy Act investigation including nontax Title 18 charges, (e.g. bank fraud, bankruptcy fraud), tax information may not be used or disclosed for purposes of the other nontax Title 18 charges, unless:
There is also a Title 26 or tax related charge that has been approved by the Department of Justice (Tax Division) and the tax and nontax charges arise out of the same facts and circumstances or
The provisions of IRC §6103(i) are followed (e.g. IRC §6103(i)(1) ex-parte order) to obtain tax information for purposes of the nontax Title 18 charges (e.g. bank fraud, bankruptcy fraud).
"Pure" Title 18 and Title 31 money laundering investigations are those investigations not involving tax or tax related violations.
Title 31 reports and other information collected by the IRS during the investigation are not protected by IRC §6103. However, Privacy Act requirements may apply.
CI personnel may seek the advice of the Disclosure Manager concerning access to returns and return information in a pure money laundering investigation.
In the absence of a determination that the related statute test is met, returns and return information may not be disclosed to Treasury (including IRS) and Department of Justice employees, except through the ex-parte court order provisions of IRC §6103(i)(1), or the request provisions of IRC §6103(i)(2).
Although the potential for meeting the related statute test may be present, it is preferable to use IRC §6103(i)(1) to obtain returns and return information. A related statute call by the appropriate official is subjective and open to scrutiny in the event of a claim of improper disclosure. (See IRM 9.3.1 and IRM 9.5.)
A money laundering investigation under 18 USC 1956(a)(1)(A)(ii) is always tax-related, and is never a pure money laundering investigation.
FinCEN's Re-Dissemination Guidelines for Bank Secrecy Act Information, promulgated under the authority of 31 CFR 103.43, permit IRS without prior specific FinCEN approval to disclose Bank Secrecy Act (BSA) report information (Title 31 reports) to Federal, state and local agencies for use in criminal, tax and regulatory law enforcement matters, including BSA enforcement under certain conditions. These include:
Same or related investigations on a related prosecution and
Members of the same Joint Task Force to which IRS belongs.
Disclosures are subject to certain administrative requirements (e.g., they must contain a warning statement, as prescribed in the Guidelines, on the use and further dissemination of the information). The Guidelines must be consulted to determine the specific requirements of a contemplated disclosure.
Currently, under Delegation Order 143 (as revised), the authority to release BSA report information is delegated to the SAC, CI. However, FinCEN has also authorized GLD through the IRC §6103(i)(1) process to release BSA reports where they are requested in addition to the tax returns and tax information covered by IRC §6103(i)(1). Please contact your Disclosure Manager for procedures.
For Title 31 information on financial institutions not within the jurisdiction of the IRS where the related statute test has been met, but where prosecution is lacking, the SAC (CI) should forward a summary of the facts on Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, to the Chief (CI), who will advise FinCEN. If tax information is disclosed, it should be noted in the summary.