11.3.22. Disclosure to certain Federal Officers and Employees for Tax Administration Purposes under IRC 6103(h)

(1) This section deals primarily with disclosure of returns and return information for tax administration purposes under IRC 6103(h).

(2) IRC 6103(h) governs disclosures of returns and return information to federal officers and employees for tax administration purposes, unless more stringent conditions of disclosure apply, for example, IRC 6103(o)(2) and IRC 4424 (relating to wagering tax).

(3) The Internal Revenue Service 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 Department of Justice (DOJ) and the Alcohol and Tobacco Tax and Trade Bureau (TTB) in Department of Treasury (Treasury).

(4) 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 DOJ (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 for tax administration activities is the Bureau of Fiscal Service (BFS) which issues tax refunds and administers the offset provisions of IRC 6402(c), IRC 6402(d) and IRC 6402(e).

(5) Federal employees who have inspected or gained access to returns or return information under IRC 6103(h) may be 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.

(1) IRC 6103(h)(1) provides for disclosure of returns and return information to officers and employees of the Department of the Treasury (including the IRS) whose official duties require access for tax administration. See IRM 11.3.22.2.

(2) IRC 6103(h)(2) provides for disclosure of returns and return information to officers and employees of the DOJ (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. See IRM 11.3.22.3.1.1 and IRM 11.3.22.3.1.2.

(3) IRC 6103(h)(3) describes how the DOJ can get returns and return information, if IRC 6103(h)(2) permits the disclosure. See IRM 11.3.22.3 .

(4) 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 11.3.22.8 . It also authorizes further disclosure of information previously disclosed to state tax officials under IRC 6103(d). See IRM 11.3.32.17 , Use of Federal Tax Returns and Return Information in State Judicial or Administrative Proceedings, pursuant to IRC 6103(h)(4).

(5) IRC 6103(h)(5) permits disclosure of address and alien status information to the Social Security Administration (SSA) and the Railroad Retirement Board (RRB) for purposes of withholding income tax from social security benefits of nonresident aliens. See IRM 11.3.22.12 .

(6) IRC 6103(h)(6) permits certain limited disclosures of returns and return information to the IRS Oversight Board. See IRM 11.3.22.13 .

(1) This IRM section is applicable to all Treasury and IRS employees who are authorized by IRC 6103(h) to disclose return information to federal officers and employees relating to their official tax administration duties or to accomplish properly any activity connected with such official duties.

(1) Business Units are responsible for establishing and documenting the program controls developed to oversee their program as well as ensuring employee compliance with all applicable elements of this IRM.

(1) An understanding of certain terms is necessary for the proper application of IRC 6103(h). This section will provide the definition for the use of "Tax Administration," "Related Statutes" and "Judicial and Administrative Tax Proceeding" as they pertain to IRC 6103(h).

(1) The Disclosure and Privacy Knowledge Base has several articles that provide guidance related to disclosures of information to federal officers or employees for tax administration purposes.

(2) For more information on privacy as it relates to disclosure of information, see IRM 10.5.1, Privacy Policy.

(1) The duties performed by IRS employees generally involve tax administration. However, IRS personnel do not have unlimited access to returns and return information.

(2) 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. See also IRM 10.5.1.2.8, Need to Know and IRM 10.5.5, IRS Unauthorized Access, Attempted Access or Inspection of Taxpayer Records (UNAX) Program Policy, Guidance and Requirements.

(3) 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.

(4) IRS employees can disclose return information to seek advice about legal, technical, or procedural issues in a specific case. However, a "need to know" must be established on a case by case basis.

(5) 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.

(6) The Internal Revenue Restructuring and Reform Act (RRA) of 1998 (Public Law 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.

(7) The IRC 6103(h)(1) need to know access even extends to federal tax information disclosed to other agencies under Title 26.

(1) 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.

(2) 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).

(3) 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.

(1) Main Treasury officials will send requests for returns and return information to IRS Headquarters. Main Treasury employees are authorized to receive returns and return information if they meet the need to know tax administration requirement. Requests from Main Treasury are generally in writing and signed by the Assistant Secretary or his/her designee.

(2) Written requests should include:

1. The name, address, and taxpayer identification number (SSN, ITIN or EIN), if available, or a description of the tax information needed.

2. The type of tax involved, i.e., income, excise, employment, etc.

3. The taxable period(s) covered by the return or return information.

4. A brief explanation of the tax administration purpose for which the information is required.

(3) Headquarters officials described below are responsible for compiling the information and transmitting it to the requestor or the designee.

(4) Returns and return information must be transmitted to Treasury following established transmission procedures. See IRM 10.5.1.6.8, Email, and IRM 10.5.1.6.9, Other Forms of Transmission. 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.

(5) Treasury employees must follow all IRC 6103 confidentiality requirements and after the material has served its purpose, Treasury employees must ensure that all information is disposed of properly. Main Treasury officials are also responsible for destroying any additional copies that may have been made.

(6) The Associate Director, Disclosure, should be contacted if there are any questions.

(7) IRM 11.3.22.1.1(5) provides information on penalty provisions.

(1) 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.

(2) TIGTA may initiate, conduct, and supervise such audits and investigations within the IRS which the TIGTA considers appropriate.

(3) Treasury Order 115-01 sets out the functions of the Office of TIGTA. Section 6.a.2) states: "In executing the functions of TIGTA, the IG, and any duly authorized representative, is authorized to: access all facilities of the IRS...including computer facilities and computer rooms, electronic data bases and files, electronic and paper records, reports and documents, and other material available to the IRS....which relate to their programs and operations;..." 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.

(4) For access for nontax criminal purposes, see IRM 11.3.28, Disclosure to Federal Agencies for Administration of Non-tax Criminal Laws.

(5) 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 the Office of Enterprise Audit Management (EAM). 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 for guidance.

(6) 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) accounting and/or IRC 6103(p)(4) safeguards provisions, TIGTA and not IRS will ensure statutory compliance.

(7) See IRM 11.3.22.1.1(5) for penalty provisions.

(1) 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 11.3.22.2.3.1.

(2) Requests should be signed by the head of the bureau, agency or office, or by a designated official not lower than a division director.

(3) The penalty provisions as outlined in IRM 11.3.22.1.1(5) apply.

(1) This section contains information on disclosure in claimant representative matters. A claimant representative matter covers:

• Office of Professional Responsibility (OPR)

• Treasury bureaus or agencies in accordance with 31 USC 330

(1) The IRS may disclose returns and return information (including taxpayer return information) to officers and employees of the DOJ (including United States Attorneys) personally and directly engaged in, and solely for their use in, any federal grand jury tax proceeding, or preparation for any tax proceeding (or investigation which may result in such tax proceeding) before a federal grand jury or any federal or state court.

(2) Returns and return information may be disclosed under the following conditions:

1. 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)).

2. 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

3. 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)).

(1) IRC 6103(h)(3) prescribes the procedural prerequisites for disclosures to the DOJ in tax matters under IRC 6103(h)(2).

(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 DOJ or the U.S. Attorney.

(3) 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 DOJ.

(4) Referral has traditionally included all tax cases where the Secretary has requested the DOJ 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 DOJ should take action, and requested that action be taken, it is a referred case.

(5) The term is not limited to cases involving violations of the IRC. "Referred" cases also may include violations of related statutes which have been investigated by the IRS.

(1) IRC 6103(h)(3)(B) provides for disclosure of returns and return information to the DOJ in non-referred cases. These requests are called "reverse referrals."

(2) 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.

(3) Generally, such requests are made by the Assistant Attorney General (Tax Division), since the Tax Division must authorize any DOJ tax investigation.

(4) 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.

(5) IRC 6103(h)(3)(B) disclosures require IRC 6103(p)(3)(A) accounting and are subject to IRC 6103(p)(4) safeguards provisions.

(1) 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, Investigative Process, describes the referral procedure.

(2) 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.

(1) 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 DOJ may request IRS participation in the investigation.

(2) 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.

(3) 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.

(4) The referral channels for IRS initiated grand jury referrals also apply to requests to the IRS for grand jury participation. See IRM 9.5, Investigative Process.

(5) IRS concurrence in the joint Title 18/26 investigation constitutes a referral under IRC 6103(h)(3)(A).

(1) Treasury Regulations in 26 CFR 301.6103(h)(2)-1 describes the use and further disclosure of tax information disclosed to the DOJ under IRC 6103(h)(2). Tax information can be used in a joint tax/non-tax grand jury investigation if the non-tax investigation 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.

(2) 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).

(3) The regulation does not require the DOJ 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 Area Manager, East or West, 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.

(4) 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.)

(1) 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.

(2) 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).

(3) 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.

(4) An individual convicted of a criminal tax violation may be granted probation conditioned on payment or settlement of his/her civil tax liability. 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.

(5) Generally, CI, 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. CI will generally prepare a report for the court as provided in IRM 9.3.1.8.1. The reports generally will be transmitted to the Probation Service through the United States Attorney to whom the report is released.

(6) Information concerning the taxpayer’s filing status for years specified in the conditions of probation may be disclosed under IRC 6103(h)(4).

(7) 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).

(8) Disclosures under IRC 6103(h)(4) are exempt from the accounting requirements.

(1) 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).

(2) The key test is whether, under the facts and circumstances of the particular case, the money laundering provisions meet the "related statute" test.

(3) A money laundering or BSA provision(s) will be deemed a "related statute" if the money laundering or BSA violation:

1. Was committed in furtherance of a violation of the internal revenue laws or

2. Is part of a pattern of violations of the internal revenue laws.

(4) 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.

(5) The related statute determination, or "call," is within the good faith judgments of the SAC 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.

(6) Returns and return information (including Form 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.)

(7) 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).

(8) Returns and return information may also be disclosed to DOJ employees personally and directly engaged in the investigation once the investigation has been referred from IRS to the DOJ according to IRC 6103(h)(2) and (3).

(9) Appropriate referral procedures should be followed based on the nature and type of alleged violations. (See IRM 11.3.22.3.2 , IRM 9.3.1, Disclosure, and IRM 9.5.5, Money Laundering and Currency Crimes.)

(10) The SAC, CI, 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, found in IRM 1.2.2.12.2.

(11) Information received or collected by the IRS in the money laundering or BSA 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 the Federal Rule of Criminal Procedure, Rule 6(e) Secrecy. Rule 6(e) does not override the protection of IRC 6103, if IRC 6103 applies to the information.

(12) In a multi-agency money laundering or BSA investigation including non-tax Title 18 charges, (e.g. bank fraud, bankruptcy fraud), tax information may not be used or disclosed for purposes of the other non-tax Title 18 charges, unless:

1. There is also a Title 26 or tax related charge that has been approved by the DOJ (Tax Division) and the tax and non-tax charges arise out of the same facts and circumstances or

2. 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 non-tax Title 18 charges (e.g. bank fraud, bankruptcy fraud).

(1) "Pure" Title 18 and Title 31 money laundering investigations are those investigations not involving tax or tax related violations.

(2) 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.

(3) CI personnel may seek the advice of the Disclosure Manager concerning access to returns and return information in a pure money laundering investigation.

(4) 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 DOJ employees, except through the ex-parte court order provisions of IRC 6103(i)(1), or the request provisions of IRC 6103(i)(2).

(5) 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, Disclosure, and IRM 9.5, Investigative Process.)

(6) A money laundering investigation under 18 USC 1956(a)(1)(A)(ii) is always tax-related, and is never a pure money laundering investigation.

(1) 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 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:

1. Same or related investigations on a related prosecution and

2. Members of the same Joint Task Force to which IRS belongs.

(2) Disclosures are subject to certain administrative requirements (e.g., they must contain a BSA warning statement, as prescribed in the Re-Dissemination Guidelines, on the use and further dissemination of the information). The Re-Dissemination Guidelines must be consulted to determine the specific requirements of a contemplated disclosure.

(3) Currently, under Delegation Order 25-5 (formerly DO-143 Rev. 6), found in IRM 1.2.2.15.5, the authority to perform certain functions to enforce Title 31 regulations is delegated to the SAC, CI.

(4) 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.