11.3.40. Disclosures Involving Trust Fund Recovery Penalty Assessments

(1) The disclosure guidance provided in this section applies to the collection of taxes subject to IRC 6672. In the case of employment taxes, IRC 6672 is limited to the trust fund portion of the tax; that is, to the tax that the responsible person is required to collect or withhold from the wages of employees. In the case of excise taxes, IRC 6672(a) is applied according to the plain language of the statute: the penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. This guidance also applies to the personal liability imposed by IRC 4103 against persons willfully causing a business entity to fail to pay certain excise taxes (for example the air transportation excise taxes under IRC 4261 and IRC 4271).

(2) The same care should be exercised in disclosures involving collected excise tax assessment records as is exercised in disclosing TFRP assessment records. Careful consideration of the complicated relationships involved in these assessments is necessary prior to disclosure of any information.

(1) The following items govern the authority pertaining to the disclosures of TFRP information:

• IRC 6103(a)

• IRC 6672(a)

• IRC 6672

• IRC 4261

• IRC 4271

• IRC 4103

(1) This IRM is intended to provide Collection or other compliance employees with information about their responsibilities in releasing TFRP penalty information. It is also meant to enable Disclosure personnel to provide advice and assistance to Revenue Officers, Appeals Officers and others engaged in the assessment, collection and litigation of such penalties and for Disclosure personnel to process Freedom of Information Act (FOIA) and Internal Revenue Code IRC 6103(a) requests for access to TFRP records.

(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) The following is a list of the terms and acronyms that are used in this IRM Section:Terms and Definitions

(1) The Disclosure and Privacy Knowledge base can be found at: https://portal.ds.irsnet.gov/sites/vl003/pages/default.aspx

(2) The following table lists other sources of guidance on Disclosures involving Trust Fund Recovery Penalty Assessments

(1) An alternative approach to release of TFRP records is provided by IRC 6103(h)(4) when the tax proceeding is still "on going."

(2) The judicial or administrative tax proceeding could be the TFRP investigation and assessment process itself conducted by Collection personnel or litigation involving the IRS which results from such assessment.

(3) Revenue Officers must ensure that all requirements of IRC 6103(h)(4) are met before disclosing any information. See IRM 11.3.22.15, Disclosure of Returns and Return Information in Judicial and Administrative Tax Proceedings.

(4) A Revenue Officer or others making disclosures in a judicial or administrative tax proceeding should demonstrate the applicability of IRC 6103(h)(4) to the request. However, it is important to remember that IRC 6103(h)(4) is NOT an access provision and disclosures are made only to the extent necessary and where the Revenue Officer or others determine the disclosure is authorized under the criteria of IRC 6103(h)(4).

(1) Generally, TFRP cases begin with an attempt to collect employment or excise taxes from the business which was initially responsible for the filing and/or payment of such taxes. The business case file in connection with the examination or collection activity is the return or return information of the business.

(2) If a FOIA request for the TFRP investigation file is received along with a request for the complete business case file the portion pertaining to the business case file should be worked following regular FOIA processing guidelines including the application of IRC 6103(e) as appropriate. See IRM 11.3.13, Disclosure of Official Information, Freedom of Information Act (FOIA) . Collection employees receiving a request for access should also apply IRC 6103(e) as appropriate, such as disclosure to an individual as authorized under IRC 6103(e)(1)(A). See IRM 11.3.2, Disclosure to Persons with a Material Interest, or Exhibit 11.3.40-1, for more information.

(3) FOIA access to TFRP documents contained in the business case file is limited to persons against whom the penalty has been proposed or assessed and limited to documents relevant to determining that person’s liability. Any information in the business case file pertaining to the determination that a TFRP should be assessed against a person is return information of only that person subject to the penalty. The return or return information of a corporation is available to:

1. a corporate officer authorized in accordance with State law to legally bind the corporation;

2. any person designated by resolution of its board of directors or any other similar governing body;

3. any officer or employee of the corporation upon written request signed by any principal officer and attested to by the secretary or other officer; or

4. a bona fide shareholder of record owning one percent or more of the outstanding stock of the corporation.

(4) FOIA requesters seeking TFRP documents contained in the business case file who are not subject to investigation or who have been determined not to be subject to the penalty may not receive access to the business case file except as otherwise provided in IRC 6103(e). Also see IRM 11.3.2.

(1) The contents of the TFRP files are generally not the return information of the business, although some supporting documents may consist of copies of records which originated in the business case file and were, in their original form and are, even after copying into a responsible person’s TFRP case file, return information of the business.

(2) TFRP case files consist of documents prepared or maintained to support and justify the penalty assessment and may contain return information of one, several, or all persons subject to, or potentially subject to, the penalty.

1. TFRP files that involve more than one responsible person, or potential responsible person, are generally organized so that a primary or "key" file and a number of supplemental, or secondary files are created.

2. All penalty determination documents are placed in the primary file while documents that pertain to a potential responsible person are placed in a specific supplemental file, pertaining solely to each potentially responsible person.

3. If Disclosure personnel request a TFRP investigation file for all TFRP and/or related files and only receive a secondary or supplemental file, they will have to make another request to secure the primary file and ensure receipt of all documents.

   Note: See IRM 5.7.6.14, Case File Documentation, for a list of documents that may be found in a TFRP investigation file.

(3) Records and information gathered or generated in the course of determining whether a specific person is a responsible person subject to the TFRP is the return information of that person. Such information is available to that person in accordance with IRC 6103(e). Such information is generally not available to the business or to any other person.

(4) Information obtained from a person being investigated for possible TFRP liability, with respect to that person’s potential liability, is the return information of that person. This is true even if the information refers to other persons who may also be liable for the same TFRP. The original provider may obtain a copy of what he/she provided even if it contains third party references.

(5) Information obtained from a person with respect to the potential liability of another person for the TFRP penalty is the return information of the person whose liability is the reason the information was obtained or received. This is true even if the provider of the information is also potentially responsible for the same TFRP. Consideration should be given as to whether the release of the information to the person whose liability is being considered, could impair an investigation, identify an informant or otherwise be exempt from disclosure.

(6) Documents found in the TFRP file may require redacting, depending upon the status and identity of the requester, whether there has been an assessment or not, or if release may impair an investigation, identify an informant or otherwise be exempt from disclosure.

(7) Specific documents that may be found in the TFRP file can be found in IRM 5.7.6.14, Case File Documentation.

(8) If an IRS employee uses a pseudonym and that is present in the file, their real name should be deleted. Disclosure should consider FOIA exemption 5 USC 552(b)(6) and/or (b)(7)(C) when responding to a FOIA request where this is noted. See IRM 11.3.13.5, Review and Redacting.

(1) A separate Balance Due file (Master File Transaction 55 Transaction Code 240 with Action Code 618) Taxpayer Delinquent Account (TDA) file is issued for each person against whom the TFRP has been assessed.

(2) Prior to releasing the Individual Master File (IMF) Balance Due File to the taxpayer to whom it pertains, the file must also be reviewed in order to delete information which would interfere with tax administration or the law enforcement process and/or would identify an informant. See IRM 11.3.13 ,Disclosure of Official Information, Freedom of Information Act, for general disclosure information.

(3) The file may also include tax or personal information concerning other persons. Such information should be deleted before the file is released.

(4) In FOIA responses, exemptions (b)(3) in conjunction with IRC 6103(a) and/or (e)(7), (b)(6) and/or (b)(7)(A), (C), (D) and/or (F) should be considered when reviewing the TDA file. See, Disclosure of Official Information, Freedom of Information Act .

(1) The originating SB/SE function (see IRM 5) has responsibility for controlling related TFRP cases. Information contained in the case control files may have various disclosure characteristics depending upon the circumstances involved.

(2) Information concerning a claim for relief or the filing of a bond pursuant to IRC 667(b) is return information of the taxpayer involved and should not be released to other persons.

(3) Initiation of a refund suit may make available to any member of the public any documents which have become public in the course of a judicial tax proceeding, including the fact that such suit has been filed. See IRM 11.3.40.6, Litigation.

(1) Investigative disclosures are made at the initiative of the IRS in the process of obtaining information, collecting tax or performing law enforcement activities. They cannot be made in response to a taxpayer's request to obtain information. Investigative disclosures are not authorized for the purpose of obtaining greater cooperation from the taxpayer and cannot be offered as a trade-off for other information.

(2) Each person subject to the TFRP may be a valid source of information concerning other persons subject to the penalty. Consequently, such person may easily infer the identity of other persons involved. Such inference does not authorize further disclosure of information and should not be confirmed.

(3) Whenever this section requires the editing of identity or personal information, such editing should be performed, even if the requester has inferred or claims to know the information being deleted.

(1) The process of asserting the TFRP may include conferences with persons subject to the penalty. Several or all of the persons subject to the penalty may appear at such conferences. Appearing jointly creates an atmosphere where Collection employees must be sensitive to the privacy considerations of each participant. Those participating should be advised up front that there is a possibility that their private information will be overheard by the other participants. If they understand that fact and agree to proceed, the case file should be adequately documented that they have given verbal consent and that they have indicated their agreement to that fact.

(2) Any record maintained of such joint conference would constitute the return information of all the persons subject to the penalty who were present.

(3) The appearance of a person at such a conference does not, however, authorize any further disclosures about the other persons present after the conference is concluded. The verbal disclosure consent expires at the conclusion of the joint conference. If the participants want the disclosure authority to extend beyond the conference, they must provide a written disclosure authorization (Form 8821, Form 2848, or equivalent).

(1) Revenue Officers and Appeals Officers may release information pertaining to an open TFRP matter assigned to them in response to a request (other than a FOIA request) from a taxpayer provided the release is in accordance with this section.

(2) If information is withheld on the basis of impairment to tax administration, the authority to withhold such information pursuant to IRC 6103(e)(7) rests with the supervisor. Unless the requester is authorized to access under IRC 6103(e)(1) and (e)(7) for the requester’s own return information, or pursuant to a written request for the specific information about other assessed responsible persons pursuant to IRC 6103(e)(9).

(3) Disclosure personnel will provide any necessary advice to accomplish the quickest and least expensive resolution of any request.

(4) Telephonic contact with the requester is strongly encouraged in order to clarify the extent and intent of the request, explain the type of information which may be released and reduce the effort and expense necessary to resolve the request.

(5) Requests that formally cite FOIA must be processed by the Disclosure office. In situations where the requester agrees, the Revenue Officer or Appeals Officer may respond if the formal FOIA request is withdrawn.

(1) Some frequently asked questions may be simply answered without necessitating a written request or a written response.

(2) Pub 594, The IRS Collection Process, provides a general description about employment tax, trust fund taxes and the trust fund recovery penalty.

(3) More information can be found in Notice 784, Could you be Personally Liable for Certain Unpaid Federal Taxes? or on Trust Fund Taxes.

(4) Prior to assessment, a person subject to the penalty may be advised whether or not other persons are also being considered unless to do so would identify those persons due to the size of the company. Other persons being considered for the penalty should not be specifically identified. A requester may be advised of the types of persons generally considered for the penalty, as discussed in IRM 5.7. Generally, the requester should not, however, be provided any specific information concerning any other persons against whom the penalty is being considered.

(5) A taxpayer may always be advised of the current payoff figure for that taxpayer's own liability, reflecting payments and credits.

(6) A taxpayer may be advised of any related judicial tax proceeding and any information which becomes public as a result of such proceeding. See IRC 6103(h)(4) and IRM 11.3.40.6, Litigation.