rr-22-07.pdf

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Part I

Section 6103.—Confidentiality and disclosure of returns and return information

26 CFR 301.6103: Confidentiality of returns.

Rev. Rul. 2022-7

ISSUE
Whether Federal, State, and local government officers or employees (government
employees) are subject to the disclosure restrictions of section 6103(a) of the Internal
Revenue Code (Code) with regard to returns or return information received as a result
of disclosure under:
• section 6103(c) with the consent of the taxpayer (taxpayer consent
exception),
• section 6103(e) as a person having a material interest, but not under
section 6103(e)(1)(D)(iii) relating to disclosures to certain shareholders
(material interest exception), or

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• section 6103(k)(6) for investigative purposes (investigative disclosure
exception).
FACTS
Situation 1. A requests the assistance of a friend, B, with respect to a Federal tax
matter. A also requests that the Internal Revenue Service (IRS) provide A’s returns and
return information to B. B subsequently discloses to a third party return information
obtained as a result of A’s request.
Situation 2. Same as Situation 1, above, except that B happens to be an employee in
the office of a State agency.
Situation 3. C is an attorney employed by a law firm. The firm has a policy of taking
disciplinary action against any of its attorneys who do not properly fulfill their tax
obligations. The IRS serves a notice of levy with respect to C’s tax liability on the payroll
department of the firm. D is a payroll department employee of the firm. D processes the
notice of levy and informs the firm’s managing partners of C’s tax delinquency to enable
the firm to take appropriate action consistent with firm policy.
Situation 4. E is an employee of a State agency. The agency has a policy of taking
disciplinary action against employees who do not properly fulfill their tax obligations.
The IRS serves a notice of levy with respect to E’s tax liability on the payroll department
of the State agency. F is a payroll department employee of the State agency. F
processes the notice of levy and informs the appropriate office of the State agency of
E’s tax delinquency to enable the agency to take appropriate action consistent with
agency policy.

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Situation 5. Same as Situation 4, above, except that E and F are employees of a
Federal agency.
Situation 6. G is the father of 5-year-old film star H. H’s mother signs H’s return as
parent for a minor child and dies shortly thereafter. G is the guardian of H’s estate under
applicable State law. G receives notice that H’s return is under examination by the IRS.
G does not have a copy of H’s return, so G obtains the return and return information
from the IRS. When subsequently asked by a news reporter how much income H
reported on the return, G replies “three million dollars.”
Situation 7. Same as Situation 6, above, except that G happens to be an employee
of a Federal agency.
LAW
Generally, section 6103 provides that returns (as defined in section 6103(b)(1)) and
return information (as defined in section 6103(b)(2)) are confidential and may not be
disclosed except as expressly authorized by the Code. Specifically, “except as
authorized by this title” (that is, the Code), section 6103(a) prohibits the disclosure by
officers or employees of the United States, of any State, or of specified local
government agencies, or by certain other specified persons, of returns and return
information obtained in connection with their service as such an officer or employee or
otherwise or under the provisions of section 6103 (disclosure restrictions). See Girard v.
Bentsen, 94-2 U.S.T.C. ¶ 50,625 (N.D. Cal. 1994) (“or otherwise” modifies “in
connection with his service,” allowing the statute to cover those who are neither
“officers” nor “employees,” namely certain other persons specified in section 6103(a)).

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For purposes of section 6103(a), the term “officer or employee” includes a former officer
or employee.
There are, however, exceptions to the general rule of confidentiality. First, the
taxpayer consent exception permits the disclosure of returns and return information to a
designee of the taxpayer, pursuant to the taxpayer’s request or consent. To be valid, a
consent must satisfy the requirements of section 6103(c) and § 301.6103(c)-1 of the
Procedure and Administration Regulations. Second, the material interest exception
permits the disclosure of returns and return information to specific persons with a
material interest in the information. Third, the investigative disclosure exception, in
conjunction with § 301.6103(k)(6)-1, authorizes the disclosure of return information (but
not returns) to the extent that disclosure is necessary in obtaining information that is not
otherwise reasonably available with respect to the correct determination of tax, liability
for tax, or the amount to be collected, or with respect to the enforcement of any other
provision of the Code.
Rev. Rul. 2004-53, 2004-1 C.B. 1026 (June 7, 2004) clarified the scope of section
6103(a) with respect to government employees and held that government employees
who receive returns or return information pursuant to section 6103(c), (e), or (k)(6) are
not subject to the disclosure restrictions of section 6103(a). Although not addressed by
Rev. Rul. 2004-53, any shareholder of a corporation permitted to inspect or receive
return information of the corporation or its subsidiaries under section 6103(e)(1)(D)(iii) is
subject to the disclosure restrictions imposed by section 6103(a).

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Section 2202 of the Taxpayer First Act (TFA), Public Law 116-25, 133 Stat. 981,
1012 (2019), amended section 6103(a)(3) and (c) to limit redisclosures and uses of
return information received pursuant to the taxpayer consent exception. Section
6103(c), as amended by the TFA, explicitly prohibits designees from using return
information for any reason other than the express purpose for which the taxpayer grants
consent and from redisclosing return information without the taxpayer’s express
permission or request. Section 6103(a)(3), as amended by the TFA, imposes disclosure
restrictions on all recipients of return information under 6103(c). The TFA did not amend
section 6103(e) or (k)(6), or section 6103(a) with respect to disclosures under section
6103(e) or (k)(6).
ANALYSIS
Under section 6103(c), as amended, the restrictions on redisclosure of returns or
return information received pursuant to the taxpayer consent exception apply to all
designees, including government employees. Therefore, in Situations 1 and 2, B is
prohibited from redisclosing A’s return information, because A did not authorize B to
further disclose A’s return information.
After the TFA, the analysis of the scope of disclosures under section 6103(e) and
(k)(6) is materially unchanged from that in Rev. Rul. 2004-53. Section 6103(e) and
(k)(6) contains no limitation or restriction on the redisclosure of returns or return
information received pursuant to the material interest or investigative disclosure
exceptions. Therefore, in Situations 3 and 6 there are no statutory or regulatory
restrictions on the redisclosures of return information made by D or G.

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In Situations 4, 5, and 7, however, the prohibition in section 6103(a) on redisclosure
of returns or return information by government employees could be read to prohibit such
redisclosures by F and G because they happen to be government employees. This
reading would create a disparity in the application of section 6103(a) based on who the
employer of the person receiving the disclosure of returns or return information happens
to be.
By its terms, section 6103(a) does not regulate or control the use of returns and
return information received under the material interest or investigative disclosure
exceptions. Moreover, the requirements for accountings and safeguards that typically
apply where redisclosure of returns or return information is limited do not apply to these
exceptions.
There is no evidence that Congress intended to limit the redisclosure of return
information received by government employees under section 6103(e) and (k)(6) merely
because they happen to be government employees. On the contrary, there are
compelling reasons for those government employees to be subject to the same rules as
other recipients. For example, a private sector employer may take disciplinary action
against employees who do not properly fulfill their tax obligations. If redisclosure of
return information is not permitted because the employer happens to be the Federal
government, the Federal employees who failed to fulfill their tax obligations would be in
a significantly better position than their private sector counterparts. This inappropriate
result only occurs if section 6103(a) is read to apply to individuals merely because they
happen to be government employees.

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Accordingly, persons are not barred because of their status as government
employees from redisclosing returns and return information received pursuant to section
6103(e) or (k)(6). Therefore, in Situations 4, 5, and 7, there are no statutory or
regulatory restrictions on the redisclosures of return information made by F or G.
HOLDING
Government employees who receive returns or return information pursuant to
disclosures under section 6103(c), like all designees who receive returns or return
information pursuant to taxpayer consent, are subject to the disclosure restrictions of
section 6103(a). Government employees who receive returns or return information
pursuant to disclosures under section 6103(k)(6) or (e), other than section
6103(e)(1)(D)(iii) (relating to certain shareholders), are not subject to the disclosure
restrictions of section 6103(a) with regard to the returns or return information received.
EFFECT ON OTHER REVENUE RULINGS
Rev. Rul. 2004-53 is modified and superseded.
DRAFTING INFORMATION
The principal author of this revenue ruling is Andrew C. Keaton of the Office of the
Associate Chief Counsel (Procedure & Administration). For further information regarding
this revenue ruling, contact Mr. Keaton at (202) 317-5404 (not a toll-free call).