CCA 1205009: Consent is required before disclosing a debtor’s returns to a Chapter 13 trustee

Plain-English summary

The Office of Chief Counsel advised that a debtor’s return information could not be disclosed to a Standing Chapter 13 Trustee without the debtor’s consent. A statement in a bankruptcy plan did not itself provide sufficient disclosure authority. The consent had to comply with IRC § 6103(c) and Treas. Reg. § 301.6103(c)-1. The IRS stated that Form 8821 meets those requirements, but its authorization for future periods is limited to periods ending no later than three years after the IRS receives the authorization. If the bankruptcy continues beyond that period, a new Form 8821 is required.

Ruling snapshot

• Question: Whether a debtor’s return information could be disclosed to a Standing Chapter 13 Trustee under a bankruptcy plan or Form 8821.
• Outcome: advice given
• Key authorities: IRC §§ 6103(c), 6103(e)(4), 6103(e)(5), 7431, and 7331; Treas. Reg. § 301.6103(c)-1.

Full text (IRS public release)

ID: CCA-531744-11 Number: 201205009
Release Date: 2/3/2012
Office: --------------
UILC: 6103.05-09, 6103.05-12

From: -----------------
Sent: Friday, August 5, 2011 1:50 PM
To: ----------------------
Cc: ----------------------------
Subject: -----------------------

We have reviewed your letter to the Chapter 13 Standing Trustee and the Standing
Trustee’s response to that letter and advise as follows:

  •   Your analysis is correct. There is no authority to disclose the debtor’s return
      information to the Standing Chapter 13 Trustee absent the debtor’s consent.
      Counsel’s position is that the Standing Chapter 13 Trustee does not have a
      material interest in the debtor’s return or return information under sections
      6103(e)(4) or (5).

  •   The statement in the Bankruptcy Plan to which the Trustee looks as disclosure
      authority does not suffice to disclose the debtor’s returns to the Standing Chapter
      13 Trustee. That statement is:
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  •   The debtor’s consent must conform with section 6103(c) and the regulations
      issued thereunder in Treas. Reg. 301.6103(c)-1.

  •   The Form 8821 conforms with the requirements of section 6103(c) and Treas.
      Reg. 301.6103(c)-1.

  •   The instructions to Form 8821 specifically state that consents for future tax
      periods may only be for periods that end no later than 3 years after the date the
      tax information authorization is received by the IRS. By its own terms, the
      consent is not open ended.

• If the bankruptcy period ends before the end of the 3-year period, there is no
problem with the Form 8821 being outstanding since the Form 8821 is not self-
effectuating. Disclosure of the debtor’s returns made in accordance with the
Form 8821 requires some action on the part of the person to whom the consent is
provided.

• If the bankruptcy period extends beyond the 3-year period provided by the Form
8821, then a new Form 8821 would be required.

• It is possible for a consent to be prepared specifically for this disclosure.
However, that consent must conform with section 6103(c) and the regulations
issued thereunder in Treas. Reg. 301-6103(c)-1.

• It may be possible for the Bankruptcy Plan to provide a section 6103(c) consent
as a separate page at the Plan pertaining solely to the disclosure of the debtor’s
returns. That separate consent would need to be signed by the debtor.

Note that there is a typo in your July 21, 2011 letter, you refer to an unauthorized
disclosure under section 7331, rather than section 7431.
If you have any questions, please do not hesitate to call.