CCA 1214025: IRS discusses disclosure of return information in examinations

Plain-English summary

Chief Counsel advice addressed when the IRS could disclose estate tax return information during an examination of an appraiser under IRC § 6695A. It stated that return information is confidential under IRC § 6103, but may be disclosed in a tax-administration proceeding when it directly relates to the proceeding's outcome under § 6103(h)(4). The IRS could disclose estate examination information to the appraiser only to the extent it directly related to the § 6695A penalty determination. The advice also stated that the fact that a corporation or employee is under examination is itself return information and generally could not be disclosed to the other party on the facts presented.

Ruling snapshot

• Question: When may the IRS disclose return information in related tax examinations?
• Outcome: Advice given
• Key authorities: IRC §§ 6103(b)(2), 6103(h)(4), and 6695A; Payne v. United States, 289 F.3d 377, 382 (5th Cir. 2002)

Full text (IRS public release)

ID: CCA_2012022414450916 Number: 201214025
Release Date: 4/6/2012
Office: --------------
UILC: 6103.02-03

From: ----------------------
Sent: Friday, February 24, 2012 2:45:25 PM
To: --------------------------
Cc: -----------------------
Subject: RE: Questions

Hi ------------ -

I.R.C. § 6103 requires the IRS to maintain the confidentiality of return information unless
a provision of title 26 provides otherwise. Courts interpret the term return information
broadly to include the taxpayer’s identity and all other information received, acquired, or
generated by the IRS in connection with the determination of a taxpayer’s tax liability.
See I.R.C. § 6103(b)(2); Payne v. United States, 289 F.3d 377, 382 (5th Cir. 2002).

In the situation presented, the issue is whether return information gathered during the
examination of an estate tax return can be disclosed to the subject of a section 6695A
examination. The subject of the section 6695A examination, an appraiser, drafted an
appraisal for purposes of the estate tax return.

The IRS may disclose return information in a federal or state judicial or administrative
proceeding related to tax administration if the proceeding arose out of a determination
of the taxpayer’s liability or if the return information directly relates to the outcome of the
proceeding. I.R.C. § 6103(h)(4). Although not defined by statute or regulation, we have
interpreted an administrative proceeding to be a proceeding conducted by an
administrative agency, body, or commission charged by law to make determinations
regarding a taxpayer’s liability under the Code or related statutes. Thus, an
administrative proceeding includes examination procedures. The IRS may disclose the
return information gathered from the estate tax examination to the subject of the section
6695A examination but only if the estate tax return information directly relates to the
determination under section 6695A. Any of the estate tax return information that does
not directly relate to the determination of the section 6695A penalty, such as information
about the executor or items of income and deductions unrelated to the appraisal, may
not be disclosed to the appraiser.

Return information also includes the fact that a taxpayer is under examination.
Accordingly, the fact that the Service is examining the corporation is the corporation’s
return information and the fact that the Service is examining the corporation’s employee
is the employee’s return information. Neither of these items of return information may be
disclosed unless a provision of title 26 provides otherwise. Based on the facts
available, no provision of title 26 would appear to authorize the disclosure to the

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corporation that its employee is under examination or to the employee that the
corporation is under examination.

I hope that this response answers the questions presented. Please contact me if you
have additional questions or need further assistance.

Thanks,

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