CCA 1310041: IRS advises against disclosing commercial title reports to auction bidders

Plain-English summary

Chief Counsel advised that a commercial title report purchased during an IRS property seizure could be return information of the taxpayer whose property was being collected. The advice considered whether the Service could provide the report to prospective auction bidders without the title company's permission. It concluded that section 6103(k)(6) might permit disclosure for tax administration only when the Service reasonably believes the activity cannot properly occur without the disclosure. On the facts described, the record did not establish that necessity, so disclosure of the title report was not authorized merely because a related Form 2434-B could be disclosed.

Ruling snapshot

• Question: Whether the Service could provide commercial title reports to prospective bidders at IRS auctions.
• Outcome: Advice given, disclosure was not authorized on the facts described.
• Key authorities: IRC §§ 6103 and 6103(k)(6); Treas. Reg. § 301.6103(k)(6)-1(a)(2).

Full text (IRS public release)

ID: CCA_2012082811495543 Number: 201310041
Release Date: 3/8/2013
Office: --------------
UILC: 6103.00-00

From: --------------------
Sent: Tuesday, August 28, 2012 11:49:56 AM
To: -----------------
Cc: ----------------------
Subject: Providing Title Reports to Bidders - 6103 Analysis

This email responds to your request for advice regarding whether the Service may provide prospective
bidders at IRS auctions copies of title reports the Service has purchased without getting the title
company’s permission.

We previously provided advice to you from ------- regarding whether the title reports would be considered
proprietary. However, even if the title company allowed the title reports to be disclosed to prospective
bidders, we considered whether the title reports constituted return information which would be prohibited
from disclosure under section 6103. It is our understanding that, in preparation for seizure and sale of
property, the Revenue Officer (RO) performs a title search at the courthouse and then prepares a draft
Form 2434-B – Notice of Encumbrances Against or Interests in Property Offered for Sale. At some time
before the seizure, the RO finalizes the Form 2434-B. A decision is made whether or not to order a
commercial title report. If a commercial title report is ordered, the Service provides the title company with
a legal description of the property up for auction and the title company then performs a title search of
information taken from the public record and compiles it into a title report which is provided to the
Service. The RO then compares the title report to the Form 2434-B, investigates any discrepancies, and
updates the Form 2434-B, if necessary. It is our understanding that the Service’s current policy is to
provide the Form 2434-B to bidders at auctions -----------------------------------------------------------------------------

Section 6103 provides the general rule that returns and return information are confidential, except as
authorized under the Code. Return information is defined as any information gathered by, collected by,
created by, or otherwise in the hands of the Secretary in connection with determining a taxpayer’s liability
or potential liability under the Code including information pertaining to a taxpayer’s payments. As such, if
a commercial title report is ordered, it would be the return information of the taxpayer from whom the
Service was collecting. As such, the title reports could only be disclosed if an exception under section
6103 applied. After a careful review of all the exceptions, the only exception that we thought could
potentially apply is section 6103(k)(6).

Section 6103(k)(6) permits disclosures for tax administration purposes to the extent necessary in the
performance of official duties, including collection activities. In order to make a disclosure under (k)(6),
the Service must reasonably believe that the activity cannot properly occur without the disclosure. Treas.
Reg. § 301.6103(k)(6)-1(a)(2). In this case, given that there have not been any real discussions about
the necessity or benefit of disclosing the title reports at auctions (excluding the issue of whether the title
reports are proprietary), we cannot say that the disclosures would be permitted under section 6103(k)(6).
Although the title reports may contain materially the same information as the Form 2434-B, disclosure of
the title reports is not permitted under section 6103 simply because disclosure of the Form 2434-B is
permitted. The title reports are arguably duplicative and a separate analysis of why this additional
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disclosure is necessary would be required before the disclosure could be authorized under section
6103(k)(6).

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