Tax Court petition may be shared with state bar, but return information may not

Plain-English summary

The IRS considered what material it could provide to state bar disciplinary authorities. A taxpayer's return or return information could not be disclosed without the taxpayer's consent. A filed Tax Court petition could be shared because it was a public court record and, in the relevant circuit, its immediate source was the court rather than an IRS return or internal document. The advice treated disclosure of Form 2848 as a close question, recommended redacting the taxpayer identification number and tax matters if it was disclosed, and said obtaining taxpayer consent was safest.

Ruling snapshot

• Question: What taxpayer-related documents may the IRS disclose to state bar disciplinary authorities?
• Outcome: Advice given
• Key authorities: IRC § 6103; Thomas v. United States, 890 F.2d 18 (7th Cir. 1989); Nixon v. Warner Communications, Inc., 435 U.S. 589 (1978)

Full text (IRS public release)

ID: CCA-07060841-15 [Third Party Communication:

UILC: 6103.02-08 Date of Communication: Month DD, YYYY]

Number: 201536019
Release Date: 9/4/2015
From: ----------------
Sent: Monday, July 6, 2015 8:41 AM
To: ---------------------
Cc: -----------------------------------------------
Subject: FW: Referrals for attorneys to state bar disciplinary commissions

There is no authority for disclosure of a taxpayer’s return or return information to State
Bar authorities, absent consent from the taxpayer(s) involved.

The Tax Court petition is public information and may be disclosed to the State Bar.
While section 6103 nor any other provision of the Code contains any express
exception authorizing publication of returns or return information that have become a
matter of public record.

The Supreme Court has held that what transpires in a court of law is a matter of public
record and can be reported with impunity. No reasonable expectation of privacy
attaches to information that is a matter of public record. Nixon v. Warner Commc’ns.,
Inc., 435 U.S. 589, 609 (1978) (media is entitled to portions of tapes already released
during trial); Cox Broad. v. Cohn, 420 U.S. 469, 491-92 (1975) (“even the prevailing law
of invasion of privacy generally recognizes that the interests in privacy fade when the
information involved already appears on the public record”); Craig v. Harney, 331 U.S.
367, 374 (1947) (“A trial is a public event. What transpires in the court room is public
property”). See also Restatement (Second) of Torts § 652D, cmt. b (1977) (“There is no
liability when the defendant merely gives further publicity to information about the
plaintiff that is already public. Thus, there is no liability for giving publicity to facts about
the plaintiff’s life that are matters of public record…”). But see Dep’t of Justice v.
Reporters Comm. for Freedom of the Press, 489 U.S. 749, 762-67 (1989) (inherent
privacy interest in the nondisclosure of something that may once have been public but
has, with passage of time, passed into practical obscurity).

In the context of unauthorized disclosure lawsuits, however, the circuits are split
regarding the proper treatment of returns and return information that have
become a matter of public record in connection with tax administration.

The Seventh Circuit (which would be the circuit at issue with respect to the
matter at hand) has adopted a hybrid test referred to as the “immediate
source” test, i.e., “that the definition of return information comes into play only
when the immediate source of the information is a return, or some internal
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document based on a return, as these terms are defined in § 6103(b)(2), and not
when the immediate source is a public document lawfully prepared by an agency
that is separate from the Internal Revenue Service and has lawful access to tax
returns.” Thomas v. United States, 890 F.2d 18, 21 (7th Cir. 1989) (IRS release
of court’s opinion in tax case to newspaper, which then published article based
on the decision, was not an unauthorized disclosure because the information
was obtained from the court’s opinion).

Here, a copy of the tax court petition as filed with the court would pass the immediate
source test.

With respect to the Form 2848, the public record exception would not apply. The Form
2848 would not fall within the definition of the return information of the taxpayer with
respect to whom the Form 2848 was filed in that it was not gathered with respect to the
taxpayer’s liability under the Code. (This is, however, a close call.) If the Form 2848 is
disclosed to the State Bar, the TIN and the tax years and tax matters at issue should be
redacted.

The safest course would be to ask the taxpayer to consent to the disclosure of the Form
2848.

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