IRS may disclose limited FFI data for vendor demonstration

Plain-English summary

The IRS wanted a prospective technology vendor to demonstrate services for identifying gaps in FATCA registration and compliance. The demonstration required access to a foreign financial institution database containing public and nonpublic return information. The advice concluded that section 6103(k)(6) permitted disclosure because the vendor's technical demonstration was appropriate and helpful to official enforcement and contracting duties and the information was not otherwise reasonably available. The IRS still had to limit disclosure to the information necessary for the demonstration.

Ruling snapshot

• Question: May the IRS give a prospective vendor access to FFI database information needed for a FATCA-compliance demonstration?
• Outcome: Advice given
• Key authorities: IRC § 6103(k)(6); Treas. Reg. § 301.6103(k)(6)-1

Full text (IRS public release)

ID: CCA_2015082610052907 [Third Party Communication:

UILC: 6103.11-06 Date of Communication: Month DD, YYYY]

Number: 201536023
Release Date: 9/4/2015
From:
Sent: Wednesday, August 26, 2015 10:05:30 AM
To:
Cc:
Bcc:
Subject: RE: D&B - 6103 issue

Hi --------,

It is our understanding that you wish to give a vendor access to the FFI database (which
contains information on FFIs – including the information we publically publish as well as
additional information such as address, rep, phone number, etc) for the purpose of
doing a demonstration. It is our understanding that the demonstration would be for the
purpose of determining whether to enter into a contract with the vendor for the provision
of technical services to help identify gaps in registration/compliance with FATCA.

The disclosures you wish to make are allowable under section 6103(k)(6).

Section 6103(k)(6) authorizes IRS employees to disclose return information “in
connection with [their] official duties relating to any audit, collection activity, or civil or
criminal tax investigation or any other offense under the internal revenue laws” to the
extent the disclosure is necessary in obtaining information that is not otherwise
reasonably available or “with respect to the enforcement of any other provision of [Title
26].” I.R.C. § 6103(k)(6). Disclosures under section 6103(k)(6) may only be made in
such situations and under such conditions as the Secretary prescribes by
regulation. Treas. Reg. § 301.6103(k)(6)-1(a)(1) permits disclosures of return
information in connection with an IRS employee’s official duties related to, among other
things, administrative, criminal, and civil investigations and enforcement activities, to the
extent the disclosure is necessary to obtain information related to those official duties or
“to accomplish properly any activity connected with such official duties.” This includes,
but is not limited to, disclosures to obtain the services of persons having special
knowledge or technical skills, including disclosures necessary in connection with
preliminary inquiries to the prospective contractee. Treas. Reg. § 301.6103(k)(6)-
1(a)(1)(v); Pub. 4639, 4-17. Disclosure under section 6103(k)(6) is only authorized if
the IRS employee reasonably believes that, at the time of the disclosure, the information
was not otherwise reasonably available or if the employee needs to make the disclosure
to carry out the employee’s official duties. Treas. Reg. § 301.6103(k)(6)-1(a)(2).
2

When determining whether or not the disclosure of the information is necessary, the
issue is whether the IRS employee reasonably believes, based on the facts and
circumstances at the time of the disclosure, that the disclosure is “appropriate and
helpful” to “accomplish properly the activities connected with carrying out” the
employee’s official duties. Treas. Reg. § 301.6103(k)(6)-1(c)(1). Disclosures to
“accomplish properly an activity connected with official duties” is defined as a disclosure
of return information to carry out a function associated with official duties generally
consistent with established practices and procedures.” Id. § 301.6103(k)(6)-1(c)(2).

In this case, the disclosures would be made in order to determine whether or not to
enter into a contract with this vendor for the performance of technical services to identify
non-compliance with FATCA. At the time of the disclosure, the IRS is obtaining
information (in the form of a demonstration) from the vendor to determine whether to
enter into a contract with the vendor for services for identifying non-compliance with
FATCA. The IRS cannot make a decision whether to contract with the vendor without
the demonstration. The demonstration requires access to the information contained in
the FFI database. Accordingly, disclosure of the FFI database to the vendor for
purposes of the demonstration is authorized by section 6103(k)(6) because the
disclosures are appropriate and helpful to the IRS’s official duties (identifying non-
compliance with FATCA), the IRS is attempting to obtain the services of persons with
technical skills, and, at the time of the disclosure, the IRS cannot properly accomplish
its official duties (contracting with individuals for the provision of services for tax
administration) without making the disclosure.

However, when making disclosures to the vendor, the IRS should carefully consider
what information is necessary and limit the disclosures it makes to only that information
which is necessary for purposes of the demonstration.

Please let me know if you have any questions of if I can be of further assistance.

Thanks,

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