Training slides built from real exam files are "return information," but IRC 6103(h)(1) lets the IRS show them to employees who need them

Plain-English summary

A Chief Counsel attorney reviewed a set of internal IRS training slides
and advised that the deck still contained "return information" even after
some taxpayer data had been stripped out, because the material was copied
from real examinations (photos, document text, taxpayer statements).
Under IRC 6103(a), returns and return information generally cannot be
disclosed. Counsel notes it prefers training to use fictional scenarios,
but IRC 6103(h)(1) authorizes disclosing return information to IRS
employees whose duties require it for tax administration, and "require"
here means the information helps them do their jobs better, not that they
cannot function without it. The attorney also stresses that removing the
taxpayer's identity does not strip material of its status as return
information, citing Church of Scientology v. IRS. Bottom line: the
presentation may be shown to IRS/Counsel employees who need it for tax
administration, subject to safeguards (no handouts or shared files, no
screen captures, and a confidentiality reminder).

Ruling snapshot

• Question: May internal training slides copied from real examination files be presented to IRS employees despite containing return information?
• Outcome: Advice given: yes, under IRC 6103(h)(1), to employees whose tax administration duties require it, with use restrictions
• Key authorities: IRC § 6103(a), (b)(2), (h)(1); Church of Scientology of California v. I.R.S., 484 U.S. 9 (1987)

Full text (IRS public release)

 ID:         CCA_2022062219255850                                Third Party Communication: None

 UILC:       6103.08-01, 6103.08-00,                             Date of Communication: Not Applicable

             6103.02-00, 6103.01-00
Number: 202246009
Release Date: 11/18/2022
From: -----------------
Sent: Wednesday, June 22, 2022 7:25:58 PM
To: ---------------------------------------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Bcc:
Subject: RE: Final Edited Version of the SCE Presentation Slides


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I reviewed the updated slides. They look better than the prior iteration, as you removed
some extraneous taxpayer return information from the deck. However, the presentation
still contains return information.

IRC 6103(a) generally prohibits the disclosure of returns and return information unless
otherwise authorized by the Code. Counsel prefers that training be done using only
hypothetical material and fictional scenarios; return information generally should not be
used for training purposes. That said, sometimes the only reasonable way to teach the
material is with return information. IRC 6103(h)(1) authorizes disclosure of return
information to IRS employees "whose official duties require [such disclosure] for tax
administration purposes." In this context, "require" is not a "cannot function without it"
test; rather, it looks to whether the recipient employees will do their jobs better if they
have access to the information. Thus, when the only reasonable way to teach a certain
subject is by using return information, disclosure of that return information to the IRS
employees who need it is authorized.

Return information is defined at IRC 6103(b)(2). It essentially includes everything the
IRS obtains, receives, or generates in the course of determining someone's liability
under title 26. The Supreme Court has held that separating the taxpayer's identity from
return information does not change the character of that material as return information,
and the confidentiality requirements of IRC 6103 continue to apply. Church of
Scientology of California v. I.R.S., 484 U.S. 9, 11 (1987). The specific training slide
deck at issue here contains significant material copied from various examinations --
photos, text copied from documents, taxpayer assertions, and similar. This is all return
information.

While Counsel would support revising the slides to remove return information, that
option was rejected on the call, because there are two other presentations at the same
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training and postponing is not realistic. Moreover, as noted above, the subject matter
and content of this training may not lend itself well to removing all return information, so
postponing might not fully resolve the concerns.

In accordance with IRC 6103(h)(1) the presentation could be made to IRS/Counsel
employees whose tax administration work requires such information. There are
restrictions on the use of these slides, which we discussed during Friday's call:
    1) The slides cannot be made available to any employee as a handout/shared file
        from the training session;
    2) Employees must be advised that they are not permitted to copy the slides from
        their screens (no Snag-it/Snipping or similar tools);
    3) Employees must be reminded that this material was taken from live case
        scenarios, is confidential, and must not be discussed with family, friends, or
        anyone else who is not an IRS/Counsel employee who also needs this
        information for their tax administration duties.

Please let me know if you have any further questions.

Thanks,

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