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Internal Revenue Service - Privacy of Tax Returns (3)
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Internal Revenue Service - Privacy of Tax Returns (3)
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Philip W. Buchen Files
Philip Buchen's General Subject Files
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Department of the Treasury. Internal Revenue Service. (07/09/1953 - )
Privacy, Right of
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Legislation
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The original documents are located in Box 20, folder "Internal Revenue Service - Privacy
of Tax Returns (3)" of the Philip Buchen Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 20 of the Philip Buchen Files
at the Gerald R. Ford Presidential Library
MEMORANDUM
OF CALL
TO:
YOU WERE CALLED BY-
YOU WERE VISITED BY-
Dick albredit
OF (Organization)
PHONE NO.
PLEASE CALL
CODE/EXT.
WILL CALL AGAIN
IS WAITING TO SEE YOU
RETURNED YOUR CALL
WISHES AN APPOINTMENT
MESSAGE
Called 10/11 to
advise of results
also called Carry &
of Gres. meeting;
RECEIVED BY
DATE
BERALD R' FORD TIME LIBRA
STANDARD FORM 63
GPO : 1969-c48-16-80341-1 332-389
63-108
REVISED AUGUST 1967
GSA FPMR (41 CFR) 101-11.6
putz 16/11/74
9:00am
Thursday 10/10/74
6:30 Mr. Metz asked if you had time to look over the briefing
material he sent over; he suggests negotiating strategy on
the last page.
.....
O.K. take our E.O. and put it in
the bill in return for your taking going along with the Treasury
bill. (which he has cleared informally with Dick Albrecht)
It is tricky legislation and he would like to talk with you about.
Will be in about 8 o'clock tomorrow -- and will call you.
FORD is LIBRAR 970837
Thursday 10/10/74
MEETING
10/11/74
9:00 - 9:15 a, m.
10:30 Doug Metz called to say he understands from Tom Korologos
there will be a meeting with the President and
Sen. Weicker and Cong. Litton -- Korologos asked Doug
to prepare some material on it. Asked me what the time and day
of the meeting would be so he'd have a deadline time.
Checked with Korologos' office ---- it's 9:00 to 9:15 tomorrow
morning (Friday 10/11) -- during Congressional Hour.
Timmons' office advises that Mr. Korologos mentioned it to
you yesterday and they will be sending a paper to you.
I have advised Doug.
FORD it LIBRARY BERALD
THE WHITE HOUSE
WASHINGTON
MEETING WITH SENATOR LOWELL WEICKER (R-CONN)
AND REPRESENTATIVE JERRY LITTON (D-MO)
Friday, October 11, 1974
The Oval Office
9:00 - 9:15 a. m. (15 Minutes)
THRU:
William E. Timmons
FROM:
Tom C. Korologos
I. PURPOSE
At Weicker's and Litton's request to discuss pending legislation
to protect confidentiality of tax returns and tax information.
II. BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background: The Treasury, on September 11, 1974, sent
Congress a comprehensive bill making all tax returns confidential
except as provided by statute. The President, on September 20,
1974, issued an Executive Order providing strict limitations on
White House access to tax returns. Senator Weicker and Congressman
Litton have introduced companion bills which are generally similar
in scope and objectives to the Treasury bill, but contain differences
noted in TAB-A.
B. Participants:
The President
Senator Lowell Weicker
Representative Jerry Litton
William E. Timmons
Tom C. Korologas
Phil Buchen
FORD
C. Press Plan:
Announce Meeting/White House Photo
LIBRARY
III.
TALKING POINTS
1. Our objectives on this matter are identical and I am sure we
can come to a meeting of the minds on how this should be handled.
-2-
1n the White House
2. As a practical matter, I assure you that no one N will
look at tax returns except under my personal authorization.
3. If you think legislation is required then let's have legislation,
but from my standpoint, I think the Executive Order covers it.
4. (You might instruct Buchen and Korologos to get together
with them and work out some kind of compromise on their bill).
NOTE: Additional Talking Points are also in TAB-A, which are
from the Privacy Committee.
BERALD R. LIBRARY FORD
Both bills have more similarities than differences. Major difference
are:
1.
The scope of the Treasury bill is much broader, protecting
tax information that is both required as well as permitted
under the IRS Code, such as returns of nontaxable entities,
e.g. partnerships and simple trusts.
2.
The Treasury bill would deny disclosure to local tax officials.
Weicker/Litton would permit disclosure.
3. Weicker/Litton would allow disclosure only to the Joint Com-
mittee on Revenue Taxation. Other Congressional committees
would get statistical information. Treasury would allow access
to Finance and Ways and Means Committees, and to other
committees by Congressional Resolution.
4. Weicker/Litton would limit access to the President personally.
Treasury will allow access by others by Executive order. The
President's order of September 20, spells this out.
5. Weicker/Litton would deny raw tax data to other agencies (Commerce
Labor, Pension Benefit Guaranty Corp.) for compiling statistical
reporting and iministration of other laws. This would require
that IRS develop a major statistical reporting capability to meet
other agency needs. Treasury would permit Commerce (largely
Census) to continue to process tax data under the protection of
existing laws containing strict confidentiality safeguards.
6. Weicker/Litton would prohibit disclosure of raw tax data for
nontax law enforcement purposes. Justice would be denied tax
information for prosecution of nontax criminal violations, for
impeachment of witnesses, and for previding the defense with
exculpatory evidence. Treasury bill permits controlled access
by Justice and resolution of access disputes by the President. FORD
MAJOR ISSUES
GERALD LIBRARY
The outstanding major issues are:
Whether the President should be permitted by Executive order
to allow others in the White House to have access to tax returns.
Arguments for:
The President, should he need to see a tax return, should
allow members of his immediate staff to assist him in its
review and analysis.
An Executive order has the force of law and is binding on
future Presidents until modified or revoked. Press exposure
and publication in the Federal Register are sufficient deterrents
to surreptitious changes in an Executive order on this subject.
Arguments against:
-
Past White House abuses require specific statutory
prohibition.
-
An Executive order can be changed at the will of the
President.
Whether Justice should have access to raw returns for nontax law
enforcement purposes.
Arguments for:
-
Tax return information provides evidence vital to the
prosecution of narcotics violations, organized crime and
other important criminal laws.
-
Tax information is often indispensable to prosecutions for
perjury as well as disclosures of exculpatory information
for the defense.
Whether or not Federal agencies other than IRS should have
access to raw returns for statistical-repörting purposes.
Arguments for:
-
Commerce's vital operations would be crippled. Most
but not all of Commerce's statistical reporting operations
are adequately protected by strict confidentiality laws.
-
An enormous administrative burden would be imposed on
IRS should it be required to develop an internal capability
to process enormous quantities of statistical data.
BERALD FURD LIBRARY
Arguments against:
-
Raw tax returns should never be disclosed for purposes
other than tax administration.
-
Resources should be given to IRS to develop a stronger
internal capability to process and provide statistical
information.
TALKING POINTS FOR THE PRESIDENT
A. We both want the strongest, most comprehensive taxpayer
protection bill possible. In some respects, I think the Treasury
bill is stronger and more comprehensive. I have asked Treasury
to prepare a detailed letter on this to send to the Congress within
the next day or two. (See attached draft letter. )
B. I see two principal issues that divide us.
1.
The first is whether anyone on the White House staff should
have access to raw tax returns.
2.
The second is whether tax returns should be disclosed
for any purpose other than tax administration; specifically
for statistical reporting and law enforcement purposes.
C.
I believe our principal difference is over the question of limiting
White House access to tax returns. (Personally, I can't think
of any instance where I would want to see anyone's tax return,
but I am ultimately responsible for administration of the tax laws,
and, as a matter of management principle, my authority should be.
as broad as my subordinates.)
1.
I understand that you like the language of my recent
Executive order limiting White House access, but object
to allowing anyone other than the President access to tax
returns. You would deny such access by statute.
2.
My position is this:
a)
It would be an unnecessary burden on a President,
should he ever need to see a tax return, to limit
access to him personally. He must be permitted
to ask others to assist him in evaluating the return
in relation to the purpose for which it was obtained.
So long as a record in writing is made, subject to
disclosure by IRS to the Congress, I see no danger
of a secret abuse of power.
FORD is LIBRARY
b)
I would have no objection to amending the Treasury
bill by including the language of my Executive order
and making it a part of the statute. As a matter of
principle, however, we would have a bill which details
Presidential access, but is general on Congressional
access. This may raise some Constitutional questions.
D. I would like your concession on the question of allowing statistical
agencies, like Commerce, and law enforcement agencies, like
Justice, to have controlled access to tax returns.
1.
Ideally, IRS would provide only statistical information to
these agencies. Practically, however, agencies in Commerce,
like the Census, are under strict confidentiality laws. Their
privacy record is unblemished. IRS will continue its efforts
to build up a stronger statistical reporting capability, but
to go all the way would be unwise from an administrative and
cost standpoint, and unnecessary from the privacy standpoint.
2.
The Justice Department needs tax return information to fight
narcotics traffic and organized crime and for other prosecution
in the public interest. Under the Treasury bill, Justice must
obtain Treasury permission in writing. Disputes would come
to me for resolution.
E. I hope we can arrive at a consensus bill. This will avoid delay.
Further dispute only tends to undermine the credibility of our
joint objective in protecting the privacy of taxpayer returns.
*
The Bureau of Economic Analysis (BEA), a major user of IRS
raw data for economic forecasting, is not protected by the
Title 13 Census Act. The Privacy Committee is working on a
bill to provide general confidentiality protections for agencies
like BEA. This bill will be submitted to Congress next year.
An immediate alternative would be to amend the Treasury bill
to extend confidentiality protections to BEA operations.
FORD is LIBRARY
DOMESTIC COUNCIL COMMITTEE ON THE RIGHT OF PRIVACY
WASHINGTON. D.C. 20504
October 10, 1974
MEMORANDUM FOR:
TOM KOROLOGOS
FROM:
DOUG METZ
SUBJECT:
Weicker/Litton Meeting with President
Re: IRS Tax Return Protection Bills
Pursuant to your request this morning, I am attaching the following
items for use in the Weicker/Litton meeting tomorrow morning
at 9:00 a.m.
Proposed talking paper
Copy of draft Treasury letter, now being cleared,
explaining the differences in the bills
Copy of the Treasury bill; copy of the Executive order
Copy of the Weicker/Litton bill
Call me if you need additional information or materials.
DWM/fme
Attachments
"LU to FORD
-
cc: Phil Buchen
THE WHITE HOUSE
WASHINGTON
October 10, 1974
TALKING PAPER FOR THE PRESIDENT
PURPOSE:
Meeting with Senator Lowell Weicker (R-Conn.) and
Congressman Jerry Litton (D-Mo.)
SUBJECT:
Pending Legislation to Protect Confidentiality of Tax
Returns and Tax Information
1.
BACKGROUND
Under present law, tax returns are public records except
as provided by Executive order or statute.
The Treasury, on September 11, 1974, sent Congress a
comprehensive bill making all tax returns confidential except
as provided by statute.
The President, on September 20, 1974, issued an Executive
order providing strict limitations on White House access to
tax returns.
Senator Weicker and Congressman Litton have introduced
companion bills which are generally similar in scope and
objectives to the Treasury bill but contain differences noted
below.
2.
COMPARISON OF TREASURY AND WEICKER/LITTON BILLS
Both bills have more similarities than differences. Major difference
are:
1.
The scope of the Treasury bill is much broader, protecting
tax information that is both required as well as permitted
under the IRS Code, such as returns of nontaxable entities,
e.g. partnerships and simple trusts.
FORDO it LIBRARY
- 2 -
2. The Treasury bill would deny disclosure to local tax officials.
Weicker/Litton would permit disclosure.
3. Weicker/Litton would allow disclosure only to the Joint Com-
mittee on Revenue Taxation. Other Congressional committees
would get statistical information. Treasury would allow access
to Finance and Ways and Means Committees, and to other
committees by Congressional Resolution.
4. Weicker/Litton would limit access to the President personally.
Treasury will allow access by others by Executive order. The
President's order of September 20, spells this out.
5. Weicker/Litton would deny raw tax data to other agencies (Commerce,
Labor, Pension Benefit Guaranty Corp.) for compiling statistical
reporting and administration of other laws. This would require
that IRS develop a major statistical reporting capability to meet
other agency needs. Treasury would permit Commerce (largely
Census) to continue to process tax data under the protection of
existing laws containing strict confidentiality safeguards.
6. Weicker/Litton would prohibit disclosure of raw tax data for
nontax law enforcement purposes. Justice would be denied tax
information for prosecution of nontax criminal violations, for
impeachment of witnesses, and for providing the defense with
exculpatory evidence. Treasury bill permits controlled access
by Justice and resolution of access disputes by the President.
3. MAJOR ISSUES
The outstanding major issues are:
Whether the President should be permitted by Executive order
to allow others in the White House to have access to tax returns.
Arguments for:
-
The President, should he need to see a tax return, should
allow members of his immediate staff to assist him in its
review and analysis.
-
An Executive order has the force of law and is binding on
future Presidents until modified or revoked. Press exposure
and publication in the Federal Register are sufficient deterrents FOR
to surreptitious changes in an Executive order on this subject.
- 3 -
Arguments against:
-
Past White House abuses require specific statutory
prohibition.
-
An Executive order can be changed at the will of the
President.
Whether Justice should have access to raw returns for nontax law
enforcement purposes.
Arguments for:
)
-
Tax return information provides evidence vital to the
prosecution of narcotics violations, organized crime and
other important criminal laws.
-
Tax information is often indispensable to prosecutions for
perjury as well as disclosures of exculpatory information
for the defense.
Whether or not Federal agencies other than IRS should have
access to raw returns for statistical-reporting purposes.
Arguments for:
-
Commerce's vital operations would be crippled. Most
but not all of Commerce's statistical reporting operations
are adequately protected by strict confidentiality laws.
-
An enormous administrative burden would be imposed on
IRS should it be required to develop an internal capability
to process enormous quantities of statistical data.
Arguments against:
-
Raw tax returns should never be disclosed for purposes
other than tax administration.
-
Resources should be given to IRS to develop a stronger
internal capability to process and provide statistical
information.
FORD is LIBRARY
- 4 -
4.
TALKING POINTS FOR THE PRESIDENT
A. We both want the strongest, most comprehensive taxpayer
protection bill possible. In some respects, I think the Treasury
bill is stronger and more comprehensive. I have asked Treasury
to prepare a detailed letter on this to send to the Congress within
the next day or two. (See attached draft letter.)
B. I see two principal issues that divide us.
1.
The first is whether anyone on the White House staff should
have access to raw tax returns.
2.
The second is whether tax returns should be disclosed
for any rurpose other than tax administration; specifically
for statistical reporting and law enforcement purposes.
C. I believe our principal difference is over the question of limiting
White House access to tax returns. (Personally, I can't think
of any instance where I would want to see anyone's tax return,
but I am ultimately responsible for administration of the tax laws,
and, as a matter of management principle, my authority should be.
as broad as my subordinates.)
1.
I understand that you like the language of my recent
Executive order limiting White House access, but object
to allowing anyone other than the President access to tax
returns. You would deny such access by statute.
2.
My position is this:
a)
It would be an unnecessary burden on a President,
should he ever need to see a tax return, to limit
access to him personally. He must be permitted
to ask others to assist him in evaluating the return
in relation to the purpose for which it was obtained.
So long as a record in writing is made, subject to
disclosure by IRS to the Congress, I see no danger
of a secret abuse of power.
FORD
- 5 -
b)
I would have no objection to amending the Treasury
bill by including the language of my Executive order
and making it a part of the statute. As a matter of
principle, however, we would have a bill which details
Presidential access, but is general on Congressional
access. This may raise some Constitutional questions.
D. I would like your concession on the question of allowing statistical
agencies, like Commerce, and law enforcement agencies, like
Justice, to have controlled access to tax returns.
1.
Ideally, IRS would provide only statistical information to
these agencies. Practically, however, agencies in Commerce,
like the Census, are under strict confidentiality laws. Their
privacy record is unblemished. IRS will continue its efforts
to build up a stronger statistical reporting capability, but
to go all the way would be unwise from an administrative and
cost standpoint, and unnecessary from the privacy standpoint.
2.
The Justice Department needs tax return information to fight
narcotics traffic and organized crime and for other prosecutions
in the public interest. Under the Treasury bill, Justice must
obtain Treasury permission in writing. Disputes would come
to me for resolution.
E. I hope we can arrive at a consensus bill. This will avoid delay.
Further dispute only tends to undermine the credibility of our
joint objective in protecting the privacy of taxpayer returns.
*
The Bureau of Economic Analysis (BEA), a major user of IRS
raw data for economic forecasting, is not protected by the
Title 13 Census Act. The Privacy Committee is working on a
bill to provide general confidentiality protections for agencies
like BEA. This bill will be submitted to Congress next year.
An immediate alternative would be to amend the Treasury bill
to extend confidentiality protections to BEA operations.
if
FORD
GERALD
LIBRARY
DEPARTMENT THE ASUST
THE
THE GENERAL COUNSEL OF THE TREASURY
WASHINGTON, D.C. 20220
1789
October E, 1974
Dear Mr. Rommel:
Enclosed is a letter of comment on the Weicker-
Litton bill dealing with tax return privacy. If the
letter is approved, we would propose to send an
identical letter of comment on the House version of
the bill.
A copy of this letter and this enclosure is being
sent to Doug Metz of the Privacy Committee for his
information and comment.
Sincerely,
Richard R. Albrecht
Mr. Wilfred P. Rommel
Assistant Director for
Legislative Reference
Office of Management and Budget
Washington, D.C. 20503
Enclosure
FORD & LIBRARY OFRATO
THE GENERAL COUNSEL OF THE TREASURY
THE
WASHINGTON. D.C. 20220
like
Dear Mr. Chairman:
This is in response to your request for the views of the Treasury
Department on S. 3982, entitled "A BILL To amend the Internal Revenue
Code of 1954 to restrict the authority for inspection of tax returns and
the disclosure of information contained therein, and for other purposes. "
The maintenance of an appropriate level of confidentiality of tax
returns and tax data, including the necessary safeguards to ensure such
confidentiality, is essential for the continued strength of our self-
assessment tax system. This matter has been under study for many
months both in the Treasury Department and in the Domestic Council
Committee on the Right of Privacy. As a result of that study, we sub-
mitted to the Congress on September 11, 1974, a comprehensive legis-
lative proposal to ensure the maximum confidentiality of returns
consistent with effective state and federal tax administration and the
legitimate needs of other federal agencies to obtain tax information for
law enforcement and statistical purposes.
The statutory provisions governing inspection and disclosure of
tax returns and tax return information, which are presently contained
in section 6103 of the Internal Revenue Code of 1954, have remained
substantially unchanged for 35 years. Moreover, the statutory provi-
sions are quite general; and in many important cases the applicable
rules are set forth in the implementing regulations and in Executive
Orders. We believe the time has come for a complete reexamination
of the existing rules in light of current needs and values.
A paramount consideration in any such reexamination must, of
course, be to safeguard the confidentiality of tax returns. But in
determining the appropriate level of confidentiality, due regard must
be given to other competing concerns. For example, the law requires
the filing of tax returns so that the correct tax liability of taxpayers
may be determined, and the use of tax returns to the extent necessary
for the enforcement of such liability must be freely allowed even though
such use may entail public disclosure of the return in litigation.
Similarly, the interest of tax return confidentiality must be
weighed against legitimate needs for access to tax return information
in the enforcement of other federal laws. The reporting or non-
reporting of gross income may be of material evidentiary value
in proving the commission of other federal crimes. Also, fairness
to both prosecution and defense may dictate that information in the
tax file be made available, SO that a perjurer will not stand uncontra-
dicted or a defendant will have access to exculpatory material as
required by decisions of the United States Supreme Court. State
governments have legitimate need for tax return information for the
administration of their own tax laws.
is
FORD
GERALD
LIDRARY
- 2 -
Tax returns constitute an invaluable resource for statistical
studies that is unique in terms of wealth of information, breadth of
coverage, and frequency and reliability of reporting. For these
reasons, tax return data is presently being used in a number of
federal statistical programs. In some cases, termination of such
use of tax return data would result, if the statistical programs are
to be continued, in very substantial dollar costs and would impose
heavy additional reporting burdens on our populace.
Finally, consideration must be given to the ability of recipients
of tax data to maintain adequate safeguards for preserving confident-
iality, taking into account their past record in that regard.
In its approach to these problems, the provisions of S. 3982 are
similar in many respects to the provisions of the Treasury Department's
legislative proposals. In some situations, S. 3982 would allow broader
access to tax return data; in others, it would provide more restricted
access. These are, of course, matters on which judgments may vary.
We believe, nevertheless, that our proposal presents a more compre-
hensive and a sounder resolution of these issues, and we urge that our
proposal be adopted in lieu of S. 3982. The balance of this letter
compares in greater detail some of the major provisions of the two
bills.
1. General approach. Under present law, tax returns are
declared to be public records. " In fact, they are treated as confiden-
tial records in that they. are open to inspection only as provided by
statute or by Executive Order. Both S. 3982 and the Treasury Depart-
ment proposal would recognize the confidential nature of tax returns
and would provide that they may be disclosed only as authorized by
statute, thus eliminating the Executive Order procedure of present
law. We believe it is important that the American taxpayer know who
will have access to information reported on his tax returns and that
the rules governing such access be specified in the statute itself.
2. Coverage. S. 3982 would cover only a return which is filed
by or on behalf of a taxpayer under compulsion of law containing
information necessary to determine Federal tax liability, and
information contained in any such return. The Treasury Department
proposal is much broader and would cover information of all kinds
filed by a taxpayer with IRS, as well as information accumulated by
IRS in files and reports. If narrowly interpreted, S. 3982 may
technically fail to achieve its stated objective in that it would not
protect returns that are permitted but not required under the Code
(e. g., certain amended returns (Form 1040X)) or, if the concept of
determination of tax liability used in the bill refers only to the
filing taxpayer's liability, returns of nontaxable entities such as
partnerships, simple trust, or subchapter S corporations. In
any event, we believe that the mantle of confidentiality should extend
to the entire tax file.
GERALD ? FORD
- 3 -
3. Disclosure to State Tax Officials. Under present law, tax
returns and tax return data may be made available to state and local
tax officials at the request of the state Governor. Both S. 3982 and the
Treasury proposal would require the request for tax information to
come from the principal tax official of the state, rather than the
Governor. The principal difference between the two proposals is that
S. 3982 would permit continued disclosure of tax data to local officials,
while the Treasury proposal would eliminate such disclosure. We
believe that local safeguards on confidentiality may not be adequate to
provide the level of protection of confidentiality that is required of the
Federal government. Also, the opportunities for non-tax use of
federal tax information are likely to be more tempting at local levels.
4. Disclosure to Committees of Congress: At present, the
Internal Revenue Code provides specific authorization for access to
tax returns by the Joint Committee on Internal Revenue Taxation, the
Ways and Means Committee, and the Finance Committee. Other
committees may and do obtain tax return data by Executive Order or,
in the case of select committees and joint committees, by Congres-
sional resolution. The Treasury Department proposal would generally
preserve present law, except that the Executive Order procedure would
be eliminated, the Congressional Resolution procedure would be
broadened, and express authorization would be added for access to
tax returns by the Chief of Staff of the Joint Committee on Internal
Revenue Taxation. Thus, all committees other than the tax committees
could obtain tax data as authorized by Congressional resolution. S. 3982
would limit access to tax returns and tax data to the Joint Committee on
Internal Revenue Taxation. The Joint Committee could disclose such tax
information to the Congress or another Congressional committee, but
only in the form of statistics that do not identify individual taxpayers.
We submit that S. 3982 is unduly restrictive, that access to tax data
by the tax committees is essential to their informed exercise of their
legislative responsibilities, and that it would be appropriate for the
Congress to retain power by resolution to authorize other committees
to obtain such tax data as may be necessary for particular investi-
gations or legislation.
5. Disclosure to the President. The Internal Revenue Code
presently authorizes disclosure of tax return data "upon order of the
President. Both S. 3982 and the Treasury proposal would eliminate
this Executive Order procedure and would make express provision
for access to tax returns by the White House. Under S. 3982, such
access would be afforded to:
"The President of the United States, upon his
written request specifically naming the taxpayer whose
return is to be inspected, provided that the inspection of
such return is necessary in the performance of his
official duties. 11
LIBRARY GERALD = FORD
- 4 -
The Treasury proposal provides more broadly that tax returns or tax
return information may be made available to such White House employees
as the President may designate in a Presidential Order. By Executive
Order 11805, issued on September 20, 1974, the President directed that
tax returns shall be open to inspection by the President "only upon
written request signed by the President personally. " Any such request
shall identify the taxpayer whose return is to be inspected, the kind of
return or returns to be inspected, and the taxable period or periods
covered by such return or returns. The President may designate by
name an employee or employees of the White House office who are
authorized to receive such returns on his behalf, but the employees
who may be so designated are only those employees who hold a
Presidential commission and whose annual rate of basic pay equals or
exceeds $36, 000. No disclosure of the information received may be
made by such designated employee except to the President, without
the written direction of the President.
It is not entirely clear whether the right of the President to re-
ceive tax returns under S. 3982 is intended. to be nondelegable or
whether the President could designate an employee to receive such tax
returns on his behalf. If such right is intended to be delegable, there
are no limits established on the extent of delegation. If it is intended
to be nondelegable, S. 3982 would impose unrealistic and unduly
burdensome restrictions on effective operation of the White House.
The main difference between S. 3982 and the Treasury proposal
is that S. 3982 seeks to specify in the statute the rules governing
Presidential access to tax returns, while the Treasury proposal leaves
the elaboration of such rules to Executive Order. Just as effective
operation of the legislative branch requires that Congress retain
power to authorize access to tax returns by its committees, so does
effective administration of the Executive Branch dictate that the
President should retain power, directly or through his immediate
subordinates, to scrutinize the activities and files of the Executive
agencies including the tax collection agencies.
6. Disclosure for statistical purposeš. As noted above, tax
returns are a unique and invaluable source of economic data. Tax
return data is presently used by the Department of Commerce in the.
development of the national income accounts (i.e., GNP and similar
figures) and by other federal agencies in their statistical programs.
The Treasury Department proposal would generally seek to reduce the
number of agencies receiving raw tax data for statistical studies
by centralizing the preparation of statistical studies in the Internal
Revenue Service. However, a general exception is made for the
Department of Commerce in view of the enormous volume of essential
statistical work done by Commerce, the demonstrated ability of that
agency to manage large volumes of sensitive information in a con
FORD
fidential manner, and the questionable ability of IRS to take on
all of that responsibility. Morcover, other agencies, as well
GERALD
LIBRARY
- 5 -
as the states and any other person, could contract for IRS to undertake
special statistical studies but would, of course, have to bear the cost
of such studies. In recognition that facility or other limitations might
make it impractical for IRS personnel to conduct all such studies that
might be requested, provision is made for the Service to contract with
other agencies or persons to perform such studies -- with such con-
tractors being fully subject to all of the safeguards ensuring confiden-
tiality, including the criminal penalties for unlawful disclosure.
S. 3982 limits all statistical uses of tax return data to the IRS
but authorizes the IRS to carry out such studies, at cost, upon the
request of another federal agency or a State. The IRS would apparently
not be authorized to carry out such studies at the request of a private
institution, such as the Brookings Institution.
S. 3982 would force the IRS to divert resources to carrying out
major statistical programs now the responsibility of the Department
of Commerce, and thus would detract from the present ability of the
Service to carry out its primary function of tax collection. It would
also seriously limit other statistical uses of tax return data and
would tend to impose unnecessary and burdensome substitute reporting
requirements. We would submit for these reasons that the restrictive
approach of S. 3982 is unwarranted and unwise.
7. Disclosure for law enforcement purposes. Both bills would
authorize use of tax returns for purposes of the administration and
enforcement of the tax laws. In addition, the Treasury draft legis -
lation would permit use of tax returns by the Justice Department
and other federal agencies in nontax enforcement activities, at both
the investigative and the judicial stage of such an enforcement pro-
ceeding, in accordance with specified statutory criteria. S. 3982
would prohibit such use in nontax enforcement activity. This differ-
ence between the Treasury proposal and S. 3982 raises a fundamental
policy question concerning the extent to which the principle of tax-
payer confidentiality should outweigh the demonstrable and legitimate
needs of law enforcement agencies. We submit that, while reasonable
men may differ concerning where the balance should be struck between
these competing interests, the approach of S. 3982 is unduly doctrin-
aire in denying all use of tax returns for nontax purposes. In many
cases, a tax investigation and nontax investigation may be conducted in
conjunction, and the use of tax returns to evaluate a possible charge
of tax law violation may be essential to a determination whether to
commence a nontax proceeding. Or the tax return may disclose a
probable nontax criminal violation, and disclosure of tax data to
prosecutorial officials may be necessary if the offender is to be held
to account for his actions. Similarly one may ask whether the interest
in ensuring a fair trail to every accused does not dictate that tax data
should be made avilable to prosecutorial officials, the defense, and
the courts to the extent necessary to contradict a lying witness or
to provide the defense with exculpatory evidence.
FORD
GERALD
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8. Other provisions. Under present law, tax returns may be
made available to persons who, because of a personal or transactional
relationship with the person making the return, need information con-
tained in such returns in order to determine their own tax liability.
For example, in appropriate circumstances a beneficiary of a trust
or eståte may obtain the return of the trust or estate and the donee
of property may obtain the donor's return. These provisions would be
retained under the Treasury Department proposal but would be elimin-
ated under S. 3982, which provides only that returns may be disclosed
to the taxpayer himself or to his duly authorized representative. The
restrictive approach of S. 3982 seems unnecessarily harsh, and we are
unaware of any abuse in this area under present regulations.
In conclusion, while the Treasury Department shares the concerns
that prompted the introduction of S. 3982, we believe that the proposed
legislation which we submitted to the Congress' on September 11 pre-
sents a more balanced resolution of the problems in this area and we
ürge your Committee's favorable consideration of that proposal.
Sincerely yours,
Richard R. Albrecht
General Counsel
The Honorable
Russel B. Long
Chairman, Senate Finance Committee
United State Senate
Washington, D. C. 20510
FORDO is LIBRARY GERALD
TLC: DSCollinson: jy: 10-8-74
A BILL
TO amend the Internal Revenue Code of 1954 to restrict
the authority for inspection of returns and the
disclosure of information with respect thereto,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. AMENDMENT OF 1954 CODE.
Whenever in this Act an amendment is expressed in terms of
an amendment to a section or other provision, the reference is to a
section or other provision of the Internal Revenue Code of 1954.
SEC. 2. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND
RETURN INFORMATION.
Section 6103 (relating to publicity of returns and disclosure of
information as to persons fi.ing income tax returns) is amended to
read as follows:
"SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND
RETURN INFORMATION.
"(a) General Rule. --
"(1) Confidentiality and disclosure. --Returns and return in-
formation shall be confidential and no person described in section 7213 (a)
shall permit inspection of or disclose returns or return information,
nor shall a court, administrative body, or other person order such in-
spection or disclosure, except to such persons and for such purposes
as are authorized by this title.
FORD is LIBRARY 038830
- 2 -
"(2) Definitions. --For purposes of this section--
"(A) Return. - --The term 'return' means any
tax or information return or declaration of estimated
tax required by, or provided for or permitted under,
the provisions of this title filed by, on behalf of, or
with respect to any person with the Secretary or his
delegate, and any amendment or supplement thereto
or claim for refund, including supporting schedules,
attachments, or lists which are designed to be supple-
mental to, or become part of, the return so filed.
"(B) Return information. --The term 'return infor-
mation' means--
(i) any data including a taxpayer's identity,
the nature, source, or amount of his income, pay-
ments, receipts, deductions, exemptions, credits,
assets, liabilities, net worth, tax liability, tax with-
held, deficiencies, overassessments, or tax payments,
whether the taxpayer's return was, is being, or will be
examined or subject to other investigation or processing,
or any particular of any data, in whattever form (whether
as a report, investigative file, memorandum or other
document, including a registration statement described
in section 6057) or manner received by, recorded by,
prepared by, or furnished to the Secretary or his
GERALD LIBRARY ? FORD
- 3 -
delegate with respect to a return as described in
subparagraph (A) or with respect to the existence of
the amount of the liability of any person under this
title for any tax, penalty, interest, fine, forfeiture,
or other imposition, or offense, but, for purposes
of this subdivision (i), not including any such data
(or particular thereof) included in a document (or
request or correspondence for or with respect
thereto) described in (ii) (without regard to the date
limitation therein) or (iii);
(ii) any letter, advice, or other document issued by
the Secretary or his delegate pursuant to a request made
therefor on or before
by, or on
behalf of, any person other than an officer or employee of
the Department of the Treasury acting in his official capa-
city, and any such request, or any correspondence for or
with respect to such document or any portion thereof,
which is intended to be used to determine or affect the
application of any rule contained in this title, related law,
or tax treaty to the facts and circumstances of a particular
transaction, arrangement, or return filed or to be filed
by the person to whom such document is furnished;
FORD is LIBRARY GERALD
- 4
"(iii) any memorandum, advice, or other
document issued by the Secretary or his delegate
pursuant to a request by, or on behalf of, any
officer or employee of the Department of the
Treasury acting in his official capacity, and any
such request, or any correspondence for or with
respect to such document or any portion thereof,
which is intended to be used by him to determine or
affect the application of any rule contained in this title,
related law, or tax treaty to the facts and circum-
stances of a particular transaction, arrangement,
or return filed or to be filed by any person to whom
such document relates or may relate; and
"(iv) any other data of the type described in
(i) which is furnished to the Secretary or his delegate
in connection with tax administration and accepted as
confidential pursuant to regulations prescribed by the
Secretary or his delegate,
whether or not such data (or particular thereof) described in (i) or
such document (or request or correspondence for or with respect
thereto) described in (ii) or (iii) may be in any manner inspected or
disclosed under the provisions of section 6104 or any other provision
of this title.
EQRD is GERALD LIBRARY
- 5 -
"(C) Tax administration. The term 'tax adminis-
tration' means the administration, management, conduct,
direction, and supervision of the execution and application
of the internal revenue laws or related statutes (or
equivalent laws and statutes of a State) and tax conven-
tions to which the United States is a party and the develop-
ment and formulation of Federal tax policy relating to
existing or proposed internal revenue laws, related
statutes, and tax treaties, and includes assessment,
collection, enforcement, litigation, publication, and
statistical gathering functions under such laws, statutes,
or conventions.
"(D) State. - -The term 'State' means the 50 States,
the District of Columb.a, the Commonwealth of Puerto
Rico, possessions of the United States, and other places
under the sovereignty of the United States.
"(E) Taxpayer identity. --The term "taxpayer identity'
means the name of a person with respect to whom a return
is filed, his mailing address, and his taxpayer identifying
number (as described in section 6109) or a combination
thereof.
"(F) Inspection. - -The terms 'inspected' and 'inspection'
mean the visual examination of a return or return information.
FORD & LIBRARY 07V839
- 6
-
"(G) Disclosure. -The term 'disclosure' means
the making known to any person in any manner what-
ever a return or return information.
"(b) Disclosure to State Tax Officials. --Returns and return in-
formation, except with respect to taxes imposed by chapters 35 and
53, shall be open to inspection by or disclosure to any State agency,
body, or commission lawfully charged with tax administration for the
purpose of, and only to the extent necessary in, the administration of
a specific tax law of such State and shall be used only for such tax
administration. The inspection shall be permitted, or the disclosure
made, only upon written request of the head of such State agency,
body, or commission, designating the representatives of such agency,
body, or commission to make the inspection or to receive the return
or return information on behalf of such agency, body, cr commission.
However, such return information shall not be disclosed to such
State agency, body, or commission to the extent that the Secretary
or his delegate determines that such disclosure would seriously impair
the administration of Federal tax laws.
"(c) Disclosure to Persons Having Substantial Interest. --
"(1) The return of a person with respect to whom
the return is filed shall, upon written request, be open
to inspection by or disclosure to--
"(A) in the case of the return of an individual,
that individual;
FORD in LIBRARY OERALD
- 7 =
"(B) in the case of an income tax
return filed jointly, either of the individuals
with respect to whom the return is filed;
"(C) in the case of the return of a
partnership, any person who was a member of
such partnership during any part of the period
covered by the return;
"(D) in the case of the return of a
corporation--
"(i) any person designated by
resolution of its board of directors, or
other similar governing body,
"(ii) any officer or employee of such
corporation upon written request signed by
any principal officer and attested by the
secretary or other officer,
"(iii) if the corporation was an electing
small business corporation under subchapter
S of chapter 1, any person who was a share-
holder during any part of the period covered
by such return during which an election was
in effect, or
FORD : LIBRARY
- 3--
"(iv) if the corporation has been dis-
solved, any person authorized by applicable
State law to act for the corporation or any
person who the Secretary or his delegate finds
to have a material interest which will be af-
fected by information contained therein;
"(E) in the case of the return of an estate--
"(i) the administrator, executor, or
trustee of such estate, and
"(ii) any heir at law, next of kin, or bene-
ficiary under the will, of the decedent but only
if the Secretary or his delegate finds that such
heir at law, next of kin, or beneficiary has a
material interest which will be affected by in-
formation contained therein; and
"(F) In the case of the return of a trust--
"(i) the trustee or trustees, jointly or
separately, and
"(ii) any beneficiary of such trust but
only if the Secretary or his delegate finds that
such beneficiary has a material interest which
will be affected by information contained therein.
FORD is LIBRARY 9ERALD
- 9 -
"(2) If an individual described in paragraph (1) is legally
incompetent, the applicable return shall be open to inspection by
or disclosure to the committee, trustee, or guardian of his estate.
"(3) If an individual described in paragraph (1), other than an
individual described in subparagraph (E) (i) or (F) (i) of such para-
graph, has died, the applicable return may be inspected by or
disclosed to--
"(A) the administrator, executor, or trustee of
his estate; and
"(B) any heir at law, next of kin, or beneficiary
under the will, of such decedent, or a donee of property,
but only if the Secretary or his delegate finds that such
heir at law, next of kin, beneficiary, or donee has a
material interest which will be affected by information
contained therein.
"(4) If substantially all of the property of the person' with respect
to whom the return is filed is in the hands of a trustee in bankruptcy
or receiver, such return or returns for prior years of such person
shall be open to inspection by or disclosure to such trustee or receiver,
but only if the Secretary or his delegate finds that such receiver or
trustee has a material interest which will be affected by information
contained therein.
FORD & 079839 LIBRARY
- 10 -
-
"(5) Any return to which this subsection applies shall also be
open to inspection by or disclosure to the attorney in fact, duly
authorized in writing, of any of the persons described in para-
graph (1), (2), (3), or (4) to inspect the return or receive the
information on his behalf, subject to the conditions provided for
therein.
"(6) Return information with respect to any return shall also
be open to disclosure to any person authorized by this subsection
to inspect such return but only to the extent that the Secretary or
his delegate determines that such disclosure would not seriously
impair the administration of Federal tax laws.
"(d) Disclosure to Committees of Congress. ---
"(1) Committee on Ways and Means, Committee on Finance,
and Joint Committee on Internal Revenue Taxation. -Upon written
request from the Chairman of the Committee on Ways and Means
of the House of Representatives, the Chairman of the Committee on
Finance of the Senate, or the Chairman of the Joint Committee on
Internal Revenue Taxation, the Secretary or his delegate shall fur-
nish such committee sitting in closed executive session with any
return or return information.
"(2) Chief of Staff of Joint Committee on Internal Revenue
Taxation. Upon written request from the Chief of Staff of the Joint
Committee on Internal Revenue Taxation, the Secretary or his dele-
gate shall furnish him with any return or return information.
BERRLD Such ORD LIBRARI
- 11 -
Chief of Staff shall have the right to submit any relevant or useful
information thus obtained to any committee described in paragraph
(1) sitting in closed executive session.
"(3) Other committees. Upon written request from the chair-
man of a committee of the Senate or House (other than a committee
specified in paragraph (1)) specially authorized to inspect returns or
return information by a resolution of the Senate or House or, in the
case of a joint committee (other than the committee specified in para-
graph (1)), by concurrent resolution, the Secretary or his delegate
shall furnish such committee sitting in closed executive session with
any return or return information which such resolution so authorizes
the committee to inspect.
"(4) Agents of committees and submission of information to
Senate or House. --Any committee described in paragraph (1), (2),
or (3) or the Chief of Staff of the Joint Committee on Internal Revenue
Taxation shall have the right, acting directly, or by or through such
examiners or agents as the Chairman of such committee or such Chief
of Staff may designate or appoint in writing, to inspect returns and
return information at such time and in such manner as he may de-
termine. Any relevant or useful information obtained by or on behalf
of such committee pursuant to the provisions of this subsection may
be submitted by the committee to the Senate or the House, or to both
the Senate and the House, as the case may be. The Joint Committee
FORD is GERALD LIBRARY
- 12 -
on Internal Revenue Taxation may also submit such information to
any committee described in paragraph (1) sitting in closed executive
session.
"(e) Disclosure Pursuant to Executive Order. -Upon order of
the President, the Secretary or his delegate shall furnish the Presi-
dent, or such employee or employees of the White House Office as
the President may designate in such order to receive on his behalf,
any return or return information.
"(f) Disclosure to Certain Federal Officers and Employees for
Purposes of Tax Administration, etc. (1) Returns and return
information shall, without written request, be open to inspection by
or disclosure to officers and employees of the Department of the
Treasury whose official duties require such inspection or disclosure.
"(2) A return or return information with respect to any tax im-
posed by this title upon a taxpayer shall, without written request,
be open to inspection by or disclosure to attorneys of the Department
of Justice (including United States Attorneys) personally and directly
engaged in, and solely for their use in, preparation for any proceeding
(or investigation which may result in a proceeding) before a Federal
grand jury or any Federal or State court in a matter involving tax
administration but only--
(A) if the taxpayer is or may be a party
to such proceeding;
TURO is LIBRARY GERALD
- 13 -
(B): if the taxpayer consents; or
(C) if such return or return information has or
may have a bearing on the outcome of such proceeding
because--
(i) treatment of an item with respect to a
person who is or may be a party to such proceeding
is or may be determined, in whole or in part, by
reference to the treatment of an item on such return;
(ii) such return or return information relates
or may relate to an issue in the proceeding; or
(iii) the liability of the party under this title
for any tax, penalty, interest, fine, forfeiture, or
other imposition, or offense, which is or may be the
subject of the proceeding is or may be determined,
in whole or in part, by reference to such return or
return information.
"(g) Disclosure to Federal Officers and Employees for Purposes
of Federal Law Administration (Other Than Tax Laws). --(1) Upon
request in writing by the Secretary of Commerce, the Secretary or
his delegate shall furnish any return or return information reflected
on such return to officers or employees of the Social and Economic
Statistics Administration (or successor administrations or estab-
lishments thereof) of the Department of Commerce for the purpose
of research and statistical studies and compilations to be conducted
FORD : 03RALD LIBRARY
- 14 -
or prepared by such Administration as authorized by law, provided
that no such officer or employee shall publish or otherwise disclose
any return or return information except in statistical form which
cannot be associated with, or otherwise identify, directly or in-
directly, a particular taxpayer.
"(2) A I eturn or return information with respect to any tax
imposed by this title upon a taxpayer shall, upon request, be open
to officers or employees of a department, agency, or other Executive
establishment of the Federal Government personally and directly
engaged in, and solely for their use in, preparation for any adminis-
trative or judicial proceeding (or investigation which may result in
such a proceeding) pertaining to the enforcement of a specifically
designated Federal statute (not involving tax administration)
to which the United States (or a department, agency, or other
Executive establishment of the Federal Government) is or may be a
party before any Federal grand jury, court, department, agency, or
other Executive establishment but only--
"(A) if the taxpayer is or may be a party to such
proceeding;
"(B) if the taxpayer consents; or
"(C) if such return or return information has or may
have a bearing on the outcome of such proceeding because--
FORD it LIBRARY 038410
- 15 -
-
"(i) there was or may have been a
transactional relationship between a person who
is or may be a party to the proceeding and the
taxpayer,
"(ii) such person is or may be a successor
in interest of the taxpayer, or
"(iii) such return or return information will
or may corroborate or contradict other information
obtained in such proceeding or investigation.
The inspection or disclosure shall be permitted only upon written
request setting forth the reasons for such request, the authority under
which the proceeding or investigation is being conducted, and the
particular subparagraph of this paragraph upon which the request is
based and signed by the head of such department, agency, or estab-
lishment or, in the case of the Department of Justice, signed by the
Attorney General, Deputy Attorney General, or an Assistant Attorney
General, or by the Director of the Federal Bureau of Investigation.
However, such return or return information shall not be disclosed
to the extent that the Secretary or his delegate determines that such
disclosure would seriously impair the admimistration of Federal tax
laws. In the event that the Secretary or his delegate makes such a
determination, the Secretary shall consult with the head of the re-
questing department, agency, or establishment, or, in the case of a
FORD is LIBRARY OFRALD
- 16 -
request by the Department of Justice, with the Attorney General.
If, after such consultation, the issue has not been resolved, a final
determination shall be made by the President or his delegate.
"(3) An officer or employee of the Department of the Treasury
participating with officers or employees of another department, agency,
or other Executive establishment of the Federal Government in a joint
investigation pertaining to the enforcement of Federal criminal laws
may, to the extent required by such investigation, disclose to such
other officers or employees return information with respect to a tax
?
imposed by this title upon a taxpayer other than return information
furnished to the Secretary or his delegate by such taxpayer.
"(h) Disclosure of Certain Returns and Return Information for
Tax Administration Purposes. --
"(1) Disclosure by internal revenue officials and employees
for investigative purposes. - -An internal revenue official or employee
may, in connection with his official duties with respect to a tax imposed
by this title, disclose return information to the extent that such dis-
?
closure is necessary in arriving at a correct determination of tax,
liability for tax, or the amount to be collected, or otherwise in the
enforcement of any provision of this title.
"(2) Disclosure of accepted offers-in-compromise. -Return in-
formation shall be disclosed to members of the general public to the
extent necessary to permit inspection of any accepted offer-in-com-
FORD
promise under section 7122, relative to the liability for a tax
by this title.
BERALE imposed AIBRART
- 17 -
"(3) Disclosure of amount of outstanding lien. --If a notice of lien
has been filed pursuant to section 6323 (f) or corresponding provision
of prior internal revenue laws, the amount of the outstanding obligation
secured by such lien is authorized to be disclosed as a matter of public
record and may be disclosed to any person who furnishes satisfactory
written evidence that he has a right in the property subject to such
lien or intends to obtain a right in such property.
"(4) Disclosure in judicial and administrative tax proceedings. --
A return or return information with respect to any tax imposed by this
title upon a taxpayer may be disclosed in a Federal or State judicial
or administrative proceeding pertaining to tax administration before
any Federal or State grand jury, court, department, or Executive
establishment, but only--
"(A) if the taxpayer is a party to such proceeding;
"(B) if the taxpayer consents;
"(C) if such return or return information has or
may have a bearing on the outcome of such proceeding
because-
"(i) treatment of an item with respect to a
party to the proceeding is or may be determined,
in whole or in part, by reference to the treatment
of an item on such return,
"(ii) such return or return information re-
lates or may relate to a transaction at issue in the
proceeding, or
FORD : LIBRARY GERALD
- 18 -
"(iii) the liability of the party under this title
for any tax, penalty, interest, fine, forfeiture, or
other imposition, or offense which is the subject of
the proceeding is or may be determined by reference
to such return or return information;
"(D) to the extent necessary to impeach a witness in
the proceeding respecting testimony as to a transaction
with the taxpayer if the taxpayer is neither a party to, nor
a witness in, such proceeding;
"(E) to the extent necessary to impeach the testimony
of the taxpayer if the taxpayer is a witness in the proceeding;
"(F) to the extent required by order of a court pursuant
to 18 U.S. C. 3500 or Rule 16 of the Federal Rules of Criminal
Procedure, such court being authorized in the issuance of such
order to give due consideration to Congressional policy favoring
the confidentiality of returns and return information as set
forth in this title; or
"(G) to the extent required by the Constitution of the
United States.
However, such return or return information shall not be disclosed
to the extent that the Secretary or his delegate determines that such
disclosure would seriously impair the administration of Federal tax
FORD & LIBRARY BERALD
laws. In the event that the Secretary or his delegate makes such a
- 19 -
determination with respect to disclosure in a judicial proceeding to
which the United States is a party, the Secretary shall consult with
the Attorney General. If, after such consultation, the issue has not
been resolved, a final determination shall be made by the President
or his delegate.
"(5) Disclosure of return information to correct misstatements
of fact. -The Secretary or his delegate may. in his discretion, dis-
close such return information or any other information with respect
to any specific taxpayer as he considers advisable for purposes of tax
administration, and to the extent necessary, to correct a misstate-
ment of fact published or disclosed with respect to such taxpayer's
return or his dealing with the Internal Revenue Service.
"(6) Disclosure to competent authority. under income tax con-
vention. --A return or return information may be disclosed to a com-
petent authority of a foreign government which has an income tax
convention with the United States but only to the extent provided in,
and subject to the terms and conditions of, such convention.
"(7) Federal and State agencies regulating tax return preparers. --
Taxpayer identity information of any tax return preparer (as defined
in section 6690 (e)) may be disclosed to any Federal or State agency,
body, or commission charged under the laws of the United States or
any State or political subdivision of a State with licensing, regis-
tration, or regulation of tax return preparers.
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- 20 -
"(i) Disclosure of Returns and Return Information for
Purposes Other Than Tax Administration. --
"(1) Disclosure in nontax judicial and administrative pro-
ceedings. --A return or return information with respect to any tax
imposed by this title upon a taxpayer may be disclosed in a judicial
or administrative proceeding pertaining to a specifically designated
Federal statute (not involving tax administration) to which the United
States (or a department, agency, or other Executive establishment
of the Federal Government) is a party before any Federal grand jury,
court, department, agency, or Executive establishment but only--
"(A) if the taxpayer is a party to such proceeding;
"(B) if the taxpayer consents;
"(C) if such return or return information has or may
have a bearing on the outcome of such proceeding because--
"(i) there was a transactional relationship
between a party to the proceeding and the taxpayer,
or
"(ii) such party is a successor in interest of
the taxpayer;
"(D) to the extent necessary to impeach a witness in
the proceeding respecting testimony as to a transaction with
the taxpayer if the taxpayer is neither a party to, nor a wit-
ness in, such proceeding;
FORD is LIBRARY DERALD
- 21 -
"(E) to the extent necessary to impeach the
testimony of the taxpayer if the taxpayer is a witness
in the proceeding;
"(F) to the extent required by order of a court
pursuant to 18 U.S.C. 3500 or Rule 16 of the Federal
Rules of Criminal Procedure, such court being authorized
in the issuance of such order to give due consideration to
Congressional policy favoring the confidentiality of returns
and return information as set forth in this title; or
"(G) to the extent required by the Constitution of the
United States.
However, such return or return information shall not be disclosed
to the extent that the Secretary or his delegate determines that such
disclosure would seriously impair the administration of Federal tax
laws. In the event that the Secretary or his delegate makes such a
determination, the Secretary shall consult with the Attorney General
if the United States is a party to the proceeding or the Department
of Justice represents a department, agency, or other Executive
establishment of the Federal Government which is a party to the pro-
ceeding, or with the head of such department, agency, or establish-
ment if the Department of Justice does not so represent the department,
agency, or establishment. If, after such consultation, the issue has
not been resolved, a final determination shall be made by the President
or his delegate.
- 22 -
"(2) Disclosure of certain returns and return information to
Social Security Administration and Railroad Retirement Board. --The
Secretary or his delegate is authorized to disclose returns and return
information--
"(A) with respect to taxes imposed by chapters 2, 21,
and 24, to the Social Security Administration for purposes
of its administration of the Social Security Act;
"(B) with respect to a plan to which part I of
subchapter D of chapter 1 applies, to the Social
Security Administration for purposes of carrying out
its responsibility under section 1131 of the Social
Security Act; and
"(C) with respect to taxes imposed by chapter 22,
to the Railroad Retirement Board for purposes of its
administration of the Railroad Retirement Act.
"(3) Disclosure of returns and return information to the Depart-
ment of Labor and Pension Benefit Guaranty Corporation. --The
Secretary or his delegate is authorized to furnish returns and return
information to the proper officers and employees of the Department
of Labor and the Pension Benefit Guaranty Corporation for purposes
of the administration of Titles I and IV of the Employee Retirement
Income Security Act.
is
ruko
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"(4) Disclosure of return information as to Presidential
appointees and certain other Federal Government appointees. --The
Secretary or his delegate is authorized to disclose to a duly autho-
rized representative of the Executive Office of the President or to the
head of any department, agency, or other Executive establishment of
the Federal Government, upon written request of such representative
or head, or to the Federal Bureau of Investigation on behalf of such
representative or head, return information with respect to an indivi-
dual who is designated as being under consideration for appointment
to a position in the Executive or Judicial Branch of the Federal
Government. Such return information shall be limited to whether
such an individual--
"(A) has filed returns with respect to the taxes
imposed under chapter 1 for not more than the im-
mediately preceding 3 years;
"(B) has failed to pay any tax within 10 days
after notice and demand, or has been assessed any
penalty under this title for negligence, in the current
year or immediately preceding 3 years;
"(C) has been or is under investigation of possible
criminal offenses under the internal revenue laws and
the result of any such investigation; and
"(D) has been assessed any penalty under this
title for fraud.
LIBRARY GERALD R. FORD
24 I I
The official to whom such return information is disclosed is autho-
rized to disclose such information to his superior officers.
"(j) Disclosure of Taxpayer Identity Information. --The Secretary
or his delegate is authorized, upon written request, to disclose tax-
payer identity information to--
"(1) any Federal agency for purposes of assisting
such agency in locating a person with respect to whom
a return has been filed;
"(2) any State agency, body, or commission
described in section 6103 (b) for purposes of assisting
such agency, body, or commission in locating a person
with respect to whom a return has been filed or com-
municating with such person to advise him that he may
be entitled to a refund, or to assist such agency, body,
or commission in its administration of the tax laws of
such State;
"(3) the Department of Health, Education, and Wel-
fare, or appropriate State and local welfare agencies
reporting to such Department, for purposes of assisting
Federal, State, and local welfare agencies in locating an
individual described in 42 U.S. C. 610 with respect to
whom a return has been filed; and
LIBRARY GERALD P. FORD
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"(4) the press and other media for purposes of
notifying persons entitled to tax refunds when the Secretary
or his delegate, after reasonable effort and lapse of time,
has been unable to locate such persons.
"(k) Disclosure of Returns and Return Information to Designee of
Taxpayer. - -The Secretary or his delegate may, subject to such re"
quirements and conditions as may be prescribed by regulations,
disclose the return of any taxpayer, or return information with
X
respect to such return, to such person or persons as such taxpayer
may designate in a written request for such disclosure, or to any other
person at the taxpayer's request to the extent necessary to comply
with a request for information or assistance made by the taxpayer io
such other person. However, return information shall not be disclosed
to such person or persons to the extent that the Secretary or his delegate
determines that such disclosure would seriously impair the adminis-
tration of Federal tax laws.
"(1) Certain Other Persons. --The Secretary or his delegate
is authorized to disclose returns and return information to any per-
son, including any person described in section 7513 (a), to the extent
necessary in connection with contractual procurement of services or
property for purposes of tax administration
"(m) Disclosure of Return Information Concerning Prospective
Jurors and Possible Criminal Activities. --
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"(1) Prospective Jurors. --
"(A) Return information with respect to any tax
imposed by this title upon a taxpayer shall be disclosed
to an attorney of the Department of Justice (including a
United States attorney) in connection with a judicial
proceeding described in paragraph (h)(4) or (i) (1) of this
section to the extent necessary to answer an inquiry by
such attorney as to whether a prospective juror has, or
has not, been investigated by the Secretary or his delegate.
"(B) Return information with respect to any tax
imposed by this title upon a taxpayer shall, upon request,
be disclosed to an attorney of the Department of Justice
(including a United States attorney) in connection with a
judicial proceeding described in paragraph (h)(4) or (i)(1)
of this section for use by him solely for purposes of im-
peaching a prospective juror upon examination of such
prospective juror, and such return information may, in
the discretion of such attorney, be delivered to the court
for such use or action by the court as the court may deem
appropriate.
"(2) Possible Criminal Activities. --
"(A) Return information with respect to any tax imposed
by this title upon a taxpayer shall, if such return information
comes to the attention of the Secretary or his delegate,
LIBRARY GERALD
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disclosed by the Secretary or his delegate to the
Attorney General or his delegate to the extent neces-
sary to apprise the Attorney General or his delegate
of activities which may constitute, or may have con-
stituted, a violation of Federal criminal laws.
"(Б) Return information with respect to any tax
imposed by this title upon a taxpayer may, if such
return information comes to the attention of the
Secretary or his delegate, be disclosed, in the dis -
cretion of the Secretary or his delegate, to an officer
of any department, agency, body, or commission of a
State (or political subdivision of a State) charged with
the enforcement of criminal laws of such State to the ex-
tent necessary to apprise such officer of activities which
may constitute, or may have constituted, a violation of
such criminal laws.
"(n) Disclosure of Returns and Return Information With Respect
to Taxes Imposed by Subtitle E. - -Returns and return information with
respect to taxes imposed by subtitle E of this title (relating to taxes on
alcohol, tobacco, and firearms) shall be open to inspection by or dis -
closure to officers and employees of a department, agency, or other
Executive establishment of the Federal Government whose official duties
require such inspection or disclosure.
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"(o) Remedy for Unauthorized Disclosure. -The exclusive
remedy for an alleged violation of this section shall be a proceeding
under section 7213, and no court shall have jurisdiction to review
a determination that a return or return information is or is not open
to inspection or disclosure or to determine the lawfulness of any such
inspection or disclosure except in such a proceeding.
"(p) Procedures. --
"(1) Manner, time, and place of inspections. --Request
for inspection and the disclosure of a return or return information
shall be made in such manner and at such time and place as shall
be prescribed by the Secretary or his delegate.
"(2) Copies of returns. --A copy or certified copy of a
return shall, upon written request, be furnished to any person to
whom disclosure of such return is authorized cr who is authorized to
inspect the return. Such copy shall have the same legal status as
the original; and any such copy shall, if properly authenticated, be
admissible in evidence in any judicial or administrative proceeding
as if it were the original, whether or not the original is in existence.
A reasonable fee may be prescribed for furnishing such copy.
"(3) Disclosure of return information. --Return information
disclosed to any person under the provisions of this subchapter may
be provided in the form of written documents, reproductions of such
documents, films or photoimpressions, or electronically-produced,
tapes, disks or records, or by any other mode or means which, in
FORD & LIBRARY GERALD
- 29 -
the opinion of the Secretary or his delegate, are necessary or appro-
priate. A reasonable fee may be prescribed for disclosing such return
information.
"(4) Records of inspection and disclosure. The Secretary
or his delegate shall maintain a record of all requests for inspec-
tion and disclosure of returns and requests for return information
and of returns inspected and return information disclosed under this
section (other than returns and return information inspected or dis-
closed under the authority of subsection (f), (h), (i) (1) or (j)), and
such records shall be available for examination by the Joint Commit-
tee on Internal Revenue Taxation or the Chief of Staff of such Joint
Committee. The Secretary or his delegate shall, at the request of
such Chief of Staff, furnish to him a summary of such records at
such time or times and in such form and containing such information
as the Chief of Staff may designate in such request.
"(5) Safeguards. - -Any department, agency, or óther
Executive establishment of the Federal Government described in sub-
section (f) (2) or (g) or any State agency, body, or commission de-
scribed in subsection (b) shall, as a condition for receiving returns
or return information--
"(A) establish and maintain a secure area or
place in which such returns or return information shall
be stored;
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-
"(B) restrict access to the returns or return in-
formation only to those persons whose duties or
responsibilities require access and to whom disclosure
may be made under the provisions of this title,
"(C) provide such other safeguards as are
necessary or appropriate to protect the confidenti-
ality of the returns or return information; and
"(D) when the returns or the return informa-
tion provided by the Secretary or his delegate in the
form of written documents, reproductions of such
documents, films cr photoimpressions, or elec-
tronically-produced tapes, disks or records has
served its purpose--
"(i) in the case of a State agency,
body, or commission described in sub-
section (b), return to the Secretary or his
delegate such returns or return information
(along with any copies made therefrom) or
furnish a written report to the Secretary
or his delegate that the returns or return
information has been destroyed or otherwise
made undisclosable in any manner whatever;
and
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"(ii) in the case of a department, agency,
or establishment described in subsection (f) (2)
or (g), either--
"(a) return to the Secretary or his
delegate such returns or return information
(along with any copies made therefrom),
"(b) otherwise make such returns
or return information undisclosable in any
manner whatever, or
"(c) to the extent not so returned or
made undisclosable, ensure that the con-
ditions of subparagraphs (A), (B), and (C)
of this paragraph continue to be met with
respect to such returns or return information,
except that the conditions of subparagraphs (A), (B), (C),
and (D) shall cease to apply with respect to any return or
return information if, and to the extent that, such return or
return information is disclosed in the course, or made a part
of the record, of any judicial or administrative proceeding de-
scribed in paragraph (h)(4) or (i)(1) of this section.
"(6) Regulations. The Secretary or his delegate is
authorized to prescribe such regulations as are necessary to
carry out the provisions of this section."
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SEC. 3. STATISTICAL PUBLICATIONS AND STUDIES
Section 6108 (relating to publication of statistics of income) is
amended to read as follows:
SEC. 6108. STATISTICAL PUBLICATIONS AND STUDIES
"(a) Publication or Other Disclosure of Statistics of Income. --
The Secretary or his delegate shall prepare and publish annually, and
may in his discretion publish or otherwise disclose at any time, sta-
tistics reasonably available with respect to the operations of the
internal revenue laws, including classifications of taxpayers and of
income, the amounts claimed or allowed as deductions, exemptions,
and credits, and any other facts deemed pertinent and valuable.
"(b) Special Statistical Studies. --The Secretary or his delegate
is authorized, upon written request by any person or persons, to
make special statistical studies and compilations of return informa-
tion (as defined in section 6103 (a) (2) (B)), and to furnish to such
person. or persons any data obtained from such special statistical
studies and compilations in statistical form. The cost of performing
such special statistical studies and compilations shall be paid by
such person or persons.
"(c) Other Publications. --The Secretary or his delegate may
prepare and publish such official rulings, procedures, and similar
information of the Internal Revenue Service as he, in his discretion,
considers necessary to promote uniform application of the tax hawseo
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"(d) Taxpayer Identity. --No publication or other disclosure of
statistics or other information required or authorized by subsection
(a), special statistical study authorized by subsection (b), or infor-
mation authorized by subsection (c) shall in any manner permit the
statistics, study, or any information so published, furnished, or
otherwise disclosed to be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer.
SEC. 4. INSPECTION OF CERTAIN RECORDS BY LOCAL OFFICERS.
Section 4102 (relating to inspection of records, returns, etc., by
local officers) is amended to read as follows:
"SEC. 4102. INSPECTION OF RECORDS BY LOCAL OFFICERS.
Under regulations prescribed by the Secretary or his delegate,
records required to be kept with respect to taxes under this part
shall be open to inspection by such officers of a State, the Common-
wealth of Puerto Rico, the District of Columbia, a possession of the
United States, or a political subdivision of any of the foregoing, as shall
be charged with the enforcement or collection of any tax on gasoline
or lubricating oils."
SEC. 5. PENALTY FOR UNAUTHORIZED DISCLOSURE OF
INFORMATION.
Section 7213 (relating to unauthorized disclosure of information)
is amended by striking out subsection (c), redesignating subsections
(d) and (e) as (c) and (d) respectively, and by amending subsection
(a) to read as follows:
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"(a) Returns and Return Information. --
"(1) Federal employees and other persons. --It shall
be unlawful for any officer or employee of the United States
or any person described in section 6103 (1) (or an officer or
employee of any such person), or any person who was
formerly any of the foregoing, to disclose or make known in
any manner whatever to any person, except as authorized
in this title, any return or return information (as defined in
section 6103(a)(2)); and it shall be unlawful for any person
to print or publish in any manner whatever not provided by
law any return or return information as so defined; and
any person committing an offense against the foregoing
provision shall be guilty of a misdemeanor and, upon con-
viction thereof, shall be fined not more than $1,000, or im-
prisoned not more than 1 year, or both, together with
the costs of prosecution, and if the offender be an officer
or employee of the United States, he shall be dismissed
from office or discharged from employment.
"(2) State employees. --Any officer, employee, or
agent, or former officer, employee, or agent, of any State
(as defined in section 6103 (a) (2)) who discloses or makes
:
FUND
known in any manner whatever to any person, except as
GERALD
authorized in this title, any return or return information
(as defined in section 6103 (a) (2)) acquired by him or
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another person under section 6103 (b) shall be guilty of a
misdemeanor, and upon conviction thereof, shall be fined
not more than $1, 000, or imprisoned not more than 1 year,
or both, together with the costs of prosecution.
SEC. 6. PROCESSING OF RETURNS, RETURN INFORMATION,
AND OTHER DOCUMENTS.
Section 7513 (relating to reproduction of returns and other docu-
ments) is amended to read as follows:
"SEC. 7513. MAKIN SPECIAL STATISTICAL STUDIES OR
PROCESSING OR REPRODUCING OF RETURNS,
RETURN INFORMATION, AND OTHER DOCUMENTS.
"(a) In General. --The Secretary or his delegate is authorized
to contract, in accordance with regulations to be prescribed by the
Secretary or his delegate, with any department, agency, or other
Executive establishment of the Federal Government, any State agency,
or any person for the purpose of making special statistical studies
(as defined in section 6108 (b)) or of processing or making repro-
ductions by any means whatever of any return or return information
(as defined in section 6103 (a) (2)), document, or other matter. For
purposes of this section, the term 'processing' includes services
involving system design; advice, maintenance, and training in con-
nection with such systems (and operation to the extent necessary or
desirable for such purposes); or other assistance in connection with
FORD is 076838 LIBRARY
such processing.
"(b) Regulations. The Secretary or his delegate is authorized
to prescribe regulations to provide such safeguards as in the opinion
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of the Secretary or his delegate are necessary or appropriate to protect
returns, return information, documents, or other matter (and repro-
ductions of any of the foregoing in any form whatever) described in
subsection (a) against any unauthorized use or any unauthorized
disclosure.
"(c) Penalty. --For penalty for unauthorized use or unauthorized
disclosure of information contained in returns, return information,
documents, or other matter, see section 7213.
SEC. 7. TECHNICAL AND CONFORMING AMENDMENTS.
(1) Section 6106 (relating to publicity of unemployment tax
returns) is hereby repealed.
(2) Section 6110 (relating to cross-references) is amended by
striking out paragraphs (2), (3), (4), and (5), and by inserting in lieu
thereof "(2) For inspection of certain records concerning gasoline
or lubricating oils by local officers, see section 4102. =
(3) Section 6323 (relating to validity and priority of tax liens
against certain persons) is amended by striking out paragraph (3)
of subsection (i).
(4) Subséction (e) of section 7213 (relating to cross-references)
3.
FORD
is amended by striking out paragraph (1) and inserting in lieu thereof
"(1) Penalties for disclosure of information by preparers of returns. --
LIBRARY
For penalty for disclosure or use of information by preparers of re-
turns, see section 7216.
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(5) Section 7515 (relating to special statistical studies and
compilations and other services on request) is hereby repealed.
(6) Subsection (c) of section 7809 (relating to deposit of col-
lections) is amended by striking out in paragraph (1) the words
"section 7515 (relating to special statistical studies and compilations
for other services on request;" and inserting in lieu thereof "section
6103 (p) (relating to furnishing of copies of returns or of return in-
formation) and section 6108 (b) (relating to special statistical studies
and compilations;"
Technical changes to change table of contents to be added.
FORD & 03RALD LIBRARY
PROPOSAL TO AMEND SECTION 6103 AND
RELATED CODE SECTIONS HAVING TO DO
WITH DISCLOSURES OF FEDERAL TAX
RETURNS AND RETURN INFORMATION
As a general rule, section 6103(a) of the Code presently
makes tax returns a matter of public record but authorizes
inspection only upon order of the President and under regu-
lations based upon his Executive Orders. Section 6103 (b)
specifically authorizes disclosure of income tax returns to
State and local tax authorities upon request by a State
governor for purposes of State or local tax administration.
Section 6103 (c) authorizes inspection of corporate income
tax returns by shareholders owning 1 percent or more of the
corporate taxpayer's stock. Section 6103(d) authorizes
inspection of returns or return information by the tax
writing committees of Congress and by any select committee
authorized to inspect returns or return information by
Congressional resolution. Finally, section 6103 (f) compels
the Secretary or his delegate to tell any inquirer whether
or not a person has filed an income tax return for a particular
year.
Section 7213(a) imposes criminal penalties on any Federal
officer or employee who makes an unlawful disclosure of income
tax return information and on any person who unlawfully prints
or publishes income tax return information. Section 7213(b)
imposes corresponding penalties on officers, employees, or
agents of a State or political subdivisiom of a State who un-
lawfully disclose such information.
The maximum effort has been made under the existing
statute and regulations to assure the confidentiality of tax
returns and tax return information consistent with effective
Federal tax administration and the legitimate needs of other
Federal agencies for tax information for Law enforcement and
statistical purposes and of the States for purposes of their
own tax administration. Nevertheless, the existing statutory
and regulatory apparatus does not adequately inform the American
taxpayer as to who will have access to his tax return and tax
return information and for what purposes. Accordingly
proposed revision of section 6103 reflects a complete
examination of the present rules and is based on the funda-
mental principle that tax returns and return information
LIBRARY
should be held confidential and private exicept as otherwise
clearly provided by statute.
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Set out below is a description of existing law and
practice under sections 6103 and 7213 in major areas and
an explanation of how this proposal would affect the pres-
ent situation.
1. Definition of Tax Return and Return Information
Existing regulations define "return" to include in-
formation returns, schedules, lists, and other written
statements which are designed to be a supplement to a return
or a part of a return. The term is also defined to include
[o] ther records, reports, information received orally or
in writing, factual data, documents, papers, abstracts,
memoranda, or other evidence
relating to [a return].
Because disclosure standards properly applicable to a
return itself day; in varying circumstances, be different
from those applicable to Internal Revenue Service files
relating to a return and to information in Service files
relating to a taxpayer's past, present, or future tax lia-
bility, the legislative proposal makes a definitional dis-
tinction between a tax return and tax return information.
The proposed def nition of "retum" is not significantly
different from the basic definition of "return" in existing
regulations. The proposed new definition of "return infor-
mation," however, is considerably more specific and detailed
than the existing supplemental definition of "return" quoted
above from existing regulations. The proposed new definition
of "return information" is intended to cover information of
any kind filed with, or compiled by, the Service which relates
to a taxpayer's past, present, or future tax liability. The
new definition would specifically cover private letter rulings
issued pursuant to a request made before enactment of this
legislative proposal and all requests for technical advice
made by Service personnel to the National Office, regardless
of when made. Future private ruling letters generally would
be confidential only to the extent permitted by the Freedom
of Information Act or other Federal legislation. Also pro-
tected is tax information furnished to the Secretary or FO his
by him as confidential pursuant to regulations.
delegate in connection with tax administration and accepted ELIBRANT
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2. Federal Tax Law Administration
Under existing regulations, tax returns and return
information are freely available to officers and employees
of the Treasury Department whose official duties require
such access. By the same token, tax returns and return in-
formation are open to Justice Department attorneys and U.S.
attorneys where necessary in the performance of official
duties relating to Federal tax administration.
While the existing rule applicable to Treasury Depart-
ment officers and employees has been retained, the rule
applicable to Justice Department attorneys and U.S. attorneys
has been clariried. The use to which tax returns and return
information are appropriately put by these attorneys in a tax
context is in preparation for tax litigation or in an investi-
gation pointing toward tax litigation. As will be described
below, the proposal restricts actual disclosure in an admin-
istrative or judicial tax proceeding of a third party's return
or return information as to a third party. Accordingly--and
logically--access by Justice Department attorneys and U.S.
attorneys to returns and return information in preparation
for tax litigation should be limited in a similar fashion.
These attorneys would have access, of course, to returns of,
and return information regarding, a taxpayer who is or may
be a party to litigation. In the case of a third party,
returns and return information would be made available only
if the third party consents or if such returns and return
information have or may have a bearing on the outcome of the
possible or actual litigation for particular reasons specified
by the statute.
3. Federal Non-Tax Law Administration
By regulation based upon an Executive Order, any Federal
department or agency may, upon request and subject to the
approval of the Secretary or his delegate, inspect tax returns
and return information in connection with a matter officially
before that department or agency.
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This access to tax returns and return information has
resulted in extensive disclosure of tax returns and return
information for use in a variety of Federal activities.
While access to tax returns is undoubtedly useful, and per-
haps essential, to the proper functioning of some Federal
departments and agencies, the volume of data and other
information obtainable has reached such proportions as to
prompt legitimate concern over the ability to maintain the
appropriate degree of confidentiality.
Because of the obviously demonstrable need of the Social
and Economic Statistics Administration for returns and return
information for research and for statistical purposes, the
legislative proposal would make returns and return information
available for such purposes upon request by the Secretary of
Commerce. No statistical study could be made public, however,
if it in any way identified a particular taxpayer or could be
so used. Likewise, because of the close relationship between
the collection of Social Security taxes and administration of
the Social Security Act by the Department of Health, Education,
and Welfare, the legislative proposal would continue existing
HEW access to returns and return information for this purpose;
and access would also be extended to the Labor Department and
the Pension Benefit Guaranty Corporation for purposes of admin-
istering the Employee Retirement Income Security Act.
In the case of other Federal departments and agencies, acce
to returns and return information in something other than statis
tical form would be limited to returns and return information
which, for particular reasons specified by statute, have or may
have a bearing upon the outcome of an administrative or judicial
proceeding (or investigation leading to such a proceeding) in
a matter relating to the enforcement of a Federal statute. Be-
cause the actual use of returns and return information in such E
proceeding is restricted as described below, the imitial access
by the Federal department or agency for purposes of preparing
for a proceeding is restricted in a similar fashion. This
pattern thus corresponds generally to that proposed for dis-
closure to Justice Department attorneys and U.S. attorneys in
tax matters which has just been described. It is further pro-
vided that the Secretary or his delegate may withhold requested
returns and return information to the extent that he finds that
disclosure would seriously impair Federal tax law administr tior
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FLIBRARY
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In the event that such a determination were made, the proposed
statute calls for a consultation on the matter between the hea
of the requesting Federal department or agency and the Secretar
of the Treasury. If, after such consultation, the issue of
disclosure has not been resolved, a final determination would
be made by the President or his delegate.
Because a number of Federal departments and agencies may
well need tax return information in statistical form for variou
purposes, new section 6108 would authorize the Commissioner to
provide statistical studies upon request, provided such statis-
tics did not reveal, directly or indirectly, any taxpayer's
identity. Further, a proposed amendment to section 7513 would
authorize the Commissioner to contract with any Federal agency
including the requesting agency, to prepare the statistical
study if the Internal Revenue Service were unable to do the
work itself.
4. State and Local Tax Law Administration
Under section 6103(b) of existing law, income tax returns
and income tax return information are, upon the written request
of a State governor, open to inspection by any official, body,
or commission lawfully charged with the administration of
State tax laws for the purpose of such administration. Further
section 6103(b) authorizes the governor to direct that tax
returns and return information be furnished to local taxing
authorities for use in administering local tax'laws.
Tax returns and return information which are supplied to
tax officials at, say, a county or city level may not be in-
variably subject to appropriate safeguards on confidentiality
which the Service has the right to expect and a duty to protect
Likewise, political considerations may produce unwarranted
interest in tax information at even higher levels for non-tax
purposes. The legislative proposal would limit access to tax
returns and return information to a State body, agency, or
commission lawfully charged with State tax law administration
and only for purposes of such administration. It is further
provided that returns and return information would be available
to State tax officials only to the extent that the Secretary
or his delegate does not determine that disclosure would seriou
impair Federal tax law administration.
GERALD
LIBRARY
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5. Judicial and Administrative Tax Proceedings
Under existing regulations, tax returns and return infor-
mation are available upon request by attorneys of the Justice
Department and U.S. attorneys for use in any Federal or State
tax litigation if the Federal Government is interested in the
result. This broad right of access can result in seriously
breaching the confidentiality of tax returns and return in-
formation relating to taxpayers who are not parties to the
litigation. This can come about through the introduction in
evidence of third party returns and return information where
such returns or information may be considered relevant in some
way to the outcome of the litigation.
For this reason, the legislative proposal imposes strict
conditions upon the use of third party returns and return in-
formation in Federal tax litigation where the third party does
not consent to such use. Essentially, the proposal would re-
strict the use of third party returns and return information
to those instances where the return or return information has
or may have a bearing on the outcome of the litigation for
reasons specified by the proposal, and then only to the extent
of such bearing. Additionally, third party returns and return
information (a) could be used to impeach the testimony of the
third party if he were a witness in the proceeding or to impeaci
the testimony of any other witness regarding a transaction with
the third party and (b) could be disclosed to the extent require
by the Constitution or, in a criminal proceeding, 18 U.S.C. 3500
or Rule 16 of the Federal Rules of Criminal Procedure. Even if
a third party's return and return information could otherwise
be disclosed by application of these rules, they could not be
used if the Secretary or his delegate determined that disclosure
would seriously impair Federal tax law administration. Once
again, any such determination would be subject to the procedure
described above calling for consultation between the Attorney
General and the Secretary of the Treasury with a final deter-
mination to be made, if necessary, by the President or his deleg
6. Judicial and Administrative Non-Tax Proceedings
Here again, present regulations effectively provide that
the Department of Justice may, upon request, use third party
- 7 -
returns and return information in non-tax litigation where
the Federal Government is interested in the result.
The necessity for protecting any taxpayer's right to
privacy with respect to his tax affairs is even more acute
in this area than in that of tax litigation since Federal
tax administration is in no way involved in the litigation.
Accordingly, the proposal would limit the use of any tax-
payer's returns and return information in non-tax judicial
and administrative proceedings to a Federal proceeding to
which the United States is a party and then only if the tax-
payer himself is a party to the proceeding or consents to
the use or if the information has a bearing upon the outcome
of the proceeding because of a transactional relationship
between the taxpayer and a party to the proceeding. As in
tax litigation, a third party's return or return information
could also be used in the litigation under certain circum-
stances to impeach a witness and to the extent required by
the Constitution, 18 U.S.C. 3500, or Rule 16 of the Federal
Rules of Criminal Procedure. Once again, the returns and
return information could be withheld, subject to the pro-
cedure outlined above, upon a finding by the Secretary or
his delegate that Federal tax law administration would be
seriously impaired.
7. Prospective Jurors and Possible Criminal Activities
Under existing regulations, attorneys of the' Department
of Justice cannot have access to tax returns for purposes of
examining prospective jurors but are authorized to deter-
mine from the Internal Revenue Service whether or not a
prospective juror has been under tax investigation. The
statutory proposal would broaden these rules to permit use
of return information by these attorneys to impeach a pro-
spective juror in Federal litigation, while retaining the
present rule applicable to inquiries regarding tax investi-
gations of prospective jurors.
In the interest of serving the basic ends of criminal
gate to notify the Attorney General as to possible viola dales
justice, the proposal would direct the Secretary or his
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of Federal criminal laws which come to his attention as the
result of his own access to return information. The proposal
would also give the Secretary or his delegate discretionary
authority to so notify State or local law enforcement agencies
of a possible violation of State criminal laws.
8. Strike Force Participation
The proposal would specifically authorize disclosure of
certain return information by Treasury Department employees
who participate jointly with another Federal agency in an
enforcement activity relating to Federal criminal laws. This
proposal is principally directed to Service participation
with the Department of Justice in the Federal Organized Crime
Strike Force program. The statute would only permit disclosure
by participating Service employees to other Federal employees
involved in the enforcement program of return information re-
ceived or developed from sources other than the taxpayer him-
self and then only to the extent required by the investigation.
9. Congressional Committees
Section 6103 (d) authorizes unlimited disclosure of returns
and return information to the three tax writing committees of
Congress and to any select committee authorized by Congressional
resolution to inspect returns and return information. Returns
and return information may be furnished to any such committee
sitting in executive session. Numerous Congressional committees
other than those referred to in section 6103 (d) have traditionall
sought and obtained returns and return information through
specific Executive Orders.
The legislative proposal would tighten existing law in
some respects and broaden it in others. The three tax writing
committees of Congress would continue to have access to any
tax returns and return information upon request, and this right
would be specifically extended to the Chief of Staff of the
Joint Committee on Internal Revenue Taxation. Any other
Congressional committee's access to tax returns and return
LIBRARY GERALD R. FORD
- 9 -
information, however, would have to be by way of a resolution
of the appropriate house of Congress. Further, returns and
return information furnished to any Congressional committee
would have to be furnished in closed executive session.
10. The President
Since tax returns and return information are presently
disclosable to the extent authorized by the President, it
stands to reason that he now has the right to inspect such
returns and return information as he may determine. Because
the proposal removes Presidential discretion in the disclosure
of tax returns and return information, it grants to him specific
authority to see returns and return information pursuant to
Executive Order and grants to him the further authority to
designate in his Executive Order an employee or employees of
the White House Office to receive the returns or return in-
formation on his behalf.
11. Persons With a Material Interest
Section 6103 (c) authorizes the inspection of a corporation's
income tax returns by any holder of 1% or more of the corpo-
ration's stock. In an attempt to head off possible mischief,
the regulations deny this right to a shareholder who acquired
his stock interest for that purpose. Income, estate, gift,
unemployment, and certain excise tax returns are presently
open to the filing taxpayer, the beneficiary of a trust, a
trustee in bankruptcy, and a member of a partnership. Income
tax returns of a deceased taxpayer are also open to the repre-
sentative of his estate and, along with estate and gift tax
returns, to certain other persons upon a satisfactory showing
of a material interest.
The proposal deletes the "1% stockholder" rule of section
6103 (c) because the rule encourages inherently improper and
severely damaging disclosures and because SEC rules now require
much of the information contained in many corporate returns to
be made public. The regulatory rules regarding disclosure to
persons with a material interest have been largely retained
- 10 -
but tightened to prohibit disclosure of tax return information
where disclosure would seriously impair Federal tax law
administration.
12. Contractors
Under the authority of section 7513, the Secretary or
his delegate may contract for the photographic reproduction
of tax returns and return information *and disclosure is, of
course, authorized for this purpose. At the same time, dis-
closure must necessarily be made to certain other contractors
and their employees who furnish property and services in con-
nection with the general administration of the tax laws by
the Treasury Department and the Internal Revenue Service.
The legislative proposal deals with this problem under
current law by specifically authorizing the disclosure of
tax returns and return information to any person to the ex-
tent necessary in, or to facilitate, the contractual pro-
curement of property or services by the Treasury Department
or the Service for tax administration purposes. At the same
time, however, the proposal would amend section 7213 to extend
to these persons the criminal penalties provided for unauthorized
disclosure.
13. Misstatements of Fact
Existing law does not provide clear authority permitting
the Secretary or his delegate to disclose return information
with respect to a particular taxpayer in order to correct a
misstatement of fact published or disclosed with respect to
that taxpayer's return or his dealing with the Service. The
proposal would permit the Secretary or his delegate to disclose
tax return information, or any other information, with respect
to that taxpayer under these circumstances to the extent
necessary to correct his public misstatement in the interests
of Federal tax administration.
=
FOR
14. Tax Checks
Although there is no specific authorizing provision under LIBRA
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existing law, tax check information on prospective appointees
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to, and employees of, the Federal Government is presently
being furnished upon request. Occasionally, such informa-
tion is also furnished to a State Government in connection
with a prospective appointee to State office.
The legislative proposal restricts tax checks to
prospective appointees of the Executive or Judicial branch
of the Federal Government, and then only upon written request
of the White House, a cabinet officer, or the head of a
Federal establishment. The information to be disclosed in
a requested tax check is then limited to whether the indi-
vidual has filed income tax returns for the last 3 years,
has failed in the current year or preceding 3 years to pay
any tax within 10 days after notice and demand or has been
assessed a negligence penalty during this period, has been
under any criminal tax investigation and the result of any
such investigation, and has been assessed a civil penalty
for fraud or negligence.
15. Taxes Imposed by Subtitle E
Existing law affords no specific statutory protection to
returns and return info: mation relating to alcohol, tobacco,
and firearms taxes imposed by subtitle E of the Internal
Revenue Code. In connection with its own law enforcement
programs, the Department of Justice has traditionally had
access to such returns and return information. Accordingly,
the proposal would grant specific statutory access to these
returns and return information by a Federal officer or em-
ployee whose official duties require such access.
16. Waivers of Confidentiality
No authority presently exists which would permit the
Secretary or his delegate to disclose returns or return in-
formation with respect to a taxpayer to someone to whom the
taxpayer himself wanted his return or return information dis-
closed. The legislative proposal would permit disclosure in
the discretion of the Secretary or his delegate if requested
- 12 -
by the taxpayer involved but then only to the extent that
such disclosure would not seriously impair Federal tax law
administration.
17. Section 6103 (f)
The required disclosure to any person of information as
to whether another taxpayer has filed an income tax return
for a particular year is plainly contrary to the most basic
principle of taxpayer privacy. For this reason, the proposal
would delete present section 6103 (f) of the Code.
18. Judicial Review
The proposal provides that the exclusive remedy for an
alleged violation of section 6103 shall be a proceeding under
section 7213. Judicial review of any determination permitted
or provided by statute to disclose or not to disclose a return
or return information is thus limited to a proceeding under
section 7213.
19. Penalties for Unauthorized Disclosure
Section 7213 makes it unlawful for any Federal or State
official or employee to make a disclosure of income tax return
information which the Code does not authorize and makes it
unlawful for any person to print or publish any such infor-
mation except as authorized by the Code.
The legislative proposal expands the scope of section
7213 in three significant respects. First, section 7213 would
apply to unauthorized disclosure of any tax returns or return
information. Second, the criminal sanctions are extended to
former officials or employees of the Federal or a State Govern-
ment. Third, the criminal sanctions are extended to private
contractors and their officers and employees (or former
officers and employees) who make unauthorized disclosure
of returns and return information to which they have been
given statutory access.
:
GERALD
FORD
FOR IMMEDIATE RELEASE
September 20, 1974
Office of the White House Press Secretary
THE WHITE HOUSE
EXECUTIVE ORDER
INSPECTION BY PRESIDENT AND CERTAIN DESIGNATED
EMPLOYEES OF THE WHITE HOUSE OFFICE OF TAX
RETURNS MADE UNDER THE
INTERNAL REVENUE CODE OF 1954
By virtue of the authority vested in me as President
of the United States, and in the interest of protecting
the right of taxpayers to privacy and confidentiality
regarding their tax affairs consistent with proper internal
management of the Government, and in the further interest
of maintaining the integrity of the self-assessment system
of Federal taxation, it is hereby ordered that any return,
as defined in Section 301.6103(a) of the Treasury
Regulations on Procedure and Administration (26 CFR Part 301)
as amended from time to time, made by a taxpayer in respect
of any tax described in Section 301.6103 (a)-1(a) (2) of such
regulations shall be delivered to or open to inspection by
the President only upon written request signed by the
President personally.
Any such request for delivery or inspection shall be
addressed to the Secretary of the Treasury or his delegate
and shall state: (i) the name and address of the taxpayer
whose return is to be inspected, (11) the kind of return
or returns which are to be inspected, and (111) the taxable
period or periods covered by such return or returns.
In any such request for delivery or inspection, the
President may designate by name an employee or employees
of the White House Office who are authorized on behalf of the
President to receive any such return or make such inspection,
provided that the President will not so designate an employee
unless such employee is the holder of a Presidential
commission whose annual rate of basic pay equals or
exceeds the annual rate of basic pay prescribed by
5 U.S.C. 5316. No disclosure of such return, or any
data contained therein or derived therefrom shall be
made by such employee except to the President, without
the written direction of the President.
All persons obtaining access to such return, or any
data contained therein or derived therefrom shall in all
respects be subject to the provisions of 26 U.S.C. 6103,
as amended.
GERALD R. FORD
THE WHITE HOUSE,
September 20, 1974
#
#
#
#
93D CONGRESS
2D SESSION
S. 3982
IN THE SENATE OF THE UNITED STATES
SEPTEMBER 11, 1974
Mr. WEICKER introduced the following bill; which was read twice and referred
to the Committee on Finance
A
BILL
To amend the Internal Revenue Code of 1954 to restrict the
authority for inspection of tax returns and the disclosure of
information contained therein, and for other purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. LIMITATIONS ON INSPECTION OF RETURNS
4
AND DISCLOSURE OF INFORMATION.
5
(a) Section 6103 of the Internal Revenue Code of 1954
6 (relating to publicity of returns, etc.) is amended to read as
7 follows:
S "SEC. 6103. CONFIDENTIALITY OF RETURNS.
:
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9
(a) PROHIBITION ON INSPECTION AND DISCLO-
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10 SURE.-All returns made with respect to the taxes imposed
II
2
1 by this title are confidential records. Except as provided in
2 this title-
3
'(1) no such return shall be open to inspection,
4
and
5
"(2) no information contained in any such return
6
shall be disclosed.
7 Paragraph (2) shall not preclude the publication by the
8 Commissioner of statistics derived from such returns, except
9 that no such publication shall disclose the identity of any
10 taxpayer or of any return.
11
' (b) DEFINITION OF RETURN.-For purposes of this
12 section, the term 'return' means any form or other docu-
13 ment, prepared by or on behalf of a taxpayer and filed under
14 compulsion of law, containing information necessary to de-
15 termine tax liability under this title.
16
(c) AUTHORIZED INSPECTIONS.-Returns of the taxes
17 imposed by this title shall be open to inspection, in such
18 manner, at such times and places, and subject to such con-
19 ditions consistent with the provisions of subsection (a) as
20 the Commissioner shall prescribe by regulations, by the
21 following persons:
22
"(1) The taxpayer by or for whom a return was
23
made or his authorized representative.
24
"(2) Officers and employees of the Internal Reve-
&
FORD
25
nue Service, the Department of the Treasury, and, with
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3
1
respect to matters referred to the Department of Justice
2
by the Commissioner, the Department of Justice, in each
3
case solely for purposes of the administration and en-
4
forcement of this title.
5
" (3) Officers and employees of Department of
6
Justice, solely for purposes of the administration and
7
enforcement of this title (other than matters referred
8
to the Department of Justice by the Commissioner),
9
and only upon the written request of the Attorney Gen-
10
eral of the United States specifically naming the tax-
11
payer whose return is to be inspected.
12
" (4) Any official, body, or commission, lawfully
13
charged with the administration of any State tax law, if
14
the inspection is for the purpose of such administration or
15
for the purpose of obtaining information to be furnished
16
to local taxing authorities as provided in this para-
17
graph. The inspection shall be permitted only upon
18
written request of the principal tax official of such State,
19
designating the representative of such official, body, or
20
commission to make the inspection on behalf of such offi-
21
cial, body, or commission. Any information thus secured
22
by any official, body, or commission of any State may be
23
used solely for the administration of the tax laws of such
24
State, except that upon written request of the principal
25
tax official of such State any such information may be
4
1
furnished to any official, body, or commission of any
2
political subdivision of such State, lawfully charged with
3
the administration of the tax laws of such political sub-
4
division, but may be furnished only for the sole pur-
5
pose of, and may be used only for, the administration of
6
such laws.
7
(5) The President of the United States, upon his
8
written request specifically naming the taxpayer whose
9
return is to be inspected, provided that the inspection of
10
such return is necessary in the performance of his official
11
duties.
12 The Commissioner shall, within thirty days after the close of
13 each calendar quarter, submit a report to the Joint Commit-
14 tee on Internal Revenue Taxation listing the returns fur-
15 nished for inspection during that quarter under paragraphs
15 (3), (4), and (5), the date on which the request for in-
17 spection of each such return was received, and, in the case of
18 returns furnished under paragraph (4), the name and posi-
19 tion of the individual making such request. The Joint Com-
20 mittee may make public such portions of such reports, or
21 information derived therefrom, as it deems advisable.
22
" (d) JOINT COMMITTEE ON INTERNAL REVENUE
23 TAXATION.-The Joint Committee on Internal Revenue
is
24 Taxation shall have the right to obtain data and to inspect
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25 returns and to submit any relevant or useful information
LIBRARY
5
1 thus obtained to the Senate, the House of Representatives,
2 or any committee of the Senate or the House, except that
3 information obtained from such returns may be disclosed in
4 statistical form only without disclosing the identity of any
5 taxpayer or of any return. Any decision of the Joint Com-
6 mittee to request any data or to inspect any return shall be
7 determined by a majority vote of the members present and
8 voting, a quorum being present.
9
(e) DISCLOSURE OF CERTAIN INFORMATION.-
10
(1) SOCIAL SECURITY AND RAILROAD RETIRE-
11
MENT TAXES.-The Commissioner shall furnish to the
12
Social Security Administration and the Railroad Retire-
13
ment Board information derived from returns of the taxes
14
imposed by chapters 2, 21, and 22.
15
'(2) FEDERAL AGENCIES AND STATE TAX AU-
16
THORITIES.-Upon the request of the head of any de-
17
partment or agency of the Federal Government or of
18
the principal tax official of a State, the Commissioner is
19
authorized to furnish statistical information derived from
20
returns to such department or agency or such State,
21
except that no information SO furnished shall disclose the
22
identity of any taxpayer or of any return. Any infor-
23
mation so furnished shall be compiled by employees of
24
the IRS and the Commissioner may prescribe a reason-
25
able fee for furnishing such information.
6
1
" (f) FURNISHING OF COPIES.-Whenever a return
2 is open to the inspection of any person, a certified copy
3
thereof shall, upon request, be furnished to such person under
4 regulations prescribed by the Commissioner who may also
5 prescribe a reasonable fee for furnishing such copy.
6
' (g) DISCLOSURE OF INFORMATION AS TO PERSONS
7 FILING INCOME TAX RETURNS.-The Commissioner shall,
8 upon inquiry as to whether any person has filed an income
9 tax return in a designated internal revenue district for a par-
10 ticular taxable year, furnish to the inquirer, in such manner
11 the Commissioner may determine, information showing that
12 such person has, or has not, filed an income tax return in
13 such district for such taxable year.".
14
(b) The table of sections for subchapter B of chapter
15 61 of such Code is amended by striking out the item relating
16 to section 6103 and inserting in lieu thereof the following:
"Sec. 6103. Confidentiality of returns."
17 SEC. 2. UNEMPLOYMENT TAX RETURNS.
18
(a) Section 6106 of the Internal Revenue Code of 1954
19 (relating to publicity of unemployment tax returns) is
20 repealed.
21
(b) The table of sections for subchapter B of chapter 61
22 of such Code is amended by striking out the item relating to
23 section 6106.
FORD
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7
1 SEC. 3. UNAUTHORIZED DISCLOSURE OF INFORMATION.
2
(a) Section 7213 of the Internal Revenue Code of 1954
3 (relating to penalties for unauthorized disclosure of informa-
4 tion) is amended-
5
(1) by striking out "misdemeanor" each place it
6
appears in paragraphs (1), (2), and (3) of subsection
7
(a) and inserting in lieu thereof "felony";
8
(2) by striking out "$1,000" each place it appears
9
in such paragraphs and inserting in lieu thereof
10
"$10,000";
11
(3) by striking out "1. year" each place it appears
12
in such paragraphs and inserting in lieu thereof "5
13
years"; and
14
(4) by redesignating subsection (e) as (f) and
15
inserting after subsection (d) the following new sub-
16
section:
17
(e) UNAUTHORIZED RECEIPT.-Any person who
18 knowingly receives any information or material which is dis-
19 closed or furnished in violation of the provisions of subsection
20 (a) shall be guilty of a felony and, upon conviction thereof,
21 shall be fined not more than $10,000, or imprisoned for not
22 more than 5 years, or both, together with the costs of prose-
23 cution.".
8
1 SEC. 4. EFFECTIVE DATES.
2
The amendments and repeal made by sections 1 and 2
3 shall take effect on the first day of the third month which
4 begins after the date of the enactment of this Act. The
5 amendments made by section 3 shall take effect on the date
6 of the enactment of this Act.
Read twice and referred to the Committee on Finance
contained therein, and for other purposes.
returns and the disclosure of information
To amend the Internal Revenue Code of 1954 to
2D SESSION
93D CONGRESS
SEPTEMBER 11, 1974
By Mr. WEICKER
restrict the authority for inspection of tax
A BILL
S. 3982
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