# Publication 4639 Catalog Number 50891P (Rev. 10-2012) Department of the Treasury Internal Revenue Service www.irs.gov

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Chief Counsel

PROCEDURE &
ADMINISTRATION

Publication 4639 Catalog Number 50891P (Rev. 10-2012) Department of the Treasury Internal Revenue Service www.irs.gov

TABLE OF CONTENTS
To the Reader:................................................................................................................ iii
CHAPTER 1 ................................................................................................................ 1-1
PART I: HISTORY AND OVERVIEW – I.R.C. § 6103 ........................................... 1-1
PART II: CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION AND
DISCLOSURE I.R.C. § 7431 ................................................................ 1-19
PART III: CRIMINAL LIABILITY FOR WILLFUL UNAUTHORIZED
INSPECTION AND DISCLOSURE....................................................... 1-48
CHAPTER 2 ................................................................................................................ 2-1
PART I: DEFINITIONS .......................................................................................... 2-1
PART II: DISCLOSURES TO PERSONS WITH A MATERIAL
INTEREST I.R.C. § 6103(e) ................................................................... 2-9
PART III: DISCLOSURES PURSUANT TO TAXPAYER'S CONSENT
I.R.C. § 6103(c) .................................................................................... 2-19
PART IV: DISCLOSURE OF INFORMATION AVAILABLE IN THE
PUBLIC RECORD................................................................................ 2-28
PART V: DISCLOSURES TO COMMITTEES OF CONGRESS
I.R.C. § 6103(f)..................................................................................... 2-33
PART VI: DISCLOSURES TO PRESIDENT AND CERTAIN
OTHER PERSONS I.R.C. § 6103(g) .................................................... 2-35
CHAPTER 3 TAX ADMINISTRATION DISCLOSURES I.R.C. § 6103(h) .................... 3-1
CHAPTER 4 TAX ADMINISTRATION INVESTIGATIVE DISCLOSURES AND
DISCLOSURES TO CONTRACTORS I.R.C. § 6103(k)(6) AND (n) ................. 4-1
CHAPTER 5 DISCLOSURES FOR NONTAX CRIMINAL PURPOSES
I.R.C. § 6103(i).................................................................................................. 5-1
CHAPTER 6 DISCLOSURE OF RETURNS AND RETURN INFORMATION IN
BANKRUPTCY CASES .................................................................................... 6-1
CHAPTER 7 BANK SECRECY ACT, MONEY LAUNDERING, FORFEITURE
AND RETURN INFORMATION......................................................................... 7-1
CHAPTER 8 FEDERAL/STATE EXCHANGE PROGRAM I.R.C. ' 6103(d)
AND (p)(8)......................................................................................................... 8-1
CHAPTER 9 FREEDOM OF INFORMATION ACT ..................................................... 9-1

i

CHAPTER 10 LITIGATION PRIVILEGES ................................................................. 10-1
CHAPTER 11 ............................................................................................................ 11-1
PART I: PERSONNEL AND CLAIMANT REPRESENTATIVE MATTERS
I.R.C. § 6103(l)(4)................................................................................. 11-1
PART II: PRIVACY ACT ...................................................................................... 11-5
CHAPTER 12 TESTIMONY AUTHORIZATION ........................................................ 12-1
CHAPTER 13 ............................................................................................................ 13-1
PART I: PUBLIC INSPECTION OF WRITTEN DETERMINATIONS
I.R.C. § 6110 ........................................................................................ 13-1
PART II: CONFIDENTIALITY OF INFORMATION ARISING UNDER
TREATY OBLIGATIONS – I.R.C. § 6105 ........................................... 13-13
PART III: PUBLICITY OF INFORMATION REQUIRED FROM
CERTAIN EXEMPT ORGANIZATIONS – I.R.C. § 6104 .................... 13-16
CHAPTER 14 DISCLOSURE GUIDE FOR TAX-EXEMPT
BOND EXAMINATIONS.................................................................................. 14-1
CHAPTER 15 APPENDICES .................................................................................... 15-1
APPENDIX-1 CONSENT TO DISCLOSURE OF TAX INFORMATION .............. 15-2
APPENDIX-2 CONSENT TO DISCLOSURE OF RETURN INFORMATION....... 15-4
APPENDIX-3 TESTIMONY REPORT AND AUTHORIZATION........................... 15-6
APPENDIX-4 POWER OF ATTORNEY AND DECLARATION OF
REPRESENTATIVE ............................................................................. 15-8
APPENDIX-5 TAX INFORMATION AUTHORIZATION..................................... 15-10
APPENDIX-6 TAX DISCLOSURES .................................................................. 15-14
APPENDIX-7 CURRENT IRS EMPLOYEE TESTIMONY AUTHORIZATION ... 15-16
APPENDIX-8 FORMER IRS EMPLOYEE TESTIMONY AUTHORIZATION ..... 15-18
APPENDIX-9 BOND EXAMINATION - CONSENTS ......................................... 15-20
APPENDIX-10 LINKS........................................................................................ 15-22

ii

To the Reader:
This reference guide updates and replaces the Disclosure Litigation and Reference
Book last revised in 2011. It covers the primary disclosure laws that affect the Internal
Revenue Service (I.R.C. §§ 6103 and 6110, the Freedom of Information Act (FOIA), and
the Privacy Act of 1974), related statutes, and testimony authorization procedures.
Together, these laws represent efforts by the Congress to strike a balance between a
citizen’s expectation of privacy and an open and effective government. Guidance on
legal matters concerning these disclosure laws is provided by the Office of the
Associate Chief Counsel (Procedure & Administration). This office is also responsible
for defending litigation filed pursuant to I.R.C. §§ 6103 and 6110, FOIA, and the Privacy
Act.
Electronic distribution of judicial opinions has provided wide access to decisions that the
issuing courts did not view as important or precedential. Although this guide cites to
"unpublished" cases by reference to the federal reporter’s table citation followed by an
applicable electronic or specialized reporter citation number, court rules often instruct
that decisions a court has affirmatively designated not to be published should not be
cited at all or only under severely limited circumstances. They are included in this guide
to elucidate the courts’ reasoning on the various legal issues outlined herein for which
there is a relatively sparse body of case law. Before you cite a decision that the
deciding court has labeled "unpublished" or "non-precedential" you should consult that
court's rules on this point. We have not cited to multiple reporters when there is more
than one source for an opinion, but the default preference for electronically available
opinions is Westlaw.
Obviously, correct legal advice concerning the matters addressed in this guide depends
upon the facts of each question. This guide was prepared for reference purposes only;
it may not be used or cited as authority for setting or sustaining a legal position.

iii

CHAPTER 1
PART I: HISTORY AND OVERVIEW – I.R.C. § 6103
I. HISTORY OF TAX CONFIDENTIALITY LAWS1
A. Introduction
Except for a few periods in our history, taxpayers’ tax information generally has
not been available to the public – disclosure has been restricted. Congress has
used two basic approaches in determining whether, and under what
circumstances, tax information could be disclosed. Under the first approach,
taken prior to 1977, tax information was considered a "public record," but was
only open to inspection under Treasury regulations approved by the President or
under presidential order. Under this scheme, the Executive Branch essentially
created all the rules regarding disclosure.
By the mid 1970s, there was increased congressional and public concern about
the widespread use of tax information by government agencies for purposes
unrelated to tax administration. This concern culminated with the enactment of
section 6103, passed as part of the Tax Reform Act of 1976. Pub. L. No. 94-455,
90 Stat. 1520 (1976) (Tax Reform Act codified at scattered sections of 7, 26, and
46 U.S.C.). There, Congress eliminated much of the executive discretion
concerning the disclosure of returns or return information. With this second
approach, Congress established a new statutory scheme under which returns
and return information are confidential and not subject to disclosure except to the
extent explicitly provided by the Internal Revenue Code. Although there have
been many amendments to the law since that time, the basic statutory scheme
established in 1976 remains in place today.
B. Publicity of Tax Returns
The history of tax information confidentiality may be traced to the Civil War
Income Tax Act of 1862,2 when tax information was posted on courthouse doors
1

Much of the information in this chapter was taken from Report on Administrative Procedures of the
Internal Revenue Service, S. Doc. No. 94-266, at 821-1028 (1975); HOWARD M. ZARITSKY, CONG.
RESEARCH SERV., 74- 211A, LEGISLATIVE HISTORY OF TAX RETURN CONFIDENTIALITY: SECTION 6103 OF
THE INTERNAL REVENUE CODE OF 1954 AND ITS PREDECESSORS (1974); Richard F. Janssen, Income
Tax Snooping Through History, W ALL ST. J., May 6, 1970, at 18; and Mitchell Rogovin, Privacy and
Income Tax Returns, W ASH. POST, Oct. 13, 1974, at C4.

2

Act of July 1, 1862, ch. 109, 12 Stat. 432, 437. Ambiguities in that provision regarding public
inspection led Congress, in 1864, to explicitly permit public inspection of the assessment list:
It shall be the duty of the assessor . . . to submit the proceedings of the assessors . . . and the
annual lists taken and returned as aforesaid, to the inspection of any and all persons who may
apply for that purpose. (continued on next page)

1-1

and sometimes published in newspapers to promote taxpayer surveillance of
neighbors. For the next 70 years, there was debate in Congress as to the effect
of public disclosure on the tax system and to societal interests in general.
1. 1866 - 1913
In 1866, Congress debated prohibiting publication of assessment lists in
the newspapers, but the proposal failed principally because many
congressmen believed that publication of the assessed tax would assist in
preventing tax fraud.
In 1870, the Commissioner prohibited newspaper publication of the annual
list of assessments, but the list itself remained available for public
inspection.3 The Revenue Act of 1870 confirmed this directive.4 Two
years later, in part because of problems stemming from publicity of tax
returns, the income tax law was allowed to expire. When the income tax
was reinstated by the Revenue Act of 1894, Congress affirmatively
prohibited both the printing and the publishing in any manner of any
income tax return unless otherwise provided by law, and provided criminal
sanctions for unlawful disclosure.5 In 1895, the Supreme Court declared
the income tax unconstitutional in Pollock v. Farmers’ Loan and Trust Co.,
157 U.S. 429 (1895). After this decision, according to one commentator,
the cause of confidentiality received its ultimate victory, the burning of all
tax returns.
It was not until the enactment of the Payne-Aldrich Tariff Act of 1909,6
which imposed a special excise tax on corporations, that the question of
tax return publicity was raised anew. Paragraph six of section 38 of that
Act seemed to provide that corporate returns were fully public, but
paragraph seven imposed a penalty for the disclosure of any information
obtained by a U.S. employee in the discharge of his duties.7 The
Act of June 30, 1864, ch. 173, 13 Stat. 218, 228.
3

Circular Letter to Assessors-Publication of the Annual list of Assessment on Income Returns to be
Discontinued, Internal Revenue Record and Customs Journal, Vol. XI, Number 15 (Apr. 5, 1870).

4

Act of July 14, 1870, ch. 255, 16 Stat. 256, 259.

5

Income Tax Act of August 15, 1894, ch. 349, 28 Stat. 509.

6

Act of August 5, 1909, 36 Stat. 11,116.

7

Section 38 of the legislation read, in part, as follows:
Sixth. When the assessment shall be made, as provided in this section, the returns,
together with any corrections thereof which may have been made by the Commissioner,
shall be filed in the office of the Commissioner of Internal Revenue and shall constitute
public records and be open to inspection as such.
Seventh. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or
employee of the United States to divulge or make known in any manner (continued on next page)

1-2

legislative history does little to illuminate these apparently conflicting
provisions. Since, however, the Payne-Aldrich legislation did not provide
any funds for the examination of returns filed pursuant to the Act, it
became necessary, in 1910, to appropriate them. During the debate on
the Appropriations Act of 1910, considerable light was shed upon the
congressional intention behind the 1909 legislation.
The prevailing opinion was that paragraph six of the 1909 legislation was
intended to make corporate tax returns "public records," that were open to
public inspection.8 Many believed that public inspection of corporate tax
returns would be of great assistance in the supervision and control of
corporate entities. There was considerable fear of the power of
corporations at that time.
The contrary minority view acknowledged that the 1909 legislation made
tax returns public documents. However, paragraph seven of the law made
it a criminal offense for any government officer or employee to release
material contained in these public documents without special instruction
from the President. If, the argument proceeded, the public access granted
by paragraph six had been entirely unfettered, paragraph seven would not
have imposed criminal sanctions for divulging information without the
President's consent. This illogical result was taken to mean that tax
returns had not been opened to indiscriminate public inspection but only to
persons having a proper interest in the returns.9
Although there was disagreement over what was intended by the 1909
legislation, it was universally conceded that it altogether failed to open
corporate returns to the public. Some blame this result on poor
draftsmanship. Others thought the failure lay in the lack of an
appropriation to provide clerks to do the publicizing. At any rate, a
majority did conclude that another approach was necessary. An
amendment to the provision in the 1910 Appropriations Act resulted.

whatever not provided by law to any person any information obtained by him in the discharge of
his official duty, or to divulge or make known in any manner not provided by law any document
received, evidence taken, or report made under this section except upon the special direction of
the President; and any offense against the foregoing provision shall be a misdemeanor and be
punished by a fine not exceeding one thousand dollars, or by imprisonment not exceeding one
year, or both, at the discretion of the court. (Emphasis added).
8

“The truth is, however, that the intention was to provide complete publicity of the returns made by
these corporations.” 45 CONG. REC. 4137 (1910) (Comments of Rep. Fitzgerald).

9

“It will be noted that the law does not provide the returns shall be subject to public inspection, but
that the returns shall become public records and open to inspection as such . . . the mere branding of
these instruments as public records did not carry with it the right of indiscriminate public inspection.”
45 CONG. REC. 4136 (1910) (Comments of Rep. Smith).

1-3

The 1910 legislation, which appropriated funds for the necessary
classifying, indexing, and processing of corporate returns, also stated:
[A]ny and all such returns shall be open to inspection only upon the
order of the President under rules and regulations to be prescribed
by the Secretary of the Treasury and approved by the President.10
The debate surrounding the 1910 Act plainly indicates that Congress
intended by the quoted provision to back away from the fully "public"
treatment of corporate returns. Some Congressmen argued for full
publicity, as opposed to publicity only at the whim of the Administration, as
provided by the bill. The majority, however, chose the approach that
returns would be made public only on the order of the President.
Left standing from the 1909 Act was the notion that returns constitute
"public records" open to public inspection. The 1910 effort to revise
congressional intent merely added on the seemingly contradictory and
confusing concept that these "public" records would be available only
upon order of the President.
2. Income Tax Law of 1913
Even though the 1910 Act had two rather inconsistent threads, Congress
wove both of them into the Income Tax Law of 1913. In pertinent part, it
provided:
(G)(d) When the assessment shall be made, as provided in this
section, the returns, together with any corrections thereof which
may have been made by the Commissioner, shall be filed in the
office of the Commissioner of Internal Revenue and shall constitute
public records and be open to inspection as such: Provided, that
any and all such returns shall be open to inspection only upon the
order of the President, under rules and regulations to be prescribed
by the Secretary of the Treasury and approved by the President.11
The 1913 Congress thereby merged the mismatching philosophies from
the 1909 Act and the 1910 amendment. Although there was, through the
years, some change in language, the basic pattern adopted in 1913
remained part of the law until 1976.

10

Act of June 17, 1910, ch. 197, 36 Stat. 468, 494.

11

Income Tax Law of 1913, Pub. L. No. 63-13, II(G)(d), 28 Stat. 114, 72.

1-4

3. 1913 - 1976
The enactment of each revenue act subsequent to 1913 was, at least
through 1934, accompanied by debate on the question of whether
individual and corporate returns should be made fully public. Two main
arguments were made in favor of making tax returns public:
1. publicity in the affairs of businesses generally is appropriate and
would serve to end improper trade policies, business methods,
and conduct; and
2. publicity would assure fuller and more accurate reporting by
taxpayers.
The proponents of full disclosure obtained their fundamental philosophy
from a speech by former President Benjamin Harrison who, before the
Union League Club of Chicago in 1898, stated:
Each citizen has a personal interest, a pecuniary interest in the tax
return of his neighbor. We are members of a great partnership, and
it is the right of each to know what every other member is
contributing to the partnership and what he is taking from it.12
The other point of view, consistently taken over the years by the
Department of the Treasury, opposed the publicity of tax information.
Secretary of the Treasury Andrew Mellon articulated this position when he
stated that:
While the government does not know every source of income of a
taxpayer and must rely upon the good faith of those reporting
income, still in the great majority of cases this reliance is entirely
justifiable, principally because the taxpayer knows that in making a
truthful disclosure of the sources of his income, information stops
with the government. It is like confiding in one's lawyer.13
Secretary Mellon later suggested:
There is no excuse for the publicity provisions except the
gratification of idle curiosity and filling of newspaper space at the
time the information is released.14
12

Mitchell Rogovin, Privacy and Income Tax Returns, W ASH. POST (Oct. 13, 1974), at C4.

13

Hearings on Revenue Revision Before the House Ways and Means Comm., 69th Cong. 8-9 (1925).

14

S. REP. NO. 94-266, at 1039 n.51 (citing Hearings on Revenue Revision Before the House Ways
and Means Comm., 69th Cong. 8-9 (1925)).

1-5

The proponents of full disclosure had a limited victory in 1924. The
Revenue Act of 1924 provided that the Commissioner would:
as soon as practicable in each year cause to be prepared and
made available to public inspection . . . lists containing the name
and . . . address of each person making an income tax return . . .
together with the amount of income tax paid by such person.15
As a result of the 1924 Act, newspapers devoted pages to publishing the
taxes paid by taxpayers, and the right of newspapers to publish these lists
was upheld by the Supreme Court.16 The Revenue Act of 1926, however,
removed the provision requiring that the amount of tax be made public
while leaving the requirement that a list be published containing the name
and address of each person making an income tax return.17
In 1934, after a widely publicized income tax evasion scandal, Congress
enacted another form of limited disclosure. The Revenue Act of 1934
contained a provision for the mandatory filing of a so-called "pink slip" with
the taxpayer's return.18 The pink slip was to set forth the taxpayer's gross
income, total deductions, net income and tax payable. The pink slip was
to be open to public inspection. Fueled by images of kidnappers sifting
through pink slips looking for worthwhile victims, the provision was
repealed even before it took effect.19
From 1934 until 1976 there was no substantial change in the statute
respecting the disclosure of tax returns. The pre-1976 statute was thus
very much the product of the 1909 and 1910 legislation, continuing with
the oddity of "public" records only open to inspection under regulations or
orders of the President.
C. Disclosure to Government Agencies
Although corporate returns were, in 1910, made available to the public, as well
as to other government agencies, individual returns were kept within Treasury
until 1920. In 1920, individual returns joined corporate returns as being generally
available to federal agencies.20 The 1930s saw a new trend of more general
15

Act of June 2, 1924, ch. 234, 43 Stat. 253, 293. One news article reported that in 1924, within 24
hours after it was announced that tax lists were ready for inspection, Internal Revenue officers
throughout the country were besieged by applications from promoters, salespeople, and advertisers.
16

U.S. v. Dickey, 268 U.S. 378 (1925).

17

Act of Feb. 26, 1926, ch. 27, 44 Stat. 9, 51-52.

18

Revenue Act of 1934, ch. 277, 48 Stat. 680, 698.

19

Act of April 19, 1935, ch. 74, 49 Stat. 158.

20

T.D. 2961, 2 C.B. 249 (1920).

1-6

access being granted to specific agencies as well as to congressional
committees. The 1940s, 1950s, and 1960s were marked by almost unrestrained
growth in the use of tax returns by government agencies. During this time, tax
returns became a generalized governmental asset. The public, however, was
denied access.
D. Summary 1866 - 1970
This history of disclosure reveals the existence of a statute that, in all significant
respects, went unchanged since 1910. Thus, the story is one of the exercise of
discretion granted by a Congress unwilling to define precisely the policy to be
followed. Having ceded discretion to the President and an agency headed by his
designee, the expanded uses of tax information was not surprising. Indeed, it
would have been unrealistic to expect the President to resist agency arguments
for access to more information on which to base important decisions even though
such information might be neither necessary nor used for their originally intended
purposes.
E. Developments in the 1970s
By the mid 1970s, Congress became increasingly concerned about the
disclosure and use of information gathered from and about citizens by federal
agencies.21 The events leading to the revision of the tax disclosure laws in 1976
can, however, be directly traced to Executive Orders 1169722 and 11709,23
issued by President Richard M. Nixon authorizing the Department of Agriculture
to inspect the tax returns of all farmers “for statistical purposes.”
In 1973, two subcommittees of the House of Representatives held hearings
regarding the Department of Agriculture's need for the tax data disclosed under
the authority of the two executive orders.24 During these hearings, sentiments
against the orders were expressed. Officers of the Department of Justice
testified that the two orders were prototypes for future orders opening other tax
returns to inspection by other agencies. Responding to the adverse sentiment

21

This concern led directly to the enactment of the Privacy Act of 1974, 5 U.S.C. § 552a.

22

Inspection by Department of Agriculture of Income Tax Returns Made Under the Internal Revenue
Code of 1954 of Persons Having Farm Operations, 38 Fed. Reg. 1723 (Jan. 18, 1973).
23

Inspection by Department of Agriculture of Income Tax Returns Made Under the Internal Revenue
Code of 1954 of Persons Having Farm Operations, 38 Fed. Reg. 8131 (Mar. 29, 1973) (superseding
Exec. Order No. 11,697, narrowing the scope of the return information to be made available to the
Department of Agriculture).
24

Hearings on Executive Orders 11697 and 11709 Permitting Inspection by the Department of
Agriculture of Farmers’ Income Tax Returns Before House Subcomm. on Foreign Operations and
Government Information of Comm. on Government Operations, 93rd Cong. (1973).

1-7

expressed in these hearings, the President revoked both with Executive Order
11773 on March 21, 1974.25
Concern over tax return confidentiality remained after revocation of the two
executive orders. The Senate Select Committee on Presidential Campaign
Activities (Watergate Committee) hearings revealed that former White House
counsel John Dean had sought from the IRS political information on so-called
"enemies." Furthermore, it was disclosed that the White House actually was
supplied with information about IRS investigations of Howard Hughes and
Charles Rebozo. The Committee noted that tax information and income tax
audits were commonly requested by White House staff and supplied by IRS
personnel.
The House Judiciary Committee investigating the possible impeachment of
President Nixon learned of the apparently unauthorized use of IRS tax data by
the President. One of the Articles of Impeachment proposed by the Judiciary
Committee alleged that President Nixon had:
endeavored to obtain from the Internal Revenue Service, in violation of the
constitutional rights of citizens, confidential information contained in
income tax returns for purposes not authorized by law.26
Congressional interest in tax return confidentiality also manifested itself in 1974
when, as part of the Privacy Act of 1974, Congress ordered the newly
established Privacy Protection Study Commission to report to the President and
Congress, and suggest restrictions on the disclosure of federal income tax
information. This report, issued on June 9, 1976, recommended major changes
in the disclosure of tax data. On June 10, 1976, the Senate Finance Committee
issued its report on H.R. 10612, the Tax Reform Act of 1976, in which it, too,
proposed substantial revisions in the rules governing tax return confidentiality.27
The Committee's proposal dealt with the same general issues as had the Privacy
Protection Study Commission, but it resolved them differently. With few technical
changes, the Conference Committee on H.R. 10612 adopted the Senate Finance
Committee's version of the tax confidentiality rules as part of the Tax Reform Act
of 1976.28

25

Revoking the Authority of the Department of Agriculture To Inspect Income Tax Returns, 39 Fed.
Reg. 10881 (Mar. 22, 1974).
26

REPORT ON THE IMPEACHMENT OF RICHARD M. NIXON, PRESIDENT OF THE UNITED STATES, H.R. REP.
NO. 93-1305, at 3 (1974).

27

S. REP. NO. 94-938 at 315-49, 1976-3 C.B. (Vol. 3) 353-87.

28

Pub. L. No. 94-455, 90 Stat. 1520 (1976).

1-8

II. PRINCIPAL AREAS OF REVISION IN THE TAX REFORM ACT OF 1976
A. Congressional Philosophy Behind the 1976 Amendments to
I.R.C. § 6103
Congress recognized that the IRS had more information about citizens than any
other federal agency and that other agencies routinely sought access to that
information. Congress also understood that citizens reasonably expected the
IRS would protect the privacy of the tax information they were required to supply.
If the IRS abused that reasonable expectation of privacy, the resulting loss of
public confidence could seriously impair the tax system.
Although Congress felt that the flow of tax information should be more tightly
regulated, not everyone agreed where the lines should be drawn. The debates
on accessibility were most heated in the area of nontax criminal law
enforcement. One side, led by Senator Long, sought more liberal access rules in
order to fight white collar crime, organized crime, and other violations of the law.
This side felt "the Justice Department is part of this Federal Government. It is all
one Government.” The other side, led by Senator Weicker, wanted very
restrictive rules. This side recognized that it was cheaper and easier for Justice
to come directly to the IRS, but they also believed that when citizens made out
their tax returns, they made them out for the IRS and no one else.
Ultimately, Congress amended section 6103 to provide that tax returns and
return information are confidential and are not subject to disclosure, except in the
limited situations delineated by the Internal Revenue Code. In each area of
authorized disclosure, Congress attempted to balance the particular office or
agency's need for the information with the citizen's right to privacy, as well as the
impact of the disclosure upon continued compliance with the voluntary tax
assessment system.29 In short, Congress undertook direct responsibility for
determining the types and manner of permissible disclosures.
B. Structure of Tax Information Confidentiality Provisions
The Tax Reform Act of 1976 created a comprehensive statutory scheme for the
disclosure and use of tax returns and return information. The four basic parts to
this statutory scheme are:
• The general rule of section 6103(a) making tax returns and return
information confidential except as expressly authorized in the Code.
Definitions of key terms, such as return and return information, are in
section 6103(b).
29

General Explanation of the Tax Reform Act of 1976, H.R. 10612, Pub. L. No. 94-455 (JCS-33-76),
at 313-16 (J. Comm. Print 1976), 1976-3 C.B. (Vol. 2) 325-28.

1-9

• The exceptions to the general rule, detailing permissible disclosures.
I.R.C. § 6103(c) – (o).
• Technical, administrative, and physical safeguard provisions to prohibit
recipients of returns or return information from using or disclosing the
information in an unauthorized manner, and accounting, recordkeeping,
and reporting requirements that detail the purposes for which certain
disclosures were made to assist in congressional oversight. I.R.C.
§ 6103(p).
• Criminal penalties, including a felony for the willful unauthorized disclosure
of returns or return information and a civil cause of action for the taxpayer
whose information has been inspected or disclosed in a manner not
authorized by section 6103. I.R.C. §§ 7213 (criminal penalty for
unauthorized disclosure) and 7431 (civil damages provision).30
C. Summary of Disclosure Issues in Tax Reform Act of 1976
The remainder of this reference guide describes the various disclosures
permitted within the statutory framework of the Code. Below is a summary of
some of the major issues Congress addressed in the 1976 Act.
1. Congress
Even though Congress, particularly its tax writing committees, requires
access to returns or return information in certain instances to carry out its
legislative responsibilities, it decided it could continue to meet these
responsibilities under more restrictive disclosure rules than those provided
under pre-1976 law.
The Ways and Means Committee, the Finance Committee, and the Joint
Committee on Taxation (JCT), can have access upon the written request
of their respective chairmen or the Chief of Staff of the JCT. The nontax
committees may be furnished returns or return information upon (1) a
committee action approving the decision to request such returns, (2) an
authorizing resolution of the House or Senate, as the case may be, and
(3) the written request by the chairman of the committee on its behalf for
disclosure of the information.

30

The Taxpayer Browsing Protection Act of 1997 created a misdemeanor for the unauthorized
inspection of returns or return information (section 7213A). In addition, in 1996, Public Law 104-294
provided that the unauthorized access of returns or return information in government computer files is
a felony under 18 U.S.C. § 1030(a)(2)(B). Pub. L. No. 104-294, 110 Stat. 3488 (1996). See generally
Chapter 1, Part III of this guide.

1-10

Taxpayers sometime write to a member of Congress with a tax question or
problem they are having with the IRS. The member of Congress or other
person generally forwards such letters to the IRS and requests that the
IRS response be made directly to him or her.
Members of Congress in their individual capacity are entitled to no greater
access to returns or return information than any other person inquiring
about the tax affairs of a third party. Disclosure of returns or return
information to a taxpayer's designee, including a member of Congress
inquiring on behalf of a constituent, may be made only in accordance with
section 6103. Generally, section 6103 provides that returns and return
information are protected from disclosure unless a request or authorization
is obtained from the taxpayer. Chapter 4 of the IRM section on Disclosure
of Official Information, IRM 11.3.4, contains further instructions concerning
disclosures in response to congressional inquiries. See also Chapter 2,
Part III.
2. White House
The IRS may disclose returns or return information to the President and/or
to certain named employees of the White House upon the written request
of the President, signed by the President personally. A request must
specify, among other things, the reason disclosure is requested. The
President (or a duly authorized representative of the Executive Office) and
the head of a federal agency also may make a written request for a "tax
check" with respect to prospective appointees.
The White House is required to report quarterly to Congress regarding the
disclosures of returns or return information made to it. Similarly, federal
agencies are required to report on tax checks.
3. Nontax Civil Cases
Section 6103 generally prohibits the disclosure of returns and return
information to the Department of Justice (DOJ) or other enforcement
agencies in nontax civil cases.
4. Government Accountability Office (GAO)
Section 6103 authorizes the GAO (formerly the General Accounting
Office) to inspect returns and return information to the extent necessary in
conducting any audit of the IRS, the Bureau of Alcohol, Tobacco,
Firearms, and Explosives, DOJ, or the Tax and Trade Bureau, Department
of the Treasury which may be required by section 713 of Title 31, United
States Code, as proposed by section 117 of the Budget and Accounting
Procedures Act of 1950. Congress intended that GAO examine returns

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and return information only for the purpose of, and to the extent necessary
to serve as a reasonable basis for, evaluating the effectiveness, efficiency
and economy of IRS operations and activities. Congress did not intend
that GAO would superimpose its judgment upon that of the IRS in specific
tax cases.
Section 6103 allows GAO to have access to returns or return information
in the possession of any federal agency when it is auditing an agency
program or activity involving the use of returns and return information.
Furthermore, under certain circumstances, GAO may access returns or
return information that a federal agency could have requested for nontax
administration purposes.
GAO is to notify the JCT in writing of the subject matter of a planned audit
and any plans for inspection of tax returns. GAO can proceed with its
audit unless the JCT, by a two thirds vote of its members, vetoes the audit
plan within 30 days of receiving written notice of the proposed audit.
Section 6103 also authorizes GAO to review and evaluate federal and
state agencies’ compliance with the requirements for the use and
safeguarding of returns and return information received from the IRS.
Finally, GAO may access returns or return information when it audits IRS
operations as an agent of the tax writing committees.
5. Inspector General
In the Internal Revenue Service Restructuring and Reform Act of 1998,
Congress created the Office of Treasury Inspector General for Tax
Administration (TIGTA), and invested it with all the duties and
responsibilities of the former Office of the Chief Inspector. Pursuant to
section 6103(h)(1), TIGTA officers and employees whose official tax
administration duties require access to returns and return information may
access such information in the same manner accorded to other Treasury
employees. No written notice of intent to access is required for TIGTA to
obtain information.
6. Statistical Use
Congress recognized the importance of returns and return information for
other federal agencies’ statistical and research functions. Congress
decided that returns and return information should be available for
statistical use by certain agencies other than the IRS because there did
not appear to be any real likelihood that the use of such information by
these agencies would, under the procedures and safeguards provided for

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by section 6103, result in an abuse of the privacy or other rights of
taxpayers.
7. Disclosures for Federal Programs
Section 6103 permits limited disclosures to a number of agencies in
defined situations where returns and return information are directly related
to programs administered by the agency in question, including the Social
Security Administration, the Railroad Retirement Board, the Department of
Labor, and the Pension Benefit Guaranty Corporation. Provisions are also
made for disclosures to verify income eligibility for certain programs,
refund offsets for child support cases, certain unemployment
compensation cases, and federal debt collection purposes. Additionally,
the Internal Revenue Service Restructuring and Reform Act of 1998
amended section 6103(l) by adding section 6103(l)(17), which requires the
IRS to disclose section 6103 protected records to officers and employees
of National Archives and Records Administration (NARA), upon written
request of the Archivist of the United States, for purposes of the appraisal
of such records for destruction or retention. See Pub. L. No. 105-206, 112
Stat. 685 (1998). Such tax data may not be open to the public, however.
8. Federal Nontax Crimes and Terrorism
In 1976, Congress significantly changed the circumstances under which
tax information could be shared with, and used by, Federal law
enforcement agencies. Believing that the information taxpayers were
compelled by the tax laws to disclose to IRS was entitled to the same
degree of privacy as information maintained in the taxpayers’ homes,
Congress imposed a court order mechanism in order for Federal criminal
law enforcement agencies to access returns or return information that was
furnished to the IRS by taxpayers or their representatives. For return
information that was obtained from other sources, a written request would
suffice and provisions were also made to allow IRS to share such return
information on its own initiative to apprise Federal criminal law
enforcement agencies of possible crimes.
After enactment of the Patriot Act in September 2001, Congress
recognized the need to permit the IRS to share tax information not only
with Federal criminal law enforcement agencies, but also with intelligence
agencies, both for purposes of punishing violators and detecting and
preventing terrorist activities. The mechanisms for the disclosure of
returns and return information for anti-terrorism purposes include the
same court-order and written request processes that are used for Federal
nontax criminal law enforcement, except Congress also gave the IRS the
authority to initiate the ex parte court order process. Victims of Terrorism
Tax Relief Act of 2001, Pub. L. No. 107-134, § 201, 115 Stat. 2427 (2001);

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Tax Extenders and Alternative Minimum Tax Relief Act of 2008, Pub. L.
No. 110-343, Div. C, Title IV, § 402(a) and (b), 122 Stat. 3765.
9. Recordkeeping (Accounting)
Section 6103 requires the IRS to maintain a standardized system of
permanent records about the use and disclosure of returns and return
information. This includes copies of all requests for inspection or
disclosure of returns and return information and a record of all inspections
and disclosures of such information. The recordkeeping requirements do
not apply in certain situations, including disclosures to: the general public
(accepted offers in compromise, the amounts of outstanding tax liens,
etc.); Treasury (including IRS) employees or DOJ for tax administration
and tax litigation purposes; persons with a material interest; persons upon
the taxpayer's written consent; the media (taxpayer identity information for
unclaimed refunds); and contractors that perform tax administration
functions.
In addition to the recordkeeping requirements imposed on the IRS, section
6103 provides generally (with limited exceptions) that each federal and
state agency that receives returns or return information is required to
maintain a standardized system of permanent records about the use and
disclosure of that information. Maintaining such records is a prerequisite
to obtaining and continuing to receive returns or return information.
10. Safeguards
Section 6103 provides that the IRS may not furnish returns and return
information to another agency unless that agency establishes procedures
satisfactory to the IRS for safeguarding the returns or return information it
receives. Disclosure to other agencies is conditioned on the recipient:
maintaining a secure place for storing the information; restricting access to
the information to people to whom disclosure can be made under the law;
restricting the use of the information to the purpose for which it was
provided; providing other safeguards necessary to keeping the information
confidential; and, returning or destroying the information when the agency
is finished with it. The IRS must review, on a regular basis, safeguards
established by other agencies.
If there are any unauthorized disclosures by employees of the other
agency, the IRS may discontinue disclosures of returns or return
information to that agency until it is satisfied that the agency took
adequate protective measures to prevent a repetition of the unauthorized
disclosure. In addition, the IRS may terminate disclosure to any agency if
the IRS determines that adequate safeguards are not being maintained by
the agency in question.

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11. Reports to Congress
Because the use of returns or return information for purposes other than
tax administration resulted in serious abuses of the rights of taxpayers in
the past, and because the potential for abuse necessarily exists in any
situation in which returns or return information is disclosed for purposes
other than the administration of the federal tax laws, Congress believed
that it must closely review the use of returns and return information and
the extent to which taxpayer privacy is being protected. In order to permit
that review, Congress requires the IRS to make comprehensive annual
reports to the JCT as to the use of returns and return information.
Specifically, section 6103 requires the IRS to make a confidential report to
the JCT each year on all requests (and the reasons therefor) received for
disclosure of returns and return information. The report must include a
section for public dissemination that includes a listing of all agencies that
received returns and return information, the number of instances in which
the IRS made disclosures to them during the year, and the general
purposes for which the agencies made the requests. In addition, the IRS
is required to file a quarterly report with the tax committees regarding
procedures and safeguards followed by recipients of returns and return
information.
12. Enforcement
Congress concluded that the prior provisions of law designed to enforce
the rules against improper disclosure were inadequate, and that the
penalties should be increased.
In section 6103(a), Congress explicitly applied the prohibition against
disclosure to present and former officers and employees of the United
States, and to certain other designated individuals.
Congress amended section 7213 to make a willful violation of the
disclosure rules a felony, with a fine up to $5,000, and up to five years
imprisonment. See United States v. Richey, 924 F.2d 857 (9th Cir. 1991);
In re Seper (United Liquor Co. v. Gard), 705 F.2d 1499 (9th Cir. 1983);
Reporters Comm. for Freedom of the Press v. Am. Tele. and Tele. Co.,
593 F.2d 1030 (D.C. Cir. 1978). In 1996, Congress amended 18 U.S.C.
§ 1030(a)(2) to make the unauthorized access of government computers a
felony, amended by Pub. L. No. 104-294, 110 Stat. 3488. This provision
includes the unauthorized access of returns or return information in
government computer files. In 1998, Congress enacted section 7213A to
specifically make the unauthorized inspection of returns or return
information, whether in paper or computer files, a misdemeanor. See
Pub. L. No. 105-206, 112 Stat. 711 (1998).

1-15

Before 1982, section 7217 provided civil remedies against individual
employees for unauthorized disclosures of returns or return information.
Because these remedies stifled some legitimate federal conduct,
Congress amended the law and enacted section 7431 establishing a civil
remedy against the United States for any taxpayer damaged by an
unlawful disclosure of returns or return information by federal employees
(codified as amended at 26 U.S.C. § 7431). Because of the difficulty in
establishing actual monetary damages sustained by aҏ taxpayer as the
result of the invasion of privacy caused by an unlawful disclosure of
returns or return information, section 7431 provides for liquidated
damages of $1,000 for each unauthorized disclosure. In the alternative,
liability extends to actual damages plus court costs. The statute also
provides for punitive damages in addition to actual damages in situations
where the unlawful disclosure is willful or is the result of gross negligence.
The law does not provide a remedy for a disclosure or inspection of
returns or return information made at the request of the taxpayer or
pursuant to a good faith, but erroneous, interpretation of the confidentiality
rules. Instead, a disclosure or inspection giving rise to civil liability is
limited to situations where the unauthorized disclosure or inspection
results from a willful or negligent failure of the person to comply with the
law.
13. Miscellaneous Disclosure Authority31
Section 6103(a) prohibits the disclosure of returns and return information
except to the extent specifically authorized by section 6103, or other
sections of the Code. Examples of other sections of the Code that
regulate the disclosure of returns or return information in certain
circumstances include:
• 274(h)(6) - Caribbean Basin exchange agreements
• 3406 - backup withholding
• 4424 - wagering tax information
• 6104 - exempt organizations and employee plans information
• 6105 - tax convention information
• 6108 - statistical studies

31

Many of these Code sections were added either before or after the Tax Reform Act of 1976.

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• 6110 - written determinations (letter rulings, determination letters,
technical advice memoranda, and Chief Counsel advice)
• 6323(f) - notice of federal tax lien
• 7461 - publicity of Tax Court proceedings
See also Chapter I, Part II, Section VI.
III. SECTION 3802 OF THE IRS RESTRUCTURING AND REFORM ACT
Section 3802 of the IRS Restructuring and Reform Act (RRA 98) mandated that the
Treasury Department and the JCT conduct studies on the provisions regarding taxpayer
confidentiality. The studies were to examine the present protections for taxpayer
privacy, any need for third parties to use returns or return information, whether
publicizing the names of persons who are legally required to file tax returns but who do
not do so would achieve greater levels of voluntary compliance, and the
interrelationship between the Freedom of Information Act (FOIA) and section 6103. The
JCT published its study on January 28, 2000. STAFF OF THE JOINT COMMITTEE ON
TAXATION, 106TH CONG., STUDY OF PRESENT-LAW TAXPAYER CONFIDENTIALITY AND
DISCLOSURE PROVISIONS AS REQUIRED BY SECTION 3802 OF THE INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT OF 1998, JCS-1-00 NO.1, 2 AND 3 (Comm.
Print 2000) (http://www.jct.gov/publications). Treasury published its study on
October 2, 2002, and it is available on the Department of Treasury website at
http://www.treasury.gov/resource-center/tax-policy/Documents/confide.pdf. These were
the first comprehensive reviews of the Code disclosure provisions since the 1976
amendments. Both studies generally endorsed the structure and approach of the
current statute, but differed most significantly on the role of contractors’ receipt and use
of returns and return information.
IV. CONCLUSION
A distinguishing characteristic and, indeed, one of the strengths of American tax
administration, is the self assessment feature of the system. Employees of the Office of
Chief Counsel and the IRS must be constantly aware that in fostering this system, there
must be public confidence with respect to the confidentiality of personal and financial
information given to us for tax administration purposes.
Thus, we must administer the disclosure provisions of the internal revenue laws in
accordance with the spirit and intent of the law, ever mindful of this public trust. The law
makes the confidential relationship between the taxpayer and the IRS quite apparent.
By the single act of filing a tax return, a record is created and also a trust. We are
responsible for maintaining both.
There is probably no other government agency having as much contact with as many
citizens as the IRS in the course of carrying out its responsibility of collecting the

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revenue. As a result, a vast majority of our records are confidential in the very real
sense that they represent information the American people have provided to their
government in confidence. The confidential nature of these records requires that each
request for information be evaluated in the light of a considerable body of law and
regulations that either authorize or prohibit disclosure. The diversity of our records, the
size of our organization, and the complexity of our operations, all contribute to the
issues we must consider when performing our official duties.

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PART II: CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION
AND DISCLOSURE
I.R.C. § 7431
I. CAUSE OF ACTION
A. Background
As discussed in Part I, in 1982, section 7431 replaced section 7217. The
purpose of this amendment was to substitute the United States, rather than
individual employees, as the proper defendant in an unauthorized disclosure
action arising from the conduct of a federal employee. See below, Section V., A.,
“Proper Party”.
In 1997, section 7431 was amended by the Taxpayer Browsing Protection Act to
specifically make damages available for the unauthorized inspection of returns
and return information. See Pub. L. No. 105-35, 111 Stat. 1104 (1997). The Act
also added subsection 7431(b)(2), which provides for a good faith defense when
inspection or disclosure is requested by the taxpayer and subsection 7431(e),
which requires the notification of the taxpayer when any person is criminally
charged by indictment or information with the offenses of unauthorized inspection
or disclosure of that taxpayer's return or return information in violation of section
7213(a), section 7213A, or 18 U.S.C. § 1030(a)(2)(B).
B. Elements of Claim
For a taxpayer to prevail under section 7431(a)(1), he must demonstrate that an
unauthorized inspection or disclosure of his returns or return information was
made by an officer or employee of the United States, the inspection or disclosure
was made knowingly or negligently, and that the inspection or disclosure was
made in violation of section 6103. Christensen v. United States, 733 F. Supp.
844, 848 (D.N.J. 1990), aff'd, 925 F.2d 416 (3d Cir. 1991) (table cite); Flippo v.
United States, 670 F. Supp. 638, 641 (W.D.N.C. 1987), aff'd mem., 849 F.2d 604
(4th Cir. 1988) (table cite).
1. Sharer v. United States, No. Civ. S-98-0116EJG/JFM, 1999 WL
671010, at *2 (E.D. Cal. Feb. 12, 1999) (plaintiff bears burden of
proving unauthorized disclosure of return information).
2. Tobin v. Troutman, No. Civ. A 3: 98-CV-663-H, 1999 WL 501004, at *45 (W.D. Ky. June 8, 1999) (plaintiff failed to state a claim under section
7431 where the information allegedly inspected was retained copies of
the taxpayer’s returns and workpapers in the taxpayer’s home (citing
Stokwitz v. United States, 831 F.2d 893 (9th Cir. 1987), cert. denied,
485 U.S. 1033 (1988), court ruled the information was not return
information because it had not been received by the IRS)).

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3. Weiner v. IRS, 789 F. Supp. 655, 656 (S.D.N.Y. 1992) (plaintiff must
show: (1) that the disclosure was unauthorized; (2) that the disclosure
was made knowingly or by reason of negligence; and, (3) that the
disclosure was in violation of section 6103), aff'd, 986 F.2d 12 (2d Cir.
1993).
4. Wilkerson v. United States, 67 F.3d 112, 115 (5th Cir. 1995) (section
7431 claim requires plaintiff to prove that the IRS disclosed confidential
tax return information either knowingly or negligently and that this
disclosure was not authorized by section 6103).
Note: The analysis for determining whether an unauthorized
disclosure has occurred is as follows:
a. Was there a disclosure of returns or return information? See
Baskin v. United States, 135 F.3d 338, 342-43 (5th Cir. 1998)
(IRS special agent's possession and transfer of data to the local
police while on temporary assignment to the grand jury did not
make the data disclosed "return information" for purposes of
section 6103); Stokwitz v. United States, 831 F.2d at 896
(disclosure of the taxpayer’s retained copies of returns did not
violate section 6103 because the returns did not pass through
the IRS).
b. Was the return or return information disclosed that of the
plaintiff/taxpayer? See Section V., I., “Standing,” below.
c. Was the disclosure authorized by some provision in Title 26?
d. Was the disclosure made knowingly or negligently? See Weiner
v. IRS, 789 F. Supp. 655, 656 (S.D. N.Y. 1992) (to hold IRS
liable for disclosure through levy resulting from computer error
would hold IRS to higher standard than Congress intended in
enacting statute); Messinger v. United States, 769 F. Supp. 935,
940 (D. Md. 1991) (mere showing of unauthorized disclosure
insufficient to demonstrate negligence) rejecting Husby v. United
States, 672 F. Supp. 442 (N.D. Cal. 1987) (which held that the
fact that an unauthorized disclosure was made is prima facie
case for section 7431); Christensen v. United States, 733 F.
Supp. 844, 854 (D. N.J. 1990) (disclosure resulting from
ministerial computer error does not rise to negligence);
Timmerman v. Swenson, Civ. No. 4-78-547, 1979 U.S. Dist.
LEXIS 10172 at *6 (D. Minn. Aug. 27, 1979) (under section
7217, court applying duty of due care negligence standard
determined that IRS was not negligent when it sent levy to bank
as result of clerical error).

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II. GOOD FAITH DEFENSE UNDER I.R.C. § 7431(b)
A. Statutory Provision
The United States is not liable for unauthorized inspections or unauthorized
disclosures of returns or return information that are the result of good faith, but
erroneous, interpretations of section 6103. Good faith is generally judged by an
objective standard, i.e., whether an IRS employee reasonably would have known
of rights provided and of the agency's applicable regulations and internal rules.
Although the circuits have split over whether good faith is an affirmative defense
or whether bad faith must be pled by the plaintiff in the complaint, the Office of
Chief Counsel and the Tax Division have officially adopted the position that good
faith is an affirmative defense that must be pled by the government (and not
negated by the taxpayer). Compare Davidson v. Brady, 732 F.2d 552, 554 (6th
Cir. 1984) (in section 7217 case, court concluded that bad faith was an element
of case that plaintiff must allege to state a claim) with McDonald v. United States,
102 F.3d 1009, 1010-11 (9th Cir. 1996) (criticizing Davidson, court held that good
faith was an affirmative defense that the government must prove).
B. Case Law
1. Agbanc v. United States, No. 87-383, slip op. at 18-19 (D. Ariz.
Dec. 21, 1988) (error by revenue agent in sending out wrong report did
not occur as a result of a good faith but erroneous interpretation of
section 6103, but as a result of negligence).
2. Balanced Financial Management, Inc. v. Fay, 662 F. Supp. 100, 106
(D. Utah 1987) (prefiling notification letters issued in compliance with
revenue procedure were sent in good faith).
3. Barrett v. United States, 51 F.3d 475, 480 (5th Cir. 1995) (court was
not persuaded by the record of testimony at trial that it was necessary
to reveal the fact of criminal investigation in circular letters sent to
plaintiff's patients; because the special agent did not review section
6103 provisions contained in the IRM prior to sending the letters and,
"of paramount importance," did not obtain prior approval of the CID
Chief, as provided by the IRM, the court concluded that a reasonable
agent would not have violated the express provisions of the manual
and, thus, did not act in good faith) remanded to 917 F. Supp. 493
(S.D. Tex. 1995), aff’d, 100 F.3d 35 (5th Cir. 1996). Cf. May v. United
States, No. 91-0650-CV-W-9, 1995 WL 761107, at *6 (W.D. Mo. Oct. 5,
1995) (because letters conformed to IRM provisions, disclosures fell
within section 7431(b) good faith provision), aff'd, 141 F.3d 1169 (table
cite), 1998 WL 71545 (8th Cir. Feb. 23, 1998).

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4. Datamatic Servs. Corp. v. United States, No. C-86-6447 EFL, 1987 WL
28603, at *4-5 (N.D. Cal. Dec. 18, 1987) (because prefiling notification
letters followed revenue procedure, good faith defense was available).
5. Diamond v. United States, 944 F.2d 431, 435 (8th Cir. 1991) (although
it was improper for special agent to identify himself as an employee of
the Criminal Investigation Division in circular letters that he sent to
doctor’s patients, no liability found because he had followed the IRM).
6. Flippo v. United States, 670 F. Supp. 638, 643 (W.D.N.C. 1987)
(plaintiff produced no evidence that revenue agent’s actions were in
bad faith, as he acted under the assumption that his attempts to
contact the petitioner and his servicing of liens and levies for the
collection of delinquent taxes were authorized under the Code) aff'd
mem., 849 F.2d 604 (4th Cir. 1988) (table cite) (text published by 1988
WL 60765, at *1 (4th Cir. 1988)).
7. Gandy v. United States, 234 F.3d 281, 286-87 (5th Cir. 2000) (court
skipped determination of whether an unauthorized disclosure had
occurred, but instead found no liability because agents acted in good
faith belief that IRM and section 6103 permitted disclosure; in dicta,
court stated that special agents are permitted to show their badges and
credentials when conducting third-party interviews).
8. Harris v. United States, 35 Fed. App’x 390, 89 A.F.T.R.2d 2002-2687
(5th Cir. 2002) (affirming lower court finding that revenue officer who
disclosed that the plaintiffs had a judgment filed against them for a
specific amount had acted in a good faith belief that the disclosure was
permitted as a disclosure of information in the public record).
9. Huckaby v. United States, 794 F.2d 1041, 1049, reh'g denied, clarified,
804 F.2d 297 (5th Cir. 1986) (revenue officer disclosed return
information based upon taxpayer's oral consent; court found that
section 6103(c) requires a written consent and because the statute and
regulations were clear, revenue officer's failure to follow them could not
be a good faith, but erroneous, interpretation of section 6103).
10. Husby v. United States, 672 F. Supp. 442, 445 (N.D. Cal. 1987) (good
faith defense applies only to good faith, but erroneous, interpretations
of section 6103, not to general defense of good faith errors in
deficiency assessments and subsequent collection activities).
11. Ingham v. United States, 167 F.3d 1240, 1245-46 (9th Cir. 1999)
(without deciding whether disclosure to a man that his former wife had
filed for a refund was authorized by section 6103(h)(4), government

1-22

was protected by good faith defense because the IRM instructed
agents that such disclosure was permitted).
12. Johnson v. Sawyer, 640 F. Supp. 1126, 1134 (S.D. Tex. 1986)
(subsequent history omitted) (public affairs officer failed to contact
AUSA, as required by district guidelines, before issuing press release
which contained return information; under predecessor to section 7431,
failure to follow established procedures formed basis for finding of bad
faith).
13. Jones v. United States, 954 F. Supp. 191, 192 (D. Neb. 1997)
(subsequent history omitted) (special agent who did not consult either
IRM or Code before disclosing to a confidential informant that a search
warrant was to be executed the following day at taxpayers’ place of
business failed to establish a good faith, but erroneous, interpretation
of the statute).
14. LeBaron v. United States, 794 F. Supp. 947, 953-54 (C.D. Cal. 1992)
(citing Huckaby, found nothing in the statute, case law, or IRS policies
or regulations to suggest that the IRS personnel who made the
disclosure had interpreted section 6103 in an objectively unreasonable
manner).
15. McLarty v. United States, 741 F. Supp. 751, 756-58 (D. Minn. 1990),
on reconsideration, 784 F. Supp. 1401, 1404 (D. Minn. 1991) (initially
adopted a test that contained both objective and subjective
components for judging good faith defense; following Diamond, above,
issued a subsequent opinion adopting objective standard (i.e., did
wrongful disclosure of the plaintiff's return information violate a clearly
established statutory right of which a reasonable person would have
known), and found that IRS agent and AUSA were presumed to know,
as a general matter, that it is improper to disclose return information),
aff’d, 6 F.3d 545 (8th Cir. 1993).
16. Millenium Marketing Group, LLC v. United States, Civ. No. H-06-962,
2010 WL 1768235, at *13-20 (S.D. Tex. Feb. 9, 2010) adopted by 2010
WL 1485925 (S.D. Tex. Mar. 24, 2010) (disclosures made to plan
participants regarding the abusive nature of the tax plan were allowable
under section 6103(e), (k), and in the alternative, both Chief Counsel
attorneys met the good faith exception under section 7431(b)(1)).
17. Payne v. United States, 289 F.3d 377, 385 (5th Cir. 2002) (district court
did not have the benefit of the court’s decision in Gandy, above;
reversed plaintiff’s $1.5 million judgment and remanded for the district
court to apply the Gandy rationale).

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Note: In a well-reasoned concurrence/dissent, Judge Garza
cautioned that the district court had incorrectly applied the good
faith defense because it had failed to first determine whether any
unauthorized disclosures had occurred. 289 F.3d at 391-92.
18. Plotkin v. United States, 465 Fed. App’x. 833-34 (11th Cir. 2012)
(Where compliance with IRS-related conditions of probation in a
criminal tax case required the defendant to file and pay all taxes, the
court held that the IRS's disclosure of the defendant's return
information to his probation officers was authorized by section
6103(h)(4)(A) upon finding that the probation revocation proceedings
were an extension of the defendant's criminal proceeding for tax
crimes. Even assuming arguendo that disclosure was not authorized,
the court concluded that the good faith exception would apply because
the Internal Revenue Manual allowed for disclosure of return
information to a probation officer under similar circumstances.)
19. Rhodes v. United States, 903 F. Supp. 819, 822, 826 (M.D. Pa. 1995)
(upon reconsideration, rejected the Fifth and Eighth Circuits' reasoning
in Barrett and Diamond, above, respectively, that disclosure of the fact
of criminal investigation was not "necessary" to obtain information
sought; fashioned its own objective, rather than subjective, standard:
"Would a reasonable agent, under the circumstances of the case and
knowing that disclosure must be kept to a minimum, disclose this
amount of information in order to obtain the cooperation of a
reasonable person receiving the form letter?").
20. Rorex v. Traynor, 771 F.2d 383, 387 (8th Cir. 1985) (taxpayers entered
into installment payment plan, which was subsequently disallowed by
revenue officer's manager, and revenue officer failed to notify
taxpayers of disallowance and served a notice of levy on the taxpayers'
bank; court, using an objective standard, found that a reasonable
person would have known that he was violating the taxpayers' rights
under section 6103).
Note: This case was decided before the addition of section 7433 to
the Code. Section 7433 addresses damages arising from improper
collection practices. Under today’s statutory scheme, this case
would (should) have been brought under section 7433.
21. Ryan v. United States, No. Civ. A. AQ-97-3548,1998 WL 919881, at *34 (D. Md. July 30, 1998) (although disclosure was permitted under
section 6103(h)(4), also held that the disclosure was made with the
good faith belief that section 6103 permitted it because it was a “close
call”).

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22. Rubel v. United States, No. ST-C-87-28, 1988 WL 167270, at *6
(W.D.N.C. Aug. 26, 1988) (government officials acted in good faith in
issuing press release).
23. Schachter v. United States, 866 F. Supp. 1273, 1275 (N.D. Cal. 1994)
(circular letters were sent to present and former customers of
taxpayers' company and IRM in effect at the time recommended that
special agents state that the taxpayer was "under investigation" and
instructed special agents to identify themselves in personal interviews
by showing their badge and credentials; agent and IRS acted in good
faith because, based on these provisions, a reasonable special agent
would not have known that he should not have disclosed that taxpayer
was under investigation), aff’d, 77 F.3d 490 (9th Cir. 1996).
24. Smith v. United States, 703 F. Supp. 1344, 1348 (C.D. Ill. 1989)
(District Director's disclosures to Illinois Department of Revenue did not
follow the procedures set forth in the Implementing Agreement, and
therefore violated section 6103(d); moreover, the District Director was
"no stranger to the disclosure provisions" and under the Huckaby
objective standard, lacked good faith), aff'd in part & rev'd in part on
other grounds, 964 F.2d 630, 635 (7th Cir. 1992) (not addressing the
good faith issue, the Agreement on Coordination satisfied section
6103(d)'s written request requirement and, therefore, the disclosure
was authorized).
25. Snider v. United States, 468 F.3d 500, 506-07 (8th Cir. 2006), petition
for reh’g en banc denied, No. 05-3636 (8th Cir. Feb. 1, 2007), nonacq.,
I.R.B. 2007-30 (July 23, 2007) (In a holding to which the Service does
not acquiesce, and in conflict with other circuit court decisions, the
Eighth Circuit concluded that a special agent’s disclosure of the identity
of the taxpayer being investigated was not authorized by section
6103(k)(6) because the government had not shown that such disclosure
was necessary and because “Section 6103 clearly defines both ‘a
taxpayer’s identity’ and ‘whether the taxpayer’s return was, is being, or
will be examined or subject to other investigation’ as ‘return information.’
. . . An agent violates the statute, as well as the Internal Revenue
Manual, when he or she identifies the subject of his or her investigation.”
Id. at 507.). Action on decision (disagreeing with the Eighth Circuit’s
holdings) is available at: http://www.irs.gov/pub/irs-aod/aod200703.pdf.
26. Traxler v. United States, No. CV-F-87-725 REC, 1988 WL 149358, at
*5 (E.D. Cal. Nov. 23, 1988) (even if deficiency assessment was
unauthorized, there would be no liability because of the good faith
exception and compliance with section 6103(k)(6)).

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Note: Although we realize there is a certain judicial economy in
deciding the matter without first ruling whether an unauthorized
disclosure actually occurred, skipping that step disserves the IRS
and the public. If the court finds no liability based on the good faith
defense absent ruling on the validity of the disclosure, the IRS is
unable to determine whether the challenged conduct is unlawful
and take any necessary remedial steps.
III. DAMAGES FOR UNAUTHORIZED DISCLOSURE AND INSPECTION
The statute provides two damage computations. A prevailing plaintiff may recover the
costs of the action plus the greater of (1) statutory damages of $1,000 for each act of
unauthorized inspection or disclosure or (2) the sum of actual damages plus, in the case
of a willful inspection or disclosure, or an inspection or disclosure resulting from gross
negligence, punitive damages. I.R.C. § 7431(c).
A. Statutory Damages
Statutory damages are limited to each act of inspection or disclosure, rather than
each item of return information inspected or disclosed; the inspection or
disclosure of multiple items of return information is not multiple inspections or
disclosures. Moreover, the Service’s position is that damages are not based
upon the number of persons who eventually may read or hear the information
wrongfully disclosed. Therefore, the United States should not be held
responsible for redisclosures of return information, e.g., to a newspaper's
subscribers.
1. Barrett v. United States, 917 F. Supp. 493, 502 (S.D. Tex. 1995), after
remand from 51 F.3d 475 (5th Cir. 1995), aff’d, 100 F.3d 35 (5th Cir.
1996) (after finding of liability, plaintiff entitled to statutory damages in
the amount of $260,000, based on the number of patients it was
presumed received circular letters from the IRS in absence of proof
that they had not received the letters, but was not entitled to actual or
punitive damages).
2. Huckaby v. United States, 794 F.2d 1041, 1050 (5th Cir. 1986)
(disclosure of taxpayer's records to state agency based upon oral
consent was only one act of unauthorized disclosure, and did not
warrant punitive damages).
Note: Huckaby was decided before the amendments to section
6103(c) and the publication of Treas. Reg. § 301.6103(c)-1 that
permit the acceptance of a verbal consent in specific
circumstances. See generally Chapter 2, Part II.

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3. Johnson v. Sawyer, 640 F. Supp. 1126, 1136 (S.D. Tex. 1986), aff’d,
980 F.2d 1490 (5th Cir. 1992), rev’d and remanded on other grounds,
47 F.3d 716, 738 (5th Cir. 1995) (damages for unauthorized
disclosures of a press release determined by number of media outlets
sent the document, not number of persons who may have actually read
it - "the degree of a violator's punishment should turn upon a factor
within the violator's knowledge and control (e.g., the number of media
outlets receiving the release) rather than a factor outside her
knowledge or control (e.g., the number of employees each of those
outlets happens to allow to read the release")).
4. Mallas v. United States, 993 F.2d 1111, 1125 (4th Cir. 1993) (single
letter addressed to two named persons in a single envelope constituted
two disclosures).
5. Marré v. United States, Civ. A. No. H-88-1103, 1992 WL 240527, at *2
(S.D. Tex. June 22, 1992) (a single communication cannot be split into
pieces to create multiple disclosures, nor does disclosure of the same
information to the same person on multiple occasions constitute
multiple disclosures), aff’d in part on other grounds, modified in part on
other grounds, vacated in part on other grounds, 38 F.3d 823 (5th Cir.
1994).
6. Miller v. United States, 66 F.3d 220, 223-24 (9th Cir. 1995) (limiting
damages to $1,000 and rejecting taxpayer’s argument that statutory
damages for unauthorized disclosure to a newspaper reporter should
be calculated by reference to number of potential readers, "in the
modern era of mass communication,” strong public policy concerns
exist for not allowing this form of second-party dissemination to be
actionable, and disclosure to person(s) likely to publish the information
is relevant only in determining degree of negligence or recklessness
involved, not number of disclosures).
7. Rorex v. Traynor, 771 F.2d 383, 385 (8th Cir. 1985) (although levy
contained multiple items of return information, court awarded $1,000
because only one levy was issued).
8. Siddiqui v. United States, 359 F.3d 1200, 1203 (9th Cir. 2004) (act of
disclosure, not size of the audience that is counted for purposes of
statutory damages), aff’g 217 F. Supp.2d 985, 989-91 (D. Ariz. 2002).
9. Smith v. United States, 730 F. Supp. 948, 954 (C.D. Ill. 1990)
(memorandum to two people at one time was only one act of
disclosure), rev’d in part and aff’d in part, 964 F.2d 630, 636 (7th Cir.
1992).

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Successful plaintiffs rarely recover actual damages due to the difficulty of
establishing losses attributable to the disclosure of returns or return information.
1. Jones v. United States, 9 F. Supp. 2d 1119, 1137 (D. Neb. 1998)
(common law elements of causation must be proven to recover actual
damages, i.e., “but for” the disclosure the harm would not have
occurred and the harm was the foreseeable result of the disclosure plaintiffs could recover for economic losses of operating business,
damages from sale of real and personal property, and emotional
distress), following determination of liability in 954 F. Supp. 191 (D.
Neb. 1997) (prior and subsequent history omitted).
2. Wilkerson v. United States, No. 3:92-cv-78 (E.D. Tex. May 16, 1994)
(plaintiff awarded $229,547.19 based primarily upon the value of her
business, "which was effectively destroyed by the unauthorized
disclosures" in levies), rev'd in part on other grounds, 67 F.3d 112 (5th
Cir. 1995).
B. Emotional Distress
One issue addressed infrequently is whether actual damages are limited to
economic loss or include recovery for non-pecuniary items such as emotional
distress.
1. Jones v. United States, 9 F. Supp. 2d 1119, 1149 (D. Neb. 1998)
(plaintiffs entitled to emotional distress damages when they
demonstrate out of pocket damages), following determination of liability
in 954 F. Supp. 191 (D. Neb. 1997) (prior and subsequent history
omitted).
2. Rorex v. Traynor, 771 F.2d 383, 387-88 (8th Cir. 1985) (taxpayers
were awarded $15,000 each for emotional suffering; however, on
appeal, the Eighth Circuit found that plaintiffs had produced no
evidence of emotional distress other than personal embarrassment and
the court did not believe that "hurt feelings alone constitute actual
damages compensable under the statute").
3. Schipper v. United States, No. CV-94-4049 (CPS), 1998 WL 786451, at
*10-11 (E.D.N.Y. Sept. 15, 1998) (unauthorized disclosures made in
the course of unlawful levies humiliated plaintiff in eyes of coworkers;
plaintiff awarded damages for physiological symptoms stemming from
humiliation).
4. Wilkerson v. United States, 67 F.3d 112, 117-18 (5th Cir. 1995)
reversing in part, No. 3:92-cv-78 (E.D. Tex. May 16, 1994) (reversing
award of $20,000 for emotional distress upon a determination that no

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unauthorized disclosure had occurred through the issuance of an
invalid levy).
Cases under the Privacy Act are analogous because the Privacy Act has a
similar damages provision. Generally, the courts have held that actual damages
for violations of the Privacy Act are limited to out-of-pocket losses. See, e.g.,
Hudson v. Reno, 130 F.3d 1193, 1207 (6th Cir. 1997); Fitzpatrick v. IRS, 665
F.2d 327, 329-31 (11th Cir. 1982); DiMura v. FBI, 823 F. Supp. 45, 48 (D. Mass.
1993); Pope v. Bond, 641 F. Supp. 489, 500-01 (D.D.C. 1986); and Houston v.
Dep't of Treasury, 494 F. Supp. 24, 30 (D.D.C. 1979). Note that in Johnson v.
IRS, 700 F.2d 971, 974-80 (5th Cir. 1983), the court held that actual damages
included pain and suffering, and in Albright v. United States, 732 F.2d 181, 18586 n.11 (D.C. Cir. 1984), the court noted, in dicta, that non-economic injuries or
damages other than out-of-pocket expenses could qualify as "actual damages"
under 5 U.S.C. § 552a(g)(4). Cf. Doe v. Chao, 540 U.S. 614, 614-15 (2004)
(unlike section 6103, which provides for award of statutory damages in absence
of actual damages, Privacy Act requires proof of actual damages, however
minimal, to qualify for minimum damage award).
The legislative history is silent as to whether Congress intended for section 7431
to include recovery for emotional distress within the ambit of “negligence.” The
Senate Report merely parrots the statutory language by noting that the United
States is liable to a person whose returns or return information was knowingly or
negligently disclosed in violation of section 6103. See S. REP. NO. 97-760, at
676 (1982). Although it could be argued that when Congress used the phrase
“negligence” in the statute it intended for the general law of negligence to apply,
including the applicable law on damages, the Supreme Court’s opinions relating
to the waiver of sovereign immunity in two cases interpreting other statutes may
be instructive.
In United States v. Nordic Vill. Inc., 503 U.S. 30, 33-34 (1992), the Supreme
Court held that in the absence of clear statutory authority waiving sovereign
immunity, a bankruptcy trustee cannot recover monetary damages from the
government for post-petition transfers. The court noted the established doctrine
that waivers of sovereign immunity must be unequivocally expressed and must
be construed strictly in favor of the government. The Court stated “Legislative
history has no bearing on the ambiguity point . . . . [T]he ‘unequivocal expression’
of elimination of sovereign immunity that we insist upon is an expression in
statutory text. If clarity does not exist there, it cannot be supplied by a committee
report.” Id. at 37. In Lane v. Pena, 518 U.S. 187, 192 (1996), the Supreme
Court held that a Merchant Marine cadet who was discharged from the academy
in violation of the Rehabilitation Act cannot recover monetary damages from the
government because the 1986 amendments to the Act did not provide for
monetary damages against federal agencies. Accordingly, a damage award
against the United States must be limited to only so much as is authorized by the

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statute waiving sovereign immunity, and if the statute does not clearly provide for
recovery for emotional distress, recovery should not be awarded.
Note: Section 7433, which was added to the Code in 1988 and provides
for civil damages for unauthorized collection activity, provides only for
"actual, direct economic damages" plus the costs of the action (enacted by
Pub. L. No. 100-647, § 6241(a), 102 Stat. 3342 (1988)).
C. Punitive Damages
1. Barrett v. United States, 917 F. Supp. 493, 503 (S.D. Tex. 1995) (no
punitive damages because (1) disclosures were not willful or grossly
negligent and (2) statutory language of section 7431(c) precludes
award of punitive damages where actual damages not proven, which is
consistent with the common law tort rule), aff'd, 100 F.3d 35 (5th Cir.
1996).
2. Mallas v. United States, 993 F.2d 1111, 1125 (4th Cir. 1993) (taxpayer
may recover punitive damages in excess and instead of statutory
damages, not in addition to statutory damages, even if the actual
damages are zero).
3. Marré v. United States, Civ. A. No. H-88-1103, 1992 WL 240527, at *4
n.3 (S.D. Tex. June 22, 1992) ("Though we take a decidedly dim view
of [the agent's] actions, we are precluded from granting punitive
damages without an award of actual damages”), aff’d on other
grounds, 38 F.3d 823, 826-27 (5th Cir. 1994) (without deciding whether
district court was correct, found special agent's conduct was not so
egregious as to warrant punitive damages).
4. Mid-South Music Corp. v. United States, 579 F. Supp. 481, 485 (M.D.
Tenn. 1985), aff’d in part, rev’d in part, 756 F.2d 23 (6th Cir. 1984)
remanded to 1985 WL 3673 (M.D. Tenn. Sept. 24, 1985), rev'd, 818
F.2d 536, 537 (6th Cir. 1987) (district court awarded $174,000 in
statutory damages, plus $1,000 in punitive damages for unauthorized
disclosure of return information; circuit court reversed and remanded to
district court for entry of judgment for defendant, as no liability exists
where the IRS disclosed taxpayer’s own information to taxpayer).
5. Rorex v. Traynor, 771 F.2d 383, 387 (8th Cir. 1985) (on appeal, court
did not find any evidence to support the conclusion that the disclosure
was either willful or the result of gross negligence).
Note: This case was decided before the addition of section 7433 to
the Code. Section 7433 addresses damages arising from improper

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collection practices. Under today’s statutory scheme, this case
would (should) have been brought under section 7433.
6. William E. Schrambling Accountancy Corp. v. United States, 689 F.
Supp 1001, 1008 (N.D. Cal. 1988) (punitive damages are not available
unless plaintiff proves actual damage), rev'd on other grounds, 937
F.2d 1485 (9th Cir. 1991).
7. Siddiqui v. United States, 395 F.3d 1200, 1201 (9th Cir. 2004) (no
punitive damages without proof of actual damages), aff’g 217 F. Supp.
2d 985, 989-91 (D. Ariz. 2002).
8. Smith v. United States, 730 F. Supp. 948, 954-55 (C.D. Ill. 1990)
(criticizing the district court in Mid-South Music, above, punitive
damages not available in the absence of actual damages), rev'd on
other grounds, 964 F.2d 630 (7th Cir. 1992).
IV. ATTORNEYS FEES IN I.R.C. § 7431 ACTIONS
Section 7431(c) provides that the plaintiff may recover
(1) the greater of (A) $1,000 for each act of unauthorized inspection or disclosure
of a return or return information with respect to which such defendant is found
liable, or (B) the sum of – (i) the actual damages sustained by the plaintiff as a
result of such unauthorized inspection or disclosure, plus (ii) in the case of a
willful inspection or disclosure or an inspection or disclosure which is the result of
gross negligence, punitive damages, plus (2) the costs of the action, plus (3) in
the case of a plaintiff which is described in section 7430(c)(4)(A)(ii) [meets the
requirements of 28 U.S.C. § 2412(d)(1)(B), i.e., by submitting request within 30
days showing entitlement], reasonable attorneys fees, except that if the
defendant is the United States, reasonable attorneys fees may be awarded only
if the plaintiff is the prevailing party (as determined under section 7430(c)(4)).
To be considered the prevailing party under section 7430, plaintiffs must establish (1)
that the position of the United States is not substantially justified, and (2) that they have
prevailed with respect to the amount in controversy or with respect to the most
significant issue presented. I.R.C. § 7430(c)(4).32
32

There is little case law on the application of the provisions under sections 7430 and 7431. Before
1998 when section 7430 was amended, the circuits were split as to whether a plaintiff could recover
attorneys fees for successfully prosecuting a section 7431 suit. Compare McLarty v. United States, 6
F.3d 545 (8th Cir. 1993) (where the underlying proceeding was unrelated to a civil tax proceeding,
section 7430 was inapplicable) and Scrimgeour v. IRS, 149 F.3d 318 (4th Cir. 1998) (underlying claim
of unauthorized disclosure did not pertain to determination of any tax) with Huckaby v. United States,
804 F.2d 297 (5th Cir. 1986) (concluding that underlying claim pertained to tax liability because the
IRS was in possession of plaintiff’s records - which were disclosed - for the purpose of determining
his liability). By amending the statute to include attorneys fees, Congress was sending a clear

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V. OTHER ISSUES IN I.R.C. § 7431 ACTIONS
A. Proper Party
The United States is the only proper party defendant for unauthorized
disclosures by federal employees. Nevertheless, the alleged unauthorized
disclosure must have been made by an individual who was an officer or
employee of the federal government at the time of the disclosure.
1. Adelman v. Discover Card Servs., 915 F. Supp. 1163, 1165 (D. Utah
1996) (rejecting argument that United States was liable because of
special relationship between state agency and federal government,
court held no liability where a state employee accessed plaintiff’s files
and disclosed confidential tax records).
2. Clode-Baker v. Cocke, No. A-11-CV-977-LY, 2012 WL 1357023 (April
16, 2012, W.D.Tex.) (Plaintiff failed to state a claim where she alleged
her former daughter-in-law obtained copies of her returns and
forwarded them to the IRS Whistleblowers office. Section 6103 only
prohibits disclosure of return information by certain individuals who fall
within the statute.)
3. Diamond v. United States, 944 F.2d 431, 432 (8th Cir. 1991) (United
States is the only proper party defendant even though special agent's
actions formed the basis for the unauthorized disclosure action).
4. Flippo v. United States, 670 F. Supp. 638, 639 (W.D.N.C. 1987)
(rejected plaintiff's attempt to name a revenue agent as a defendant),
aff'd mem., 849 F.2d 604 (table cite), 1988 WL 60765, at *1 (4th Cir.
June 7, 1988).
5. Hassell v. United States, 203 F.R.D. 241, 244 (N.D. Tex. 1999) (even
assuming IRS employees made unauthorized disclosures of return
information, the claim is against the United States, not individual
employees).
6. Henkell v. United States, No. S-96-2228 MLS GGH, S-97-0017 MLS
GGH, 1998 WL 41565, at *8 (E.D. Cal. Jan. 9, 1998) (by its express
language, section 7431 authorizes suit only against the United States
and not against individual employees).

message that “when the IRS violates taxpayer’s right to privacy by engaging in unauthorized
inspection or disclosure activities, it is appropriate to reimburse taxpayers for the costs of their
damages.” S. REP. NO. 105-174, reproduced at IRS Restructuring and Reform, Law, Explanation and
Analysis, ¶ 10250 at 599 (CCH 1998).

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7. Payne v. United States, No. Civ. A. H-97-2255, 1998 WL 773625, at *3
(S.D. Tex. Feb. 10, 1998) (even though "the United States may not be
held liable in a civil action for unlawful disclosure of tax return
information by a former officer or employee," the plaintiff was given
leave to amend complaint to add former employee).
8. Ungaro v. Desert Palace, No. CV S 88-838 RDF, 1989 WL 199264, at
*4-5 (D. Nev. Nov. 17, 1989) (because the disclosures were specifically
authorized under section 6103(h), no violation of 6103 occurred;
section 7431 does not apply as a remedy against individual
employees).
9. Young v. Boyle, 849 F.2d. 610 (table cite), No. 83-1789, 1988 WL
62397 at *2 (6th Cir. 1988) (claims for damages against judge and law
clerk for summons enforcement proceedings in which financial
information was disclosed were barred by doctrine of judicial immunity),
aff’g No. 83-1789 (E.D. Mich. Nov. 30, 1982) (unpublished opinion).
B. Specificity
A complaint filed pursuant to section 7431 must allege with specificity the returns
or return information inspected or disclosed, the dates of inspection or
disclosure, to whom information was disclosed, and any other facts sufficient to
inform the defendant of the particulars of the alleged violation. Absent such
information, motions to dismiss for failure to state a claim pursuant to Federal
Rule of Civil Procedure 12(b)(6) have been successful. Generally, however,
courts dismiss without prejudice and provide plaintiffs an opportunity to amend
the complaint.
1. Aloe Vera of Am., Inc. v. United States, 580 F.3d 867, 872 (9th Cir.
2009) (two-year statute of limitations on claim for wrongful disclosure of
return information accrues when plaintiffs knew or should have known
of disclosure), remanded to 730 F. Supp. 2d 1020 (D. Ariz. 2010) (on
remand, district court held that certain plaintiffs’ failure to establish
specific dates barred portions of their complaint asserting that the IRS
had disclosed false information to a foreign tax authority and that the
IRS knew or should have known that the information would be leaked),
appeal docketed, No. 10-17136 (9th Cir. Sept. 24, 2010).
2. Bleavins v. United States, No. 90-3178, 1991 U.S. Dist. LEXIS 20975,
at *3-4 (C.D. Ill. Jan. 18, 1991) (complaint did not allege to whom the
information was disclosed or the items of information disclosed; action
dismissed without prejudice, providing plaintiff 20 days to amend
complaint).

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3. Colton v. IRS, No. CV-R-85-635-ECR, 1989 U.S. Dist. LEXIS 12021, at
*17-18 (D. Nev. Apr. 4, 1989) (dismissed complaint because it
contained mere legal conclusions not factual allegations).
4. Flippo v. United States, 670 F. Supp. 638, 641 (W.D.N.C. 1987) (case
dismissed against revenue agent personally and non-government
defendants for failure to allege specific instances of wrongdoing; district
court examined only whether violations of 6103 occurred in revenue
agent’s efforts to contact petitioner or institute collection), aff'd mem.,
849 F.2d 604 (table cite), 1988 WL 60765, at *1 (4th Cir. June 7, 1988).
5. May v. United States, No. 91-0650-CV-W-9, 1992 U.S. Dist. LEXIS
16055, at *6 (W.D. Mo. Apr. 17, 1992) (plaintiff must specifically allege
who made the alleged disclosures, to whom they were made, the
nature of the disclosures, the circumstances surrounding them, and the
dates on which they were made).
6. Soghomonian v. United States, 82 F. Supp.2d 1134, 1146-47 (E.D.
Cal. 1999) (section 7431 claim was subject to dismissal where
complaint failed to state the “specific taxpayer information allegedly
disclosed, the timing of such alleged disclosures,” and other pertinent
information).
7. Tobin v. Troutman, No. Civ. A. 3:98-CV-663-H, 1999 WL 501004, at *4
(W.D. Ky. June 8, 1999) (more than a mere allegation of a violation is
needed to state a claim).
C. Jury Trials
Section 7431 lawsuits are not subject to jury trials. The Seventh Amendment
right to a jury trial does not apply in actions against the federal government
unless Congress has waived sovereign immunity and created that right by
statute. See Lehman v. Nakshian, 453 U.S. 156, 162 n.9 (1981) (“Since there is
no generally applicable jury trial right that attaches when the United States
consents to suit, the accepted principles of sovereign immunity require that a jury
trial right be clearly provided in the legislation creating the cause of action.”); see
also United States v. Testan, 424 U.S. 392, 399 (1976) (“the United States, as
sovereign, is immune from suit save as it consents to be sued . . . and the terms
of its consent to be sued in any court define that court’s jurisdiction . . . a waiver
of the traditional sovereign immunity cannot be implied but must be
unequivocally expressed”) (internal quotations omitted).
Section 7431 is silent regarding a jury trial. Following the rationale in Lehman,
no such right exists in section 7431 cases. Accordingly, courts that have
considered whether a plaintiff is entitled to a jury trial pursuant to section 7431
have unanimously found that there is no such entitlement.

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1. Agbanc v. Berry, 678 F. Supp. 804, 809 (D. Ariz. 1988).
2. Carbo v. United States, No. Civ. A. 97-2461, 1998 WL 918473, at *3
(W.D. La. Dec. 30, 1998).
3. Christensen v. United States, 733 F. Supp. 844, 854 (D.N.J. 1990),
aff'd, 925 F.2d 416 (3d Cir. 1991) (table cite).
4. Ret. Care Assoc. v. United States, 3 F. Supp. 2d 1434, 1445 (N.D. Ga.
1998).
D. Exclusive Remedy
It is the IRS’s position, and most courts have agreed, that section 7431 is the
exclusive remedy for unauthorized disclosure of returns or return information.
This section explores some other remedies that plaintiffs have sought for alleged
disclosure violations.
1. Bivens
In Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403
U.S. 388 (1971), the Supreme Court recognized a cause of action against
federal employees who violated an individual’s Fourth Amendment rights,
even though the Fourth Amendment did not expressly authorize a remedy.
The court reasoned that “‘it is . . . well settled that where legal rights have
been invaded, and a federal statute provides for a general right to sue for
such invasions, federal courts may use any available remedy to make
good the wrong done.’” Id. at 396 (citing Bell v. Hood, 327 U.S. 678, 684
(1946)). However, the courts generally have declined to provide Bivens
relief to taxpayers for claims premised on tax administration activities
because of the comprehensive remedial scheme Congress passed in the
Code.
a. Cameron v. IRS, 773 F.2d 126, 129 (7th Cir. 1985) (“Congress
has given taxpayers . . . rights against an overzealous [official],
including . . . the right to sue the government for a refund if
forced to overpay taxes, and it would make the collection of
taxes chaotic if a taxpayer could bypass the remedies provided
by Congress simply by bringing a damage action against
Treasury employees”).
b. Fishburn v. Brown, 125 F.3d 979, 982-83 (6th Cir. 1997) (court
declined to create Bivens action against revenue officers for
alleged due process violations during seizure) (section 7433
case).

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c. Judicial Watch, Inc. v. Rossotti, 317 F.3d 401, 413 (4th Cir.
2003) (“‘it would be inappropriate to supplement the regulatory
scheme with a new judicial remedy’ for alleged retaliatory tax
audits”) (citing Bush v. Lucas, 462 U.S. 367 (1983)).
d. Malis v. United States, No. CV 83-7767 (CBM), 1986 WL 15721,
at *6 (C.D. Cal. Dec. 17, 1986) (no Bivens remedy lies for
improper disclosure of returns or return information).
e. Shreiber v. Mastrogiovanni, 214 F.3d 148, 155 (3d Cir. 2000)
(denial of Bivens remedy where plaintiff alleged violation of
equal protection based on religious animus because
“Congress’s efforts to govern the relationship between the
taxpayer and the taxman indicate that Congress has provided
what it considers to be adequate remedial mechanisms for
wrongs that may occur in the course of this relationship”).
2. Federal Tort Claims Act
A Federal Tort Claims Act (FTCA) claim cannot be premised on an
unauthorized disclosure because the liability of the United States arises
only when the law of the state where the alleged wrong occurred would
impose it. Because section 6103 - which creates the general
confidentiality rule covering returns and return information - is federal law,
not state law, there can be no action for unauthorized disclosures under
the FTCA.
a. Cecile Indus., Inc. v. United States, 793 F.2d 97, 100 (3d Cir.
1986) (FTCA not satisfied by federal statutes or regulations).
b. Fishburn v. Brown, 125 F.3d 979, 982 (6th Cir. 1997) (suits
alleging liability based on activity connected to the assessment
or collection of taxes are expressly excluded from the FTCA).
c. Johnson v. Sawyer, 47 F.3d 716, 729-30 (5th Cir. 1995) (en
banc) (claim wholly grounded on a duty imposed by federal
statute is not enough; state law of “negligence per se” and
respondeat superior were insufficient bases for federal tort
claim), rev’g and remanding, 980 F.2d 1490 (5th Cir. 1992).
d. Sellfors v. United States, 697 F.2d 1362, 1365 (11th Cir. 1983)
(FTCA not intended to redress breaches of federal statutory
duties).

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3. Exclusionary rule
a. In re Grand Jury, M.D.B. No. 82 536, slip op. at 10 (D. Mass.
Feb. 22, 1983) (quashing of a grand jury subpoena on the
grounds of a section 6103 violation is not a proper remedy under
section 7431).
b. Nowicki v. Commissioner, 262 F.3d 1162, 1163 (11th Cir. 2001)
(“[The] imposition of the exclusionary rule is not warranted for a
disclosure of return information which violates section 6103.
Congress has specifically provided civil (section 7431) as well
as criminal penalties (section 7213) for violations of section
6103. There is no statutory provision requiring exclusion of
evidence obtained in violation of section 6103 and we will not
invent one.”).
c. United States v. Chem. Bank, 593 F.2d 451, 457 (2d Cir. 1979)
(suppression of evidence may be available for a section 6103
violation) (dicta).
d. United States v. Lavin, 604 F. Supp. 350, 355-56 (E.D. Pa.
1985) (relying on Chemical Bank, above, to set aside portions of
an affidavit supporting a search warrant application because of
unauthorized disclosure).
e. United States v. Mangan, 575 F.2d 32, 41 (2d Cir. 1978)
(sections 7431 and 7213 are exclusive and therefore the
exclusionary rule is not available to redress alleged wrongful
disclosures) (dicta).
4. Injunctive relief
Trahan v. Regan, 718 F.2d 449, 455-57 (D.C. Cir. 1983) (declaratory
judgment is available to declare contemplated disclosures illegal and that,
if declared illegal, injunctive relief could be granted to enjoin the
contemplated disclosures) (subsequent history omitted).33
33

This is the only case where a court determined that declaratory relief was available to halt a
proposed disclosure. The facts of the case make the holding unique. Congress had directed the
Social Security Administration to check on the eligibility of benefits recipients. The GAO suggested
that the SSA use returns and return information to identify ineligible recipients. Faced with the
confidentiality provision of section 6103, the SSA mailed consent forms to over 4 million benefits
recipients. Contemporaneous class actions were brought against the IRS and SSA to, inter alia, halt
the disclosures, and for a determination as to the appropriateness of the consents. In granting the
injunction, the court of appeals noted that the consent forms mailed by the SSA failed to meet the
requirements of the Treasury regulations under section 6103(c).

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5. Conditional summons enforcement
There is a split in the circuits concerning conditional enforcement of
summonses.
a. United States v. Author Servs., Inc., 804 F.2d 1520, 1525 (9th
Cir. 1986) (relying on Texas Heart, below, even though
government had satisfied all the requirements for summons
enforcement, a court may, as part of its inherent authority to
assure that part of its process is not abused, condition summons
enforcement on the requirement that the government secure
court approval before the summoned records are disclosed to
other government agencies (the condition being imposed to
assure that any disclosure is in accordance with section 6103)),
amended by, 811 F.2d 1264 (9th Cir. 1987).
b. United States v. Barrett, 837 F.2d 1341, 1349 (5th Cir. 1988) (en
banc) (overruled Texas Heart, below, indicating that conditional
summons enforcement was inappropriate), cert. denied, 492
U.S. 926, reh'g denied, 493 U.S. 883 (1989).
c. United States v. Texas Heart, 755 F.2d 469, 482 (5th Cir. 1985)
(appropriate for district court to determine whether section 6103
was violated and, if so, to condition summons enforcement on
compliance with that section) overruled by Barrett, above.
d. United States v. Zolin, 491 U.S. 554, 561 (1989) (equally divided
Supreme Court let stand Ninth Circuit’s position on conditional
summons enforcement first adopted in Author Services, above)
on remand to 905 F.2d 1344 (9th Cir. 1990).
6. Privacy Act
Generally, courts have held that the Privacy Act is not available to redress
unauthorized disclosures of return information.
a. Berridge v. Heiser, 993 F. Supp. 1136, 1144 (S.D. Ohio 1997)
(plaintiffs erroneously brought their suit under the Privacy Act;
section 7431 is the exclusive remedy by which to bring a cause
of action for the unauthorized disclosure of returns or return
information).
b. Hobbs v. United States, 209 F.3d 408, 412 (5th Cir. 2000)
(Ҥ 6103 is a more detailed statute that should preempt the more
general remedies of the Privacy Act, at least where, as here,
those remedies are in conflict”).

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c. Sinicki v. United States, No. 97 CIV. 0901 (JSM), 1998 WL
80188, at *2-3 (S.D.N.Y. Feb. 24, 1998) (plaintiff brought suit
alleging that IRS violated Privacy Act by placing her tax returns
in her personnel file; court rejected IRS’s arguments that section
6103 prevails over the Privacy Act, and held that plaintiff may
pursue action for wrongful disclosure under both the Privacy Act
and section 7431, but noted, however, that to extent the Privacy
Act conflicted with section 6103, section 6103 prevailed).
7. 18 U.S.C. § 1030(g)
For claims arising from the alleged unauthorized inspection of return
information through the use of a computer, a civil remedy may also be
available under this criminal statute. However, certain conditions apply.
8. I.R.C. § 7433
The Code provides a civil damages remedy for unauthorized collection
activity occurring after November 10, 1988. The exclusive remedy for
alleged unauthorized disclosures occurring in the course of collection
activities is section 7433.
a. Elias v. United States, No. CV 90-0432-WJR(JRX), 1990 WL
264722, at *2 & n.7 (C.D. Cal. Dec. 21, 1990) (taxpayer may not
use section 7431 to challenge the merits of the assessment; it is
reasonable to assume that Congress did not intend for section
7431 damage suits to be maintained in situations arising from
collection activities given enactment of section 7433), aff'd
mem., 974 F.2d 1341 (9th Cir. 1992) (table cite).
b. Mann v. United States, 204 F.3d 1012, 1017 (10th Cir. Feb. 18,
2000) (section 7433 provides taxpayers a remedy for
unauthorized collection activities; court does not address
exclusivity issue).
c. Schipper v. United States, No. CV-94-4049 (CPS), 1998 WL
786451, at *9-12 (E.D.N.Y. Sept. 15, 1998) (United States liable
for unauthorized disclosures resulting from erroneous levies in
the course of a failed collection of a tax refund on plaintiff’s
wages and bank accounts despite plaintiff’s and plaintiff’s
counsel’s effort to correct the error; not a section 7433 matter
because IRS sought to recover an erroneous refund rather than
a tax assessment).

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d. Shwarz v. United States, 234 F.3d 428, 432-33 (9th Cir. 2000)
(section 7433 addresses the willful or negligent act of
disregarding Title 26 during the collection of taxes; therefore any
violation of section 6103 during collection of taxes is addressed
by section 7433).
e. Simpson v. United States, No. 90-30021-RV, 1991 WL 253014,
at *6-7 & n.8 (N.D. Fla. Oct. 9, 1991) (although disclosures in
various liens and levies were authorized by section 6103(k)(6),
section 7433(a) applied to one of the levy claims and precluded
any section 7431 liability).
f. Soghomonian v. United States, 82 F. Supp. 2d 1134, 1147 (E.D.
Cal. 1999) (plaintiff failed to state a claim when he brought claim
for unauthorized disclosure through filing of Notice of Federal
Tax Lien; section 7433 is the exclusive remedy).34
E. Authorized Disclosures Based Upon Validity of Summonses, Liens or
Levies
There is a split in the circuits concerning the relevance of the validity of
summonses, liens or levies to whether certain disclosures were authorized.
1. "[W]hether a disclosure is authorized under section 6103 is in no way
dependent upon the validity of the underlying summons, lien, or levy."
Elias v. United States, No. CV 90-0432-WJR (JRX), 1990 WL 264722,
at *5 (C.D. Cal. Dec. 21, 1990), aff'd mem., 974 F.2d 1341 (9th Cir.
1992) (table cite).
a. Farr v. United States, 990 F.2d 451, 455 (9th Cir. 1993) (where
disclosures were necessary to collection procedures, fact that
they may have been defective does not make disclosures
wrongful).
b. Huff v. United States, 10 F.3d 1440, 1447 (9th Cir. 1993)
(possible procedural lapses in collection process will not render
necessary disclosures wrongful).
c. Mann v. United States, 204 F.3d 1012, 1018-19 (10th Cir. 2000)
(distinguishing Chandler v. United States, 687 F. Supp. 1515 (D.
34

The amendments to section 7433 in RRA 98 lowered the threshold from willful to negligent
violations in the collection process and eliminated the use of section 7431 to collaterally attack
unauthorized collection actions.

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Utah 1988), aff’d per curiam, 887 F.2d 1397 (10th Cir. 1989),
which had been decided before the passage of section 7433,
where section 6103(k)(6) permits the issuance of levies and the
filings of liens, it is irrelevant whether there is a procedural
defect in the collection activity; “sections 6103 and 7431 address
improper disclosure of return information and not improper
collection activity”).
d. McAdams v. United States, Civ. A. No. 3:95-621, 1996 WL
303271, at *3 (W.D. La. June 24, 1996) (principle "that the
propriety of the underlying actions is irrelevant to the propriety of
the disclosure at issue, controls here").
e. Spence v. United States, 114 F.3d 1198 (table cite), No. 962196, 1997 WL 314836, at *4 (10th Cir. June 12, 1997) ("Neither
the plain language of the statute or the Treasury regulation [sic]
authorize this court to look behind the summons to determine
whether they [sic] were properly issued; §§ 7431 and 6103
address improper disclosure, not improper summons").
f. Venen v. United States, 38 F.3d 100, 105 (3d Cir. 1994) (court
joined "those cases that decline to consider the validity of the
underlying levy in deciding whether the IRS has disclosed in
violation of [I.R.C.] § 6103").
g. Wilkerson v. United States, 67 F.3d 112, 117-18 n.10 (5th Cir.
1995), reversing in part, No. 3:92-cv-78 (E.D. Tex. May 16,
1994) (Congress enacted separate and distinct provisions
concerning collection activities and information handling, and
"[t]hese two bodies of law must remain distinct[;]" absent
additional evidence, proof of a wrongful levy is "legally
insufficient" to support a claim for wrongful disclosure).
2. Another line of cases does consider the validity of the levy to be
relevant to and/or determinative of unauthorized disclosures under
section 7431.
a. Husby v. United States, 672 F. Supp. 442, 445 (N.D. Cal. 1987)
(disclosures made pursuant to a levy resulting from a computer
error did not fall under "good faith" exception because no
interpretation of section 6103 was involved).
b. Maisano v. United States, 908 F.2d 408, 409-10 (9th Cir. 1990)
(although not specifically linking the two, court considered
validity of the underlying tax liens and levies before finding IRS
authorized to disclose under section 6103).

1-41

c. Rorex v. Traynor, 771 F.2d 383, 386 (8th Cir. 1985) ("disclosure
in pursuance of an unlawful levy violates the confidentiality
requirement of § 6103(a) and is not authorized under
§ 6103(k)(6)").
d. Schipper v. United States, No. CV-94-4049 (CPS), 1998 WL
786451, at *9-12 (E.D.N.Y. Sept. 15, 1998) (United States held
liable for unauthorized disclosures resulting from repeated
erroneous levies on plaintiff’s wages and bank accounts despite
plaintiff’s and plaintiff’s counsel’s effort to correct error; however,
the disclosures in this case occurred in the context of a failed
collection of a tax refund, not the collection of a tax liability).
e. William E. Schrambling Accountancy Corp. v. United States, 689
F. Supp. 1001, 1006 (N.D. Cal. 1988) (improper notice of levy is
basis for liability under section 7431), rev'd on other grounds,
937 F.2d 1485 (9th Cir. 1991).
See also Chapter 4, pertaining to investigative disclosures, and Treas. Reg.
§ 301.6103(k)(6)-1.
F. Statute of Limitations
Section 7431(d) provides that actions for alleged unauthorized inspections or
disclosures of returns or return information must be brought within two years
after the date of discovery by the plaintiff of the unauthorized inspection or
disclosure.
1. Aloe Vera of Am., Inc. v. United States, 580 F.3d 867, 872 (9th Cir.
Sept. 2, 2009) (two-year statute of limitations on claim for wrongful
disclosure of return information accrues when plaintiffs knew or should
have known of disclosure), remanded to 730 F. Supp. 2d 1020 (D. Ariz.
Aug. 3, 2010) (district court held that plaintiffs’ failure to establish
specific dates barred portions of their complaint asserting false IRS
disclosures to a foreign tax authority), appeal docketed, No. 10-17136
(9th Cir. Sept. 24, 2010).
2. Amcor Capital Corp. v. United States, No. CV 94-6814 (GHKx), 1995
WL 515690, at *2-5 (C.D. Cal. June 13, 1995) (unauthorized disclosure
claim was time-barred because plaintiff failed to allege that it
discovered the unauthorized disclosure within two years of date claim
was made against United States; plaintiff's own letters and internal
memoranda proved that its allegations of not discovering the
government's misconduct and unauthorized disclosures until a later
date were false), aff'd, 106 F.3d 406 (table cite), 1997 WL 22248 (9th
Cir. Jan. 15, 1997).

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3. Carlson v. United States, CV. No. 94-00924 ACK, 1995 WL 687110, at
*2 (D. Haw. Sept. 22, 1995) (action filed in 1994 was outside the
limitations period when Certificate of Assessments and Payments
demonstrated that the administrative levies made against plaintiff
resulted in payments to IRS in 1989 and 1990).
4. Clark v. Internal Revenue Service, No. 06-CV-00544, 2011 WL
3157196, *15-16 (D. Haw. July 26, 2011) (District Court held that it did
not have jurisdiction over plaintiff’s section 7431 action upon finding
that plaintiff had actual knowledge that the Service issued a refund
check to an incorrect party (and thus made an unauthorized disclosure)
more than sixteen years before plaintiff filed her lawsuit alleging the
unauthorized disclosure of return information. The court concluded
that plaintiff’s “knowledge of the improperly issued refund check put her
on inquiry notice of any disclosures prior to the issuance of the refund
check.” Thus, the court did not have jurisdiction over plaintiff’s section
7431 lawsuit.)
5. Darby v. Jensen, 75 A.F.T.R.2d 95-2549, at *11-12 (D. Colo. May 15,
1995) (complaint, filed March 10, 1994, was outside statute of
limitations where plaintiff alleged his response to the IRS's letter
concerning dispute about 1989 exemptions and tax withholding was
mailed on March 22, 1991), aff’d, 78 F.3d 597 (table cite), 1996 WL
84111 (10th Cir. Feb. 27, 1996).
6. Gandy v. United States, 234 F.3d 281, 283-84 (5th Cir. 2000) (plaintiff
became aware that circular letters were sent to clients in September
1990, but suit was filed in August 1996; therefore, the section 7431
claim pertaining to those letters was time barred).
7. Hobbs v. United States, 1997 U.S. Dist. LEXIS 19230, at *18 (S.D.
Tex. Nov. 3, 1997) (plaintiff was aware that disclosures of his returns
and return information were made as early as 1990 and certainly by
April 1994; thus, when suit was brought in November 1996, claims
which accrued prior to November 1994 were time barred).
8. Pack v. United States, Civil No. 90-1002-LKK-PAN, 1991 U.S. Dist.
LEXIS 15523, at *3-4 (E.D. Cal. Oct. 11, 1991) (claims time barred
where plaintiff failed to submit any admissible evidence that he
discovered alleged wrongful disclosures within two years of filing of
complaint).
9. William E. Schrambling Accountancy Corp. v. United States, 689 F.
Supp. 1001, 1008 (N.D. Cal. 1988) (claims regarding levies issued
more than two years before filing of lawsuit barred by the statute of
limitations).

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G. Limited Stay of Discovery
Courts will often issue a limited stay of discovery in section 7431 cases while
awaiting the outcome of a pending related criminal proceeding.
1. Diamond v. United States, No. 3:87-cv-80086 (S.D. Iowa Sept. 6,
1990) (limited stay of discovery in section 7431 case because there
was a potential criminal prosecution of the plaintiff pending)
(subsequent history omitted).
2. Lancon v. United States, No. 4:92-cv-3499 (S.D. Tex. Feb. 11, 1998)
(Order Nov. 12, 1993 to "administratively close” section 7431 action
until conclusion of criminal proceedings involving the IRS employee
who made the alleged unauthorized disclosure).
3. McQueen v. United States, No. 4:91-cv-329 (S.D. Tex. Sept. 29, 1997)
(June 7, 1991 order granting an unlimited stay of discovery pending
resolution of related criminal investigation).
H. Survivability
Courts are split in determining whether a cause of action under section 7431
survives death of the plaintiff such that a plaintiff's estate may be substituted for
the plaintiff.
1. Schachter v. United States, 847 F. Supp. 140, 141-42 (N.D. Cal. 1993)
(rejecting argument that a section 7431 case was in the nature of a
personal tort action not intended to survive plaintiff's death, instead
finding it a property interest that should survive death and noting that
the statute provided for actual damages, an indication that property
rights were to be taken into account; administrator could be substituted
as plaintiff).
2. Shapiro v. Smith, 652 F. Supp. 218, 218-19 (S.D. Ohio 1986) (statute
was designed to protect only personal privacy rights and is therefore
governed by the rule that privacy actions do not survive the death of
the injured party).
I. Standing
1. Brown v. United States, 755 F. Supp. 285, 286-87 (N.D. Cal. 1990) (no
cause of action for disclosure of a Notice of Levy to plaintiff's employer
regarding her former husband's liability because it was not plaintiff's
return information, but that of her husband; under section 6103 there
had been no wrongful disclosure of her return information).

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2. Haywood v. United States, 642 F. Supp. 188, 192 (D. Kan. 1986)
(notice sent to taxpayer's employer revealed husband's tax liability, not
plaintiff's).
3. Kaiawe v. Dep't of Treasury, Civ. No. 95-00166 HG, 1995 WL 552260,
at *1 (D. Haw. June 21, 1995) (notwithstanding plaintiff's status as
president and sole shareholder of corporate taxpayer, plaintiff lacked
standing to assert wrongful disclosure and wrongful collection claims
pursuant to sections 7431 and 7433 on behalf of corporate taxpayer;
no evidence was presented that plaintiff was taxpayer's alter ego or
that he had personally suffered any injury).
4. Newberry v. United States, No. LR-C-86-13, 1986 WL 9460, at *3 (E.D.
Ark. June 4, 1986) (allegation that IRS received information unlawfully
resulted in dismissal for failure to state a claim under section 7431
because action lies only for the improper disclosure of returns or return
information).
5. Rogers v. United States, No. 94-1305-J(AJB), 1995 WL 775245, at *1
(S.D. Cal. Oct. 24, 1995) (government incorrectly assumed that plaintiff
was asserting that the return information of a third party was wrongfully
disclosed; court read complaint to clearly assert that plaintiff's own
return information was wrongfully disclosed and thus the government’s
motion to dismiss for lack of standing was denied).
6. Ruiz-Rivera v. IRS, 226 F. Supp. 2d 345, 349 (D.P.R. 2002) (only the
taxpayer whose return or return information has allegedly been
disclosed has standing to sue under section 7431).
7. Simpson v. United States, No. 91-30293 RV, 1991 WL 330932, at *2-3
(N.D. Fla. Nov. 27, 1991) (plaintiff’s allegations that - concerning
investigation of husband - circular letters requesting payment history of
husband, his company or payments made to plaintiff, insufficient to
confer standing to sue upon plaintiff), aff'd mem., 986 F.2d 507 (table
cite) (11th Cir. 1993).
8. Soghomonian v. United States, 82 F. Supp. 2d 1134, 1147 (E.D. Cal.
1999) (wife of taxpayer complainant does not have standing under
section 7431; also, where information disclosed was that of
partnership, not the plaintiff, and plaintiff was neither a partner nor
liable for partnership’s taxes; plaintiff does not have standing to sue for
unauthorized disclosure of return information).

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VI. OTHER CODE SECTIONS AUTHORIZING DISCLOSURE
Section 6103(a) provides that return information is confidential and may not be
disclosed "except as otherwise provided by" Title 26. Accordingly, permissible
disclosures of returns and return information are not limited to the exceptions to the
general rule enumerated in section 6103(c)-(o).
A. Case Law
1. Messinger v. United States, 769 F. Supp. 935, 938 (D. Md. 1991)
(under section 3406(c)(1), the IRS is authorized to release return
information to financial institutions to notify them of the necessity to
deduct interest and dividends for payees who are underreporting when
certain conditions occur; “Title 26 U.S.C. § 3406(c)(1) allows the IRS to
disclose the return information in question, provided that it met the
specific requirements set forth in the statute”).
2. O’Donnell v. United States, No. 84-2055-CIV-KEHOE, 1985 WL 1565,
at *2-3 (S.D. Fla. Mar. 26, 1985) (the IRS did not violate section 6103
by disclosing to plaintiff’s employer that plaintiff had filed a defective
certificate of exemptions because section “6103(a) prohibits the
disclosure of certain tax information except as authorized by this title
which refers to Title 26 U.S.C., the Internal Revenue Code,” and
section 3402 requires an employer to withhold taxes from wages in
accordance with procedures promulgated by the Secretary; inasmuch
as the procedures provide that the IRS will notify the employer when
the certificate is defective, it is evident that the IRS cannot so notify the
employer without disclosing the employee’s return information).
3. Swierkowski v. United States, 620 F. Supp. 149, 151 (E.D. Cal. 1985)
(section 3402(m)-(n) authorizes the promulgation of regulations relating
to claims for withholding allowances and for exemptions from
withholding; Treas. Reg. § 31.3402(f)(2)-1(g)(5) instructs the IRS to
furnish an employer with information such as an employee's status,
withholding allowances, etc.), aff'd mem., 800 F.2d 1145 (9th Cir. 1986)
(table cite).
4. Van Skiver v. United States, No. 89-1490-C, 1990 WL 11038, at *2 (D.
Kan. Jan. 31, 1990) (subsequent history omitted) (dealing with the
disclosure of return information through the filing of proper Notices of
Federal Tax Lien and issuing of levies authorized under Title 26; as a
matter of law, “[b]oth acts are not only permitted but required by the
statutes and the Regulations of the Internal Revenue Service when tax
assessments have been made and unpaid”; thus disclosures to
effectuate such liens or levies do not violate section 6103).

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B. I.R.C. § 9706(f)(1)
A mine operator can, within 30 days of receipt of an assignment of a United Mine
Workers of America (UMWA) beneficiary, “request from the Commissioner of the
Social Security Administration detailed information as to the work history of the
beneficiary and the basis of the assignment.” I.R.C. § 9706(f)(1). If section
9706(f)(1) permits the mine operator to request the wage information of the
assigned beneficiaries from the SSA, it necessarily implies that the SSA can
disclose the wage information to the mine operators. Section 9706 also
contains, at subparagraph (g), a provision pertaining to the confidentiality of such
information.
CONFIDENTIALITY OF INFORMATION — Any person to which
information is provided by the Commissioner of Social Security under this
section shall not disclose such information except in any proceedings
related to this section. Any civil or criminal penalty which is applicable to
an unauthorized disclosure under section 6103 shall apply to any
unauthorized disclosure under this section.
Reading subsections (g) and (f) of section 9706 in concert suggests that
Congress had a distinct reason for allowing and limiting the disclosure of
beneficiaries’ wage information in order to effectuate the Energy Policy Act of
1992, amended by Pub. L. No. 103-296, Title I, § 108(h)(9)(B) (1994), 108 Stat.
1487 and Pub. L. No. 109-432, Div. C, Title II, § 212(a)(3) (2006), 120 Stat.
3025.
For additional provisions of the Code that authorize the disclosure of returns and
return information, see generally Chapters 2 - 12, 14.

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PART III: CRIMINAL LIABILITY FOR WILLFUL
UNAUTHORIZED INSPECTION AND DISCLOSURE
I. I.R.C.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ad278a99a95882460. Public record. Not legal advice.