Proposed Legislative Changes To Disclosure and Administrative Summons Provisions of Internal Revenue Code

GAO analyzed some Senate bills which, if enacted, would substantially revise the disclosure and administrative provisions of the Internal Revenue Code. The disclosure provisions had afforded taxpayers increased privacy over information they provided the Internal Revenue Service (IRS), but had adversely impacted the ability of IRS to coordinate with other members of the law enforcement community. GAO supported the overall thrust of the bills proposed by the Senate. However, GAO suggested some modifications. GAO supported efforts to simplify tax information categories, but all information supplied by the taxpayers to IRS should have the protection a "return" category warrants. GAO would limit "return" information which would be available to Justice Department attorneys to determine that a return exists before seeking court-ordered access. GAO would limit the authority to request tax information to fewer Justice attorneys than is proposed in the legislative changes. While GAO did not object to court review of IRS determinations, it seemed unnecessary. A proposal which would obligate IRS to disclose third-party information to other Federal law enforcement agencies could cause IRS to become deeply involved in intelligence gathering to the detriment of its basic responsibilities. GAO supported the intent of a bill which would require IRS to disclose to other Federal agencies, without court order, necessary information concerning a threat to persons, property, or national security; however, it seemed unnecessarily broad in scope. Other bills commented on would effect desirable changes to the summons and disclosure penalty provisions of the Internal Revenue Code. The bills did not address a second important issue, restrictions on the use of tax data for exclusively civil and administrative purposes. Congress may want to address this issue in considering the amendments.