          Disclosure of Tax Division Files for Purposes of
                 General Accounting Office Audit

Under 31 U.S.C. §67 and 26 U.S.C. §6103, the Tax Division of the Departm ent of
 Justice may disclose to the General Accounting Office (GAO) case files containing tax
 returns and related information for the purpose o f and to the extent necessary in
 G A O ’s audit of Internal Revenue Service operations.

                                                                      January 13, 1981

M EM ORANDUM OPIN IO N FO R T H E ASSISTA N T A TTO R N EY
             G E N ER A L, TAX D IV ISIO N

  This responds to your request for the opinion of this Office as to
whether it is permissible for you to disclose to the General Accounting
Office (GAO) your files concerning certain tax cases. On October 17,
1979, the Chairman of the Subcommittee on Commerce, Consumer, and
Monetary Affairs of the House Committee on Government Operations
requested the Comptroller General to review the activities o f the Inter­
nal Revenue Service (IRS) with respect to tax protester activities. The
review is designed to assess the nature and scope o f the tax protester
problem and to evaluate the actions taken by the IRS in dealing with
that problem. As part of its review, G A O has requested that the Tax
Division of the Department of Justice furnish its files with respect to 16
test cases involving alleged “vow of poverty” protester schemes. Pros­
ecution has been declined in eight cases and authorized in the others.
Your inquiry relates specifically to your files, each of which you state
contains tax returns and return information.1 We believe that the Tax
Division is permitted to disclose such material to GAO under the
provisions of 31 U.S.C. § 67 and 26 U.S.C. § 6103.

                                     I. Background

  The Tax Reform Act of 1976 enacted into law 26 U.S.C. § 6103,
whose principal purpose is to establish “a general rule that tax returns
and return information are to be confidential and not subject to disclo­
sure except as specifically provided by statute.” House Committee on
Ways and Means, 94th Cong., 2d Sess., Summary of the Conference

  1 We are informed that GAO does not seek grand jury material, whose disclosure is governed by
Fed. Rule Crim. Proc. 6(e).

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Agreem ent on the Tax Reform Act of 1976 (H.R. 10612), 43 (Comm.
Print 1976). Under 26 U.S.C. § 6103(a), no officer or employee of the
United States is permitted to “disclose any return or return information
obtained by him . . . in connection with his service as such an officer
o r an employee . . . .” The term “return” is defined as any part of a
“tax or information return, declaration of estimated tax, or claim for
refund . . . . ” § 6103(b)(1). T h e term “return information” is defined as
“a taxpayer’s identity, the nature, source, or amount o f his income,
payments, receipts, deductions, exemptions, credits, assets, liabilities, net
w orth, tax liability, tax withheld, deficiencies, overassessments, or tax
payments, w hether the taxpayer’s return was, is being, or will be
examined or subject to other investigation or processing . . . .”
§ 6103(b)(2).
   Section 6103 contains a number of limited exceptions to the general
rule of confidentiality. T he exception relevant for purposes of the
present inquiry appears in § 6103(i)(6). That provision states, in perti­
nent part, that “upon written request by the Comptroller General of the
U nited States, returns and return information shall be open to inspec­
tion by, o r disclosure to, officers and employees of the General A c­
counting Office for the purpose of, and to the extent necessary in,
making—(i) an audit of the Internal Revenue Service . . . which may
be required by section 117 o f the Budget and Accounting Procedures
A ct of 1950 (31 U.S.C. 67) . . . .” The relevant provision of 31 U.S.C.
§ 67 in turn empowers the Com ptroller General to “make, under such
rules and regulations as he shall prescribe, audits of the Internal Reve­
nue Service.” It authorizes G A O representatives to inspect returns and
return information “ [f]or the purposes of, and to the extent necessary
in,” making those audits. G A O representatives are also permitted access
“ to all other books, accounts, financial records, reports, files, papers,
things, and property belonging to or in use by the Internal Revenue
Service . . . .” 31 U.S.C. § 67(d) (Supp. I 1977).
   F o r present purposes, the principal questions are (1) whether the
G A O ’s requested examination of Tax Division files would be “for the
purpose of, and to the extent necessary in, making an audit of the
Internal Revenue Service”; and (2) whether § 6103(i)(6) contemplates
disclosure by any agency having lawful possession of returns and return
information. W e believe that the answer to both questions is in the
affirmative.
                               II. Discussion

  Under § 6103(i)(6), returns and return information may be disclosed
to the G A O only “for the purpose of, and to the extent necessary in,”
making an audit o f the IRS. This provision was enacted to carry out a
general congressional goal o f “permit[ting] the G A O to independently
conduct management audits to review IRS administration of the tax

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laws.” H.R. Rep. No. 480, 95th Cong., 1st Sess. 6 (1977). The provision
resolved a longstanding dispute between GA O and IRS with respect to
G A O ’s authority to examine IRS files. The legislation was designed to
enable the “G A O . . . [to] serve as a means o f identifying alleged IRS
abuses and weakness,” id., for Congress believed, that “as a consequence
of [its] refusal [to allow inspection], IRS’ . . . management practices
and administration of the tax laws have not been as efficient as they
otherwise would have been.” Id. at 7. Congress thus intended “that the
GAO examine returns and individual tax transactions only for the
purpose of, and to the extent necessary to serve as a reasonable basis
for, evaluating the effectiveness, efficiency and economy o f IR S operations
and activities. ” General Explanation of the Tax Reform A ct of 1976,
Joint Committee on Taxation, H.R. Rep. No. 10612, 94th Cong., 2d
Sess. 337 (1976) (emphasis added). See also S. Rep. No. 42, 95th Cong.,
 1st Sess. 1 (1977). Congress’ authorization o f disclosure of returns and
return information to the GAO must be read in light o f this overriding
purpose.
   The Tax Division files contain two principal items: (1) tax returns
and (2) files of the Division that contain returns and return information.
The first question is w hether disclosure of that material is justified as
“for the purpose of, and to the extent necessary in,” auditing the IRS.
We believe it is so justified. We note, first, that both the IRS and
GAO 2 are agreed that disclosure of the documents at issue is properly
regarded as “necessary in” making an audit o f the IRS. This construc­
tion of the statute, agreed upon by the two agencies responsible for
administering the statute’s relevant provision, “is entitled to deference
unless it can be said not to be a reasoned and supportable interpretation
of the A ct.” Whirlpool Corp. v. Marshall, 445 U.S. 1, 11 (1980). The
IRS and G A O state that review of the Department’s files may well aid
GAO in assessing the effectiveness of the IRS’ operations. The files
may themselves evaluate IRS actions and will in all likelihood indicate
whether the IRS has been referring cases to the Department of Justice
in appropriate circumstances. G A O ’s task would be facilitated if, for
example, the Department has concluded that the IRS has compiled
insufficient evidence in cases in which it has recommended prosecution.
G A O would also be aided if the files showed that IRS recommenda­
tions were being followed in most cases or that the reasons why
prosecution was declined had nothing to do with the IR S’ performance.
The files may well show whether the IRS has properly selected, inves­
tigated, developed, and referred criminal cases. For these reasons, we
believe that the interpretation offered by GA O and IRS is a “ reasoned
and supportable” one.

   2 The IRS and GA O were requested to provide memoranda expressing their views on the questions
presented, and they reached identical conclusions.

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   T he second question is w hether § 6103(i)(6) contemplates disclosure
by any agency having lawful possession of returns and return informa­
tion, or w hether the disclosure must be made solely by IRS personnel.
In this context as well, the IRS and GA O are agreed that the statute
permits disclosure by the Tax Division. We believe that the language,
history, and structure of the statute are compatible with this view.
First, § 6103(i)(6) states in broad terms that returns and return informa­
tion “shall be open to inspection by, or disclosure to” GAO. The
statute does not state that the materials should be disclosed only by the
Secretary of the Treasury. This is a significant factor, for a number of
the tax disclosure provisions state in plain terms that it is “the Secre­
tary” w ho “m ay” or “shall” disclose returns or return information. See
26 U.S.C. § 6103(c), (0, (g)- Similarly, the legislative history contains
no indication that disclosure under § 6103(i)(6) was to be made solely
by the IRS. See S. Rep. No. 938, 94th Cong., 2d Sess. 341 (1976).
Finally, the structure of the statute supports the interpretation offered
by the G A O and IRS, for, as noted, Congress made explicit who the
releasing party must be w hen it intended that disclosure be made only
by that party.3
   W e conclude by observing that anomalous results would be produced
if the interpretation proposed by G A O and the IRS were rejected.
There is no dispute that the relevant returns and return information
may be obtained from the IRS, which has copies of the tax returns in
question. T he intention underlying the tax disclosure provisions of the
A ct—to limit undue circulation of returns and return information—
would plainly not be furthered if § 6301 (i)(6) were interpreted to pre­
clude disclosure o f the T ax Division’s files, for the same information
protected by the tax disclosure provisions is available to GA O in any
event. T he statutory purpose of preventing disclosure of returns and
return information would not, therefore, be served if G A O ’s request
w ere denied. As a result, we see no sufficient basis for rejecting the
interpretation offered by G A O and IRS. W e conclude that you are
perm itted to disclose the files in question.

                                                                 L eo n U lm a n
                                                     Deputy Assistant Attorney General
                                                         Office o f Legal Counsel




  3 W e also note that the Secretary o f the Treasury has promulgated regulations permitting disclosure
by other federal agencies in lawful possession of returns and return information even when the statute
on its face requires disclosure by the Secretary See Treas. Reg. § 301.6103(p)(2)(B)-l(a).

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