II. Explanation of the Bill
(Sec. 1105 of the Bill and new Sec. 7217 of the Code)
There is no explicit prohibition in the Code on high-level Executive Branch
influence over taxpayer audits and collection activity.
The Internal Revenue Code prohibits disclosure of tax returns and return
information, except to the extent specifically authorized by the Internal
Revenue Code (Sec. 6103). Unauthorized disclosure is a felony punishable
by a fine not exceeding $5,000 or imprisonment of not more than five
years, or both (Sec. 7213). An action for civil damages also may be brought
for unauthorized disclosure (Sec. 7431).
Reasons for Change
The Committee believes that the perception that it is possible that
high-level Executive Branch influence over taxpayer audits and collection
activity could occur has a negative influence on taxpayers' views of the
tax system. Accordingly, the Committee believes that it is appropriate to
prohibit such influence.
Explanation of Provision
The bill makes it unlawful for a specified person to request that any
officer or employee of the IRS conduct or terminate an audit or otherwise
investigate or terminate the investigation of any particular taxpayer with
respect to the tax liability of that taxpayer. The prohibition applies to the
President, the Vice President, and employees of the executive offices of
either the President or Vice President, as well as any individual (except
the Attorney General) serving in a position specified in section 5312 of
Title 5 of the United States Code (these are generally Cabinet-level
positions). The prohibition applies to both direct requests and requests
made through an intermediary. In the case of a law enforcement action
authorized by the Attorney General, discussions involving specified
persons with respect to that law enforcement action shall not be
considered to be requests made through an intermediary.
Any request made in violation of this rule must be reported by the IRS
employee to whom the request was made to the Chief Inspector of the IRS.
The Chief Inspector has the authority to investigate such violations and to
refer any violations to the Department of Justice for possible prosecution,
as appropriate. Anyone convicted of violating this provision will be
punished by imprisonment of not more than 5 years or a fine not exceeding
$5,000 (or both).
Three exceptions to the general prohibition apply. First, the prohibition
does not apply to a request made to a specified person by or on behalf of a
taxpayer that is forwarded by the specified person to the IRS. This
exception is intended to cover two types of situations. The first situation
is where a taxpayer (or a taxpayer's representative) writes to a specified
person seeking assistance in resolving a difficulty with the IRS. This
exception permits the specified person who receives such a request to
forward it to the IRS for resolution without violating the general
prohibition. The second situation that this first exception is intended to
cover is an audit or investigation by the IRS of a Presidential nominee.
Under present law (Sec. 6103(c)), nominees for Presidentially appointed
positions consent to disclosure of their tax returns and return information
so that background checks may be conducted. Sometimes an audit or other
investigation is initiated as part of that background check. The Committee
anticipates that any such audit or investigation that is part of such a
background check will be encompassed within this first exception.
The second exception to the general prohibition applies to requests for
disclosure of returns or return information under section 6103 if the
request is made in accordance with the requirements of section 6103.
The third exception to the general prohibition applies to requests made by
the Secretary of the Treasury as a consequence of the implementation of a
change in tax policy.
The provision applies to violations occurring after the date of enactment.