Several recent Congressional investigations of tax shelters, the Advance Pricing Agreement program, and certain charitable organizations have raised questions in the minds of taxpayers concerning how to maintain the confidentiality of sensitive information once it is turned over to a Congressional committee so that it is not "redisclosed" to other third parties. Unfortunately, the short answer is, it depends.
As an initial matter, there is no doubt that the Congressional tax-writing committees can get otherwise confidential taxpayer information from the IRS. Section 6103(f)(1) of the Code authorizes the IRS to disclose any return or return information to the Chairmen of the House Ways and Means Committee, the Senate Finance Committee, and the Joint Committee on Taxation upon a proper written request. Paragraphs (f)(2) and (f)(4) of section 6103 permit such disclosures to the Joint Committee' Chief of Staff and to designated staff members of the tax-writing committees, respectively. The main restriction on the IRS is that, if the information is taxpayer-specific (i.e., relates to or identifies, directly or indirectly, a particular taxpayer), the IRS must obtain the taxpayer's consent or make the disclosure to the committee or staff only in "closed executive session."
What happens once taxpayer-specific information produced by the IRS is in the hands of the committee or staff? There are two lines of potentially applicable authority preventing redisclosure to third parties. First, the general prohibition in section 6103(a)(1) against redisclosure of taxpayer returns or return information by any "officer or employee of the United States" is likely to apply. Although section 6103 does not contain a definition of "officer or employee of the United States," Congressional employees are often treated as "officers or employees" of the United States under various other statutes, such as personnel or employment laws. Members of Congress, by contrast, are not as clearly covered by the term, but the IRS reportedly takes the position that section 6103(a)(1) still applies to Members who receive taxpayer-specific information from it (although there is no public ruling to this effect). The Members of the tax-writing committees also have an historical practice of treating themselves as if they are subject to section 6103(a)(1)'s general prohibition against redisclosure of information.
Second, the rules of the respective houses and committees of Congress may apply to restrict further disclosure. Both the Senate and the House have rules permitting their committees (including the taxwriting committees) to conduct business in "executive session" not open to the public, although the conditions under which that can occur vary. Materials considered by the committees in executive session are generally confidential, subject to certain exceptions, and unauthorized disclosure of such materials can result in sanctions, including the termination of a staffer's employment or expulsion of a Member. Of course, those rules can be amended at any time by a majority of the legislative chamber in which they apply.
As a consequence of these restrictions and practices, it can generally be assumed that returns and taxpayer-specific return information that are disclosed by the IRS to Congressional bodies will remain confidential.
What about information disclosed to Congressional committees directly by taxpayers themselves or by persons doing business with the taxpayers? The answer here is less a legal one than a political one. Both houses of Congress and most committees have subpoena authority to obtain any materials relevant to an issue they are considering, and as a practical matter there are few restrictions on the Members of Congress once such materials are in their hands. Taxpayers frequently seek pledges of confidentiality from committees that have issued (or are threatening to issue) subpoenas, but the staff and Members ordinarily resist, so the best a taxpayer can ordinarily obtain is some agreement limiting the use of materials produced to the committees.
An example of how this process can go awry involves the recent Congressional investigations of Enron Corporation. Enron and the Congressional investigating committees entered into a written agreement of confidential information obtained from Enron to be disclosed only in the official meetings and reports of those committees. The committees also agreed to a similarly limited redisclosure policy with respect to information obtained from the IRS. However, the committees used the "report" exception to swallow up the rule. They ultimately issued a lengthy report containing detailed and specific information on Enron's business, accounting and tax activities. The political imperatives of issuing the Enron report overcame any Congressional qualms about redisclosing information that might have been considered confidential or proprietary. Copies of the agreements are actually reproduced in an Appendix to the Joint Committee's report on Enron's tax issues.
In sum, when Congress obtains information from the IRS, it is generally confidential and remains so. But information obtained by Congress from other sources can ordinarily be redisclosed barring an agreement to the contrary.
This article is designed to give general information on the developments covered, not to serve as legal advice related to specific situations or as a legal opinion. Counsel should be consulted for legal advice.
