[House Report 105-51]
[From the U.S. Government Publishing Office]
105th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 105-51
_______________________________________________________________________
TAXPAYER BROWSING PROTECTION ACT
_______
April 14, 1997.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______________________________________________________________________
Mr. Archer, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 1226]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 1226) to amend the Internal Revenue Code of 1986 to
prevent the unauthorized inspection of tax returns or tax
return information, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
I. Summary and Background............................................3
A. Summary............................................... 3
B. Background and Reasons for Legislation................ 3
C. Legislative History................................... 3
II. Explanation of the Bill...........................................3
III.Vote of the Committee.............................................5
IV. Budget Effects of the Bill........................................5
A. Committee Estimates of Budgetary Effects.............. 5
B. Budget Authority and Tax Expenditures................. 5
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 5
V. Other Matters To Be Discussed Under the Rules of the House........6
A. Committee Oversight Findings and Recommendations...... 6
B. Summary of Findings and Recommendations of the
Committee on Government Reform and Oversight......... 7
C. Constitutional Authority Statement.................... 7
D. Information Relating to Unfunded Mandates............. 7
E. Applicability of House Rule XXI clause 5(c)........... 7
VI. Changes in Existing Law Made by the Bill, as Reported.............7
The amendment is as follows:
At the end of the bill insert the following new section:
SEC. 3. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OF RETURNS AND RETURN
INFORMATION; NOTIFICATION OF UNLAWFUL INSPECTION OR
DISCLOSURE.
(a) Civil Damages for Unauthorized Inspection.--Subsection
(a) of section 7431 of the Internal Revenue Code of 1986 is
amended--
(1) by striking ``Disclosure'' in the headings for
paragraphs (1) and (2) and inserting ``Inspection or
disclosure'', and
(2) by striking ``discloses'' in paragraphs (1) and
(2) and inserting ``inspects or discloses''.
(b) Notification of Unlawful Inspection or Disclosure.--
Section 7431 of such Code is amended by redesignating
subsections (e) and (f) as subsections (f) and (g),
respectively, and by inserting after subsection (d) the
following new subsection:
``(e) Notification of Unlawful Inspection and Disclosure.--If
any person is criminally charged by indictment or information
with inspection or disclosure of a taxpayer's return or return
information in violation of--
``(1) paragraph (1) or (2) of section 7213(a),
``(2) section 7213A(a), or
``(3) subparagraph (B) of section 1030(a)(2) of title
18, United States Code,
the Secretary shall notify such taxpayer as soon as practicable
of such inspection or disclosure.''
(c) No Damages for Inspection Requested by Taxpayer.--
Subsection (b) of section 7431 of such Code is amended to read
as follows:
``(b) Exceptions.--No liability shall arise under this
section with respect to any inspection or disclosure--
``(1) which results from a good faith, but erroneous,
interpretation of section 6103, or
``(2) which is requested by the taxpayer.''
(d) Conforming Amendments.--
(1) Subsections (c)(1)(A), (c)(1)(B)(i), and (d) of
section 7431 of such Code are each amended by inserting
``inspection or'' before ``disclosure''.
(2) Clause (ii) of section 7431(c)(1)(B) of such Code
is amended by striking ``willful disclosure or a
disclosure'' and inserting ``willful inspection or
disclosure or an inspection or disclosure''.
(3) Subsection (f) of section 7431 of such Code, as
redesignated by subsection (b), is amended to read as
follows:
``(f) Definitions.--For purposes of this section, the terms
`inspect', `inspection', `return', and `return information'
have the respective meanings given such terms by section
6103(b).''
(4) The section heading for section 7431 of such Code
is amended by inserting ``INSPECTION OR'' before
``DISCLOSURE''.
(5) The table of sections for subchapter B of chapter
76 of such Code is amended by inserting ``inspection
or'' before ``disclosure'' in the item relating to
section 7431.
(6) Paragraph (2) of section 7431(g) of such Code, as
redesignated by subsection (b), is amended by striking
``any use'' and inserting ``any inspection or use''.
(e) Effective Date.--The amendments made by this section
shall apply to inspections and disclosures occurring on and
after the date of the enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Summary
H.R. 1226, as reported by the Committee on Ways and Means,
provides for a criminal penalty for unauthorized willful
inspection (``browsing'') of tax returns and return
information. The bill provides for civil damages for
unauthorized inspection, and also contains a notification
requirement.
B. Background and Reasons for Legislation
Widespread indications of browsing have made it imperative
that Congress create a criminal penalty in the Internal Revenue
Code to penalize this behavior.
C. Legislative History
Committee bill
H.R. 1226 was introduced by Chairman Archer (for himself,
Ms. Dunn, Mr. Rangel, Mrs. Johnson of Connecticut, Mr. Coyne,
Mr. Thomas, Mr. Herger, Mr. Camp, Mr. Ensign, Mr. Hayworth, Mr.
Weller, Mrs. Kennelly of Connecticut, Mr. Levin, Mr. Kleczka,
Mr. Lewis of Georgia, Mr. Neal of Massachusetts, Mr. Jefferson,
Mr. Tanner, Mrs. Thurman, and Mr. Portman) on April 8, 1997.
The bill was considered in a Committee on Ways and Means markup
on April 9, 1997, and was ordered favorably reported, with an
amendment, by voice vote.
II. EXPLANATION OF THE BILL
present law
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 willful 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).
There is no explicit criminal penalty in the Internal
Revenue Code for unauthorized inspection (absent subsequent
disclosure) of tax returns and return information. Such
inspection is, however, explicitly prohibited by the Internal
Revenue Service (``IRS'').\1\ In a recent case, an individual
was convicted of violating the Federal wire fraud statute (18
U.S.C. 1343 and 1346) and a Federal computer fraud statute (18
U.S.C. 1030) for unauthorized inspection. However, the U.S.
First Circuit Court of Appeals overturned this conviction.\2\
Unauthorized inspection of information of any department or
agency of the United States (including the IRS) via computer
was made a crime under 18 U.S.C. 1030 by the Economic Espionage
Act of 1996.\3\ This provision does not apply to unauthorized
inspection of paper documents.
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\1\ IRS Declaration of Privacy Principles, May 9, 1994.
\2\ U.S. v. Czubinski, DTR 2/25/97, p. K-2.
\3\ P.L. 104-294, sec. 201 (October 11, 1996).
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reasons for change
The Committee believes that it is important to have a
criminal penalty in the Internal Revenue Code to punish this
type of behavior. The Committee also believes that it is
appropriate to provide for civil damages for unauthorized
inspection parallel to civil damages for unauthorized
disclosure.
explanation of provisions
Criminal penalties (sec. 2 of the bill and new sec. 7213A of the Code)
The bill creates a new criminal penalty in the Internal
Revenue Code. The penalty is imposed for willful inspection
(except as authorized by the Code) of any tax return or return
information by any Federal employee or IRS contractor. The
penalty also applies to willful inspection (except as
authorized) by any State employee or other person who acquired
the tax return or return information under specific provisions
of section 6103. Upon conviction, the penalty is a fine in any
amount not exceeding $1,000,\4\ or imprisonment of not more
than 1 year, or both, together with the costs of prosecution.
In addition, upon conviction, an officer or employee of the
United States would be dismissed from office or discharged from
employment.
---------------------------------------------------------------------------
\4\ Pursuant to 18 U.S.C. sec. 3571 (added by the Sentencing Reform
Act of 1984), the amount of the fine is not more than the greater of
the amount specified in this new Code section or $100,000.
---------------------------------------------------------------------------
The Congress views any unauthorized inspection of tax
return information as a very serious offense; this new criminal
penalty reflects that view. The Congress also believes that
unauthorized inspection warrants very serious personnel
sanctions against IRS employees who engage in unauthorized
inspection, and that it is appropriate to fire employees who do
this.
Civil damages (sec. 3 of the bill and sec. 7431 of the Code)
The bill amends the provision providing for civil damages
for unauthorized disclosure by also providing for civil damages
for unauthorized inspection. Damages are available for
unauthorized inspection that occurs either knowingly or by
reason of negligence. Accidental or inadvertent inspection that
may occur (such as, for example, by making an error in typing
in a TIN) would not be subject to damages because it would not
meet this standard. The bill also provides that no damages are
available to a taxpayer if that taxpayer requested the
inspection or disclosure.
The bill also requires that, if any person is criminally
charged by indictment or information with inspection or
disclosure of a taxpayer's return or return information in
violation of section 7213 (a) or (b), section 7213A (as added
by the bill), or 18 USC section 1030 (a)(2)(B), the Secretary
notify that taxpayer as soon as practicable of the inspection
or disclosure.
effective date
The bill is effective for violations occurring on or after
the date of enactment.
III. VOTE OF THE COMMITTEE
In compliance with clause 2(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the following statement
is made concerning the vote on the motion to report the bill.
The bill (H.R. 1226) was ordered favorably reported, as amended
by voice vote on April 9, 1997, with a quorum present.
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimates
In compliance with clause 7(a) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the estimated budget effects of the bill as
reported.
The bill, as reported, is estimated to have an
indeterminate revenue effect.
B. Budget Authority and Tax Expenditures
Budget authority
In compliance with subdivision (B) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, the
Committee states that the provisions of the bill as reported
involve no new or increased budget authority.
Tax expenditures
In compliance with subdivision (B) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, the
Committee states that the provisions of the bill as reported
involve no new or increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with subdivision (C) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, requiring
cost estimate prepared by the Congressional Budget Office, the
Committee advises that the Congressional Budget Office has
submitted the following statement on this bill.
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 11, 1997.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1226, the Taxpayer
Browsing Protection Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz.
Sincerely,
June E. O'Neill, Director.
Enclosure.
H.R. 1226--Taxpayer Browsing Protection Act
H.R. 1226 would ban the authorized inspection of federal
tax returns or tax return information. Violators of the bill's
provisions would be subject to a criminal fine and
imprisonment. In addition, H.R. 1226 would permit taxpayers
whose returns are unlawfully inspected to bring a civil action
against the United States.
CBO estimates that enacting this legislation would have no
significant impact on the federal budget. While the bill could
lead to increases in both direct spending and receipts, the
amounts involved would be less than $500,000 a year. Because
H.R. 1226 could affect direct spending and receipts, pay-as-
you-go procedures would apply.
Enacting H.R. 1226 could increase government receipts from
criminal fines. Such fines would be deposited in the Crime
Victims Fund and would be spent in the following year. Thus,
direct spending from the fund would match the increase in
revenues with a one-year lag. In any case, CBO estimates that
the criminal fines would likely total less than $500,000 a
year.
Enacting this legislation also could increase civil actions
by taxpayers against the Internal Revenue Service. Successful
litigants would be paid from a permanent, indefinite
appropriation for Claims, Judgments, and Relief Acts. CBO
estimates that any increase in direct spending from such
payments also would total less than $500,000 annually.
H.R. 1226 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act of 1995
and would not impose costs on state, local, or tribal
governments.
The CBO staff contact for this estimate is Mark Grabowicz.
This estimate was approved by Robert A. Sunshine, Deputy
Assistant Director for Budget Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to subdivision (A) of clause 2(l)(3) of rule
XI of the Rules of the House of Representatives (relating to
oversight findings), the Committee advises that it was the
result of the Committee's oversight activities concerning
reports of unauthorized ``browsing'' of taxpayer's returns and
return information by Internal Revenue Service personnel that
the Committee concluded that it is appropriate to enact the
provisions contained in the bill as reported.
B. Summary of Findings and Recommendations of the Committee on
Government Reform and Oversight
With respect to subdivision (D) of clause 2(l)(3) of rule
XI of the Rules of the House of Representatives, the Committee
advises that no oversight findings or recommendations have been
submitted to this Committee by the Committee on Government
Reform and Oversight with respect to the provisions contained
in the bill.
C. Constitutional Authority Statement
With respect to clause 2(l)(4) of Rule XI of the Rules of
the House of Representatives (relating to Constitutional
Authority), the Committee states that the Committee's action in
reporting this bill is derived from Article I of the
Constitution, Section 7 (``All bills for raising revenue shall
originate in the House of Representatives'') and Section 8
(``The Congress shall have power to lay and collect taxes,
duties, imposts and excises, to pay the debts * * * of the
United States'').
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
The Committee has determined that the provisions of the
bill do not impose a Federal mandate on the private sector nor
a Federal intergovernmental mandate. Thus, the provisions of
the bill do not affect the competitive balance between the
private sector and State, local, and tribal government.
E. Applicability of House Rule XXI5(c)
Rule XXI5(c) of the Rules of the House of Representatives
provides, in part, that ``No bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase shall be considered as passed or agreed to unless
so determined by a vote of not less than three-fifths of the
Members.'' The Committee has carefully reviewed the provisions
of the bill, and states that the provisions of the bill do not
involve any Federal income tax rate increase within the meaning
of the rule.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3 of Rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman).
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 75--CRIMES, OTHER OFFENSES, AND FORFEITURES
Subchapter A--Crimes
PART I--GENERAL PROVISIONS
Sec. 7201. Attempt to evade or defeat tax.
* * * * * * *
Sec. 7213A. Unauthorized inspection of returns or return
information.
* * * * * * *
SEC. 7213. UNAUTHORIZED DISCLOSURE OF INFORMATION.
(a) Returns and return information.--
(1) * * *
(2) State and other employees.--It shall be unlawful
for any person (not described in paragraph (1))
willfully to disclose to any person, except as
authorized in this title, any return or return
information (as defined in section 6103(b)) acquired by
him or another person under subsection (d),
(i)(3)(B)(i), (l)(6), (7), (8), (9), (10), (12), or
(15) or (m)(2), (4), (5), (6), or (7) of section 6103.
Any violation of this paragraph shall be a felony
punishable by a fine in any amount not exceeding
$5,000, or imprisonment of not more than 5 years, or
both, together with the costs of prosecution.
* * * * * * *
SEC. 7213A. UNAUTHORIZED INSPECTION OF RETURNS OR RETURN INFORMATION.
(a) Prohibitions.--
(1) Federal employees and other persons.--It shall be
unlawful for--
(A) any officer or employee of the United
States, or
(B) any person described in section 6103(n)
or an officer or employee of any such person,
willfully to inspect, except as authorized in this
title, any return or return information.
(2) State and other employees.--It shall be unlawful
for any person (not described in paragraph (1))
willfully to inspect, except as authorized in this
title, any return or return information acquired by
such person or another person under a provision of
section 6103 referred to in section 7213(a)(2).
(b) Penalty.--
(1) In general.--Any violation of subsection (a)
shall be punishable upon conviction by a fine in any
amount not exceeding $1,000, or imprisonment of not
more than 1 year, or both, together with the costs of
prosecution.
(2) Federal officers or employees.--An officer or
employee of the United States who is convicted of any
violation of subsection (a) shall, in addition to any
other punishment, be dismissed from office or
discharged from employment.
(c) Definitions.--For purposes of this section, the terms
``inspect'', ``return'', and ``return information'' have the
respective meanings given such terms by section 6103(b).
* * * * * * *
CHAPTER 76--JUDICIAL PROCEEDINGS
* * * * * * *
Subchapter B--Proceedings by Taxpayers and Third Parties
Sec. 7421. Prohibition of suits to restrain assessment or
collection.
* * * * * * *
Sec. 7431. Civil damages for unauthorized inspection or
disclosure of returns and return information.
* * * * * * *
SEC. 7431. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OR DISCLOSURE OF
RETURNS AND RETURN INFORMATION.
(a) In general.--
(1) [Disclosure] Inspection or disclosure by employee
of United States.--If any officer or employee of the
United States knowingly, or by reason of negligence,
inspects or discloses any return or return information
with respect to a taxpayer in violation of any
provision of section 6103, such taxpayer may bring a
civil action for damages against the United States in a
district court of the United States.
(2) [Disclosure] Inspection or disclosure by a person
who is not an employee of United States.--If any person
who is not an officer or employee of the United States
knowingly, or by reason of negligence, inspects or
discloses any return or return information with respect
to a taxpayer in violation of any provision of section
6103, such taxpayer may bring a civil action for
damages against such person in a district court of the
United States.
[(b) No liability for good faith but erroneous
interpretation.--No liability shall arise under this section
with respect to any disclosure which results from a good faith,
but erroneous, interpretation of section 6103.]
(b) Exceptions.--No liability shall arise under this section
with respect to any inspection or disclosure--
(1) which results from a good faith, but erroneous,
interpretation of section 6103, or
(2) which is requested by the taxpayer.
(c) Damages.--In any action brought under subsection (a),
upon a finding of liability on the part of the defendant, the
defendant shall be liable to the plaintiff in an amount equal
to the sum of--
(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
disclosure or a disclosure] 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.
(d) Period for bringing action.--Notwithstanding any other
provision of law, an action to enforce any liability created
under this section may be brought, without regard to the amount
in controversy, at any time within 2 years after the date of
discovery by the plaintiff of the unauthorized inspection or
disclosure.
[(e) Return; return information.--For purposes of this
section, the terms ``return'' and ``return information'' have
the respective meanings given such terms in section 6103(b).]
(e) Notification of Unlawful Inspection and Disclosure.--If
any person is criminally charged by indictment or information
with inspection or disclosure of a taxpayer's return or return
information in violation of--
(1) paragraph (1) or (2) of section 7213(a),
(2) section 7213A(a), or
(3) subparagraph (B) of section 1030(a)(2) of title
18, United States Code,
the Secretary shall notify such taxpayer as soon as practicable
of such inspection or disclosure.
(f) Definitions.--For purposes of this section, the terms
``inspect'', ``inspection'', ``return'', and ``return
information'' have the respective meanings given such terms by
section 6103(b).
[(f)] (g) Extension to information obtained under section
3406.--For purposes of this section--
(1) any information obtained under section 3406
(including information with respect to any payee
certification failure under subsection (d) thereof)
shall be treated as return information, and
(2) any inspection or use of such information other
than for purposes of meeting any requirement under
section 3406 or (subject to the safeguards set forth in
section 6103) for purposes permitted under section 6103
shall be treated as a violation of section 6103.
For purposes of subsection (b), the reference to section 6103
shall be treated as including a reference to section 3406.
* * * * * * *