[Federal Register Volume 68, Number 132 (Thursday, July 10, 2003)]
[Rules and Regulations]
[Pages 41073-41077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17384]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9073]
RIN 1545-BB17


Disclosure of Return Information by Certain Officers and 
Employees for Investigative Purposes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations and removal of final regulations.

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SUMMARY: This document contains temporary regulations relating to the 
disclosure of return information pursuant to section 6103(k)(6) of the 
Internal Revenue Code. The temporary regulations describe the 
circumstances under which officers or employees of the IRS, the IRS 
Office of Chief Counsel, and the Office of Treasury Inspector General 
for Tax Administration (TIGTA), in connection with official duties 
relating to any examination, administrative appeal, collection 
activity, administrative, civil, or criminal investigation, enforcement 
activity, ruling, negotiated agreement, prefiling activity, or other 
proceeding or offense under the internal revenue laws or related 
statutes, or in preparation for any proceeding described in section 
6103(h)(2) (or investigation which may result in such a proceeding), 
may disclose return information to the extent necessary to obtain 
information relating to such official duties or to accomplish properly 
any activity connected with

[[Page 41074]]

such official duties. The temporary regulations amend the existing 
regulations to clarify and elaborate on the facts and circumstances in 
which disclosure pursuant to section 6103(k)(6) is authorized. The 
temporary regulations clarify that IRS and TIGTA officers and employees 
make the determination, based on the facts and circumstances, at the 
time of the disclosure, whether a disclosure is necessary to obtain the 
information sought, and that section 6103(k)(6) does not affect the 
authority or decision of IRS and TIGTA officers and employees to 
initiate, or to conduct, an investigation, or to determine the nature 
of the investigation. The temporary regulations clarify that the return 
information of any taxpayer, not only the taxpayer under investigation, 
may be disclosed when necessary to obtain the information sought in an 
investigation. The temporary regulations clarify that section 
6103(k)(6) permits IRS and TIGTA officers and employees to identify 
themselves, their organizational affiliation with the IRS (e.g., 
Criminal Investigation (CI)) or TIGTA (e.g., Office of Investigations 
(OI)), and the nature of their investigation when making oral, written, 
or electronic contacts with third party witnesses. The text of the 
temporary regulations also serves as the text of the proposed 
regulations set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section in this issue of the Federal 
Register.

DATES: Effective Date: These temporary regulations are effective July 
10, 2003.

FOR FURTHER INFORMATION CONTACT: Helene R. Newsome, 202-622-4570 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Under section 6103(a), returns and return information are 
confidential unless the Code authorizes disclosure. Section 6103(k)(6) 
authorizes an internal revenue officer or employee and an officer or 
employee of TIGTA, in connection with official duties relating to any 
audit, collection activity, civil or criminal tax investigation, or 
offense under the internal revenue laws or related statutes, to 
disclose return information to a person other than the taxpayer to whom 
such return information relates (or his or her representative) to the 
extent that such disclosure is necessary to obtain information not 
otherwise reasonably available with respect to the correct 
determination of tax, liability for tax, or the amount to be collected, 
or with respect to the enforcement of any other provision of the Code 
or related statutes. Disclosure is subject to situations and conditions 
prescribed by regulation.
    The temporary regulations amend the existing regulations to reflect 
a recent legislative amendment to section 6103(k)(6). The Consolidated 
Appropriations Act, 2001, Public Law 106-554 (114 Stat. 2763), was 
signed into law on December 21, 2000. Section 1 of that Act enacted 
into law H.R. 5662, the Community Renewal Tax Relief Act of 2000. 
Section 313(c) of the Community Renewal Tax Relief Act of 2000 amended 
section 6103(k)(6) to clarify that officers or employees of TIGTA are 
among those persons authorized to make disclosures under section 
6103(k)(6).
    The temporary regulations also clarify the standard used in 
determining whether disclosures are authorized under section 
6103(k)(6). Recent litigation indicates that there is some confusion as 
to the authority of IRS (and now TIGTA) officers and employees to make 
disclosures in certain situations under section 6103(k)(6). The 
temporary regulations seek to address these issues. In particular, the 
temporary regulations address the issues surrounding the disclosures 
that occur when IRS or TIGTA officers and employees introduce 
themselves to third party witnesses or communicate in writing using, 
e.g., official letterhead that reveals affiliation with IRS or TIGTA. 
The temporary regulations also clarify that section 6103(k)(6) does not 
limit IRS or TIGTA officers and employees with respect to the 
initiation or conduct of an investigation. Finally, the temporary 
regulations clarify that section 6103 does not require IRS and TIGTA 
officers or employees to contact a taxpayer for information before 
contacting third party witnesses.

Explanation of Provisions

    The temporary regulations amend the existing regulations to clarify 
that there is a single, objective standard for all disclosures under 
section 6103(k)(6). This standard is embodied in the definitions of the 
terms disclosure of return information to the extent necessary and 
information not otherwise reasonably available.
    The definition of disclosure of return information to the extent 
necessary is a disclosure of return information that an IRS or TIGTA 
officer or employee, based on the facts and circumstances known to the 
officer or employee at the time of the disclosure, reasonably believes 
is necessary to obtain information to perform properly the official 
duties described by the temporary regulations, or to accomplish 
properly the activities connected with carrying out those official 
duties. The term necessary in this context does not mean essential or 
indispensable, but rather appropriate and helpful in obtaining the 
information sought.
    The definition of information not otherwise reasonably available is 
information that an IRS or TIGTA officer or employee reasonably 
believes, under the facts and circumstances known to the officer or 
employee at the time of a disclosure, cannot be obtained in a 
sufficiently accurate or probative form, or in a timely manner, and 
without impairing the proper performance of the official duties 
described by the temporary regulations, without making the disclosure. 
Corroboration of information provided by, or concerning, a taxpayer is, 
by definition, information not otherwise reasonably available from the 
taxpayer. In criminal cases, corroboration of information provided by 
the taxpayer is essential. See Smith v. United States, 348 U.S. 147 
(1954).
    The temporary regulations clarify that section 6103(k)(6) does not 
alter or affect the authority of IRS and TIGTA officers or employees to 
decide whether or how to conduct an investigation. For example, in an 
action for wrongful disclosure under section 7431, the inquiry is 
whether the particular disclosure at issue was consistent with section 
6103(k)(6), not the necessity of conducting an investigation or the 
appropriateness of the means or methods chosen to conduct the 
investigation. Thus, the temporary regulations remove the term 
necessary from several places in the existing regulations where the 
term may have implied a requirement, under section 6103(k)(6), that the 
information sought be necessary to or for an investigation (e.g., Sec.  
301.6103(k)(6)-1(a)(``disclose * * * to obtain necessary 
information'')). Removal of the term necessary in these instances 
clarifies that the standard is whether disclosure is necessary to 
obtain the information sought, not whether the information sought is 
necessary for the investigation. See Barrett v. United States, 795 F.2d 
446 (5th Cir. 1986).
    The temporary regulations also address certain issues that have 
arisen in criminal investigations, although similar issues may arise in 
civil investigations. Criminal investigations typically involve 
obtaining evidence and verifying taxpayer-supplied information through 
contacts with third party witnesses. A disclosure that a taxpayer is 
under criminal investigation may occur by various means including, but 
not limited to, direct oral, written, or electronic disclosure, or 
indirect

[[Page 41075]]

disclosure by the introduction of the special agent through the 
presentation of a CI or OI badge, credential, or business card, or 
through the use of information document requests, summonses, or 
correspondence, about an identified taxpayer, on CI or OI letterhead or 
that bears a CI or OI return address or signature block. In litigation, 
taxpayers have asserted that CI special agents, by various means, 
wrongfully disclosed the criminal nature of the investigation of the 
taxpayers in the course of conducting third party witness interviews or 
inquiries. See, e.g., Comyns v. United States, 155 F. Supp. 2d 1344 
(S.D. Fla. 2001), aff'd, 287 F.3d 1034 (11th Cir. 2002); Payne v. 
United States, 91 F. Supp. 2d 1014 (S.D. Tex. 1999), rev'd, 289 F.3d 
377 (5th Cir. 2002); Gandy v. United States, 99-1 U.S. Tax Cas. (CCH) 
para. 50,237 (E.D. Tex. 1999), aff'd, 234 F.3d 281 (5th Cir. 2000); 
Rhodes v. United States, 903 F. Supp. 819 (M.D. Pa. 1995); Diamond v. 
United States, 944 F.2d 431 (8th Cir. 1991).
    When CI special agents disclose to third party witnesses that a 
taxpayer is under criminal investigation, there is a risk that the 
disclosure may adversely affect the taxpayer's reputation, particularly 
if the third party witnesses have no prior independent knowledge of the 
investigation. The government and third party witnesses have equally 
important interests at stake: The CI special agents' authority to 
accurately identify themselves so as not to mislead third party 
witnesses, and the third party witnesses' interest in knowing that the 
inquiry involves a criminal investigation to fairly assess the 
situation and protect their own interests. See Roebuck v. United 
States, 83 A.F.T.R.2d (RIA) para. 99-2947 (E.D.N.C. 1999), aff'd, 84 
A.F.T.R.2d (RIA) para. 99-7051 (4th Cir. 1999). This issue has 
concerned the Department of the Treasury and the Staff of the Joint 
Committee on Taxation, both of which have recommended legislation to 
clarify that CI special agents may identify themselves as CI special 
agents when contacting third party witnesses in the course of a 
criminal investigation. See Study of Present-Law Taxpayer 
Confidentiality and Disclosure Provisions as Required by Section 3802 
of the Internal Revenue Service Restructuring and Reform Act of 1998, 
Vol. I: Study of General Disclosure Provisions (JCS-1-00), at 208-11, 
Joint Committee on Taxation, January 28, 2000; Report to the Congress 
on Scope and Use of Taxpayer Confidentiality and Disclosure Provisions, 
Vol. I: Study of General Provisions, at 51-52, Office of Tax Policy, 
Department of the Treasury, October 2000. The temporary regulations 
clarify that section 6103(k)(6) permits, but does not require, IRS or 
TIGTA officers or employees, including CI or OI special agents, to 
identify themselves, their organizational affiliation with the IRS or 
TIGTA, and the nature of the investigation, when making oral, written, 
or electronic contacts with third party witnesses.
    Moreover, the temporary regulations do not require IRS or TIGTA 
officers or employees to contact a taxpayer for information before 
contacting a third party witness. The temporary regulations clarify 
that, if an IRS or TIGTA officer or employee reasonably believes, under 
the facts and circumstances, at the time of a disclosure, that 
information cannot be obtained from a taxpayer in a sufficiently 
accurate or probative form, or in a timely manner, without impairing 
the proper performance of official duties, then the officer or employee 
may disclose taxpayer identity or other return information in seeking 
information from a third party. For example, a taxpayer may be a 
reasonable source of routine business records, but not of records 
detailing alleged illegal transactions or sources of income. The facts 
and circumstances will help determine the necessity of the disclosures, 
but IRS and TIGTA officers or employees have wide latitude to determine 
whether the taxpayer is a reasonable source of information. The 
temporary regulations clarify that disclosures are authorized to verify 
independently, or to corroborate, from third party sources, information 
obtained from or concerning the taxpayer.
    The temporary regulations expand upon the list of official duties 
relating to tax administration for which disclosure, pursuant to 
section 6103(k)(6), is authorized, and clarify that this list is not 
exhaustive. Finally, the temporary regulations retain the authority for 
IRS and TIGTA officers or employees to make section 6103(k)(6) 
disclosures in certain personnel or claimant representative matters.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that 5 U.S.C. 553(b), the Administrative Procedure Act, does 
not apply to these regulations, and because the regulation does not 
impose a collection of information on small entities, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to 
section 7805(f), these temporary regulations will be submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal author of these regulations is Helene R. Newsome, 
Office of the Associate Chief Counsel (Procedure and Administration), 
Disclosure and Privacy Law Division.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
Taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 is amended by adding 
an entry in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 301.6103(k)(6)-1T also issued under 26 U.S.C. 
6103(k)(6); * * *


Sec.  301.6103(k)(6)-1  [Removed]

0
Par. 2. Section 301.6103(k)(6)-1 is removed.

0
Par. 3. Section 301.6103(k)(6)-1T is added to read as follows:


Sec.  301.6103(k)(6)-1T  Disclosure of return information by certain 
officers and employees for investigative purposes (temporary).

    (a) General rule. (1) Pursuant to the provisions of section 
6103(k)(6) and subject to the conditions of this section, an internal 
revenue employee or an Office of Treasury Inspector General for Tax 
Administration (TIGTA) employee, in connection with official duties 
relating to any examination, administrative appeal, collection 
activity, administrative, civil or criminal investigation, enforcement 
activity, ruling, negotiated agreement, prefiling activity, or other 
proceeding or offense under the internal revenue laws or related 
statutes, or in preparation for any proceeding described in section 
6103(h)(2) (or investigation which may result in such a proceeding), 
may disclose return information, of any taxpayer, to the extent 
necessary to obtain information relating to such official duties or to 
accomplish properly any activity connected with such official duties, 
including, but not limited to--

[[Page 41076]]

    (i) Establishing or verifying the correctness or completeness of 
any return or return information;
    (ii) Determining the responsibility for filing a return, for making 
a return if none has been made, or for performing such acts as may be 
required by law concerning such matters;
    (iii) Establishing or verifying the liability (or possible 
liability) of any person, or the liability (or possible liability) at 
law or in equity of any transferee or fiduciary of any person, for any 
tax, penalty, interest, fine, forfeiture, or other imposition or 
offense under the internal revenue laws or related statutes or the 
amount thereof for collection;
    (iv) Establishing or verifying misconduct (or possible misconduct) 
or other activity proscribed by the internal revenue laws or related 
statutes;
    (v) Obtaining the services of persons having special knowledge or 
technical skills (such as, but not limited to, knowledge of particular 
facts and circumstances relevant to a correct determination of a 
liability described in paragraph (a)(1)(iii) of this section skills 
relating to handwriting analysis, photographic development, sound 
recording enhancement, or voice identification) or having recognized 
expertise in matters involving the valuation of property if relevant to 
proper performance of official duties described in this paragraph;
    (vi) Establishing or verifying the financial status or condition 
and location of the taxpayer against whom collection activity is or may 
be directed, to locate assets in which the taxpayer has an interest, to 
ascertain the amount of any liability described in paragraph 
(a)(1)(iii) of this section for collection, or otherwise to apply the 
provisions of the Internal Revenue Code relating to establishment of 
liens against such assets, or levy, seizure, or sale on or of the 
assets to satisfy any such liability;
    (vii) Preparing for any proceeding described in section 6103(h)(2) 
or conducting an investigation which may result in such a proceeding; 
or
    (viii) Obtaining, verifying, or establishing information concerned 
with making determinations regarding a taxpayer's liability under the 
Internal Revenue Code, including, but not limited to, the 
administrative appeals process and any ruling, negotiated agreement, or 
prefiling process.
    (2) Disclosure of return information for the purpose of obtaining 
information to carry out properly the official duties described by this 
paragraph, or any activity connected with the official duties, is 
authorized only if the internal revenue or TIGTA employee reasonably 
believes, under the facts and circumstances, at the time of a 
disclosure, the information is not otherwise reasonably available, or 
if the activity connected with the official duties cannot occur 
properly without the disclosure.
    (3) Internal revenue and TIGTA employees may identify themselves, 
their organizational affiliation with the Internal Revenue Service 
(IRS) (e.g., Criminal Investigation (CI)) or TIGTA (e.g., Office of 
Investigations (OI)), and the nature of their investigation, when 
making an oral, written, or electronic contact with a third party 
witness through the use and presentation of any identification media 
(including, but not limited to, an IRS or TIGTA badge, credential, or 
business card) or through the use of an information document request, 
summons, or correspondence on IRS or TIGTA letterhead or which bears a 
return address or signature block that reveals affiliation with the IRS 
or TIGTA.
    (4) This section does not address or affect the requirements under 
section 7602(c) (relating to contact of third parties).
    (b) Disclosure of return information in connection with certain 
personnel or claimant representative matters. In connection with 
official duties relating to any investigation concerned with 
enforcement of any provision of the Internal Revenue Code, including 
enforcement of any rule, or directive prescribed by the Secretary or 
the Commissioner of Internal Revenue under any provision of the 
Internal Revenue Code, or the enforcement of any provision related to 
tax administration under the jurisdiction of the IRS or TIGTA, that 
affects or may affect the personnel or employment rights or status, or 
civil or criminal liability, of any former, current, or prospective 
employee of the Treasury Department or the rights of any person who is, 
or may be, a party to an administrative action or proceeding pursuant 
to 31 U.S.C. 330 (relating to practice before the Treasury Department), 
an internal revenue or TIGTA employee is authorized to disclose return 
information for the purpose of obtaining, verifying, or establishing 
other information which is or may be relevant and material to the 
investigation.
    (c) Definitions. The following definitions apply to this section--
    (1) Disclosure of return information to the extent necessary means 
a disclosure of return information which an internal revenue or TIGTA 
employee, based on the facts and circumstances, at the time of the 
disclosure, reasonably believes is necessary to obtain information to 
perform properly the official duties described by this section, or to 
accomplish properly the activities connected with carrying out those 
official duties. The term necessary in this context does not mean 
essential or indispensable, but rather appropriate and helpful in 
obtaining the information sought. Nor does necessary in this context 
refer to the necessity of conducting an investigation or the 
appropriateness of the means or methods chosen to conduct the 
investigation. Section 6103(k)(6) does not limit or prescribe IRS or 
TIGTA officers and employees with respect to the decision to initiate 
or how to conduct an investigation. Disclosures under this 
subparagraph, however, may not be made indiscriminately or solely for 
the benefit of the recipient or as part of a negotiated quid pro quo 
arrangement. This paragraph (c)(1) is illustrated by the following 
examples:

    Example 1.  A revenue agent contacts a taxpayer's customer 
regarding the customer's purchases made from the taxpayer during the 
year under investigation. The revenue agent is able to obtain the 
purchase information only by disclosing the taxpayer's identity and 
the fact of the investigation. Depending on the facts and 
circumstances known to the revenue agent at the time of the 
disclosure, such as the way the customer maintains his records, it 
also may be necessary for the revenue agent to inform the customer 
of the date of the purchases and the types of merchandise involved 
for the customer to find the purchase information.
    Example 2. A revenue agent contacts a third party witness to 
obtain copies of invoices of sales made to a taxpayer under 
examination. The third party witness provides copies of the sales 
invoices in question and then asks the revenue agent for the current 
address of the taxpayer because the taxpayer still owes money to the 
third party witness. The revenue agent may not disclose that current 
address because this disclosure would be only for the benefit of the 
third party witness and not necessary to obtain information for the 
examination.
    Example 3. A revenue agent contacts a third party witness to 
obtain copies of invoices of sales made to a taxpayer under 
examination. The third party witness agrees to provide copies of the 
sales invoices in question only if the revenue agent provides him 
with the current address of the taxpayer because the taxpayer still 
owes money to the third party witness. The revenue agent may not 
disclose that current address because this disclosure would be a 
negotiated quid pro quo arrangement.

    (2) Disclosure of return information to accomplish properly an 
activity connected with official duties means a disclosure of return 
information to carry out a function associated with official duties 
generally consistent with established practices and procedures.

[[Page 41077]]

This paragraph (c)(2) is illustrated by the following example:

    Example. A taxpayer failed to file an income tax return and pay 
the taxes owed. After the taxes were assessed and the taxpayer was 
notified of the deficiencies, a revenue officer filed a notice of 
federal tax lien and then served a notice of levy on the taxpayer's 
bank. The notices of lien and levy contained the taxpayer's name, 
social security number, amount of outstanding liability, and the tax 
period and type of tax involved. The taxpayer's assets were levied 
to satisfy the tax debt, but it was determined that, prior to the 
levy, the revenue officer failed to issue the taxpayer a notice of 
right to hearing before the levy, as required by section 6330. The 
disclosure of the taxpayer's return information in the notice of 
levy is authorized by section 6103(k)(6) despite the revenue 
officer's failure to issue the notice of right to hearing. The 
ultimate validity of the underlying levy is irrelevant to the issue 
of whether the disclosure was authorized by section 6103(k)(6).

    (3) Information not otherwise reasonably available means 
information that an internal revenue or TIGTA employee reasonably 
believes, under the facts and circumstances, at the time of a 
disclosure, cannot be obtained in a sufficiently accurate or probative 
form, or in a timely manner, and without impairing the proper 
performance of the official duties described by this section, without 
making the disclosure. This definition does not require or create the 
presumption or expectation that an internal revenue or TIGTA employee 
must seek information from a taxpayer or authorized representative 
prior to contacting a third party witness in an investigation. 
Moreover, an internal revenue or TIGTA employee may make a disclosure 
to a third party witness to corroborate information provided by a 
taxpayer. This paragraph (c)(3) is illustrated by the following 
examples:

    Example 1. A revenue agent is conducting an examination of a 
taxpayer. The taxpayer refuses to cooperate or provide any 
information to the revenue agent. Information relating to the 
taxpayer's examination would be information not otherwise reasonably 
available because of the taxpayer's refusal to cooperate and supply 
any information to the revenue agent. Therefore, the revenue agent 
may seek information from a third party witness. Neither the 
Internal Revenue Code, IRS procedures, nor these regulations require 
repeated contacting of an uncooperative taxpayer.
    Example 2. A special agent is conducting a criminal 
investigation of a taxpayer. The special agent has acquired certain 
information from the taxpayer. Although the special agent has no 
specific reason to disbelieve the taxpayer's information, the 
special agent contacts several third party witnesses to confirm the 
information. The special agent may contact third party witnesses to 
verify the correctness of the information provided by the taxpayer 
because the IRS is not required to rely solely on information 
provided by a taxpayer, and a special agent may take appropriate 
steps, including disclosures to third party witnesses under section 
6103(k)(6), to verify independently or corroborate information 
obtained from a taxpayer.

    (4) Internal revenue employee means, for purposes of this section, 
an officer or employee of the IRS or Office of Chief Counsel for the 
IRS.
    (5) TIGTA employee means an officer or employee of the Office of 
Treasury Inspector General for Tax Administration.
    (d) Examples. The following examples illustrate the application of 
this section:

    Example 1. A revenue agent is conducting an examination of a 
taxpayer. The taxpayer has been very cooperative and has supplied 
copies of invoices as requested. Some of the taxpayer's invoices 
show purchases that seem excessive in comparison to the size of the 
taxpayer's business. The revenue agent contacts the taxpayer's 
suppliers for the purpose of corroborating the invoices the taxpayer 
provided. In contacting the suppliers, the revenue agent discloses 
the taxpayer's name, the dates of purchase, and the type of 
merchandise at issue. These disclosures are permissible under 
section 6103(k)(6) because, under the facts and circumstances known 
to the revenue agent at the time of the disclosures, the disclosures 
were necessary to obtain information (corroboration of invoices) not 
otherwise reasonably available because suppliers would be the only 
source available for corroboration of this information.
    Example 2. A revenue agent is conducting an examination of a 
taxpayer. The revenue agent asks the taxpayer for business records 
to document the deduction of the cost of goods sold shown on 
Schedule C of the taxpayer's return. The taxpayer will not provide 
the business records to the revenue agent, who contacts a third 
party witness for verification of the amount on the Schedule C. In 
the course of the contact, the revenue agent shows the Schedule C to 
the third party witness. This disclosure is not authorized under 
section 6103(k)(6). Section 6103(k)(6) permits disclosure only of 
return information, not the return (including schedules and 
attachments) itself. If necessary, a revenue agent may disclose 
return information extracted from a return when questioning a third 
party witness. Thus, the revenue agent could have extracted the 
amount of cost of goods sold from the Schedule C and disclosed that 
amount to the third party witness.
    Example 3. A special agent is conducting a criminal 
investigation of a taxpayer, a doctor, for tax evasion. 
Notwithstanding the records provided by the taxpayer and the 
taxpayer's bank, the special agent decided to obtain information 
from the taxpayer's patients to verify amounts paid to the taxpayer 
for his services. Accordingly, the special agent sent letters to the 
taxpayer's patients to verify these amounts. In the letters, the 
agent disclosed that he was a special agent with IRS-CI and that he 
was conducting a criminal investigation of the taxpayer. Section 
6103(k)(6) permits these disclosures to confirm the taxpayer's 
income. The decision of whether to verify information already 
obtained is a matter of investigative judgment and is not limited by 
section 6103(k)(6).
    Example 4. Corporation A requests a private letter ruling (PLR) 
as to the taxability of a merger with Corporation B. Corporation A 
has submitted insufficient information about Corporation B to 
consider properly the tax consequences of the proposed merger. 
Accordingly, information is needed from Corporation B. Under section 
6103(k)(6), the IRS may disclose Corporation A's return information 
to Corporation B to the extent necessary to obtain information from 
Corporation B for the purpose of properly considering the tax 
consequences of the proposed merger that is the subject of the PLR.

    (e) Effective date. This section is applicable on July 10, 2003.

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: June 27, 2003.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 03-17384 Filed 7-9-03; 8:45 am]
BILLING CODE 4830-01-P