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OPR releases new letter to request return info in inquiry into violations of practitioners’ conduct

IRS’s Office of Professional Responsibility (OPR) has announced the creation of a standard Code Sec. 6103 information-request letter for practitioners and their representatives to use to request tax information maintained in OPR case files and obtained as part of an inquiry into possible violations of the regs governing practice before IRS (Circular 230). The letter functions as a request under Code Sec. 6103 for access to tax returns and related tax information.

Background. Under Code Sec. 6103, returns and return information are confidential and generally can’t be disclosed except as expressly authorized by the Code.

New letter. OPR says that a practitioner, or an authorized representative on a practitioner’s behalf, can use the new standard letter to request copies of (1) the practitioner’s own tax information; (2) relevant tax information of other taxpayers, such as clients or former clients of the practitioner; or (3) both the practitioner’s own tax information and the tax information of third parties, depending on the particular case.

The information-request letter is based on certain provisions in Code Sec. 6103:

…Code Sec. 6103(e)(1) and Code Sec. 6103(e)(7) provide the method for a practitioner, in his status as a taxpayer, to obtain disclosure of the practitioner’s tax information contained in the case file associated with the practitioner. More specifically, the provisions authorize a taxpayer, through a written request, to inspect and receive the taxpayer’s returns filed with IRS and the taxpayer’s “return information,” unless IRS determines that disclosure of some or all of the return information would seriously impair federal tax administration.
…With respect to another taxpayer’s returns and return information, Code Sec. 6103(l)(4) authorizes their disclosure, upon written request, to “any person…whose rights are or may be affected by an administrative action or proceeding” under Circular 230. The same returns and return information may also be disclosed to a “duly authorized legal representative” of the person. Disclosure under this provision is limited to returns and return information that are or may be “relevant and material” to the action or proceeding involving Circular 230. A practitioner, or a practitioner’s authorized representative, therefore, may use Code Sec. 6103(l)(4) in a Circular 230 matter or proceeding to request disclosure of relevant third-party tax information.

IRS says that it is important to note that any information disclosed under Code Sec. 6103(l)(4) is solely for use in, or to prepare for, the action or proceeding. Any other use or disclosure of the third-party tax data is prohibited. A practitioner or representative who makes an unauthorized disclosure is subject to potential civil and criminal liability.

The Code Sec. 6103 information-request letter includes acknowledgments by the requester(s) of the disclosure restrictions and potential penalties for violations.

In addition, IRS notes that the Code Sec. 6103 information-request letter is distinct from a Freedom of Information Act (FOIA) request. The Code Sec. 6103 information-request letter generally will be an easier way to obtain the information requested and most often result in greater release of information than a FOIA request. IRS will not release any third-party tax information in response to a FOIA request, regardless of the relevance and materiality of the information to a pending or prospective action or proceeding that could affect the rights of the practitioner making the request or on whose behalf the request is made.

References: For confidentiality of return information, see FTC 2d/FIN ¶  S-6200  et seq.; United States Tax Reporter ¶  61,034; TG ¶  1974.