Rev. Rul. 2004-53, 2004-1 C.B. 1026

(June 7, 2004) clarified the scope of section 6103(a) with respect to government employees and held that government employees who receive returns or return information pursuant to section 6103(c), (e), or (k)(6) are not subject to the disclosure restrictions of section 6103(a). Although not addressed by Rev. Rul. 2004-53, any shareholder of a corporation permitted to inspect or receive return information of the corporation or its subsidiaries under section 6103(e)(1)(D)(iii) is subject to the disclosure restrictions imposed by section 6103(a). Section 2202 of the Taxpayer First Act (TFA), Public Law 116-25, 133 Stat. 981, 1012 (2019), amended section 6103(a) (3) and (c) to limit redisclosures and uses of return information received pursuant to the taxpayer consent exception. Section 6103(c), as amended by the TFA,

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explicitly prohibits designees from using return information for any reason other than the express purpose for which the taxpayer grants consent and from redisclosing return information without the taxpayer’s express permission or request. Section 6103(a)(3), as amended by the TFA, imposes disclosure restrictions on all recipients of return information under 6103(c). The TFA did not amend section 6103(e) or (k)(6), or section 6103(a) with respect to disclosures under section 6103(e) or (k)(6).

ANALYSIS

Under section 6103(c), as amended, the restrictions on redisclosure of returns or return information received pursuant to the taxpayer consent exception apply to all designees, including government employees. Therefore, in Situations 1 and 2, B is prohibited from redisclosing A’s return information, because A did not authorize B to further disclose A’s return information.

After the TFA, the analysis of the scope of disclosures under section 6103(e) and (k)(6) is materially unchanged from that in Rev. Rul. 2004-53. Section 6103(e) and (k)(6) contains no limitation or restriction on the redisclosure of returns or return information received pursuant to the material interest or investigative disclosure exceptions. Therefore, in Situations 3 and 6 there are no statutory or regulatory restrictions on the redisclosures of return information made by D or G.

In Situations 4, 5, and 7, however, the prohibition in section 6103(a) on redisclosure of returns or return information by government employees could be read to prohibit such redisclosures by F and G because they happen to be government employees. This reading would create a disparity in the application of section 6103(a) based on who the employer of the person receiving the disclosure of returns or return information happens to be.

By its terms, section 6103(a) does not regulate or control the use of returns and return information received under the material interest or investigative disclosure exceptions. Moreover, the requirements for accountings and safeguards that typically apply where redisclosure of returns or return information is limited do not apply to these exceptions.

There is no evidence that Congress intended to limit the redisclosure of return information received by government employees under section 6103(e) and (k)(6) merely because they happen to be government employees. On the contrary, there are compelling reasons for those government employees to be subject to the same rules as other recipients. For example, a private sector employer may take disciplinary action against employees who do not properly fulfill their tax obligations. If redisclosure of return information is not permitted because the employer happens to be the Federal government, the Federal employees who failed to fulfill their tax obligations would be in a significantly better position than their private sector counterparts. This inappropriate result only occurs if section 6103(a) is read to apply to individuals merely because they happen to be government employees.

Accordingly, persons are not barred because of their status as government employees from redisclosing returns and return information received pursuant to section 6103(e) or (k)(6). Therefore, in Situations 4, 5, and 7, there are no statutory or regulatory restrictions on the redisclosures of return information made by F or G.

HOLDING

Government employees who receive returns or return information pursuant to disclosures under section 6103(c), like all designees who receive returns or return information pursuant to taxpayer consent, are subject to the disclosure restrictions of section 6103(a). Government employees who receive returns or return information pursuant to disclosures under section 6103(k)(6) or (e), other than section 6103(e)(1)(D)(iii) (relating to certain shareholders), are not subject to the disclosure restrictions of section 6103(a) with regard to the returns or return information received.

EFFECT ON OTHER REVENUE RULINGS