Section 6103 and Rule 6(e) Secrecy Rules in Tax Grand Jury Investigations (4/1/12)

In a pair of related rulings in Tucker v. United States,  2012 U.S. Dist. LEXIS 43154 (ND WV 2012), here, and Tucker v. United States, 2012 U.S. Dist. LEXIS 43155 (ND WV 2012), here, the court rejected the plaintiff's claims for damages for alleged Section 6103 violations made by IRS CI special agents interviewing witnesses while assisting in a grand jury investigation.  Section 6103, here, prohibits the IRS from disclosing "return information." (This section has numerous exceptions that go on page after page, but none appear applicable here.)  Section 7431, here, affords a civil remedy for improper disclosures of return information.

The relevant facts, highly summarized, are:  A grand jury was investigating the plaintiff for potential tax crimes.  Two IRS CI agents were assisting the grand jury, as is usually the case in tax grand jury investigations.  (There is no indication of whether these agents had previously conducted an IRS administrative criminal investigation of the plaintiff.)  Incident to the grand jury investigation, the CI Agents interviewed plaintiff and certain third-party witnesses.  The plaintiff alleged that the CI Agents improperly disclosed to the witnesses the following:  (i) that they were investigating plaintiff pursuant to a grand jury investigation of plaintiff; and (ii) that the plaintiff "was going to jail for tax evasion" or some variant thereof.  The witnesses they interviewed appeared as witnesses in the case for the plaintiff and testified somewhat consistently with the plaintiff's allegations.  The CI Agents denied the allegations.

The court first dismissed the first type of allegations -- identifying that the CI agents were investigating pursuant to a grand jury investigation of the plaintiff -- because the court felt the allegations had not been timely made by the plaintiff.  The court dismissed the second type of allegations -- that plaintiff was going to jail -- finding that plaintiff's witnesses not credible and the CI agents credibly denied the allegations.

The case seems straight-forward, but it seems to me the issue is more nuanced than presented.  I have encountered a similar pattern before so I am just going to provide a high level summary to illustrate some nuance.  Section 6103 applies to tax return information gathered by the IRS functioning as the IRS.  Section 6103 does not apply to information gathered by a grand jury, and I think this is true even if IRS CI agents are assisting the grand jury investigation and, as often occurs, actually interview witnesses and gather documents.  Grand jury information is covered by a different "secrecy" provision, Rule 6(e), Federal Rules of Criminal Procedure, here.  Thus, for example, the fact that the CI Agents were assisting in a grand jury investigation is grand jury information and not IRS return information.
Tax grand juries invariably get information from the IRS that the IRS has gathered in its normal function of administering the tax laws (including any prior CI administrative criminal investigation).  That information certainly is return information and does not lose its status as return information when given to the grand jury.  As I understand it, when that information is sent to DOJ Tax for use in grand jury investigations, CI carefully identifies it to show that it is information the IRS possessed independent of the grand jury investigation so that, in the future, the IRS can use that information independent of the secrecy requirement of Rule 6(e).  See, e.g., 25.1.5.3, (01-15-2010) Cooperating Grand Jury Examiner/Revenue Officer Procedures, here, at par. 3.A.. In other words, vis-a-vis the IRS's ability to use the information in the future, that information does not become tainted Rule 6(e) grand jury information simply because the IRS sent it to DOJ Tax for the grand jury's use.  Vis-a-vis the rest of the world, the information is grand jury information, but vis-a-vis the IRS it is not, so that, when the grand jury investigation is concluded, the information can be used by the civil function of the IRS to determine and assess tax liability.  The information is, of course, return information because that is what it was when the IRS sent it forward for grand jury use.  So, in the grand jury's hands, it is both return information and grand jury information (the latter at least as to all the world except the IRS).

Applying these concepts, it appears to me that the fact that the CI Agents are conducting interviews pursuant to a grand jury investigation is grand jury information and is not IRS return information.  The complaint for that claim of improper disclosure seems to me to implicate grand jury secrecy and not Section 6103 because, while assisting the grand jury, the IRS agents do not seem to be acting in their capacities as IRS CI Agents.  But, there is another way of looking at it.  The IRS records would show that there is a grand jury investigation and that the CI Agents are assisting the grand grand jury, and in that sense I suppose the information could also be IRS information return information as well as grand jury information.  So, viewed, the case authority holds that it is tax return information subject to Section 6103.  See Snider v. United States, 468 F.3d 500, 508 (8th Cir. 2006) (although the Eight Circuit's holding is cryptic).  Nevertheless, the Government argued the identifying the IRS CI Agents and the capacity in which they served were  authorized disclosures under Section 6103(k)(6), citing in its Memorandum Roebuck v. United States, 1999 WL 501003 at *4 (E.D. N.C.) aff’d, 1999 WL 1128884 (4th Cir. 1999); 26 C.F.R. § 301.6103(k)(6)-1(a)(3); Internal Revenue Manual § 9.5.2.5.3.

As to the second type of allegations as to whether the plaintiff would go to jail, it seems to me that the allegation -- had it been found true -- would not be tax return information per se in any event.  If the statement were made (the court found it was not made), it is just a statement of conclusion and not fact.  But the conclusion does implicate the information underlying the conclusion and, in a sense, that underlying information might implicate both  grand jury information and IRS return information (the latter being the information the grand jury received from the IRS).  And, this might particularly be a problem if the CI Agents had participated in the IRS administrative criminal investigation before the case was referred to DOJ Tax for grand jury investigation.

It seems to me that information developed independently by the grand jury and not sourced from the IRS implicates only Rule 6(e) and not Section 6103.  In other words grand jury information does not become Section 6103 return information simply because the grand jury investigation is a tax grand jury investigation and simply because IRS CI agents are assisting the grand jury.  What this means is  that, if the IRS wants to access the grand jury information that the grand jury developed from other sources (i.e., did not get from the IRS), the information is not tax return information and the IRS will have to apply for a Rule 6(e) disclosure order to access it and use it just like everybody else wanted grand jury information.  Thus, if the CI Agents' alleged statements had been based only on grand jury information which the grand jury independently developed, the alleged statements -- assuming they had been made, an assumption contrary to fact -- should not implicate Section 6103.