Options for Promoting Privacy on the National Information Infrastructure. 5. Statutory Limits Applicable to Federal Agencies

04/01/1997

A number of organic statutes limit the use of personal information collected by particular agencies in the course of fulfilling their statutory obligations. For example, federal law prohibits the use of census records for anything other than statistical purposes.73 Subject to extremely narrow exceptions, only Census Bureau officers, sworn to uphold the confidentiality of census records, may access any census information that identifies individuals.74

At the federal level, the Internal Revenue Service (IRS) possesses the most comprehensive personal financial information. Individuals must report income from all sources, and there are incentives to itemize certain types of deductible expenditures such as home mortgage interest, charitable contributions, and other expenses.

Section 6103 of the Internal Revenue Code, as amended by the Tax Reform Act of 1976,75 prohibits unauthorized disclosure of tax returns and return information by employees of the federal government, state and local governments, or IRS contractors.76 The statute covers virtually everything collected by or generated by the Internal Revenue Service related to a taxpayer's tax liability, including a taxpayer's identity, whether a return was, is being, or will be examined, any data submitted by the taxpayer or his or her representative, any data collected by the IRS from other sources, and any material generated by the IRS relating to any specific taxpayer's liability.

Unauthorized disclosure of tax information subjects the offender to criminal penalties and permits the wronged party to bring a civil action for damages. The statute provides for minimum damages of $1,000 per disclosure.77

The statute requires the IRS to keep records of requests for disclosure and to report a summary of requests for and disclosure of returns and return information each year to Congress. Furthermore, the statute requires federal agencies that receive returns and return information from the IRS to establish procedures to safeguard such information and to report periodically to the IRS on those procedures.78


73. Pub. Law. No. 83-740, § 214, 68 Stat. 1023; Pub. L. No. 94-521, § 12(a), 90 Stat. 2464, 13 U.S.C. §§ 9, 214 (1994).

74. Id. §§ 8(a), 8(c), & 301(g).

75. Pub. L. No. 94-455 § 1202, 90 Stat. 1520, 1667, 26 U.S.C. § 6103 (1994).

76. 26 U.S.C. § 6103(a). The statute permits disclosure to third parties under certain exceptions, including for tax administration purposes, to persons with material interest in the data (such as an heir of a deceased taxpayer), and to federal, state, and local agencies under specified circumstances. 26 U.S.C. § 6103(c)-(n).

77. 26 U.S.C. § 6103. Several years ago it was widely reported that more than 1,300 IRS employees had been investigated for improperly accessing private taxpayer files. See Stephen Barr, IRS Vows 'Zero Tolerance" For Snooping in Tax Records, Wash. Post, July 20, 1994, at A4; Stephen Barr, Probe Finds IRS Workers Were 'Browsing" in Files; Security Review Points to Fraud, Wash. Post, Aug. 3, 1993, A1. As of July 31, 1993, 397 instances of questionable access to taxpayer records were referred to IRS management. The IRS reported to Congress in 1993 that eleven employees resigned, five employees were removed, sixty-three employees were suspended or demoted; ninety-three employees were reprimanded or admonished; twenty employees were counseled or given caution letters; and that management action was pending in fifteen cases. See, Auditing the Auditors: Waste and Abuse at IRS and Customs? Hearing Before the Senate Committee on Government Affairs66, 103d Cong. (1993) ); see also S. 522, A Bill to amend the Internal Revenue Code of 1986 to impose civil and criminal penalties for the unauthorized access of tax returns and tax return information by Federal employees and other persons, and for other purposes, 105th Cong. 1st Sess., introduced Apr. 9, 1997.

78. 26 U.S.C. § 6103(p).