As the Wall Street Journal recently uncovered in the latest chapter of the “Lois Lerner Scandal,” in the run-up to the 2010 election, the IRS transmitted a 1.1 million-page database of confidential tax return information to the FBI. The IRS’s idea – which, to its credit, the FBI apparently immediately and rightly rejected – was to use this information to criminally investigate nonprofit groups’ political activity, according to House Republican legislators investigating the IRS who cited internal emails between the two federal agencies.
Congress compelled disclosure of this information by subpoena, which the IRS complied with after more than one year, ultimately owning up to the fact that the IRS disclosed the confidential taxpayer information without any authority to do so and explaining that this was really no big deal because most of the information sent to the FBI was publicly available.
It is black letter federal law that an IRS official may not unlawfully disclose confidential tax return information for an improper purpose. 26 U.S.C. 6103actually makes it a federal felony for a government official to willfully disclose confidential taxpayer information. The tax secrecy laws stemmed from President Richard Nixon’s corrupt use of the IRS to further his political purposes, permitting disclosure of taxpayer and tax return information only for legitimate, proper purposes (such as a specific criminal investigation requiring a specific referral of a specific criminal case by the IRS to the U.S. Department of Justice’s Tax Division). Each unlawful disclosure constitutes a felony.
So why is this significant?
First of all, the IRS regularly uses this same statute – perhaps reasonably – to hide information from criminal tax attorneys and from the press, so if it is to be used as a shield, IRS employees should be criminally prosecuted when they violate this statute and use confidential taxpayer information as a sword. This is especially true when IRS officials do exactly as President Nixon did — attempt to use the IRS to criminally investigate political opponents.
Second, as a former federal tax prosecutor who worked regularly with the IRS on the majority of cases I …