Department of Justice Participation on the Internal Revenue Service Undercover Review Committee, 96-39

• Citation: 20 Op. O.L.C. 352
• Decision Date: 08 October 1996
• Docket Number: 96-39
• Court: Opinions of the Office of Legal Counsel of the Department of Justice
• Parties: Department of Justice Participation on the Internal Revenue Service Undercover Review Committee

20 Op. O.L.C. 352

Department of Justice Participation on the Internal Revenue Service Undercover Review Committee

No. 96-39

United States Department of Justice

October 8, 1996

CHRISTOPHER H. SCHROEDER Acting Assistant Attorney General Office of Legal Counsel

Department of Justice Participation on the Internal Revenue Service Undercover Review Committee

Disclosure of tax return information to a Department of Justice attorney serving on the Undercover Review Committee of the Internal Revenue Service is permissible under §6103 of title 26 of the United States Code as a limited referral for legal advice.

MEMORANDUM OPINION FOR THE ASSISTANT ATTORNEY GENERAL TAX DIVISION

This memorandum responds to your request for our legal opinion on what limitations, if any, are imposed by the provisions of §6103 of the Internal Revenue Code on the participation by Department of Justice ("DOJ") attorneys on the Undercover Review Committee of the Internal Revenue Service ("IRS")- Letter for Walter Dellinger, Assistant Attorney General, Office of Legal Counsel, from Loretta C Argrett, Assistant Attorney General, Tax Division (July 6 1995) ("DOJ July 6, 1995 Letter"). Specifically, we have been asked to determine whether tax return information can be disclosed to DOJ attorneys sitting on the IRS Undercover Review Committee ("Committee") in investigations that have not been formally referred to DOJ by the IRS. As set forth below, we conclude that disclosure of tax return information to a DOJ attorney serving on the Committee is permissible under section 6103 as a limited referral for legal advice.

I. Background

A. Section 6103

Section 6103 of title 26 of the United States Code imposes restrictions on the disclosure of tax returns or tax return information. Only if authorized by statute can such information be disclosed. 26 U.S.C. § 6103(a). In pertinent part, § 6103(h)(2) and (3) provides for disclosure of tax returns or return information to DOJ attorneys. Section 6103(h)(2) states:

(2) Department of Justice. — In a matter involving tax administration, a return or return information shall be open to inspection by or disclosure to officers and employees of the Department of Justice (including United States attorneys) personally and directly engaged in, and solely for their use in, any proceeding before a Federal grand jury or preparation for any proceeding (or investigation which may result in such a proceeding) before a Federal grand jury or any Federal or State court, but only if— [ 353] (A) the taxpayer is or may be a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of such civil liability in respect of any tax imposed under this title;

(B) the treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding or investigation; or

(C) such return or return information relates or may relate to a transactional relationship between a person who is or may be a party to the proceeding and the taxpayer which affects, or may affect, the resolution of an issue in such proceeding or investigation.

Section 6103(h)(3) provides:

(3) Form of request.—In any case in which the Secretary is authorized to disclose a return or return information to the Department of Justice pursuant to the provisions of this subsection —

(A) if the Secretary has referred the case to the Department of Justice, or if the proceeding is authorized by subchapter B of chapter 76, the Secretary may make such disclosure on his own motion, or

(B) if the Secretary receives a written request from the Attorney General, the Deputy Attorney General, or an Assistant Attorney General for a return of, or return information relating to, a person named in such request and setting forth the need for the disclosure, the Secretary shall disclose return or return information so requested.

A disagreement has arisen between the IRS and the Tax Division of DOJ as to what limitations, if any, are imposed by § 6103(h)(2) and (3) on the participation by a DOJ attorney on the Committee.

B. The Undercover Review Committee

The IRS has promulgated, in the form of guidelines, specific procedures for the review, approval, conduct, and oversight of undercover operations. As set forth in these guidelines, the IRS recognizes that although the undercover technique [ 354] is lawful and valuable as an investigative tool, undercover operations can create legal problems. Internal Revenue Manual 910 at 9781-551 ("IRM").

Undercover operations conducted by the IRS are classified into two groups. Group I operations are deemed more sensitive in nature, and the approval of the Assistant Commissioner (Criminal Investigation) of the IRS must be obtained. These operations include those that exceed six months in duration and/or exceed the Director of Investigations' level of approval for confidential expenditures. IRM 922 at 9781-551. Group I operations also include any operation in which there is a reasonable chance that one or more of fourteen specified sensitive factors will arise. These factors include, inter alia, operations that will: result in significant civil claims against the United States; have an impact on investigations in numerous regions; involve public corruption crimes; involve an undercover person running the risk of being arrested or being required to give sworn testimony or attending a meeting where the subject understood a privilege would exist. Id. at 9781— 551 to 552.

Group II operations are those undercover activities that do not meet the Group I requirements. The IRS Director of Investigations is authorized to approve requests for Group II operations. Id. at 9781-552.

Requests for undercover operations must be submitted in writing, setting forth information necessary to evaluate the particular request. Each request must include in narrative form the evidence obtained to date that would lead a reasonable person to believe a violation of law has occurred. Not all undercover operations involve tax or tax-related crimes. Some investigations involve crimes such as money laundering.

The request must also establish that the undercover operation is the only efficient investigative alternative available. IRM 931 at 9781-553. We have been advised by the IRS that every submission to the Committee for a tax or tax-related investigation includes all information generated or collected by the IRS regarding the investigation, the identity of the taxpayer and the nature and plan of investigation and the potential charges, and tax return information for purposes of §6103. Letter for Richard L. Shiffrin, Deputy Assistant Attorney General, Office of Legal Counsel, from Eliot D. Fielding, Associate Chief Counsel, Enforcement Litigation, Internal Revenue Service (Jan. 22, 1996) ("IRS Jan. 22, 1996 Letter").

All requests for Group I operations are reviewed by the Committee. The Committee also reviews significant deviations in ongoing Group I operations and all requests for recoverable funds which exceed an aggregate of $50, 000 in Group II operations. The Committee is advisory in nature and makes recommendations to the Assistant Commissioner (Criminal Division).

The Attorney General and the IRS Commissioner have agreed in a Memorandum of Understanding ("MOU"), signed in August 1995, on following specified procedures for the review and approval of certain undercover operations conducted by the IRS. According to the MOU, an attorney from either the Criminal Division or Tax Division of the Department of Justice will serve on the Committee [ 355] in assessing Group I operations that exceed one year in duration and/or require approval of more than $40, 000 in confidential funds.

With the exception of the DOJ attorney, the Committee is comprised of IRS officials: the Director, National Operations Division; the Assistant Chief Counsel (Criminal Tax); and the Chief, Office of Special Investigative Techniques; or their designees. The Assistant Commissioner (Criminal Investigation) may invite other individuals to participate in the Committee. IRM 932 at 9781-554(2); MOU at 3.

According to the MOU, the Committee shall meet on a regular basis to consider initial requests for qualifying Group I undercover operations or significant deviations to previously approved plans of action. No more than four operations will be scheduled for each meeting. Prior to each meeting, Committee members are to receive a sealed packet containing the undercover requests. The materials must be securely maintained and may not be copied. The materials must be returned after the Committee meeting. MOU at 3-4.

The IRS National Operations Division, Office of Special Investigative Techniques, is responsible for the presentation of the undercover request packets to the Committee. Prior to the Office of the Special Investigative Techniques' receipt of the requests, however, each request has been reviewed and approved by the respective IRS Division Chief, District Director and Area Director of Investigations. MOU at 3.

After consideration of each request is completed, the Committee makes a recommendation to the Assistant Commissioner (Criminal Investigation) that the operation be approved, approved with conditions, or disapproved. The recommendation is based upon a majority vote of the Committee members. The Committee's recommendation, minutes from the Committee meeting and the undercover request is then sent to the Assistant Commissioner (Criminal Investigation) for final action. MOU at 4.

In the event the DOJ attorney disagrees with the Committee's recommendation for approval because of legal, ethical prosecutive, or departmental policy considerations, the appropriate Assistant ...