William & Mary Business Law Review
Abstract
The June 2021 ProPublica report “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax” revealed tax return data of many of the wealthiest people in America. However, the tax information about these individuals is not public information. As part of the Tax Reform Act of 1976, Congress removed tax returns and return information from the realm of public documents and protected them under federal law. Congress also provided criminal and civil sanctions for the unauthorized disclosure of tax returns and return information. Over forty-five years later, there have been hundreds of cases adjudicated, but only a small number have resulted in damage awards to taxpayers.
This Article revisits Karnes and Lirely’s 1993 article “Striking Back at the IRS: Using Internal Revenue Code Provisions to Redress Unauthorized Disclosures of Tax Returns or Return Information” and extends the research of cases to the present. This Article will provide a historical perspective of section 7431 and review modifications to section 6103 since 1993. Next, section 7431 actions are examined, with specific attention paid to cases involving the good faith defense, statutory damage awards, court costs and attorney fees, and interpretations of unauthorized disclosures. Finally, a critical examination of whether sections 6103 and 7431 have been effective is offered, as are suggestions to improve their effectiveness to protect taxpayer information.