Former IRS Commissioner John Koskinen may have violated tax information privacy law when he revealed during an interview published November 15 by Politico that President Trump had filed his tax returns and that they are secured at agency headquarters, tax lawyers told Tax Analysts.
Asked by Politico whether he planned to provide Trump’s tax return, Koskinen replied: “It’s in a locked cabinet in a locked room that nobody’s in. You’ll need a key to the room and the cabinet to get it. We’re in the process of turning that cabinet into a safe. We keep all the returns from every president in there.”
“There is no doubt” that disclosing the fact that a taxpayer filed a tax return is a violation of taxpayer information anti-disclosure provisions in section 6103, said Christopher S. Rizek of Caplin & Drysdale Chtd.
But whether Koskinen’s implication about Trump’s tax return constitutes a 6103 violation is another matter, Rizek said. “I’m not sure this reaches that level,” he said. “It’s arguably not that specific.”
Just disclosing a taxpayer’s filing status is a federal crime punishable by up to five years in prison and a $5,000 fine, tax attorneys said November 16. The only defense, Rizek said, would be if Trump had granted Koskinen a waiver to disclose his information.
Koskinen could not be reached for comment. The White House did not respond to questions from Tax Analysts.
Koskinen disclosed nothing about specific filings Trump did or didn’t make, Rizek noted, and Trump has repeatedly complained in public that he is under audit by the IRS. One could argue that the president has already tacitly admitted that he has filed, Rizek said.
But that argument won’t win on the legalities, said David Herzig, professor of law at Valparaiso University. “The definition of what ‘return information’ is, is a really broad idea,” Herzig said.
However, based on his review of Koskinen’s comments, Herzig added, “What I think is interesting here is: There is a violation. The question now is: So what?”
6103 ‘Almost Gospel’
Karen Hawkins, former director of the IRS Office of Professional Responsibility, agreed that Koskinen may have violated section 6103 taxpayer information nondisclosure provisions.
Adherence to 6103 privacy standards “is almost gospel inside the IRS,” Hawkins said. “Everyone is constantly reminded that 6103 is very tight in its interpretations of what constitutes disclosure,” she noted, and the IRS interpretations of the law tend to be broad but strict.
Nondisclosure provisions of section 6103 provide both criminal and civil remedies, tax lawyers said.
The normal process for adjudicating a 6103 criminal violation is to report it to the Treasury Inspector General for Tax Administration, Hawkins said. TIGTA investigates the disclosure and reports its results to the alleged offender’s superior, which in the commissioner’s case would be the Treasury secretary.
Internal sanctions may range from a private chat between the alleged offender and his superiors, to suspension from the job. If criminal prosecution is deemed warranted, the Justice Department might be brought in, Hawkins said. Koskinen’s last day in office was November 8, but he is still bound by the confidentiality provisions of section 6103 regarding anything he learned while working at the IRS, the practitioners agreed.
On the civil side, Trump could sue the United States, but probably not Koskinen, for damages, Rizek and Herzig said. Both cited section 7431 regarding civil damages for the unauthorized inspection or disclosure of returns and return information. It is unclear whether Koskinen could face other civil liability.
However, Herzig added, there is no civil liability under the statute for an alleged offender’s erroneous but good-faith misinterpretation of the law. So Koskinen could be in the clear if he can convince a court that he honestly thought he wasn’t breaking the law, Herzig said.
Crime or Blunder?
Is what Koskinen told Politico a crime or just a blunder by the departing head of the tax agency?
Tax lawyers said it’s hard to believe it’s either, partly because Koskinen gains nothing from the violation and partly because the turnaround specialist who just completed four years as head of the IRS waxes so eloquently during the interview about the dedication of agency employees to protecting taxpayer privacy.
“Anyone who knows anything about the IRS knows the staff wouldn’t put up with political interference,” Koskinen told Politico. “I’d be very surprised if anyone tried to muscle the IRS politically, and if they did, it would end badly for them.”
Hawkins called Koskinen’s remarks the “inadvertent, unintentional, harmless” effort of the outgoing commissioner to reassure taxpayers generally and the president in particular that their return information is secure. Civil or criminal prosecution “would be ill-advised,” she said. “It’s clear in context that the commissioner was seeking to reassure, not to do harm.”
If Koskinen had said instead that presidential tax return information was being moved to a secure vault, and not referred to any specific individual’s return, Herzig said he’d be in the clear.
And prosecutors have discretion on which cases they pursue, Herzig noted. “Not every crime is prosecuted,” he said. “I can totally see the [Justice Department] saying, ‘Come on.’ . . . This isn’t like the Tea Party scandal.”
But while the infraction could be considered minor, tax attorneys agreed that the principles at stake are bedrock to taxpayer confidence that the tax system is secure and their information is safe.
“I don’t think the  statute should be changed,” Herzig said. “I think taxpayer confidentiality is important. . . . I don’t think whether I even filed a return or not is anybody’s business but mine.”
Herzig added: “I think it’s important for people to understand that if you filed a tax return, you’re safe, and that the IRS commissioner is not going be in a meeting and slip up and say, ‘Oh yeah, so-and-so paid a lot of taxes last year.’”