It is not often that a mundane section of the Internal Revenue Code becomes a pressing issue, but that is exactly what has happened to Section 6103(f). The purpose of this column is to explain how these rules work.
Nearly 100 years ago, during Warren Harding’s presidency, the nation was marred by the Tea Pot Dome Scandal, which before Watergate was the biggest presidential scandal in American history. Back then, the secretary of the interior accepted bribes for leasing naval oil reserves to private companies at below market rates without competitive bidding.
As part of its investigation of that scandal, Congress asked the executive branch to see the tax returns of those involved. At that time, the only person authorized to release the returns was President Calvin Coolidge. Coolidge eventually complied with the request, but only after considerable deliberation.
In 1924, Congress expressed concerns that the executive branch may not always comply with future requests. The 1924 Revenue Act (which was signed into law by President Coolidge) contained a provision that is nearly identical to today’s Section 6103(f). Generally Congress can obtain access to the tax return of any taxpayer provided that it complies with the provisions of Section 6103(f).
The two congressional committees that deal with tax matters are the House Ways & Means Committee and the Senate Finance Committee.
In addition, the Joint Committee on Taxation is a congressional committee composed of members of both the Ways & Means and Senate Finance committees.
Section 6103(f) provides that, upon the written request of the chairman of any of these three committees, the secretary of treasury shall provide the tax returns or tax return information requested.
When the chairman of any other congressional committee (or the full body of the House or Senate) makes a similar request, the treasury secretary is still required to furnish the requested information. However, the chairman must specify the purpose of the inspection and must state that the information cannot be obtained from any other source.
There is no statutory remedy available to the secretary under Section 6103(f) if he feels the request is unreasonable. Furthermore, the law itself does not provide a basis for failing to provide the requested information if a congressional committee fails to specify the purpose of the request.
However, the courts have been more restrictive upon Congress. In situations where congressional committees (other than the tax writing committees) have sought to enforce a request by subpoena, the courts have ruled that a subpoena is unenforceable when the request is not made in connection with an investigation that is consistent with the exercise of congressional responsibilities. Each of those cases dealt with a request by a committee that was required under statute to specify the purpose of the request. The statute does not impose this requirement on the tax writing committees.
Recently, House Ways & Means Chairman Richard Neal formally requested President Trump’s tax returns, providing a basis for the request (i.e., monitoring how the IRS audits presidents’ tax returns). Although this request is clearly within the congressional scope contemplated in 1924, Treasury Secretary Steven Mnuchin refused to comply with the request.
Mr. Trump’s attorneys have stated that the request is unprecedented and have questioned whether Mr. Neal’s request has sufficient legislative purpose. The request is not unprecedented, as Mr. Neal’s predecessors obtained Richard Nixon’s tax returns in a similar fashion, finding that Mr. Nixon understated his taxes by $477,000. Moreover, the House Ways & Means committee is not required under the statute to provide a reason for the request.
On May 10, Neal subpoenaed the tax returns. Although the statute says the secretary shall comply with the request, there are no court cases addressing the failure to comply with a request from the Ways & Means Committee. Thus, there is no apparent judicial precedent with respect to this issue.
George K. Yin, a noted tax scholar and former chief of staff of the congressional Joint Committee on Taxation, recently wrote an article discussing Congress’s alternatives. In that article, Yin suggested that, instead of issuing a subpoena, Congress should consider suing Mnuchin to enforce Section 6103(f) rather than suing to enforce the subpoena.
Indeed Chairman Neal may have issued the subpoena merely to demonstrate that Congress has exhausted all of its remedies. When this matter is litigated, most tax scholars believe that, unlike the other cases, Mr. Neal will not be required to show why the Ways & Means Committee requested the tax returns, and if he is, the basis provided in the request will be sufficient.
Regardless of how Chairman Neal moves forward, it is conceivable that this process will drag on past the 2020 election. It will be interesting to see how this chess game unfolds.
Jim de Bree is a semi-retired CPA who resides in Valencia.
