MASTER FILE MAGNETIC TAPE RECORDS; MICROFILM INDEXES AND SETTLEMENT REGISTERS These materials fall within the purview of section 522(b)(3), (4), and (6) and are, therefore, protected from disclosure under the Act. Master file magnetic tape records contain a continuously updated record of tax data for each taxpayer, identifying the particular taxpayer, all returns for which he is liable, when and where returns have been filed, the amount and status of each liability and audit results. They are maintained either in account number sequence or by Social Security number. All tax return data, assessments, debit and credit transactions for each tax account are posted to the master file. Periodically, information is taken from the magnetic tape and placed on microfilm. The microfilm record is then sent to each Service Center and District Office where it is used to answer queries from taxpayers. Print-outs of a particular taxpayer account are also available from the microfilm. The microfilm record, therefore, is the readable copy of the magnetic tape information. Assessment and settlement data are a product of electronic processing of the various tax transactions into the taxpayer accounts. These transactions include the processing of all types of returns, the application of remittance credits, depositary receipt credits, and transferred credits to outstanding liabilities on applicable master file accounts, account adjustment transactions, tax liability adjustments, refunds to taxpayers, and other transactions affecting master file accounts. The processing of all these transactions into the taxpayer accounts results in assessment and settlement data output. Current deficiency and other assessments are individually recorded on the taxpayer accounts. Settlement registers are generated on a weekly basis and all assessments are separately identified on the applicable Register of Settlements for each district office. For each Register of Settlements printed each week, the Regional Service Center prepares and certifies an Assessment Certificate. The certified Assessment Certificate authenticates and dates, as officially assessed, each assessment item listed on the related Register of Settlements. In effect, the settlement registers are an itemization of assessment and settlement transactions relating to master file accounts. Under section 552(b) (3), the provisions of section 552 (a) are not applicable to matters "specifically exempted from disclosure by statute." The statutory provisions providing certain tax returns and related tax information with protection from disclosure are sections 6103, 6104 and 6106 of the Code and the penalty section 7213 of the Code and 18 U.S.C. 1905. These provisions would likewise protect magnetic tape records, microfilm indexes, and settlement registers which contain such information. There are certain types of tax returns which are "not covered" by the provisions of sections 6103, 6104, and 6106 of the Code, such as those relating to the Federal Insurance Contributions Act and certain excise tax matters. For these "non-covered" tax returns, disclosure may be withheld under section 552 (b) (4) which exempts "commercial or financial information obtained from any person and privileged or confidential." This exemption is designed to protect the type of information which would not customarily be disclosed by the person from whom it was obtained. (H. Rept., p. 10) It is believed that the information in these "non-covered" returns is of this type. However, it must be noted that since there are no statutory provisions specifically covering the disclosure of these returns, the Commissioner may, in his discretion, disclose them in appropriate cases. Section 552 (b) (4) imposes no limitation on that discretion. Additionally, section 552(b) (6) may be applicable in appropriate cases. This section permits the withholding of private or personal information which if disclosed to the public would amount to a clearly unwarranted invasion of privacy of any person, including members of the family of the person to whom the information pertains. (Attorney General, pp. 79-80) Further clarification of the scope of this provision may come as a result of litigation; however, at this point, disclosure of such financial information as the tax affairs of a person may be covered under section 552 (b) (6). REPORTS INTERNAL AUDIT The documents described below fall within the purview of one or more of the following exemptions: section 552(b) (2), (3), (4) or (5). Internal Audit reports point out the operating deficiencies disclosed during the course of each internal audit, including a summary of management's action on each of the deficiencies reported. These reports are designed to reflect whether the prescribed policies and procedures and the system of review and management controls are adequate and functioning properly. Related workpapers contain various analyses, summaries, memorandums, correspondence and other written material relative to the internal audit report. Such documents frequently include the identity of specific taxpayers, tax cases, tax information and other matters of a confidential nature. Each month the Assistant Commissioner (Inspection) reports the results of the internal audit program to the Commissioner in summary, informal report form. This report is in narrative form and highlights the more important findings or conditions disclosed by the internal audits. The contents also relate the Service's actions that are taken on those findings or conditions. Annually, the Commissioner submits a report to the Secretary summarizing the results of the Service's internal audit program. This contains highlights of the most significant internal audit findings. Section 552 (b) (2) exempts internal rules, practices and procedures which cannot be disclosed to the public without substantial prejudice to the effective performance of a significant Service function. (Attorney General, p. 71) The examples cited in the House report (p. 10) are "operating rules, guidelines, and manuals of procedure for Government investigators or examiners." In general, section 552 (b)(2) is designed to permit the withholding of agency records relating to management operations to the extent that the proper performance of necessary Service functions requires such withholding. (Attorney General, pp. 71-72) Thus, to the extent that the documents in question contain data relative to such operating rules and guidelines, they would be exempt from disclosure. It is clear that where the reports pertain to income or other tax information protected by a statute, such as sections 6103 or 7213 of the Code, they thereby fall within the purview of section 552 (b)(3) relating to information specifically exempted from disclosure by statute. Section 552(b)(4) authorizes the withholding of documents if they contain "commercial or financial information obtained from a person and privileged or confidential." This is information which would not customarily be made public by the person from whom it was obtained by the Government. (Attorney General, pp. 74-76) As to section 552 (b) (5), it appears that virtually all of these documents would be covered by this exemption for inter-agency or intra-agency memorandums which would not be available by law to a party other than an agency in litigation with the Service. Section 552(b) (5) is discussed in detail elsewhere in this memorandum, wherein is referenced the status of internal communications under the Federal discovery rules together with the degree of security afforded. In brief, the memorandums and reports in question are of the type exempted by section 552 (b) (5) since they are concerned generally with an analysis of the Service's audit and collection activities, with recommended Service action relative thereto. RECOMMENDATIONS FOR IMPROVEMENTS ON PROCEDURES, METHODS AND PROGRAMS TO VARIOUS ASSISTANT COMMISSIONERS; REGIONAL FINANCIAL ACCOMPLISHMENT REPORTS AND SUMMARIES THEREOF The documents described below fall within the purview of one or more of the following exemptions section 552(b) (2), (3), (4) or (5). Recommendations for improvement generated by the Inspection Service have characteristics analogous to internal audit reports, yet relate only to one isolated problem area. Recommendations are prompted by circumstances indicating that a change is necessary in practices and procedures promulgated by the National Office. In general, there would be a showing as to the deficiencies in a particular facet of the Service's operation. Problem areas would include assessment, refund or interest computations. Rarely would the recommendations be concerned with investigative data. The files in question would contain a description of the recommendations and accomplishments on adopted recommendations. Specific cases containing taxpayers' names, years and tax accounts involved are cited to illustrate the basis for the recommendation. Regional financial accomplishment reports are primarily based upon data derived from a review of closed cases as handled by the Audit, Intelligence, Collection, and Appellate Divisions. In some instances, reference may be made to cases currently being processed. The reports are submitted quarterly, and contain details on actual and potential financial accomplishments resulting from corrective actions taken or to be taken on findings filed by regions and districts in which reported. A brief description of the deficiency reported and the corrective action is outlined. Some relate to general conditions, but most findings relate to specific cases, including names of taxpayers, years and amounts involved. For Audit findings, this includes amounts realized from reexaminations of reopened years, and examinations of related cases and subsequent years. For Collection activities, specific taxpayer cases are also cited including years and amounts involved in reactivated accounts written-off, delinquent tax accounts and delinquent return investigations. In brief, these documents reflect the activity of the Inspection Service in reviewing Service procedures to ascertain where a breakdown in such procedures has resulted in monetary losses, and the corrective action taken relative thereto. As a consequence, reference would be made not only to a named taxpayer, but likewise to his specific individual tax situation. The legislative history indicates that the exemption for matters which are related solely to the "internal personnel rules and practices of an agency," in section 552 (b) (2), includes matters which are for the guidance of agency personnel only, such as internal rules and practices which cannot be disclosed to the public without substantial prejudice to the effective performance of a significant Service function. (Attorney General, p. 71) The examples cited in the House report (p. 10) are "operating rules, guidelines, and manuals of procedure for Government investigators or examiners." It is noted, however, that the House report cautions that not all matters of internal management would be exempt, such as employee relations, working conditions, or routine administrative procedures. In general, section 552(b) (2) is designed to permit the withholding of agency records relating to management operations to the extent that the proper performance of necessary Service functions requires such withholding. (Attorney General, p. 72) Thus, to the extent that the documents in question contain data relative to such operating rules and guidelines, the material is exempt from disclosure. It is clear that most of these documents contain confidential tax information and may thereby fall within the scope of section 552 (b) (3), that is, information specifically exempted from disclosure by statute. Thus, to the extent that these documents contain the type of information protected by section 6103 and similar sections of the Code, and the penalty provisions of section 7213 of the Code and 18 U.S.C. 1905, they would be exempt from disclosure under section 552 (b) (3). Section 552 (b) (4) authorizes the withholding of documents if they contain "commercial or financial information obtained from a person and privileged or confidential." This is information which would not customarily be made public by the person from whom it was obtained by the Government. Section 552(b) (4) may be read in the disjunctive, so as to cover not only privileged commercial and financial information, but all information which is customarily privileged or is appropriately given to an energy in confidence. (Attorney General, pp. 74-76) Certain information contained in the instant documents may fall within this latter criteria. As to section 552(b) (5), it appears that many of these documents would be covered by this exemption for intra-agency memorandums which would not be available by law to a party other than an agency in litigation with the Service. Section 552 (b) (5) is discussed in detail elsewhere in this memorandum, wherein is referenced the status of internal communications under the Federal discovery rules together with the degree of security afforded. In brief, the memorandums and reports in question are of the type exempted by section 552 (b) (5) since they are concerned generally with an analysis of the Service's audit, enforcement and collection activities, with recommended Service action relative thereto. TAXPAYER COMPLAINT FILES Documents included within a taxpayer complaint file are deemed to fall within the purview of one or more of the following sections: 552(b)(2), (3), (4), (5), or (6). At the outset it should be noted that there are certain taxpayer complaint letters for which the Service would be unable to assert any of these exemptions. This occurs, for example, where the complainant has already made the substance of his letter generally public or where the letter states that the complainant does not care if the letter is made public. This memorandum refers only to those letters which have not been made public and in which no such statement is found. Taxpayer complaint letters are, for the most part, concerned with potential problems in internal Service procedures or controls as well as errors in handling a taxpayer's case. These letters may relate to any facet of the operations of the Service, i.e., delays in making refunds, continuous letters demanding payment where a tax obligation has already been paid, or improper conduct by an officer or employee of the Service. The letters may contain confidential tax information pertinent to the particular complainant. Procedurally, the letter of the complainant will be acknowledged and a report subsequently prepared analyzing the particular problem. Such reports will contain the results of the field review, including, where appropriate, detailed tax information relative to the complainant's particular problem, and, in many instances, comprehensive information outlining how a breakdown in Service procedures has affected the complainant. The report will often make recommendations as to steps needed to correct human errors, as well as the revision of established Service procedures. In the latter instance, the matter is referred to an appropriate official along with a discussion of the matters disclosed in the review, and recommendations as to adjustments, changes in procedures, or controls. The legislative history indicates that the exemption for matters which are related solely to the "internal personnel rules and practices of an agency," in section 552 (b) (2), includes those matters which are for the guidance of agency personnel only, such as internal rules and practices which cannot be disclosed to the public without substantial prejudice to the effective performance of a significant Service function. The examples cited in the House report (p. 10) are "operating rules, guidelines, and manuals of procedure for Government investigators or examiners." It is noted, however, that the House report cautions that not all matters of internal management would be exempt, such as employee relations, working conditions, or routine administrative procedure. In general, section 552(b) (2) is designed to permit the withholding of agency records relating to management operations to the extent that the proper performance of necessary Service functions requires such withholding. (Attorney General, pp. 71–72). Thus, to the extent that taxpayer complaint files contain data relative to such operating rules and guidelines, the material is exempt from disclosure. It is clear that many of the papers included in the taxpayer complaint files deal with confidential tax information within the scope of section 552(b) (3), that is, information specifically exempted from disclosure by statute. Thus, to the extent that these documents contain the type of information protected by sections 6103 and similar sections of the Code, and the penalty provisions of section 7213 of the Code and 18 U.S.C. 1905, they would be exempt from disclosure under section 552 (b) (3). Section 552(b) (4) authorizes the withholding of documents if they contain "commercial or financial information obtained from a person and privileged or confidential." This is information which would not customarily be made public by the person from whom it was obtained by the Government. Section 552(b) (4) may be read in the disjunctive, so as to cover not only privileged commercial or financial information, but all information which is customarily privileged or is appropriately given to an agency in confidence. (Attorney General, pp. 74–76) The taxpayer complaint letter, and certain documents prepared by the Service in reference to that letter, would seem to meet this latter criteria. As to section 552(b) (5), it appears that many of the various documents prepared by Service officers or employees would be covered by this exemption for intra-agency memorandums which would not be available by law to a private party in litigation with the Service. Section 552 (b) (5) is discussed in detail elsewhere in this memorandum, wherein is referenced the status of internal communications under the Federal discovery rules together with the degree of security afforded. In brief, memoranda related to a taxpayer complaint are the type exempted by section 552(b) (5) since they are concerned generally with an analysis of a specific complaint with recommended Service action relative thereto. Section 552 (b)(6) is pertinent in that production of documents found in taxpayer complaint files may result in "a clearly unwarranted invasion of personal privacy." A balancing of the need for protection of an individual's right of privacy against the preservation of the public's right to Government information in the case of the instant documents, would seem, as a general rule, to contra-indicate disclosure. The harm to the individual through disclosure is readily apparent. Section 552(b)(6) is intended to exclude from the disclosure requirements not only all personnel and medical files, but likewise all private or personal information contained in other files which would constitute a clearly unwarranted invasion of the privacy of an individual. The complaint files in question would contain this type of information. JOINT INTERNAL AUDIT-INTERNAL SECURITY SPECIAL ASSIGNMENT FILES Documents included within joint special assignment files are deemed to fall within the purview of one or more of the following exemptions: section 552(b) (3), (4), (5), (6), or (7). Correspondence from a Regional Inspector would describe the basis for initiat ing a joint investigation, the results of any preliminary investigation previously accomplished, and the anticipated audit and investigative procedures to be followed. This correspondence would include in most instances the names of Service employees, taxpayers, and tax practitioners, as well as specific tax information relative to named individuals. Joint investigations would be directed toward matters such as bribery, extortion, embezzlement, and employee attempts to preclude audit of specific tax returns. The joint special assignment files would include periodic progress reports which frequently include confidential information having both tax and criminal aspects. The files may also contain correspondence from the National Office to the field, acknowledging the initiation of a case, suggesting program changes, or commenting on the developments reflected in a particular progress report. The National Office file would probably contain memorandums relative to telephone conversations, conferences, visitations, or work performed. Interim and final reports are submitted, which customarily contain specific tax or investigative data of a confidential nature relative to specified individuals. Miscellaneous materia's contained in special assignment files would include summaries of prosecutive action, as well as follow-up reports giving additional data in a particular case or related matter. It is clear that many of the papers found in the joint special assignment files contain confidential tax information within the scope of section 552(b) (3), that is, information specifically exempted from disclosure by statute. Thus, to the extent that these documents contain the type of information protected by section 6103 and similar sections of the Code, and the penalty provisions of section 7213 of the Code and 18 U.S.C. 1905, they would be exempt from disclosure under section 552(b) (3). Section 552 (b) (4) authorizes the withholding of documents if they contain "commercial or financial information obtained from a person and privileged or confidential." This is information which would not customarily be made public by the person from whom it was obtained by the Government. Section 552(b) (4) may be read in the disjunctive, so as to cover not only privileged commercial or financial information, but all information which is customarily privileged or is appropriately given to an agency in confidence. (Attorney General, pp. 74-76.) Certain information contained in documents included in the joint assignment files would seem to fall within this latter criteria. As to section 552 (b) (5), it appears that many of the documents found within the files in question would be covered by this exemption for intra-agency memorandums which would not be available by law to a party other than an agency in litigation with the Service. Section 552 (b) (5) is discussed in detail elsewhere in this memorandum, wherein is referenced the status of internal communications under the Federal discovery rules together with the degree of security afforded. In brief, memorandums found in the joint special assignment files are of the type exempted by section 552(b) (5) since they are concerned gen |