a

GAO

United States Government Accountability Office

Report to the Committee on Finance, 

U.S. Senate

October 2005 TAXPAYER 

INFORMATION

Options Exist to 

Enable Data Sharing 

Between IRS and 

USCIS but Each 

Presents Challenges

GAO-06-100
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-100.

To view the full product, including the scope 

and methodology, click on the link above. For 

more information, contact Michael Brostek at 

(202) 512-9110 or brostekm@gao.gov. 

Highlights of GAO-06-100, a report to the 

Committee on Finance, U.S. Senate 

October 2005

TAXPAYER INFORMATION 

Options Exist to Enable Data Sharing 

Between IRS and USCIS but Each 

Presents Challenges 

Data sharing can help improve (1) tax compliance if businesses applying to 

sponsor immigrant workers are required to meet tax filing and payment 

requirements, and (2) the accuracy and timeliness of USCIS’s immigration 

eligibility decisions if it obtained tax data from IRS to help ensure business 

sponsors meet eligibility criteria. As of December 2003, IRS databases 

showed 18,942 businesses (5 percent) applying to sponsor immigrant 

workers had $5.6 billion in unpaid assessments. Of this amount, businesses 

were not in installment agreements with IRS or otherwise making payments 

on $3.7 billion. If future business sponsors owe taxes and are required to 

meet their tax obligations, they would need to make arrangements with the 

IRS to come into compliance. Although USCIS officials acknowledge that no 

explicit prohibition exists in immigration laws against conditioning approval 

of employer applications on their tax compliance, USCIS officials said a 

statutory change is preferable because they have legal concerns about 

USCIS’s authority to issue such a regulation absent specific authority. IRS 

data can help USCIS make more accurate eligibility decisions by better 

identifying businesses that may not have met eligibility criteria due to having 

unpaid assessments or not filing returns. In our nationwide selection, 67,949 

of 413,723 (16 percent) business sponsors were in IRS’s nonfiler database at 

the time of their application. 

Businesses Sponsoring Immigrant Workers That May Not Have Met USCIS’s Immigration 

Eligibility Criteria, 1997-2004 

Source: GAO analysis of taxpayer and immigration data.

0

Unpaid assessments

Nationwide selection

Nonfilers

20

19

68

40 60 80

Number of sponsors (in thousands)

A variety of options is available to IRS and USCIS for establishing and 

implementing data sharing. An applicant-initiated data-sharing arrangement 

could be implemented under existing Internal Revenue Code authority 

through taxpayer consent, whereby taxpayers authorize IRS to disclose their 

information. USCIS then could verify applicant-provided data by obtaining 

tax returns or tax transcripts. Treasury guidance suggests a small-scale pilot 

using consents as a way to make the business case for continued access to 

taxpayer information. In general, the more that data sharing could be done 

electronically, the more efficient the data sharing could be. However, 

achieving electronic data sharing may take longer than paper-based 

processes due to legal, technological, and cost challenges. Further, if 

business sponsors need to come into compliance, net tax collections might 

not increase if collecting their taxes displaces other IRS work. Establishing 

user fees to cover data-sharing costs could be a way to fund data sharing, but 

IRS lacks the authority to collect and retain a user fee to cover compliancerelated costs associated with data sharing. 

In 2000, federal agencies estimated 

they saved at least $900 million 

annually through data sharing 

initiatives. The Internal Revenue 

Service (IRS) can use data from 

taxpayers and third parties to 

better ensure taxpayers meet their 

obligations. Likewise, Congress 

has authorized certain agencies 

access to taxpayer information 

collected by IRS to better 

determine benefit eligibility. 

In July 2004, we reported that data 

sharing between IRS and the 

United States Citizenship and 

Immigration Services (USCIS) has 

the potential to improve tax 

compliance as well as immigration 

eligibility decisions (GAO-04-972T). 

For this report, GAO determined 

(1) the potential benefits of data 

matching, and (2) the options and 

associated challenges. 

What GAO Recommends

Congress may wish to consider 

(1) requiring businesses applying to 

sponsor immigrant workers to 

meet tax filing and payment 

obligations, and (2) authorizing a 

user fee to be retained by IRS to 

cover compliance-related costs. To 

improve immigration eligibility 

decisions, GAO recommends that 

USCIS, in consultation with the 

IRS, conduct a pilot data-sharing 

test utilizing taxpayer consents. 

IRS agreed and USCIS generally 

agreed with the pilot study. USCIS 

raised several issues that GAO 

generally believes should be 

addressed as part of the 

recommended pilot program. 
Page i GAO-06-100 Taxpayer Information

Contents

Letter 1

Results in Brief 3

Background 7

IRS and USCIS Could Benefit from Data Sharing Although an 

Immigration Eligibility Change Would Be Key for IRS 14

IRS and USCIS Have Data-Sharing Options but Each Presents 

Challenges 25

Conclusions 43

Matters for Congressional Consideration 44

Recommendation for Executive Action 44

Agency Comments and Our Evaluation 45

Appendixes

Appendix I: Objective, Scope, and Methodology 49

Appendix II: Summary of IRS/USCIS Data-Matching Results 52

Appendix III: Comments from the Internal Revenue Service 56

Appendix IV: Comments from the Department of Homeland Security 57

Appendix V: GAO Contact and Staff Acknowledgments 60

Tables Table 1: Forms of Data Sharing Involving Taxpayer or Personal 

Information 10

Table 2: User Fee Guidance and Authority 13

Table 3: Examples of State and Private Entities That Require Tax 

Checks 29

Table 4: Examples of Operational Data on the Paper Taxpayer 

Consent Process 30

Table 5: Characteristics of Selected Electronic Data-Sharing 

Arrangements between IRS and Federal Agencies 32

Table 6: Criteria Applied by Treasury and IRS When Evaluating 

Specific Proposals for Governmental Disclosures 35

Table 7: User Fees Collected by IRS, Fiscal Year 2004 42

Table 8: Number and Percentage of Total Applications GAO 

Collected 54

Table 9: Matching Results on Nationwide Data, 1997 through 2004 – 

Automated Data 54

Table 10: Matching Results on Nonprobability Sample, 2001 through 

2003 – Hard Copy Application Files 55
Contents

Page ii GAO-06-100 Taxpayer Information

Figures Figure 1: Current Lack of Data Verification between IRS and USCIS 

9

Figure 2: Businesses Sponsoring Immigrant Workers That May Not 

Have Met USCIS’s Financial Feasibility or Legitimacy 

Requirements, 1997-2004 18

Figure 3: USCIS General Adjudication Process for 

Employment-Based Applications to Sponsor Immigrant 

Workers 19

Figure 4: Average Reported Processing Times for Fiscal Years 2004 

and 2005 and Fiscal Year 2006 Processing Time Goal for 

Select USCIS Forms 24

Figure 5: Process for Retrieving Tax Return and Tax Transcript 

Information 27

Figure 6: Flow Chart on the Medicare Prescription Drug 

Process 34
Contents

Page iii GAO-06-100 Taxpayer Information

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.

Abbreviations

BMF Business Master File

CLAIMS 3 Computer Linked Application Information Management 

System, Version 3.0

CMA Computer Matching Agreement

CMS Centers for Medicare and Medicaid Services

DHS Department of Homeland Security

Education Department of Education

EIN Employer Identification Number

FMS Financial Management Service

FOIA Freedom of Information Act 

IDRS Integrated Data Retrieval System 

IMF Individual Master File

IRC Internal Revenue Code

IRS Internal Revenue Service

OIG Office of Inspector General

OMB Office of Management and Budget

SSA Social Security Administration

SSN Social Security Number

TDS Transcript Delivery System

USCIS United States Citizenship and Immigration Services
Page 1 GAO-06-100 Taxpayer Information

United States Government Accountability Office

Washington, D.C. 20548

A

October 11, 2005 Letr

The Honorable Charles E. Grassley 

Chairman

The Honorable Max Baucus 

Ranking Minority Member

Committee on Finance 

United States Senate

In 2000, federal agencies estimated that they saved at least $900 million 

annually in program costs through data-sharing initiatives. As we have 

previously reported, federal agencies are increasingly using data sharing to 

help verify applicant-provided information. Many federal agencies use 

financial information to make eligibility decisions or ensure compliance 

with program requirements. For instance, the United States Citizenship 

and Immigration Services (USCIS) grants immigrants admittance into the 

United States or allows immigrants to remain in the country based, in part, 

on financial information provided by the applicant and/or their sponsors. 

Likewise, the Internal Revenue Service (IRS) uses financial information to 

ensure that taxpayers are meeting their tax obligations.

To facilitate data sharing, Congress has authorized a number of agencies to 

access federal taxpayer information collected by the IRS to improve the 

accuracy of eligibility decisions. The Social Security Administration (SSA) 

is one agency, for example, that has an extensive data-sharing relationship 

with IRS, which aids in administering Social Security benefit programs and 

ensuring taxpayer compliance. At the same time, taxpayers’ privacy must 

be protected and various federal laws and agency policies regulate 

agencies’ use and disclosure of taxpayer and personal information. Internal 

Revenue Code (IRC) Section 6103 allows IRS to disclose taxpayer 

information to federal agencies and authorized employees of those 

agencies, but only under specific conditions. Such privacy protection is an 

important component of continued voluntary compliance with the internal 

revenue laws.

Data-sharing arrangements between agencies can take different forms. 

These arrangements can be applicant- or agency-initiated data sharing. 

Applicant-initiated arrangements entail requiring an applicant for a benefit 

or employment to secure proof from another agency to qualify for the 

benefit or employment. In these cases, the agency may share the eligibility 

proof directly with the agency that would be providing the benefit or 
Page 2 GAO-06-100 Taxpayer Information

employment. Agency-initiated sharing can include matching data from two 

agencies to help one agency or both agencies verify data accuracy. 

In our July 2004 testimony, we reported that data sharing between IRS and 

USCIS has the potential to improve tax compliance as well as immigration 

eligibility decisions.1

 You then requested additional information on 

potential benefits and options for data sharing between IRS and USCIS. 

For this study, our objectives were to determine the (1) potential benefits 

of data matching for IRS and USCIS and (2) options for establishing and 

maintaining a data-sharing relationship between the IRS and USCIS, 

including any challenges associated with those options. 

In responding to the objectives, we performed work at several IRS offices, 

including compliance and research, and at various program and district 

offices, and service centers at USCIS. We also contacted representatives of 

two immigration advocacy groups to obtain their perspectives. Our 

findings are based on matching of immigration and IRS taxpayer data, 

documents and various publications, and interviews with agency officials. 

We used two sets of USCIS data to match with IRS taxpayer data to 

determine the potential value for increased data sharing and matching. We 

matched taxpayer data to automated immigration applications and hard 

copy immigration applications. We used a nationwide selection of 

automated USCIS applications from immigration applications submitted to 

USCIS service centers from 1997 through 2004. Approximately 3.4 million 

of 4.5 million automated immigration records had Social Security numbers 

(SSN) or employer identification numbers (EIN) that could be used to 

match with SSNs and EINs in IRS databases. We used these data to 

determine whether businesses and others that had applied to sponsor 

immigrant workers or immigrants applying to change their immigration 

status had filed a tax return with IRS and, if so, whether they owed taxes to 

IRS.2

 Because the nationwide selection did not include any financial 

information, we also selected a nonprobability sample of about 1,000 

immigration hard copy applications for citizenship, employment, and 

family-related immigration and change of immigration status filed by 

1

GAO, Taxpayer Information: Data Sharing and Analysis May Enhance Tax Compliance 

and Improve Immigration Eligibility Decisions, GAO-04-972T (Washington, D.C.: July 21, 

2004).

2

The term immigrant as used in this report generically refers to any employer-sponsored 

alien worker whether immigrant or nonimmigrant. The term application as used in this 

report refers to immigration petitions.
Page 3 GAO-06-100 Taxpayer Information

businesses and individuals from 2001 through 2003 at four immigration 

locations.3

 We used the hard copy applications to build a database of 

personal and financial information. We used this sample as a second 

source of examples of USCIS applicants who may not have filed tax returns 

and may have owed taxes to IRS. For this report, our discussion will focus 

on businesses applying to sponsor immigrant workers because the 

matching results from our July 2004 testimony identified business sponsors 

as the most likely group in which benefits would result. 

We assessed the reliability of IRS’s Individual Master File (IMF) and 

Business Master File (BMF) data and the USCIS’s Computer Linked 

Application Information Management System, Version 3.0 (CLAIMS 3), 

which is a database containing nationwide immigration data. As part of our 

annual audits of IRS’s financial statements, we also assessed the reliability 

of IRS’s BMF and IMF data with respect to unpaid assessments by testing 

selected statistical samples of unpaid assessment modules. We determined 

that the data were sufficiently reliable for the purpose of this report. We 

conducted our work from August 2004 through August 2005 in accordance 

with generally accepted government auditing standards. For details on our 

scope and methodology, see appendixes I and II.

Results in Brief IRS’s tax compliance efforts could benefit from data sharing with USCIS if 

immigration eligibility were changed to require business sponsors to show 

that they met tax filing and payment requirements to qualify to sponsor 

immigrant workers. Our analysis of automated immigration records 

matched against IRS databases showed that 18,942 (5 percent) of 

businesses applying to sponsor immigrant workers from 1997 through 2004 

had $5.6 billion in unpaid assessments, as of December 2003. Business 

sponsors who were not in an installment agreement with the IRS or 

otherwise making payments to IRS had unpaid assessments totaling $3.7 

billion of the $5.6 billion. USCIS officials said that businesses that apply to 

sponsor workers tend to do so in multiple years. To the extent future 

business sponsors owe taxes and are required to meet their tax obligations, 

they would need to make arrangements with the IRS to come into 

compliance before being eligible to sponsor immigrant workers to enter the 

3

USCIS has four service centers nationwide established to handle the filing, data entry, and 

adjudication of certain applications for immigration services and benefits. District offices 

are responsible for providing certain immigration services and benefits to residents in their 

service areas.
Page 4 GAO-06-100 Taxpayer Information

country. Although this likely would help IRS collect unpaid tax 

assessments, not all taxes would be collected since, for example, some 

businesses may not be able to repay their full debt. USCIS officials said 

requiring business sponsors to meet their tax obligations in order to 

sponsor immigrant workers could be accomplished by a regulatory change. 

Although USCIS officials acknowledge that no explicit prohibition exists in 

immigration laws against conditioning approval of employer applications 

on their tax compliance, USCIS officials said a statutory change is 

preferable because they have legal concerns about USCIS’s authority to 

issue such a regulation absent specific authority. 

Even if the eligibility criteria for business sponsors is not changed as 

mentioned previously, USCIS can still benefit from data sharing with IRS by 

making more accurate and timely immigration eligibility decisions for 

businesses applying to sponsor workers. For businesses applying to 

sponsor immigrant workers, immigration adjudicators use two basic 

criteria for evaluating the eligibility of businesses to sponsor immigrants: 

(1) the sponsor’s financial feasibility and (2) the legitimacy of the sponsor’s 

existence. According to USCIS, because filing and paying taxes is an 

indicator that these qualifications are met, having access to IRS data may 

help them better identify businesses that do not meet immigration 

eligibility criteria. In addition to the 18,942 business sponsors we identified 

that owed taxes, we found that 67,949 of 413,723 (16 percent) of business 

sponsors in our nationwide selection did not file one or more tax returns at 

the time of their application to sponsor an immigrant worker. 

Since adjudicators receive self-reported—and sometimes false—personal 

and financial information from applicants, USCIS officials said that a datasharing arrangement to verify applicant-provided data during the 

adjudicatory process would help USCIS adjudicators make more accurate 

immigration eligibility decisions. USCIS officials said that adjudicators 

would find IRS information on small businesses particularly useful; 25 of 43 

businesses with unpaid tax assessments in our nonprobability sample 

reported net incomes of less than $10 million to USCIS. Although USCIS 

officials are seeking a regulatory change that would shift adjudicators’ 

focus away from a business sponsor’s ability to pay, IRS taxpayer data 

could still help adjudicators establish a business sponsor’s financial 

viability and legitimacy by providing information on whether the business 

sponsor was a functioning business. Further, USCIS officials said that 

access to IRS taxpayer data could improve the timeliness of making benefit 

decisions by (1) decreasing rework/follow-up work with applicants and 

(2) possibly reducing the volume of applications received if benefits were 
Page 5 GAO-06-100 Taxpayer Information

made contingent on applicants having met tax filing and payment 

requirements.

A variety of options is available to IRS and USCIS for establishing and 

implementing data sharing regardless of whether data sharing is applicantor agency-initiated. An applicant-initiated data-sharing arrangement could 

be implemented under existing IRC authority through a taxpayer consent, 

whereby a taxpayer authorizes IRS to disclose his or her information to 

other agencies. If so, USCIS could verify applicant-provided data by 

obtaining the applicant's tax return or tax transcript. However, the 

Department of the Treasury suggests that before an agency uses taxpayer 

consents, the agency should first conduct a statistical test match or a smallscale pilot demonstrating that the need for information outweighs concerns 

about taxpayer privacy and voluntary tax compliance. In general, the more 

that data sharing could rely on electronic communications between 

applicants and the agencies, the more efficient the data-sharing 

arrangements could be. USCIS, which is working to move into a paperless 

environment, is reluctant to receive additional pieces of hard copy 

information. However, achieving efficient electronic data sharing may take 

longer than implementing paper-based sharing due to legal, technological, 

and cost challenges that must be overcome. For example, if taxpayer 

consents were not used, IRC Section 6103 would need to be changed to 

authorize IRS to disclose taxpayer information directly to USCIS for 

immigration eligibility purposes. USCIS must also address a number of 

technological challenges, such as ensuring all necessary data are accurate 

and entered into automated systems to lay the foundation that would 

enable data sharing to take place between the two agencies. Further, 

estimating the cost benefit associated with data sharing can be 

complicated. Unless IRS’s costs to bring business sponsors with unpaid 

assessments into compliance are reimbursed, net tax collections may not 

rise since IRS might have to forgo bringing other noncompliant taxpayers 

into compliance to bring the business sponsors into compliance. 

Establishing user fees collected from businesses applying to sponsor 

workers to cover data-sharing costs could be a way to fund data sharing, 

but the IRS lacks authority to collect and retain fees for compliance-related 

costs. USCIS, on the other hand, has authority to collect and retain fees for 

adjudicatory services including compliance related costs. 

To improve taxpayer compliance and USCIS’s immigration benefit 

decisions, we suggest that Congress consider (1) changing immigration 

eligibility to require businesses applying to sponsor immigrant workers to 

meet tax filing and payment obligations and (2) authorizing a user fee to be 
Page 6 GAO-06-100 Taxpayer Information

collected and retained by IRS to cover its costs to bring business sponsors 

into compliance. To improve the accuracy and timeliness of USCIS’s 

immigration eligibility decisions absent requiring business to have met 

their tax filing and payment obligations, we recommend the Secretary of 

the Department of Homeland Security (DHS) direct USCIS, in consultation 

with the IRS, to conduct a pilot data-sharing test. In the test, USCIS should 

require a tax check for selected businesses and other entities applying to 

sponsor immigrant workers before qualifying for immigration benefits. 

In commenting on a draft of this report (see app. III and IV), the 

Commissioner of Internal Revenue agreed and the Director of DHS’s Office 

of Inspector General (OIG) Liaison—commenting on behalf of the 

Secretary of DHS—generally agreed with our recommendation to conduct 

a small-scale pilot test to determine whether a business case exists for 

supporting data sharing before pursuing legislation or a large-scale 

taxpayer consent program. The Commissioner also stated an executive 

working group will determine the merits of applying user fees for 

compliance data sharing. The Director of DHS’s OIG Office liaison 

generally agreed with our recommendation on the pilot program but said 

he had serious concerns about our recommendation on the IRS user fee. 

The Director acknowledged the pilot would be consistent with USCIS’s 

desire to explore ways to streamline its processes and provide necessary 

information with respect to considering the feasibility of initiatives such as 

data sharing on a larger scale. However, his agreement was contingent on 

the extent to which USCIS can lawfully engage in a pilot program that 

requires business sponsors to consent to a tax check. The Director did not 

further describe his legal concerns and therefore we do not have a basis to 

evaluate them. We agreed with the Director’s assessment in technical 

comments that immigration laws contain no explicit prohibition on 

conditioning employer petitions on their tax compliance and doing so 

might be legally defensible. We believe consulting with IRS in determining 

how to design the pilot test should help USCIS resolve those concerns. 

In commenting on user fees, the Director stated that policy considerations 

have kept USCIS from completely using its authority to recover its full 

costs but did not identify the specific policy considerations. The Director 

specifically cited concerns about increasing fees to immigration benefit 

applicants without a corresponding improvement in services. However, as 

stated in our report, USCIS access to IRS data has the potential to improve 

the agency’s services because it could decrease rework and follow-up 

work, which would help USCIS minimize processing time for all business 

sponsors. Further, with more routine access to IRS data, USCIS might not 
Page 7 GAO-06-100 Taxpayer Information

need to request as much financial information from business applicants as 

it does now since USCIS officials themselves see IRS data as more reliable 

than information provided by applicants. 

Finally, the Director commented that the proposed user fee to cover IRS’s 

compliance-related costs seems to be different in concept from other 

existing user fees. IRS officials say they do not receive a user fee to bring 

applicants for any other agencies’ benefits into compliance with their tax 

obligations. However, Congress has authorized new or expanded funding 

arrangements recently to help IRS deal with its workload. For instance, the 

user fees authorized in connection with IRS programs such as its Offers-InCompromise Program and its private debt collection program are to 

support costs associated with processing agreements between IRS and the 

taxpayer that resolve the taxpayer’s tax liability. Given the substantial 

unpaid taxes that we found among businesses applying to sponsor 

immigrant workers, we believe that it is appropriate for Congress to 

consider steps for effectively bringing these taxpayers into compliance 

without unduly deterring IRS from pursuing other noncompliant taxpayers. 

Consequently, our report put forth the user fee as one option for Congress 

to consider for supporting a potential data sharing arrangement between 

IRS and USCIS. 

Background As one of the largest repositories of personal information in the United 

States, IRS receives tax returns from about 116 million individual taxpayers 

who have wage and investment income and from approximately 45 million 

small business and self-employed taxpayers each year. IRS performs a 

variety of checks to ensure the accuracy of information reported by these 

taxpayers on their tax returns. These checks include verifying 

computations on returns, requesting more information about items on a tax 

return, and matching information reported by third parties to income 

reported by taxpayers on returns (i.e., document matching). IRS's 

document matching program has proven to be a highly cost-effective way 

of identifying underreported income, thereby bringing in billions of dollars 

of tax revenue while boosting voluntary compliance.

IRC Section 6103, amended significantly by the Tax Reform Act of 1976,4

 is 

the primary law used to restrict IRS's data-sharing capacity. The law 

4

Pub. L. No. 94-455, Oct. 4, 1976.
Page 8 GAO-06-100 Taxpayer Information

provides that tax returns and return information are confidential and may 

not be disclosed by IRS, other federal and/or state employees, and certain 

others having access to the information except as provided in IRC Section 

6103. IRC Section 6103 allows IRS to disclose taxpayer information to 

federal agencies and authorized employees of those agencies for certain 

specified purposes. Accordingly, IRC Section 6103 controls whether and 

how tax information submitted to IRS on federal tax returns can be shared. 

IRC Section 6103 specifies which agencies (or other entities) may have 

access to tax return information, the type of information they may access, 

for what purposes such access may be granted, and under what conditions 

the information will be received. For example, IRC Section 6103 has 

exceptions allowing certain federal benefit and loan programs to use 

taxpayer information for eligibility decisions. Because the confidentiality 

of tax data is considered crucial to voluntary compliance, if agencies want 

to establish new efforts to use taxpayer information, executive branch 

policy calls for a business case to support sharing tax data.

USCIS is part of the Department of Homeland Security (DHS), which was 

established by the Homeland Security Act of 2002.5

 USCIS is responsible 

for administering several immigration benefits and services transferred 

from the former Immigration Services Division of the Immigration and 

Naturalization Service. Included among the immigration benefits and 

services USCIS's offices oversee are citizenship, asylum, lawful permanent 

residency, employment authorization, refugee status, intercountry 

adoptions, replacement immigration documents, family- and employmentrelated immigration, and foreign student authorization. USCIS's functions 

include adjudicating and processing applications for U.S. citizenship and 

naturalization, administering work authorizations and other petitions, and 

providing services for new residents and citizens. USCIS's employees who 

review immigration benefit applications and determine if they should be 

approved are its adjudicators. USCIS's fraud detection units and Fraud 

Detection and National Security immigration officers in the districts, 

service centers, and asylum offices detect potential fraudulent applications 

and any trends or patterns that suggest potential fraud. USCIS staff work 

with applicants through the adjudicatory process beginning with initial 

contact when an application or petition is filed, through the stages of 

gathering information on which to base a decision. This contact continues 

to the point of an approval or denial, the production of a final document or 

oath ceremony, and the retirement of case records.

5

Pub. L. No. 107-296, § 451, 116 Stat. 2195.
Page 9 GAO-06-100 Taxpayer Information

Under current legislative authority, USCIS is not authorized to receive 

taxpayer information from IRS directly. USCIS currently obtains selfreported personal and financial information provided by (1) businesses, 

religious organizations, non-profit entities and individuals applying to 

sponsor immigrant workers; (2) individuals applying to sponsor relatives; 

and (3) individuals applying to enter the country, extend their stay or 

obtain citizenship. USCIS also obtains information from third parties, not 

including IRS, to verify applicants’ self-reported data. Figure 1 illustrates 

the current lack of data verification between USCIS and IRS during the 

immigration application process. 

Figure 1: Current Lack of Data Verification between IRS and USCIS 

Data-sharing arrangements between agencies can take different forms. As 

used in this report, data sharing means obtaining and disclosing 

information on individuals between federal agencies (IRS and USCIS) to 

ensure taxpayers have met their tax obligations or to determine eligibility 

for immigration benefits.6

 Table 1 lists different forms of data sharing, 

enabling authority, information gained, and related examples.

6

GAO, The Challenge of Data Sharing: Results of a GAO-Sponsored Symposium on Benefit 

and Loan Programs, GAO-01-67 (Washington, D.C.: Oct. 20, 2000).

Business owner submits tax returns to IRS

Tax return

Tax return

USCIS 

checks:

• business financial information 

• determines if business meets financial 

 feasibility and legitimacy criteria

Source: GAO.

Business owner submits tax returns to USCIS

No USCIS/IRS 

data cross-check 

occurs
Page 10 GAO-06-100 Taxpayer Information

Table 1: Forms of Data Sharing Involving Taxpayer or Personal Information

Sources: IRS and USCIS documents. 

An example of applicant-initiated sharing occurs via tax checks required by 

some states. A taxpayer may authorize a third party to receive his or her 

IRS tax return information via consent. According to an IRS official, many 

states may require consents to qualify for benefits or certain types of 

employment. For example, the state of Missouri requires applicants to be 

current on their state taxes before receiving a new professional license. An 

example of agency-initiated sharing is an arrangement between IRS and 

SSA for the Combined Annual Wage Reporting Program. SSA processes and 

maintains W-2 and W-3 information on employees. IRS maintains personal 

and financial information on employees. SSA and IRS conduct exchanges 

of information to ensure employers are submitting accurate wage 

information and to identify nonfilers. The agencies have a direct datasharing arrangement. 

Research shows that certain data-sharing programs have value for 

increasing taxpayer compliance since these programs have identified 

discrepancies in income reporting amounts and, in some cases, enabled the 

assessment of additional dollars in unpaid taxes. For example, matching 

IRS’s unpaid assessment database with the Treasury’s Financial 

Management Service’s (FMS) records shows a substantial amount of 

money that could have been collected by either IRS or FMS. In particular, 

Type of sharing Authority Form

New information

gained or confirm 

agency information Examples (entities involved)

ApplicantinitiatedTaxpayer consent Applicant authorizes information 

to be sent from one agency to 

another to be used to qualify for 

benefits or employment

New Tax checks (IRS/states) 

Tax checks

(IRS/mortgage bankers)

Agency-initiated Specific authority 

allowing disclosure

Agency-to-agency data matching 

that benefits one agency

New Taxpayer address request 

(IRS/Department of Education)

Agency-to-agency data matching 

that benefits both agencies

Confirm Combined annual wage 

reporting (IRS/SSA)

Agency-to-agency matching to 

verify applicant provided data

Confirm Employment Verification Pilot 

(USCIS/SSA)

Transitional Assistance 

Program (Centers for Medicare 

and Medicaid Services/IRS)
Page 11 GAO-06-100 Taxpayer Information

the Taxpayer Relief Act of 19977 allows IRS to continuously levy up to 15 

percent of certain federal payments made to delinquent taxpayers.8

 IRS’s 

continuous levy program adds tax debts to FMS’s program for recovering 

debts owed to federal agencies. For the levy program, FMS compares 

federal payee information from agency payment records with extracts of 

IRS’s unpaid assessments. We estimated that IRS could recover at least 

$270 million annually from about 70,000 delinquent taxpayers.9

 In addition, 

our analysis10 of a match between FMS’s database on payments to 

contractors and IRS’s unpaid assessment database showed that about 

33,000 contractors who received substantial federal payments from civilian 

agencies during fiscal year 2004 owed a total of more than $3 billion in 

unpaid taxes.11 We estimated that if FMS database deficiencies such as 

erroneous Taxpayer Identification Numbers (TINs) and invalid contractor 

names were corrected, FMS could have collected at least $50 million more 

than it did in fiscal year 2004.12

Although data-sharing arrangements can be useful, privacy advocates, 

lawmakers, and others are concerned about the extent to which the 

government can disclose and share citizens’ personal information, 

including sharing with other government agencies. Historically, lawmakers 

7

Pub. L. No. 105-34, 1977.

8

 The American Jobs Creation Act of 2004 authorized IRS to levy 100 percent of the payment 

amount for certain federal payments [(Pub. L. No. 108-357,§. 887 (a), 118 Stat. 1418, October 

22, 2004, to be codified at 26 U.S.C. § 6331(h)(3)].

9

GAO, Tax Administration: Millions of Dollars Could Be Collected If IRS Levied More 

Federal Payments, GAO-01-711 (Washington, D.C.: July 20, 2001). Since we issued our 2001 

report, additional payment categories have been added to the levy program, so the amount 

that could be collected would likely be substantially higher.

10GAO, Financial Management: Thousands of Civilian Agency Contractors Abuse the 

Federal Tax System with Little Consequence, GAO-05-637 (Washington, D.C.: June 16, 

2005).

11Our initial matches of civilian contractor payments made during fiscal year 2004 with IRS 

tax debt as of Sept. 30, 2004, identified about 63,000 contractors that had tax debt totaling 

$5.4 billion. We excluded tax debts from our preliminary estimates that have not been 

agreed to by the tax debtor or affirmed by the court, tax debts from calendar year 2004, tax 

debts of $100 or less, and fiscal year 2004 FMS payments of $100 or less. 

12GAO previously issued a similar report on Department of Defense (DOD) contractors 

where GAO reported that DOD and IRS records showed that over 27,000 contractors owed 

about $3 billion in unpaid taxes as of Sept. 30, 2002; GAO, Financial Management: Some 

DOD Contractors Abuse the Federal Tax System with Little Consequence, GAO-04-414T

(Washington, D.C.: Feb. 12, 2004).
Page 12 GAO-06-100 Taxpayer Information

and policymakers have created legislation to address these concerns. For 

example, the Privacy Act of 197413 regulates the federal government’s use 

of personal information by limiting the collection, disclosure, and use of 

personal information maintained in an agency’s system of records. The 

Computer Matching and Privacy Protection Act of 198814 further protects 

personal information by requiring agencies to enter into written 

agreements, referred to as matching agreements, when they share 

information that is protected by the Privacy Act of 1974 for the purpose of 

conducting computer matches.

User fees are collected from identifiable recipients of special benefits 

beyond those accruing to the general public, and the amounts are based on 

the recovery of costs of providing the service, the market value of goods, or 

may be set by legislation. Various user fee authorities and guidance exist 

which range from general to specific authority. Title V of the Independent 

Offices Appropriations Act of 1952 codified at 31 U.S.C. § 9701 established 

general authority to assess user fees or charges on identifiable 

beneficiaries by administrative regulation. Under this general authority, all 

fees collected would be deposited as miscellaneous receipts to the General 

Fund of the Treasury and their use would be determined through the 

annual appropriations process. Authority to assess user fees may also be 

granted to agencies through the enactment of specific authorizing or 

appropriations legislation, which may or may not authorize the agencies to 

retain and/or use the fees they collect. 

In setting certain user fees, agencies must follow either the general user fee 

statute 31 U.S.C. § 9701 or specific user fee statute. For example, IRS must 

follow IRC section 752815 in certain cases while USCIS adheres to the 

Immigration and Nationality Act,16 the general user fee statute, and DHS 

regulations which outline fees that are collected, the amounts, and by 

whom (see table 2).17 The Office of Management and Budget’s (OMB) 

13Pub. L. No. 93-579, Dec. 31, 1974.

14Pub. L. No. 100-503, Oct. 18, 1988.

15Section 7528 was added to the IRC by section 202 of the Temporary Assistance for Needy 

Families Block Grant Program, Pub. L. 108-89, and was extended to Sept. 30, 2014, by 

section 690 of the American Jobs Creation Act of 2004, Pub. L. 108-357.

168 U.S.C. § 1356(m), (n).

178 C.F.R. § 103.7.
Page 13 GAO-06-100 Taxpayer Information

Circular A-25, User Charges, establishes general federal policy and 

guidance for user fees assessed for government services by executive 

branch agencies.18 IRS’s chief financial office provides internal guidance on 

user fees, which provides examples on how to implement the OMB 

directives. USCIS does not provide internal guidance. According to USCIS 

officials, the agency’s fee setting is based upon cost studies and a fullfledged regulatory process under the Administrative Procedure Act, with 

the actual fees provided in regulations. 

Table 2: User Fee Guidance and Authority

18OMB Circular A-25 applies to executive branch agencies assessing charges under the 

general user fee statute enacted in the Independent Offices Appropriations Act of 1952 and 

codified at 31 U.S.C. § 9701. The circular provides guidance to agencies imposing user fees 

under other statutes to the extent that the circular is not inconsistent with the statute in 

question.

OMB Circular 

A-25

Requires that agencies: 

• Identify services and activities that convey special benefits;

• Determine services’ and activities’ full cost or market price, as 

appropriate;

• Perform biennial reviews of user fees for unanticipated cost or market 

price changes; and 

• Perform biennial reviews of agency programs not subject to user fees 

to determine if such fees should be assessed.

IRC Section 

7528

Requires that IRS user fees:

• Vary according to categories or subcategories; 

• Take into account the average time and difficulty of requests by 

categories or subcategories;

• Be payable in advance; and

• Be subject to appropriate exemptions and reduced fees within limits 

specified by IRC Section 7528.

Internal CFO guidance:

• Provides steps and examples on developing cost estimates and 

implementation considerations.
Page 14 GAO-06-100 Taxpayer Information

Sources: IRS and USCIS.

IRS and USCIS Could 

Benefit from Data 

Sharing Although an 

Immigration Eligibility 

Change Would Be Key 

for IRS

IRS’s tax compliance efforts could benefit from data sharing with USCIS if 

immigration eligibility were changed to require business sponsors to show 

that they met tax filing and payment requirements to qualify to sponsor 

immigrant workers. In particular, IRS could benefit because businesses 

applying to sponsor immigrant workers that had not filed a tax return or 

paid taxes would need to come into compliance. IRS data can also enable 

USCIS adjudicators to make more accurate eligibility decisions by better 

identifying businesses that may not have met immigration eligibility criteria 

because they had unpaid assessments or did not file tax returns. Further, 

obtaining IRS data has the potential to improve the timeliness of benefit 

decisions by (1) decreasing rework/follow-up work and (2) potentially 

resulting in fewer applicants if benefits are contingent on having met tax 

filing and payment requirements. 

A Change in Eligibility Rules 

Is Key to IRS Benefiting 

from a Data-Sharing 

Relationship with USCIS

Compliance with Payment of 

Taxes

IRS could benefit from data sharing with USCIS if certain taxpayers, such 

as business sponsors who owe taxes, were required to be in compliance 

USCIS 

Guidance

Immigration and Nationality Act permits:

• Setting fees for providing adjudication and naturalization services at a 

level that will ensure recovery of the full costs of providing all such 

services.

• Retention and use of fees to provide immigration services.

General statute requires agencies to establish fees that are:

• Fair

• Based on the costs to the government; the value of the service or thing 

to the recipient, public policy or interest served, and other relevant 

facts.

DHS regulations outline:

• Fee remittances

• Amounts of fees

• Fee adjustments

• Fee waivers

No internal guidance exists.

(Continued From Previous Page)
Page 15 GAO-06-100 Taxpayer Information

with tax filing and payment requirements to qualify for immigration 

benefits such as sponsoring immigrant workers. Our analysis of automated 

immigration records matched against IRS databases showed that 18,942 

businesses applying to sponsor immigrant workers from 1997 through 2004 

had $5.6 billion in unpaid assessments,19 as of December 2003 (app. II). 

Many were not paying their tax bill or making payments towards fulfilling 

their tax obligations. As of December 2003, business sponsors from our 

nationwide selection who were not in installment agreements with the IRS 

or otherwise making payments to IRS, for taxes due, had unpaid 

assessments totaling $3.7 billion.20 Although these businesses with past 

applications to sponsor immigrant workers would not be affected by a 

change to requirements for sponsoring workers since they have already 

received immigration benefits, USCIS officials said that businesses that 

apply to sponsor workers tend to do so in multiple years. If businesses 

were required to meet their tax obligations, to the extent that future 

business sponsors owe taxes, they would need to pay their tax bill or make 

payment arrangements with the IRS to come into compliance before 

becoming eligible to sponsor immigrant workers to enter the country. 

USCIS officials said a statutory change would be preferable to a regulatory 

change because, although they acknowledge no explicit prohibition exists 

in immigration laws against conditioning approval of employer petitions on 

their tax compliance, they have serious legal concerns about USCIS’s 

authority to issue such a regulation absent specific statutory authority.

Although changing the eligibility requirement would likely help bring 

taxpayers with unpaid assessments into compliance, IRS would be unlikely 

to recover all taxes owed by the businesses. IRS officials commented that 

some businesses, even if they came forward to IRS, would not be able to 

repay their full debt. USCIS officials made a similar comment and added 

19Unpaid assessments consist of (1) federal taxes receivable, which are taxes due from 

taxpayers for which IRS can support the existence of a receivable through taxpayer 

agreement or a favorable court ruling; (2) compliance assessments where neither the 

taxpayer nor the court has affirmed that the amounts are owed; (3) write-offs, which 

represent unpaid assessments for which IRS does not expect further collections due to 

factors such as the taxpayer’s death, bankruptcy, or insolvency; and (4) “memo,” a module 

which includes duplicate assessments, fraudulent returns, and cases the IRS/taxpaying 

entities need to resolve due to overstatements or understatements. 

20Of the $5.6 billion in unpaid assessments owed by these businesses, business sponsors had 

entered into installment agreements and payment arrangements for $168 million of the 

unpaid assessments. An additional $1.7 billion in unpaid assessments that had not been 

affirmed, had been judged by IRS to have no future collection potential, or were from 

duplicate or fraudulent returns. 
Page 16 GAO-06-100 Taxpayer Information

some businesses may decide not to apply for immigration benefits knowing 

they are not in compliance with tax filing and payment requirements. 

Further, either IRS would only be able to pursue collection for business 

sponsor cases that exceed thresholds IRS uses in determining how many 

cases to pursue or, if IRS took steps to collect taxes in all of these cases, it 

would be unable to work other cases. As we have reported previously, IRS 

has too many compliance cases to work.21 

Compliance With Filing of Taxes Immigration data appear less likely to be useful to IRS for identifying 

applicants who do not file tax returns. For instance, we identified 33 

business/entity sponsors from our nonprobability sample who appeared to 

be unknown to the IRS because they did not show up in any of six different 

IRS databases.22 An IRS investigation of the 33 revealed no productive 

compliance leads. IRS determined most of the sponsors—businesses and 

religious organizations—were either tax exempt, had no filing requirement, 

or were no longer liable for the tax. However, these 33 cases were a small 

fraction of the almost 20,000 business sponsors that appeared to be 

unknown to IRS based on our nationwide selection of USCIS business 

sponsor applications (see app. II).

In the mid-1980s, IRS and USCIS entered into a cost-reimbursable datasharing arrangement under which USCIS shared immigrant data with IRS 

by completing IRS Form 9003.23 According to IRS officials, IRS used Form 

9003 information to help identify whether individuals who filed for U.S. 

permanent residency had filed tax returns and properly reported their 

income. IRS and USCIS shared Form 9003 data for about 10 years but 

ended this arrangement in 1996. Much of the form 9003 immigrant data 

received from USCIS lacked SSNs--a primary mechanism IRS uses for 

tracking individual taxpayers, which made it increasingly difficult for IRS 

to use the data to determine whether individuals had filed taxes and 

21GAO, Compliance and Collection: Challenges for IRS in Reversing Trends and 

Implementing New Initiatives, GAO-03-732T (Washington, D.C.: May 7, 2003).

22GAO-04-972T.

23USCIS completed Form 9003 whenever an immigrant filed for lawful permanent residency 

status. The form contained personal identifying information on the immigrant such as name 

and SSN as well as financial information on an individual’s income. USCIS provided a 

contractor with the Form 9003, and the contractor then transcribed the Form 9003 

immigrant data onto tape and sent it to IRS’s Martinsburg Computing Center. IRS conducted 

matches of the Form 9003 immigrant data against its own databases to determine whether 

the individuals had filed taxes and properly reported their incomes.
Page 17 GAO-06-100 Taxpayer Information

properly reported income, according to IRS officials. Additionally, the costs 

associated with the data-sharing agreement escalated each year, to the 

point that, in IRS’s view, it was no longer cost effective. 

USCIS Can Benefit from 

Data Sharing with IRS in 

Making Immigration 

Eligibility Decisions

More Accurate Immigration 

Eligibility Decisions

IRS data can enable USCIS adjudicators to make more accurate eligibility 

decisions by better identifying businesses that may not have met 

immigration eligibility criteria. Our matching of immigration and taxpayer 

data identified business sponsors that may not meet immigration financial 

feasibility and legitimacy tests because they have failed to file tax returns 

and/or pay all of their taxes. Sixteen percent of businesses from our 

nationwide selection (67,949 of 413,723 businesses) applying to sponsor 

immigrant workers did not file one or more tax returns at the time of their 

application to sponsor an immigrant worker between 1997 and 2004 (app. 

II). Twenty four percent of businesses (112 of 475 businesses) from our 

nonprobability sample that applied to sponsor immigrant workers did not 

file one or more tax returns at the time of their application to sponsor an 

immigrant worker between 2001 and 2003 (app. II). Five percent of 

sponsors from our nationwide selection (18,942 of 413,723 businesses) and 

20 percent of businesses in our nonprobability sample (94 of 475 

businesses) had unpaid tax assessments at the time of application. As of 

December 2003, for the nationwide results, the assessments totaled $5.6 

billion and for the nonprobability sample results, the assessments totaled 

$39 million (app. II). Filing and paying taxes is an indicator that financial 

feasibility and legitimacy tests are met. Figure 2 shows matching results 

identifying business nonfilers and those with unpaid assessments from our 

nationwide selection.
Page 18 GAO-06-100 Taxpayer Information

Figure 2: Businesses Sponsoring Immigrant Workers That May Not Have Met 

USCIS’s Financial Feasibility or Legitimacy Requirements, 1997-2004

Immigration adjudicators use applicants’ self-reported personal and 

financial information plus third party data to make decisions about 

granting benefits to immigration applicants. For businesses applying to 

sponsor immigrant workers—employment-based applications—

immigration adjudicators use financial information for evaluating two basic 

eligibility criteria for businesses sponsoring immigrants: (1) the sponsor’s 

financial feasibility and (2) the legitimacy of the sponsor’s existence. 

Financial feasibility refers to the sponsor’s ability to pay wages to or 

financially support the individual being sponsored. For example, if a 

company is sponsoring an immigrant for employment, that company must 

show that it has sufficient ability to pay the worker. Information on tax 

returns filed with IRS show income levels and these could be used to 

validate applicant-provided information. Legitimacy, in the case of 

employment-based petitions, refers to whether a sponsoring business or 

organization actually exists, has employees, and has real assets. Figure 3 

depicts an overview of the adjudication process for employment-based 

applications.

Source: GAO analysis of taxpayer and immigration data.

0

Unpaid assessments

Nationwide selection

Nonfilers

20

19

68

40 60 80

Number of sponsors (in thousands)
Page 19 GAO-06-100 Taxpayer Information

Figure 3: USCIS General Adjudication Process for Employment-Based Applications to Sponsor Immigrant Workers

a

Some applicants may choose not to provide additional evidence, thereby ending the adjudication 

process.

Since adjudicators receive self-reported—and sometimes false—personal 

and financial information from applicants, they sometimes obtain 

additional or different documentation from the applicant or third parties. 

For example, at the time of application or during the adjudicatory process, 

applicants may be required to provide additional documentation, such as 

tax returns from IRS or unofficial copies to verify financial information 

reported on immigration forms. However, immigration officials we spoke 

with in five field locations said applicants could alter or falsify those 

Does 

evidence meet 

financial 

feasibility & 

legitimacy 

tests? 

no

yes

unclear

Further evidence is needed to 

make a decision. Send 

applicant a Request for Further 

Evidence (RFE).

Applicant provides 

additional 

documented 

evidence.a

Approval is granted.

CLAIMS 3.0 system is 

updated and case 

forwarded for disposition.

Approval is 

denied.

CLAIMS 3.0 

system is 

updated to 

reflect case 

status.

USCIS

Adjudicator reviews application form 

and supporting documentation for 

soundness of evidence.

Source: GAO analysis of USCIS data.

Staff queries the Interagency Border Inspection System (IBIS)

and other databases to provide background checks for 

immigrant workers.

Business or individual 

sponsor submits an 

application via mail or 

the Web to an USCIS 

service center or 

local office.
Page 20 GAO-06-100 Taxpayer Information

documents. According to USCIS officials, designing a data-sharing 

arrangement that includes verification of applicant-provided data during 

the adjudicatory process would be useful to USCIS adjudicators for the 

financial feasibility and legitimacy tests and afford more accurate 

immigration eligibility decisions. Additionally, with an eligibility change as 

discussed earlier, business sponsors would be required to file tax returns, 

pay amounts due, or make payment arrangements with IRS before 

qualifying for immigration benefits. This, in turn, could result in a higher 

likelihood of USCIS getting applications from business sponsors that have 

met their tax filing and payment obligations, thereby more likely meeting 

USCIS’s financial feasibility and legitimacy criteria. USCIS could then 

better assure that it was granting benefits to those business sponsors that 

accurately meet their criteria. 

USCIS Ombudsman and representatives of immigration advocacy groups 

have concerns about data sharing and immigration eligibility for business 

sponsors. Although the Ombudsman acknowledged the benefits of data 

sharing, he was concerned that another step in the immigration application 

process could be more cumbersome for business sponsors. He questioned 

the type of information IRS would share and said businesses in dispute 

with the IRS should not be prevented from applying for benefits while the 

dispute is being resolved. A representative from one advocacy group 

expressed several concerns on behalf of business sponsors including:

• Increased delays in the immigration process - from their perspective, 

any additional step in the application process could lengthen the time 

between when a business decides to sponsor a worker and obtaining 

USCIS’s approval. 

• Problems with improving USCIS’s technological capabilities – according 

to the immigration advocate, USCIS is still mostly paper-driven and 

therefore it is questionable as to whether they could share data 

electronically.

• Special tax issues related to small businesses – many small business 

sponsors file tax extensions and, therefore, may not have readily 

available tax documents. Additionally, newer small businesses have no 

tax history.

• Adjudicator training – adjudicators need to understand how to read and 

interpret business tax documents because many, in the advocate’s 

opinion, have no training in dealing with those complicated documents. 
Page 21 GAO-06-100 Taxpayer Information

A representative of another immigration advocacy group also voiced the 

same concern about adjudicator training and added that implementing data 

sharing may be more useful in dealing with small- and medium-sized 

businesses because, based on their experience, larger businesses are less 

likely to be involved in immigration fraud. In addition, although not 

mentioned by USCIS officials, one potential unintended effect of data 

sharing might be an increased incentive to employ illegal workers. That is, 

if a business knew that its tax status would be checked by USCIS, or if it 

was required to meet tax filing and payment obligations before sponsoring 

immigrant workers, some businesses might decide to meet their labor force 

needs with workers not properly authorized to work in the United States. 

Smaller employers, who are more likely to have tax compliance problems 

according to IRS, may be more likely to make this choice than larger-sized 

businesses.

According to USCIS officials, adjudicators would find IRS information on 

small businesses particularly useful since they are limited in their ability to 

assess these businesses’ financial feasibility and legitimacy. IRS has also 

encountered problems in corroborating financial information provided by 

small businesses and its research generally shows higher noncompliance 

among its small business population.24 Among our nonprobability sample, 

25 of 43 business sponsors with unpaid assessments reported their net 

incomes as less than $10 million on USCIS employment-based 

applications.25 Additionally, USCIS has begun a series of benefit fraud 

assessments, which take a random sample of applications filed within 

certain immigrant and nonimmigrant categories and assess them for fraud 

by verifying key data reported. Based on the results of their fraud 

assessments, USCIS could focus on businesses that are more prone to 

fraud to match IRS data against in determining their financial feasibility 

and legitimacy.

The type of taxpayer data USCIS adjudicators find useful could change 

under a USCIS proposal to revise regulations for employment-based 

24IRS classifies small businesses as all sole proprietorships, partnerships, and corporations 

with assets of $10 million or less. The USCIS application forms for business sponsors we 

examined asked for net income and gross income instead of assets. 

25Our non-probability sample revealed 94 businesses with unpaid assessments (see app. II). 

However, 47 of those businesses did not report net incomes on their USCIS application 

forms and 4 reported negative net incomes. We did not include these in our analysis of 

businesses with net incomes of less than $10 million.
Page 22 GAO-06-100 Taxpayer Information

immigration applications.26 USCIS officials are seeking to revise 

requirements since they believe that (1) establishing the validity of the 

sponsor is sufficient to meet immigration statutory requirements27 and (2) 

adjudicators were spending too much time trying to establish a sponsor’s 

income levels for well-known or established businesses. In the interim, in 

May 2004, USCIS issued updated guidance to adjudicators directing them 

not to reestablish a sponsor’s ability to pay with its USCIS Form I-485, 

Application to Register Permanent Residence or to Adjust Status (see app. 

II) to minimize processing delays. If this regulatory change is made, IRS 

taxpayer data could still help adjudicators establish the legitimacy or the 

bona fide nature of a business sponsor. According to USCIS officials, if the 

proposed regulation were adopted, USCIS would still need tax documents 

but would no longer need specific income information from tax returns. 

USCIS adjudicators would need tax return information such as whether the 

sponsor filed income tax returns, what years they filed, how many 

employees they had, and if they paid taxes, and they would need to further 

evaluate whether additional IRS information would be useful. USCIS 

would need specific income information from the tax return, such as 

adjusted gross income, only in cases where the initial information provided 

by IRS raised questions about the sponsor for USCIS (e.g., if the employer 

had unpaid assessments or was a nonfiler). As of July 2005, the proposed 

regulatory change was with DHS’s legal office, awaiting approval.

More Timely Immigration 

Eligibility Decisions

USCIS officials said that access to IRS taxpayer data could also improve 

the timeliness of making benefit decisions primarily because it could 

decrease the rework and follow-up work with the applicant. For example, 

adjudicators said that if they could match applicant data against IRS data 

early in the review process, they would spend less time researching and 

following up on the validity of applicant-provided data (e.g., sending fewer 

RFEs to applicants; see figure 3 for an overview of the adjudicatory 

process). According to adjudicators, it could take as long as 12 weeks to 

receive responses from applicants for a certified IRS tax return, during 

which time, the application file sits on a “suspense” shelf, thereby 

extending the application processing time. Due to this time gap, in certain 

cases, background checks must be redone, which further lengthens the 

application-processing time. As we reported in May 2001, USCIS officials 

said that lengthy processing times had resulted in increased public 

268 CFR 204.5(g)(2).

278 U.S.C. 1154.
Page 23 GAO-06-100 Taxpayer Information

inquiries on pending cases, which, in turn, caused USCIS to shift resources 

away from processing cases to responding to inquiries, adversely affecting 

processing time.28

Under a presidential initiative, USCIS has a 5-year, $540 million effort under 

way intended to reduce its backlog of applications, and ensure a 6-month 

average processing time per immigration application by the end of 2006. 

While USCIS has made progress on meeting most of its fiscal year 2004 and 

2005 processing time goals, which range from 2 months to 20 months, its 

overall goal is to reduce processing time to 6 months in fiscal year 2006. 

This will be difficult because USCIS’s fiscal year 2004 and 2005 average 

processing times for some forms are more than twice as long as its fiscal 

year 2006 goal of a 6-month processing time. As Figure 4 shows, for three 

of the six forms we examined—the I-485 (Application to Register 

Permanent Residence or to Adjust Status), I-751 (Petition to Remove the 

Conditions on Residence), and N-400 (Application for Naturalization),—

USCIS will need to cut its application processing times by more than 50 

percent by fiscal year 2006 to meet its goal and thereby improve the 

timeliness of eligibility decisions. 

28GAO, Immigration Benefits: Several Factors Impede Timeliness of Application 

Processing, GAO-01-488 (Washington, D.C.: May 4, 2001).
Page 24 GAO-06-100 Taxpayer Information

Figure 4: Average Reported Processing Times for Fiscal Years 2004 and 2005 and 

Fiscal Year 2006 Processing Time Goal for Select USCIS Forms 

Note: USCIS application forms are described in app. II. USCIS provided us with processing times for 

five of the six forms we examined.

a

FY 2005 times are reported through May 2005.

In his fiscal year 2006 budget request, USCIS’s director stated “Although we 

are on track to achieve the President’s backlog elimination mandate, we 

fully realize that funding alone will not enable us to achieve this goal...I 

have worked closely with the leaders in USCIS to continually review our 

processes, identify opportunities for streamlining and further 

improvement, and to implement meaningful change.”29 USCIS’s director is 

looking for opportunities to further streamline the adjudicatory process, 

and, as stated previously, USCIS adjudicators said that if they could match 

applicant data against IRS data early in the review process, they would 

29“The President’s FY 2006 Budget Request”, Statement of Eduardo Aguirre, Jr., Director, 

USCIS, U.S. Department of Homeland Security before the House Committee on 

Appropriations, Subcommittee on Homeland Security, Mar. 17, 2005.

I-751

N-400

I-129

I-485

USCIS application form

I-140

0

Number of months

FY 06 goal

FY 05 average processing timea

Source: GAO analysis of USCIS data.

FY 04 average processing time

5 10 15 20 25

21.6

18.2

6

14.6

10.5

6

13.5

12

6

10.4

8.3

6

1.7

1.5

2
Page 25 GAO-06-100 Taxpayer Information

spend less time researching and following up on the validity of applicantprovided data, which could reduce USCIS’s processing times for business 

sponsors’ applications. 

USCIS staff in headquarters said that changing immigration eligibility to 

require proof of tax filing and payment compliance for business sponsors 

may also deter businesses that are not filing and paying their taxes from 

submitting immigration applications because they would know that USCIS 

would deny their applications. If so, this could somewhat reduce the 

volume of applications received and, thereby contribute to quicker

application processing times. 

IRS and USCIS Have 

Data-Sharing Options 

but Each Presents 

Challenges 

A variety of options is available to IRS and USCIS for establishing and 

implementing data sharing. An applicant-initiated data-sharing relationship 

could be implemented under existing IRC authority through a taxpayer 

consent, whereby a taxpayer authorizes IRS to disclose his or her 

information to other agencies. Under an agency-initiated option, agencies 

could share information directly with each other in an electronic format, a 

process that is viewed as more efficient and desirable by USCIS and IRS 

officials. However, achieving such efficient data sharing may take time due 

to various legal, technological, and cost challenges that must be overcome. 

Establishing user fees to cover data-sharing costs are a way agencies can 

fund these various data-sharing options, but IRS lacks authority to include 

in its user fees the costs for bringing non-compliant business sponsors into 

compliance or to retain such fees.

Applicant-Initiated Option 

Could Be Implemented 

Using Existing Disclosure 

Authority 

Taxpayer Consents Under 

Existing Disclosure Authority 

One option for establishing data sharing between IRS and USCIS is to use 

an existing authority within the Internal Revenue Code (IRC). USCIS is not 

currently authorized to directly receive taxpayer information for 

immigration eligibility decisions under IRC Section 6103. However, 

individual taxpayers could authorize IRS to disclose their tax return 

information to agencies like USCIS through a taxpayer consent submitted 

either via paper or electronically. The consent must be in the form of a 

separate written document pertaining solely to the authorized disclosure – 
Page 26 GAO-06-100 Taxpayer Information

with text appearing on a paper document or text appearing on a separate 

computer screen. The consent must include: (1) taxpayer identity 

information (i.e., name, address, SSN or EIN); (2) the designee to whom the 

disclosure is to be made; (3) the type of tax return (or specified portion of 

the return) or return information (and the particular data) that are to be 

disclosed; and (4) the tax year or years to be covered. The consent must be 

signed and dated by the taxpayer who filed the return or to whom the 

return information relates and IRS must receive the consent within 60 days 

of the taxpayer’s signature and date. 

Taxpayers use the Form 4506, Request for Copy of Tax Return, and the 

Form 4506-T, Request for Transcript of Tax Return, to authorize the paper 

consent. A tax return can show that the taxpayer filed a tax return and a 

tax transcript can show whether the taxpayer had a filing requirement, 

owed taxes, or paid taxes. Figure 5 is an overview of the way IRS 

processes paper consents, any costs to the taxpayer, and the average 

turnaround times. 
Page 27 GAO-06-100 Taxpayer Information

Figure 5: Process for Retrieving Tax Return and Tax Transcript Information 

Note: According to IRS officials, taxpayers who live in disaster relief areas do not have to pay the $39 

fee.

IRS paper consents permit the agency to verify for a third party whether a 

taxpayer has been filing required tax returns and paying his or her taxes. 

These verifications may be referred to by various names but can be 

generically called “tax checks.”30 They are often done in connection with a 

30The state of Kansas refers to this verification as a tax clearance, which is defined as a 

thorough taxpayer account review (of all tax types) to ensure the account is current, 

properly registered, and compliant with all Kansas tax laws.

Source: GAO analysis of IRS data.

Tax return request

(Average time 30 days) (Average time 10-30 days)

Tax transcript request

IRS retrieves 

information on the 

taxpayer’s account 

from IDRS and 

makes a print out.

IRS retrieves the 

taxpayer return and 

makes a photocopy.

Form 450

Tax

6-T

payer submits 

 hardcopy for

mail or f

m via 

ax. 

No fee.

Form 4506

Taxpayer submits 

hardcopy form 

via mail or fax.

$39 fee.

IRS sends copy to the taxpayer 

or the designated 

agency/official.
Page 28 GAO-06-100 Taxpayer Information

taxpayer’s application for benefits, licensing, or employment. Entities that 

use tax checks include mortgage institutions, major banks, financial 

institutions, state revenue agencies, and federal agencies. States are the 

biggest users of taxpayer information. According to an official with the 

Federation of Tax Administrators, many states have a taxpayer consent 

requirement, along with their own consent form, to require potential 

employees or contractors to consent to a state tax check as a condition of 

employment or to receive a license. When states verify individual and 

business compliance with state tax requirements, they are also able to 

determine federal compliance as permitted by IRC 6103(d), since states 

routinely receive extracts of IRS taxpayer information (See table 3 for 

examples of state and private entities that require tax checks.).

For example, an Executive Order permits the state of Kansas to require a 

tax check in order for individuals and businesses to qualify for state 

employment or state contracts. State law also permits the rejection of a 

business’s application if the business owes the state taxes. Further, Kansas 

requires a tax check on all new and renewing vehicle dealership licenses. A 

March 2003 Kansas Legislative Audit Report found 514 motor vehicle 

dealers who owed $7 million in state sales tax. Before a business can apply 

or renew its dealership license at the state’s Division of Motor Vehicles 

(DMV), the business must present to the DMV proof that it fulfilled its state 

tax filing and payment requirements. According to an official with the 

Kansas Secretary of Revenue, for an active dealer, the threat of license 

revocation provided an incentive to bring non-compliant businesses into 

compliance. Businesses with unpaid assessments either paid their 

assessments or set up a payment plan. The state increased its car dealer 

tax compliance rate by 97 percent, according to an official with the Kansas 

Secretary of Revenue. 
Page 29 GAO-06-100 Taxpayer Information

Table 3: Examples of State and Private Entities That Require Tax Checks

Source: GAO analysis.

As noted previously, IRS taxpayer consents can also be implemented 

electronically. Similar to the paper consent, the electronic consent must 

indicate taxpayer identity information, the designee to whom the 

disclosure is made, the type of return information that is to be disclosed, 

and the tax year or years covered. USCIS officials are agreeable to using 

taxpayer consents if they could be implemented electronically in a way 

similar to an electronic verification pilot project that was undertaken by 

IRS and the Department of Education (Education). In the pilot, students 

who wanted to qualify for financial aid authorized the IRS to release their 

tax information to their academic institutions via the Internet. After 

authorizing the release, IRS sent the individuals’ tax transcripts directly to 

the schools. This procedure then resolved any inconsistencies between 

information on the tax transcripts and on financial aid applications.31

Challenges Using Taxpayer 

Consents 

One challenge agencies face in implementing data sharing based on 

taxpayer consents is the costs IRS and USCIS would incur to make data 

sharing work. Taxpayer consents can be costly and resource intensive 

when using paper, according to IRS officials. For example, IRS processed 

approximately 340,000 paper return and transcript requests at an IRS 

estimated cost of about $6.2 million (see table 4) during fiscal year 2004. 

Furthermore, the process can be paper intensive since IRS typically 

receives only hard copies of taxpayer consents. The agency only accepts 

paper requests via mail or fax, and no electronic versions of the paper 

copies (e.g., scanned copies cannot be e-mailed to IRS) are accepted. The 

Entity For What Purpose

Criteria

To qualify for...

Banks/financial institutions Income verification A mortgage

Kansas Tax compliance Employment

Vehicle dealer license

Maryland Tax compliance Business and professional 

license

Missouri Tax compliance Building permits

Professional license

31GAO, Taxpayer Information: Increased Sharing and Verifying of Information Could 

Improve Education’s Award Decisions, GAO-03-821 (Washington, D.C.: July 18, 2003).
Page 30 GAO-06-100 Taxpayer Information

process also can be time intensive. For example, the average processing 

turnaround time to process a copy of a tax return is 30 days; and the 

average turnaround time for a tax transcript is 10 to 30 days. 

Table 4: Examples of Operational Data on the Paper Taxpayer Consent Process

Source: IRS.

USCIS officials are reluctant to use a paper consent because the agency is 

moving from a paper to an electronic environment. USCIS officials warned 

that requiring applicants to consent to a paper or electronic tax check 

would necessitate business process and procedural changes by USCIS, as 

well as an education process to the immigration community and the third 

parties that assist petitioners with their applications. USCIS officials said 

that requiring business and individual applications to undergo a tax check 

could strain already limited agency resources. USCIS application data 

showed the estimated annual volume for the six immigration forms we 

reviewed totaled about two million for fiscal year 2004. USCIS officials 

said implementing a tax check for employment-based business 

applications—estimated to be at least 180,000 for fiscal year 2004—would 

be less difficult to process than the six application forms that require 

financial information. Also, because the same business sponsor could file 

applications more than once in a year, depending on how USCIS 

implemented the requirement for a tax check, it could be valid for a certain 

period of time according to whatever policy USCIS established. 

Subsequently, the business would not have to undergo a tax check every 

time it sponsored a worker, which would not strain USCIS’s resources.

Although use of tax data has helped some federal agencies better 

administer their programs, some are concerned that widespread use of 

taxpayer consents may undermine taxpayers’ right to privacy and, 

subsequently, voluntary tax compliance. The confidentiality of tax data is 

considered by many to be crucial to voluntary compliance. The Joint 

Process

Volume of

information

shared

Data-sharing 

method

Turnaround 

time

Annual

processing

cost

Request for copy of 

tax return

161,000 Mail or fax 30 days $2.9 million

Request for 

transcript of tax 

return

179,000 Mail or fax 10 to 30 days 

(48 hours for 

bulk requests)

$3.3 million
Page 31 GAO-06-100 Taxpayer Information

Committee on Taxation and Treasury’s Office of Tax Policy warn that the 

use of consents for programmatic governmental purposes potentially 

circumvents the general rule of taxpayer confidentiality because the 

taxpayer waives certain restrictions on agencies’ use of the data. When 

such waivers are granted, agencies are not obligated to follow the 

recordkeeping, reporting, and safeguard requirements that apply to tax 

data, although the less stringent requirements of the privacy act may still 

apply. IRS’s National Taxpayer Advocate stated in 2003 that “Widespread 

use of tax information by federal or state agencies will, in fact, undermine 

our tax administration system,” and that “A change in tax compliance of 

even one percentage point equates to an annual loss of over $20 billion of 

revenue to the federal government.” In its October 2000 report to the 

Congress on taxpayer confidentiality, Treasury’s Office of Tax Policy 

recommended that before a government program is allowed to use 

taxpayer consents, the requesting agency should first conduct a statistical 

test match or a small-scale pilot.32 If that test or pilot demonstrates that the 

program’s need for information outweighs concerns about taxpayer privacy 

and voluntary tax compliance, then Treasury will determine whether the 

agency can proceed with a limited program using taxpayer consents or 

whether a legislative amendment should be sought permitting direct 

access.

Agency-Initiated Electronic 

Option Is Seen as More 

Efficient, but Additional 

Authority Would Be Needed

Specific Disclosure Authorities 

for Sharing Data Electronically

Another option for data sharing is direct agency-to-agency sharing. Such 

data-sharing arrangements are enabled by specific statutes or regulations 

and, in the case of electronic data matching, have written agreements 

between agencies. Education, SSA, and the Centers for Medicare and 

Medicaid Services (CMS) are examples of agencies that have existing datasharing relationships with IRS using electronic media such as a magnetic 

tape. These agencies are able to share data with IRS because they were 

each given specific authorities under IRC Section 6103, which authorizes 

32U.S. Department of the Treasury, Office of Tax Policy, Report to Congress on Scope and 

Use of Taxpayer Confidentiality and Disclosure Provisions, Vol. 1: Study of General 

Provisions (Washington, D.C.: October 2000).
Page 32 GAO-06-100 Taxpayer Information

the disclosure of a taxpayer’s return information and tasks IRS with 

oversight of safeguards for taxpayer information. Further, agencies enter 

into a computer matching agreement (CMA), which outlines the purpose 

for the data-sharing relationship, the information to be shared, the method 

of sharing, the approximate number of records to be shared, the frequency 

of sharing, and the length of the data-sharing arrangement. The requesting 

agency is required to attach to the CMA an analysis that measures the costs 

and benefits associated with a data-sharing arrangement with IRS. 

Agencies must also provide IRS an annual report on their security 

safeguards that protect against any unauthorized access or disclosure of 

data received during the arrangement.

As shown by the examples in table 5, each agency’s data-sharing 

relationship with IRS differs in terms of the number of records shared, the 

method and frequency of sharing, the annual cost to the agency, and the 

cost per record.

Table 5: Characteristics of Selected Electronic Data-Sharing Arrangements between IRS and Federal Agencies

Source: CMAs.

Note: With the exception of CMS’s FY 2004 actual figures, all other agency figures are estimated 

based on the 18-month duration of the matching agreement. Education’s figures are estimated for 

February 2001 through August 2002. The first SSA program’s figures are estimated for July 2003 

through December 2004. The second SSA program’s figures are estimated for October 2000 through 

March 2002.

Agency

Purpose of data-sharing 

relationship 

IRC Section 

6103 Provision

Annual 

number of 

records

Data-sharing 

method Frequency

Annual cost to agency

and cost per record

Education Education obtains the 

current addresses of 

those taxpayers who have 

defaulted on their student 

loan.

6103(m)(4) 4.6 million Magnetic tape Weekly $819,000 $.18/record

SSA SSA determines eligibility 

for its cash assistance 

program for the poor.

6103(1)(7) 26 million Magnetic tape Monthly $5.7 million $.22/record

SSA identifies Medicareeligible individuals with 

insurance coverage to 

avoid duplicate payment 

for health services.

6103 (1)(12) 40 million Magnetic tape Annually $8.2 million $.21/record

CMS CMS determines eligibility 

for its prescription drug 

program.

6103(l)(19) 1,064,685 Computer file Daily $129,858 $.12/record
Page 33 GAO-06-100 Taxpayer Information

Electronic Data Sharing between IRS and the Department of 

Education

The Department of Education obtains the mailing addresses of taxpayers 

for use in collecting debt from students who have defaulted on loans. 

Under the Taxpayer Address Request program, as authorized by IRC 

Section 6103(m)(4), Education furnishes the name and SSN of each 

defaulted student to the IRS. IRS then matches the information to its 

records and provides Education the most recent address for the taxpayer. 

Education sends about 4.6 million records annually to IRS for matching. 

Electronic Data Sharing between IRS and the Social Security 

Administration

SSA is using each section within IRC Section 6103 that authorizes the 

disclosure of taxpayer information by IRS to SSA for benefit eligibility 

purposes. For example, the Disclosure of Information to Federal, State, and 

Local Agencies, under IRC Section 6103(l)(7), enables SSA to request and 

use taxpayer information from IRS to determine the eligibility of applicants 

and recipients of Supplemental Security Income, the nation’s largest cash 

assistance program for the poor. SSA officials estimate a savings of 

approximately $48 million annually with this data-sharing relationship. In 

addition, with the Medicare Secondary Payer Program, as authorized by 

IRC Section 6103(l)(12), SSA, through information collected from 

employers of working-aged beneficiaries and Medicare-eligible spouses 

such as name and SSN, is able to avoid duplicate payments for services by 

identifying Medicare-eligible individuals who have primary coverage 

through a group health plan. This data-sharing relationship’s annual savings 

are estimated at $463 million.

Electronic Data Sharing between IRS and the Centers for Medicare 

and Medicaid Services

The most recent data-sharing relationship under IRC Section 6103 is 

between IRS and CMS in which CMS uses taxpayer information on a daily 

basis to determine eligibility for the Transitional Assistance Program, 

which provides up to $600 to individuals to purchase prescription drugs. 

IRC Section 6103(l)(19) authorizes IRS to disclose to CMS specified tax 

return information of applicants for transitional assistance to help CMS 

identify eligible applicants. Figure 6 describes how the data matching 

occurs. In fiscal year 2004, CMS sent IRS about one million records for 
Page 34 GAO-06-100 Taxpayer Information

matching, and this data-matching arrangement cost CMS approximately 

$130,000.

Figure 6: Flow Chart on the Medicare Prescription Drug Process

Electronic Data Sharing via Transcript Delivery System

IRS offers electronic service, or e-service, products that are accessed 

directly by authorized third parties such as tax practitioners and state 

revenue agencies. Available since July 2004, the Transcript Delivery 

System (TDS) allows authorized third parties to immediately, electronically 

access taxpayer transcript information like the return transcript, account 

transcript, record of account, and verification of nonfiling—products that 

otherwise are available via the paper consent Form 4506-T. Tax 

practitioners can use this service if the taxpayer authorizes disclosure via

Form 2848, Power of Attorney, which must be on file with IRS before the 

practitioner can request and receive a taxpayer’s data. This type of 

disclosure is authorized via IRC Section 6103(e)(6). Only three states are 

currently using TDS, as authorized by IRC Section 6103(d).

The TDS e-services are Internet based and authorized users can access 

them from any computer with minimal Internet capabilities. The authorized 

individual retrieving taxpayer information inputs the request, and the 

CMS provides IRS a file containing the name, 

SSN, and health insurance claim number for 

Medicare beneficiaries.

IRS matches this information with the individual’s 

taxpayer income information and returns the file 

to CMS containing the applicant’s SSN and 

income information.

• name 

• SSN

• claim number

• name

• SSN

• income information

Source: GAO analysis of CMS data.
Page 35 GAO-06-100 Taxpayer Information

information is accessed immediately. For fiscal year 2004, IRS estimates 

that it cost about 4.8 cents to provide access to a transcript using TDS.33

Challenges Associated with 

Electronic Data Sharing 

Legal Challenge of Data Sharing 

Electronically sharing taxpayer information directly from IRS to USCIS 

without a taxpayer consent has a number of legal, technological, and cost 

challenges if it is used for immigration benefit purposes. In order to 

electronically share information without first obtaining taxpayers’ consent, 

IRC Section 6103 would need to be changed to authorize IRS to disclose 

taxpayer information directly to USCIS for immigration eligibility 

purposes. Over the years, a number of exceptions have gradually been 

added to IRC Section 6103 that allow access to taxpayer information. As 

mentioned previously, some are concerned that disclosing taxpayer data 

could affect the taxpayer’s right to privacy and, subsequently, undermine 

voluntary tax compliance. According to Treasury, the burden of supporting 

an exception to IRC Section 6103 should be on the requesting agency, 

which should make the case for disclosure and provide assurances that the 

information will be safeguarded appropriately. Table 6 lists the criteria 

Treasury and IRS have applied when evaluating specific legislative 

proposals to amend IRC Section 6103 for governmental disclosures.

Table 6: Criteria Applied by Treasury and IRS When Evaluating Specific Proposals 

for Governmental Disclosures

33TDS was accessible in July 2004; thus, actual data are not available for the 3 months of 

access during fiscal year 2004.

Criteria to be 

addressed by 

the requesting 

agency

Is the requesting information highly relevant to the program for which 

it is to be disclosed? 

Are there substantial program benefits to be derived from the requested 

information? 

Is the request narrowly tailored to the information actually necessary for 

the program? 

Is the same information reasonably available from another source?
Page 36 GAO-06-100 Taxpayer Information

Source: Office of Tax Policy, Department of the Treasury.

Technological Challenges of Electronic Data Sharing 

USCIS must also address a number of technological challenges to lay the 

foundation that would enable data sharing to take place between the two 

agencies. For example, in our July 2004 testimony, we reported that:

• USCIS does not maintain any automated financial data on applicants. 

Although USCIS automates certain personal information from benefit 

applications, such as an individual’s name and alien registration number, 

it does not automate any financial data that are reported on the benefit 

application or in accompanying documents such as tax returns.

• USCIS systems contain some inaccurate data. We and the Department 

of Justice’s Office of Inspector General have criticized USCIS systems 

because they contain some inaccurate data for identifying pieces of 

information that identifies applicants (such as immigrants’ addresses).

• USCIS and IRS databases do not always have a common numerical 

identifier for tracking individuals or businesses. USCIS uses alien 

registration numbers as tracking identifiers whereas IRS uses SSNs or 

EINs. Although USCIS’s systems capture SSNs/EINs if they are provided 

on applications, USCIS does not require them to be entered into its 

systems. Thus, even though business sponsors should all have SSNs (if 

sole proprietor) or EINs (if another form of business), USCIS may not 

have entered the number into automated databases and therefore 

cannot match directly to IRS records.

These limitations in USCIS’s record keeping would make electronic sharing 

of data between USCIS and IRS less productive than it otherwise could be, 

regardless of whether the data sharing was done directly between the 

Criteria to be 

addressed by 

the requesting 

agency and 

Treasury/IRS 

Will the disclosure involve significant resource demands on IRS?

Will the information continue to be treated confidentially within the 

agency to which it is disclosed, pursuant to standards prescribed by 

IRS? 

Other than IRC Section 6103, are there any statutory impediments to 

implementation of the proposal?

Criteria to be 

addressed by 

Treasury/IRS

Will the disclosure have an adverse impact on tax compliance or tax 

administration?

Will the disclosure implicate other sensitive privacy concerns? 

(Continued From Previous Page)
Page 37 GAO-06-100 Taxpayer Information

agencies pursuant to a change in IRC Section 6103 or whether done 

through taxpayer consents. USCIS officials recognize that these problems 

could interfere with achieving data sharing in the fully electronic 

environment that they hope to achieve for adjudicators, but if a policy 

decision was made to share data, they believe that some form of electronic 

data sharing could be achieved relatively quickly without major 

technological improvements. The officials believe that USCIS could 

develop interim solutions while other USCIS transformation activities are 

under way. For example, these officials said USCIS could modify its 

existing automated systems to add a SSN/EIN identifier, and could adopt 

procedures to ensure the identifiers are routinely entered in all locations. 

They view this as a business process and policy challenge rather than a 

technological challenge. They also believe they could link the existing 

USCIS record identifiers to SSNs and EINS to enable data sharing to take 

place with IRS relatively quickly. 

Officials did offer some cautions about how quickly even these changes 

could be implemented. For example, they said that although adding a 

SSN/EIN identifier to their existing systems may only take a few months, 

changing immigration forms and notifying adjudicators and the larger 

community about the change could take much longer. As mentioned 

previously, these officials contend that establishing a new immigration 

requirement on applicants for a tax check will necessitate business process 

and procedural changes by USCIS, as well as an education process to the 

immigration community and the third parties that assist petitioners with 

their applications, which could take years. Finally, these USCIS officials 

pointed out, and the agency’s fiscal year 2006 budget request reflects, that 

the agency’s current priorities fall into three areas: (1) enhancing national 

security, (2) eliminating the immigration benefit application backlog, and 

(3) improving customer service. They stated that implementing changes to 

enable data sharing with IRS might take a longer time because it is not one 

of the agency’s three main priorities.

If data sharing were to occur, officials ultimately would prefer to have it 

integrated into a transformed USCIS information technology (IT) 

environment. Since July 2004, USCIS has taken a number of steps to 

improve IT capability. In March 2005, USCIS unveiled its IT transformation 

plan that USCIS describes as a large scale and complex program to 

increase capabilities, streamline processes and support the collection of 

service fees. As such, the overall planned IT upgrade includes changes, 

which will improve the agency’s overall IT environment as well as facilitate 

data sharing such as: 
Page 38 GAO-06-100 Taxpayer Information

• Moving from a paper to an automated environment;

• Adding a unique identifier to track records for background checks;34

• Implementing electronic adjudication whereby adjudicators will be able 

to review immigration applications and supporting evidence online, 

among the first increments of the IT upgrade.

Of the many ongoing activities related to USCIS’s IT transformation, USCIS 

officials described three major projects under way to improve its ability to 

receive and share data within the agency as well as with other agencies: 

• Data layer/repository – this project will present users with a 

consolidated system to access information from 63 USCIS systems 

rather than the current situation where users have to log onto separate 

systems to obtain data. This capability would be available to 

adjudicators and, eventually, to external users. 

• Software updates – this project will upgrade, among other things, 

USCIS’s desktop and software capabilities, USCIS’s servers and 

network, and USCIS’s capability to support the new electronic 

processes. 

• E-adjudication pilots – this project will allow paperless (electronic) 

adjudication for certain immigration forms. Initially, USCIS has plans to 

pilot green card replacement/renewal applications (Form I-90) and 

extension applications for temporary workers in specialty occupations 

(Form I-129 H1B).

In the fall of 2004, USCIS officials anticipated implementing the eadjudication pilots by mid-April 2005 and having the ability to receive data 

from IRS in June or July 2005. However, these projects have not gotten 

under way as scheduled; the start of the pilots is dependent on the data 

layer and software updates being in place. USCIS could not provide us 

with a completion date for the data layer and e-adjudication pilots due, in 

part, to uncertainty regarding future funding. USCIS expects to complete 

34USCIS is currently reviewing whether its integrated case management system and 

electronic adjudication process will track records using current immigration identification 

schemes (alien registration numbers) or will develop and implement a modernized 

immigrant identification scheme (still to be designed) that may use EINs/SSNs to track 

records.
Page 39 GAO-06-100 Taxpayer Information

full implementation for its information technology transformation by fiscal 

year 2010. We are examining USCIS’s technological improvements as part 

of our ongoing work on immigration backlog and benefit fraud issues. 

Cost Challenges of Data Sharing 

Estimating the cost benefit associated with establishing and maintaining a 

data-sharing relationship can be complicated. One reason developing a 

cost estimate is difficult is because electronic methods of sharing data can 

vary, and different costs are associated with different methods of sharing. 

For example, USCIS may incur technological costs related to improving 

their IT capability to enable data sharing, which can be processed by either 

magnetic tape or computer file, each of which has different costs. However, 

some of the necessary IT improvements are already planned and would be 

funded as part of USCIS’s comprehensive upgrade of its IT systems if data 

sharing with IRS does not occur. 

Estimating the cost benefit is also complicated because of the difficulty 

both agencies may encounter in establishing costs for providing the 

service. The Computer Matching and Privacy Protection Act of 1988 states 

that no matching program can be approved unless the agency has 

preformed a cost-benefit analysis for the proposed matching program that 

demonstrates the program is likely to be cost effective. Similarly, 

Treasury's criteria for considering whether a statutory change should be 

made for the sharing of tax data stresses the importance of documenting 

whether a substantial benefit is likely and what the resource demands on 

IRS would be to support sharing the data. In our July 2004 testimony, we 

recommended that IRS and USCIS assess the benefits and costs of data 

sharing to enhance tax compliance and improve immigration eligibility 

decisions. IRS responded by stating it would study the issues and work 

with USCIS to identify possible solutions. DHS/USCIS agreed with our 

recommendation and said they were “exploring a technical capability for 

effectively and efficiently sharing data with the IRS on individuals who 

apply for immigration benefits.” In addition, in 2004, we reported IRS did 

not have a cost accounting system capable of providing reliable cost 
Page 40 GAO-06-100 Taxpayer Information

information,35 and in 2004, we also reported USCIS had insufficient cost 

data to determine the full extent of its operating costs.36

Finally, estimating the cost benefit is also complicated because of 

uncertainty regarding the net benefits that would be gained from data 

sharing. For example, IRS is unable to pursue all of the current leads that it 

receives from existing data corroboration efforts, like document matching. 

Therefore, to the extent that obtaining and analyzing additional data from 

USCIS developed more leads for possible enforcement actions, IRS likely 

would only be able to pursue the portion of cases that exceeds thresholds 

IRS uses in determining how many cases to pursue. Further, apparent 

noncompliance may not be substantiated. For example, some of those who 

appear not to have filed tax returns based on matching IRS and USCIS data 

may indeed have filed but were not found in IRS’s databases due to 

inaccurate information in USCIS files or otherwise not have a filing 

obligation. Of business sponsors with unpaid assessments, some portion 

likely would be unable to repay all taxes owed. From USCIS's perspective, 

although we found that many businesses may not have filed tax returns or 

may owe taxes, some of these situations may not be significant enough to 

affect a USCIS adjudicator's decision about their financial feasibility or 

legitimacy. For instance, some of the businesses applying to sponsor 

immigrant workers that owe taxes may not owe enough to raise doubts 

about their ability to pay the worker. This may be especially true for larger 

businesses.

Currently Authorized User 

Fees Can Fund Data 

Sharing, but IRS Could Not 

Recover All Related Costs 

Under current statutes, USCIS likely would be able to increase its user fees 

to recover all costs associated with data sharing with IRS and to retain the 

fees, but IRS would not be able to charge user fees that would include costs 

to bring noncompliant business sponsors into compliance. Because IRS 

could not recover all costs, it might not realize an increase in net tax 

collections through data sharing with USCIS.

Both IRS and USCIS currently have authority that states when and under 

what circumstances they can charge user fees and defines permissible uses 

of the funds. IRS is statutorily restricted to retaining no more than the 

35GAO, Financial Audit: IRS’s Fiscal Years 2004 and 2003 Financial Statements, 

GAO-05-103 (Washington, D.C.: Nov. 10, 2004). 

36GAO-04-309R.
Page 41 GAO-06-100 Taxpayer Information

$119 million in user fees annually. If the additional user fees to perform 

tax checks for USCIS business applicants seeking to sponsor workers 

generate additional funds that exceed IRS’s limit, the agency would be 

unable to retain the excess amounts. Further, IRS is limited to recovering 

the costs directly associated with providing a service to taxpayers. USCIS, 

on the other hand, does not have a limit on the amount of user fees it can 

collect and currently is authorized to collect and retain a user fee related to 

providing adjudicatory and naturalization services including compliance 

related costs. 

In 2004, IRS collected over $137 million in user fees for a wide range of 

services, including installment agreements, offers in compromise, and 

Freedom of Information Act (FOIA) requests.37 In fiscal year 2004, about 82 

percent of all user fees collected by IRS were for installment agreements or 

employee plans and exempt organizations’ letter rulings and determination 

letters.38 The 1995 Treasury Appropriations Act specifies that IRS can keep 

an overall maximum of $119 million per year of the user fees it collects for 

specific purposes, with the rest of the user fees going into the Treasury 

general fund.39 However, statutory formulas also limit how much IRS can 

retain of certain individual user fees. Due to these individual user fee limits, 

in 2004, IRS retained about $90 million from the user fees collected (see 

table 7) while the remaining $48 million went to the Treasury general fund. 

37An offer-in-compromise is an agreement between a taxpayer and IRS that resolves the 

taxpayer’s tax liability for less than the full amount owed for taxes, interest, and penalties. 

IRS charges a one-time fee. FOIA requestors are charged a one-time fee and are provided 

with agency records as requested, with some exceptions.

38A letter ruling is a written determination issued in response to a written inquiry from an 

individual or an organization about its status for tax purposes or the tax effects of its acts or 

transactions, prior to the filing of returns or reports that are required by the revenue laws. A 

determination letter is written and applies the principles and precedents previously 

announced by IRS to a specific set of facts. It is issued only when a determination can be 

made based on clearly established rules in a statute, a tax treaty, the regulations, a 

conclusion in a revenue ruling, or an opinion or court decision that represents the position 

of IRS.

39Pub. L. 103-329, Sept. 20, 1994. 
Page 42 GAO-06-100 Taxpayer Information

Table 7: User Fees Collected by IRS, Fiscal Year 2004

Source: IRS.

According to USCIS officials, in 2004, USCIS collected $1.3 billion in user 

fees for administering a variety of immigration services and benefits. 

Altogether, the agency has about 60 user fees, which range from $2 to $585, 

except for the $1000 premium-processing fee for select employment based 

applications.40 With the exception of FOIA fees, which are retained by the 

Treasury, DHS retains all user fees collected. According to USCIS, the 

agency’s budget will be entirely fee based beginning in fiscal year 2007.41 

IRS cannot collect and retain a user fee to support the compliance-related 

costs it incurs in connection with data-sharing activities. IRS currently 

only has authority to collect and retain a user fee related to the direct cost 

of providing the service—such as providing a copy of a tax return. If 

business sponsors were required to meet their tax obligations before they 

could sponsor immigrant workers, IRS also would incur costs to bring 

some sponsors into tax filing and payment compliance. As discussed 

earlier, bringing noncompliant business sponsors into compliance could 

displace other compliance activities that IRS would otherwise undertake. 

Dollars in millions

Fee type User fees collected

User fees to

Treasury

general fund

User fees

retained by IRS

Installment agreements $69.4 0.0 69.4

Offers-in-compromise 6.6 0.0 6.6

Employee plans and exempt 

organizations letter rulings 

and determination letters

43.1 $41.2 1.9

Chief counsel letter rulings 

and determination letters

9.3 5.5 3.8

Photocopy reimbursable 

user fees

6.4 0.0 6.4

Other 2.8 1.2 1.6

Total $137.6 $47.9 89.7

408 C.F.R. §103.7.

41According to USCIS, the agency will seek appropriations in the fiscal year 2007 budget to 

fund its information technology upgrades.
Page 43 GAO-06-100 Taxpayer Information

Depending on whether bringing the noncompliant business sponsors into 

compliance brought in more, the same, or less taxes than the displaced 

cases, bringing business sponsors into compliance could result in little 

change to IRS’s overall net tax collections, an increase, or possibly even a 

decrease. 

If data sharing were begun between USCIS and IRS and a user fee is 

charged, a number of implementation issues also would need to be 

considered. For example, would both agencies charge fees to cover their 

costs? Would one charge a fee sufficient to cover both agencies’ costs and, 

if so, how often would it forward collected monies to the other agency? In 

addition, if IRS were authorized to include costs for bringing noncompliant 

business sponsors into compliance, it likely would have to adjust the fees 

as it gained experience in determining how much cost it would incur to 

bring sponsors into compliance. 

Conclusions Data sharing between IRS and USCIS has the potential to better guide IRS’s 

efforts to identify and correct noncompliance by taxpayers and result in 

more informed, accurate, and timely immigration eligibility decisions by 

USCIS adjudicators. Although the agencies would benefit in differing ways, 

establishing and implementing data sharing can be beneficial to both 

agencies. For tax compliance purposes, requiring a tax check—

documenting whether a business sponsor has filed required returns and 

paid required taxes—likely would lead some businesses to come into 

compliance because they would know that USCIS would consider this 

information in determining whether the business can sponsor immigrant 

workers. However, because USCIS would only consider this information as 

one indication of whether businesses qualify to sponsor workers, a greater 

tax compliance increase is likely if businesses were required to meet tax 

filing and payment obligations as a condition for sponsoring workers. 

Given the billions of dollars of unpaid tax assessments among past 

business sponsors, our matching results illustrate strong potential for 

increased tax collections from changing immigration eligibility 

requirements. Although USCIS officials say no statutory provision 

prohibits USCIS from changing its regulations to require business sponsors 

to meet their tax filing and payment obligations, officials believe a statutory 

change would better withstand a legal challenge. Further, because 

collecting the unpaid assessments of business sponsors would displace 

other tax collections work, absent funding to cover its costs of bringing the 

business sponsors into compliance, IRS might not realize a net increase in 

overall tax collections. 
Page 44 GAO-06-100 Taxpayer Information

For immigration eligibility purposes, requiring business sponsors to meet 

their tax filing and payment obligations would help ensure businesses 

applying to sponsor immigrant workers are legitimate. Short of this 

change, either an applicant-initiated or an agency-initiated data-sharing 

arrangement could help improve benefit decisions. Our analysis shows 

strong potential to improve thousands of immigration eligibility decisions if 

USCIS uses IRS data to help support officials’ decisions about a business 

sponsor’s financial health. 

Even though data sharing shows promise to benefit both agencies, they 

would face implementation choices and challenges that could require 

technological or statutory solutions. In order to develop a better 

understanding of the implementation challenges and costs, to explore the 

most practical options for full scale implementation of data sharing, and to 

more completely assess benefits to IRS and USCIS from data sharing, 

USCIS should undertake a pilot test of data sharing under existing 

authority to use taxpayer consents to obtain tax data. Such a study would 

be consistent with congressional and executive branch policies that stress 

that sharing of tax data be thoroughly justified given concerns about 

possible adverse effects on tax compliance if the confidentiality of 

taxpayer’s data is compromised. Additionally, a study could assess issues 

raised by USCIS’s Ombudsman and immigration advocacy groups. A study 

would provide executive and legislative policymakers better information 

for determining the costs and benefits of data sharing and whether USCIS 

should require taxpayer consents from all future business sponsors or 

whether a change to IRC Section 6103 would better support efficient data 

sharing. 

Matters for 

Congressional 

Consideration

To improve taxpayer compliance and USCIS’s immigration benefit 

decisions, Congress should consider (1) changing immigration eligibility to 

require businesses applying to sponsor immigrant workers to meet tax 

filing and payment obligations to sponsor immigrant workers and 

(2) authorizing a user fee to be collected and retained by IRS to cover the 

costs of bringing non-compliant taxpayers into compliance. 

Recommendation for 

Executive Action

To improve the accuracy and timeliness of USCIS’s immigration eligibility 

decisions absent requiring businesses to have met their tax filing and 

payment obligations, we recommend the Secretary of the Department of 

Homeland Security direct USCIS, in consultation with the IRS, to conduct a 
Page 45 GAO-06-100 Taxpayer Information

pilot data-sharing test. In the test, USCIS should require a tax check for 

selected businesses and other entities applying to sponsor immigrant 

workers before qualifying for immigration benefits. The pilot test should 

assess and document the costs and benefits of data sharing including key 

issues such as using paper or electronic consents, or pursuing specific IRC 

Section 6103 disclosure authority, assessing resource implications, and 

considering how the agencies would allocate responsibilities for collecting 

and allocating user fees from the business sponsors.

Agency Comments and 

Our Evaluation

The Commissioner of Internal Revenue provided written comments on a 

draft of this report in a September 16, 2005, letter. The Commissioner 

agreed that data sharing between the IRS and USCIS within the Department 

of Homeland Security may have many benefits. IRS agreed to conduct a 

small-scale pilot test, in conjunction with USCIS, to determine whether a 

business case exists for supporting data sharing before pursuing legislation 

or a large-scale taxpayer consent program. The Commissioner also stated 

an executive working group will determine the merits of applying user fees 

for compliance data sharing. 

On behalf of the Secretary of DHS, the Director of DHS’s Office of 

Inspector General Liaison provided written comments on a draft of this 

report in a September 26, 2005, letter. The Director generally agreed with 

our recommendation and acknowledged the pilot program would be 

consistent with USCIS’s desire to explore ways to streamline its processes 

and could provide necessary information with respect to considering the 

feasibility of initiatives such as data sharing on a larger scale. He 

appreciated GAO’s recognition of the burden of paper taxpayer consent 

forms place on USCIS and its reluctance to embark on a process that would 

be largely paper-based. 

Although the Director generally agreed with our recommendation, his 

agreement was contingent on the extent to which USCIS can lawfully 

engage in a pilot program as we recommend. The Director’s letter did not 

elaborate on his uncertainty regarding USCIS’s ability to lawfully engage in 

the recommended pilot program. Based on supplemental communication, 

his concern focused on USCIS’s authority to require business sponsors to 

consent to a tax check. According to the Director, immigration laws 

contain no explicit prohibition on conditioning employer petitions on their 

tax compliance and doing so might be legally defensible. Nevertheless, he 

said USCIS has serious legal concerns about USCIS’s authority to 

promulgate regulations with such a requirement. 
Page 46 GAO-06-100 Taxpayer Information

The Director did not describe the legal concerns and therefore we do not 

have a basis to evaluate them. Consulting with IRS in determining how to 

design the pilot test should help USCIS resolve these concerns. We note 

that Education requires taxpayer consents as a condition of participation in 

certain student loan repayment programs.42 Should USCIS ultimately 

conclude that it does not have authority to require such a waiver, an option 

for proceeding with the pilot test would be to ask selected business 

applicants to voluntarily allow USCIS to directly obtain tax data from IRS. 

Taxpayers may authorize others to obtain their tax data directly from IRS. 

The Director also expressed concerns about the impact of ongoing tax 

disputes on immigration benefit decisions if those decisions are contingent 

on a taxpayer being required to meet tax filing and payment obligations. 

We believe consultations between USCIS and IRS in designing a pilot 

program can address this issue. For instance, officials might decide that 

businesses with some minimal level of tax underpayment or businesses 

with tax delinquencies that are actively participating in a payment 

arrangement with IRS would not be disqualified from sponsoring 

immigrant workers. We would urge USCIS and IRS to develop data-sharing 

policies that would minimize the impact of ongoing tax disputes on 

immigration benefit decisions for business sponsors. 

In commenting on a user fee to be collected and retained by the IRS, the 

Director agreed that IRS should be provided with adequate resources to 

carry out its tax compliance mission but had serious concerns about the 

user fee proposal. The Director commented that policy considerations 

have kept USCIS from completely using its authority to recover its full 

costs. He noted that Congress has mandated several additional fees for 

certain employment-based applications and that, “in short, the more 

interagency functions the overall cost of an application to USCIS is 

expected to support, the higher the cost to the applicant without 

consequent improvements in USCIS services, the less likely it is that USCIS 

will be able to increase its fees as may be necessary to fully recover its own 

costs.” The Director also noted that we had previously reported that fee 

collections are not sufficient to pay USCIS’s full costs. 

We understand that many considerations must be taken into account in 

setting USCIS’s overall fees. However, as our report indicates, obtaining a 

benefit from IRS’s perspective depends substantially on having sufficient 

42GAO-03-821.
Page 47 GAO-06-100 Taxpayer Information

funds to bring business applicants that have outstanding tax filing or 

payment obligations into compliance. Further, as also indicated in our 

report, USCIS access to IRS tax data for determining immigration benefit 

decisions has the potential to improve service to USCIS’s business 

applicants because it could decrease rework and follow-up work with the 

applicant that currently occurs. This would help USCIS in minimizing 

processing time for all business sponsors. Ultimately, with more routine 

access to IRS data, USCIS might not need to request as much financial 

information from business applicants as it does now since USCIS officials 

themselves see IRS data as more reliable than information provided by 

applicants. Finally, the GAO report cited by the Director did conclude that 

USCIS fees were not sufficient to fully fund USCIS’s operations. The 

insufficiencies, however, were not due to fees being collected for 

interagency functions. Rather, we said this resulted because USCIS’s fee 

schedule was based on an outdated fee study that did not include all costs 

of USCIS’s operations and costs had increased since the fee study was 

conducted.43 

Finally, the Director commented that the proposed user fee to cover IRS’s 

compliance related costs seemed to be different in concept from other 

existing user fees. As the Director noted, it was not within the scope of our 

review to examine all user fee relationships between IRS and other 

agencies. Based on the work we did, we are not aware of another case in 

which IRS receives a user fee to bring applicants for other agencies’ 

benefits into compliance with their tax obligations. However, Congress has 

authorized new or expanded funding arrangements to help IRS deal with its 

workload. For instance, in Treasury’s appropriations for 1995, Congress 

specifically authorized IRS to establish new user fees or raise existing fees 

for services provided in order to increase receipts.44 More recently, 

Congress also authorized IRS to use private collection agencies to assist in 

collecting delinquent taxes and specified that up to 25 percent of money 

collected can be used to pay the collection agencies and another 25 percent 

can be retained by IRS.45 Given the substantial unpaid taxes that we found 

among businesses applying to sponsor immigrant workers, we believe that 

it is appropriate for Congress to consider steps for effectively bringing 

these taxpayers into compliance without unduly deterring IRS from 

43GAO-04-309R.

44P.L. 103-329, Sept. 30, 1994.

45P.L. 108-357, Oct. 22, 2004.
Page 48 GAO-06-100 Taxpayer Information

pursuing other noncompliant taxpayers. As our report explains, for this to 

occur, IRS’s costs for bringing the noncompliant business sponsors into 

compliance must be covered, otherwise IRS might experience a net 

decrease in tax collections. Consequently, our report put forth the user fee 

as one option for Congress to consider for supporting a potential datasharing arrangement between IRS and USCIS. 

As agreed with your office, unless you publicly release its contents earlier 

we plan no further distribution of this report until 30 days from the date of 

this letter. At that time, we will send copies to interested congressional 

committees, the Secretary of the Treasury, the Commissioner of Internal 

Revenue, the Secretary of the Department of Homeland Security, the 

Director of the United States Citizenship and Immigration Services, and 

other interested parties. We will also make copies available to others on 

request.

If you or your staff have any questions about this report, please contact me 

at (202) 512-9110 or brostekm@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix IV. 

Michael Brostek

Director, Tax Issues,

Strategic Issues Team
Page 49 GAO-06-100 Taxpayer Information

Appendix I

Objective, Scope, and Methodology ApApenednxidexiIs

Our objectives were to determine the (1) potential benefits of data 

matching and the (2) options for establishing and maintaining a datasharing relationship between the Internal Revenue Service (IRS) and the 

U.S. Citizenship and Immigration Services (USCIS), including any 

challenges associated with those options. 

We performed our work at various IRS offices, including the Office of 

Governmental Liaison and Disclosure, the Office of Safeguards; and the 

Office of Program, Evaluation, and Risk Analysis. Our work included 

interviews with employees in IRS's Wage and Investment Operating 

Division and Small Business/Self Employed Operating Division. We 

interviewed USCIS officials in headquarters’ operational, technological, 

fraud, ombudsman, and policy offices. Additionally, we interviewed 

representatives of two immigration advocacy groups—the American 

Council on International Personnel and the American Immigration Lawyers 

Association—to obtain their perspectives on potential changes to 

immigration eligibility rules.

To determine the potential benefits of data matching between IRS and 

USCIS, we summarized the benefits reported in our July testimony (GAO04-972T), including the results of our data matching efforts (see app. II). 

We worked with IRS on conducting additional research for business 

sponsors unknown to IRS (identified in our July 21, 2004 testimony) to 

determine whether they are operating businesses/organizations and have 

any tax compliance problems. To better illustrate the potential tax 

compliance benefit related to business sponsors who have unpaid tax 

assessments, we further stratified the business sponsors with unpaid 

assessments from our nationwide selection to identify subpopulations of 

business sponsors that were or were not in a payment arrangement or had 

made payments within 2 years. 

To determine the options for establishing and maintaining a data-sharing 

relationship between the IRS and USCIS, we interviewed IRS and USCIS 

officials on processes in place that support data sharing under existing 

disclosure authorities. We summarized operational information such as 

timeliness, costs, and volume levels for existing data-sharing relationships 

to provide perspective on the options for establishing a data-sharing 

relationship between IRS and USCIS. We interviewed IRS officials on the 

resource implications of sharing data via different data-sharing 

arrangements. We compiled examples of private institutions and state 

entities that use “tax checks”— IRS verification that a taxpayer filed and/or 

paid his or her taxes--for eligibility determination purposes and to 
Appendix I

Objective, Scope, and Methodology

Page 50 GAO-06-100 Taxpayer Information

summarize costs associated with “tax checks.” We interviewed IRS and 

USCIS officials and obtained and reviewed statutory and regulatory 

guidance on the use of user fees and summarized information on (1) types 

of user fees IRS has in place to support compliance and enforcement 

activities, (2) regulatory implications for employing a user fee to support 

data sharing between USCIS and IRS, and (3) whether user fees go to the 

general fund or the Treasury fund. Finally, we interviewed USCIS officials 

and reviewed documents on planned changes to immigration eligibility that 

may impact the type of IRS information immigration adjudicators will need 

for eligibility decisions. 

To determine the potential challenges of data matching between IRS and 

USCIS under the various data-sharing options, we primarily summarized 

the challenges reported in our July testimony, including the technological, 

cost, and legislative barriers. We identified and reviewed the legislative and 

regulatory authorities that govern disclosure of personal and financial 

information for eligibility determinations and tax compliance purposes. 

We interviewed USCIS policy and legal staff on the implications of 

changing immigration eligibility decisions to require applicants to (1) 

provide taxpayer consents that allow IRS to share data and (2) be current 

on their taxes and review related documentation. We also interviewed 

USCIS and IRS officials regarding future cost challenges associated with 

establishing a data-sharing relationship. 

We assessed the reliability of IRS's Business Master File (BMF) and 

Individual Master File (IMF) data and the USCIS's Computer Linked 

Application Information Management System, Version 3.0 (CLAIMS 3), a 

database containing nationwide data but not naturalization data, by (1) 

performing electronic testing of required data elements, (2) reviewing 

existing information about the data and the system that produced them, 

and (3) interviewing agency officials knowledgeable about the data. As 

part of our annual audits of IRS’s financial statements, we also assess the 

reliability of IRS’s BMF and IMF data with respect to unpaid assessments 

by testing selected statistical samples of unpaid assessment modules. We 

determined that the data were sufficiently reliable for the purposes of this 

report.

Our review was subject to some limitations. We relied on IRS officials to 

identify offices that use personal information because there is no central, 

coordinating point within IRS for receipt of this type of information. We 

relied on USCIS officials to identify immigration forms they believed would 

most benefit from data sharing with IRS, and we relied on IRS and USCIS 
Appendix I

Objective, Scope, and Methodology

Page 51 GAO-06-100 Taxpayer Information

officials’ views on possible impediments or missed opportunities to verify 

information, any additional data sharing and verification needs, and the 

benefits of increased disclosure of taxpayer information. Because our 

sample of 984 hard copy applications at selected USCIS field locations was 

not a probability sample, we cannot make inferences about the population 

of applications. In addition, because employer identification 

numbers/social security numbers were only available for 3.4 million of the 

4.5 million applications in our nationwide selection of automated 

applications, our findings from these records are not representative of the 

entire population. We did not assess the reliability or quality of taxpayer 

information collected by IRS or the accuracy of information applicants 

reported to USCIS. Immigration applicants/taxpayers who were in IRS’s 

non-filer database could include individuals who did not meet IRS filing 

requirements. We relied on IRS’s investigation of the 33 business sponsors 

that were not in IRS’s databases since disclosure rules limit our contact 

with taxpayers. Since IRS searched its tax data for the last 5 years (1999–

2004) and we collected 7 years of immigration data (1997-2004), an 

unknown but likely small percentage of the businesses that submitted 

applications during 1997 and 1998, but are unknown to IRS, could be no 

longer in operation. Additionally, we did not assess the reliability of IRS 

data on the cost of paper taxpayer consents since we used this information 

for background purposes. We conducted our work from August 2004 

through August 2005 in accordance with generally accepted government 

auditing standards.
Page 52 GAO-06-100 Taxpayer Information

Appendix II

Summary of IRS/USCIS Data-Matching 

Results ApendxiI

The tables that follow present the data we reported in our July 2004 

testimony (GAO-04-972T) on the results of matching two sets of USCIS 

immigration data with IRS taxpayer data to determine the potential value 

for increased data sharing and matching. First, we used a nationwide 

selection of automated data on certain immigration applications: I-129 

(Petition for a Nonimmigrant Worker), I-140 (Immigrant Petition for Alien 

Worker), and I-360 (Petition for Amerasian, Widow(er), or Special 

Immigrant1

) submitted from January 1, 1997, through March 5, 2004, to 

USCIS service centers for immigration benefits. We used only those 

applications in USCIS’s Computer Linked Application Information 

Management System, Version 3.0 (CLAIMS 3), a database containing 

nationwide data that contained an individual’s Social Security Number 

(SSN) or a business’s Employer Identification Number (EIN). For the 

matching process, 3.4 million out of 4.5 million records had usable SSNs or 

EINs. We obtained automated data for those years because USCIS’s 

automated system had historical data not readily available in hard copy 

files. We used these data to determine whether businesses and others that 

had applied to sponsor immigrant workers or immigrants applying to 

change their immigration status had filed a tax return with IRS and, if so, 

whether they owed taxes to IRS. Because the nationwide selection did not 

include any financial information, we could not use it to determine whether 

USCIS applicants reported the same income amounts to IRS and USCIS. 

Second, we visited five USCIS field locations and selected a nonprobability 

sample of 984 immigration files covering the period of 2001 through 2003 at 

four of the locations because they contained personal as well as financial 

information. These hard copy files were applications for citizenship, 

employment, and family-related immigration and change of immigration 

status applications. We used the hard copy immigration files to build an 

automated database of certain personal information, such as the 

individual’s SSN or business’s EIN and income reported to USCIS. We 

obtained hard copy files for those years because the USCIS offices we 

visited had immigration applications for those years on-site. Immigration 

offices send older files to storage. Since each district and service center 

organized and stored its applications in a different way and immigration 

officials could not always provide an updated count of applications by form 

number, we developed an approach to selecting applications that included 

pulling approximately every 50th file in immigration file rooms. We 

1

The I-360 applications in our sample were submitted by religious organizations sponsoring 

religious workers.
Appendix II

Summary of IRS/USCIS Data-Matching 

Results

Page 53 GAO-06-100 Taxpayer Information

generally selected approximately 50-75 files at each field location for the 

following forms: I-129 (Petition for a Nonimmigrant Worker); I-140 

(Immigrant Petition for Alien Worker); N-400 (Application for 

Naturalization); I-751 (Petition to Remove the Conditions on Residence); I360 (Petition for Amerasian, Widow(er), or Special Immigrant); and I-864 

(Affidavit of Financial Support) that accompanies the I-485 (Application to 

Register Permanent Residence or to Adjust Status). We planned to select 50 

files for Form I-829 (Petition by Entrepreneur to Remove Conditions) but 

only reviewed 12 files due to resource constraints and the voluminous 

nature of the application files. The matching results for our nonprobability 

sample included Form I-829s for a small number of individual immigrants 

who had unpaid assessments or were nonfilers and none for business or 

individual sponsors.

To facilitate matching immigration and taxpayer data, we divided 

immigration applicants into three groups: business sponsors, individual 

sponsors, and individual beneficiaries. We matched the SSNs/EINs in our 

nationwide selection of immigration applications and our nonprobability 

sample of immigration applications with IRS's Business Master File (BMF) 

and Individual Master File (IMF) and other subsets such as the Revenue 

and Refunds Database. We identified immigration applicants/taxpayers 

that (1) matched with the IRS master files, (2) had unpaid assessments, (3) 

were nonfilers, (4) were businesses/organizations that had no record of tax 

activity in the last 5 years, and (5) did not match IRS master files. 

Additionally, to ensure we identified only business and organization 

sponsors whose EINs were unknown to IRS, we had IRS perform three 

additional matches using its BMF Taxpayer Identification Number CrossReference File, the BMF Entity File and the IMF Entity File.

We used this sample to determine whether USCIS applicants reported the 

same income information to IRS as to USCIS and also as a second source of 

examples of USCIS applicants may who not have filed tax returns and may 

have owed taxes to IRS. 

Tables 1-3 show our results on business sponsors, individual sponsors, and 

individual beneficiaries that have unpaid assessments2

 or are nonfilers for 

2

Immigration applicants/taxpayers in IRS’s unpaid assessment database may include 

taxpayers that have entered into an installment agreement, have proposed an offer-incompromise or are in litigation with IRS about amounts due. 
Appendix II

Summary of IRS/USCIS Data-Matching 

Results

Page 54 GAO-06-100 Taxpayer Information

both our nationwide selection and nonprobability sample of immigration 

files. 

Table 8: Number and Percentage of Total Applications GAO Collected

Source: GAO analysis of USCIS data.

Table 9: Matching Results on Nationwide Data, 1997 through 2004 – Automated Dataa

Source: GAO analysis of IRS and USCIS data.

a

These results have been time controlled. That is, these numbers reflect taxpayers’ filing status with 

IRS at the time the USCIS application was filed.

b

Unpaid assessments are maintained in IRS’s accounts receivable database.

c

Did not match IRS’s IMF, BMF, accounts receivable, nonfiler, revenue and refunds, BMF Taxpayer 

Identification Number Cross-Reference file, BMF entity file, and the IMF entity file.

Years Total

Total with

identifiers Percentage

Nationwide selection of 

automated immigration data 

(CLAIMS 3) 1997-2004 4,518,875 3,430,754 75.9

Nonprobability sample of hardcopy application files 2001-2003 984 984 100.0

Owe IRS taxes 

Matched with IRS’s database for 

unpaid assessmentsb

Nonfilers

Matched with IRS’s nonfiler 

database

Unknown to IRS

Did not match IRS Master 

Files and subsetsc

Total Number Percent Amount Number Percent Amount Number Percent Amount

Business 

sponsors 

(petitioners) 413,723 18,942 4.6 $5.6 billion 67,949 16.0

Not

available

(N/A) 19,972 4.8 N/A

Individual 

sponsors 

(petitioners) 51,169 889 1.7 49.8 million 791 1.5 N/A 4,378 8.6 N/A

Individual 

beneficiaries 2,009,046 38,877 1.9 327,859,723 25,662 1.3 N/A 511,180 25.4 N/A
Appendix II

Summary of IRS/USCIS Data-Matching 

Results

Page 55 GAO-06-100 Taxpayer Information

Table 10: Matching Results on Nonprobability Sample, 2001 through 2003 – Hard Copy Application Files

Source: GAO analysis of IRS and USCIS data.

Note: Results from nonprobability samples cannot be generalized to the population.

a

Unpaid assessments are maintained in IRS’s accounts receivable database.

b

Did not match IRS’s IMF/BMF, accounts receivable, nonfiler, revenue and refunds, BMF Taxpayer 

Identification Number Cross-Reference file, BMF entity file, and the IMF entity file.

Owe IRS taxes 

Matched with IRS’s database 

for unpaid assessmentsaa

Nonfilers

Matched with IRS’s nonfiler 

database

Unknown to IRS

Did not match IRS Master 

Files and subsetsb

Total Number Percent Amount Number Percent Amount Number Percent Amount

Business 

sponsors 

(petitioners) 475 94 19.8

$39.0

million 112 24.0

$533.4

million 13 2.7 N/A

Individual 

sponsors 

(petitioners) 273 14 5.2 84,761 4 1.5 19,189 17 6.3 N/A

Individual 

Beneficiaries 804 20 2.5 100,821 7 .9 903 83 10.3 N/A
Page 56 GAO-06-100 Taxpayer Information

Appendix III

Comments from the Internal Revenue Service ApendxiI
Page 57 GAO-06-100 Taxpayer Information

Appendix IV

Comments from the Department of Homeland 

Security ApendxiIV
Appendix IV

Comments from the Department of Homeland 

Security

Page 58 GAO-06-100 Taxpayer Information
Appendix IV

Comments from the Department of Homeland 

Security

Page 59 GAO-06-100 Taxpayer Information
Page 60 GAO-06-100 Taxpayer Information

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact Michael Brostek, (202) 512-9110

Acknowledgments In addition to the contact named above, major contributors to this 

assignment were Signora J. May, Assistant Director; Jyoti Gupta, Tina 

Younger, Michele Fejfar, Shirley Jones, Amy Rosewarne, and James 

Ungvarsky who made key contributions to this report.

(450350)
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548