Opinion ID: 27195
Heading Depth: 1
Heading Rank: 5

Heading: The Taxpayer as Reasonably Available Source of Necessary Information

Text: 26 The United States argues that IRS special agents need never consider the taxpayer under investigation as a source from whom information is reasonably available. Reviewing the statute and regulations promulgated under its authority, as well as the court decisions construing § 6103(k)(6), we find no convincing authority for this rigid proposition. 27 According to the regulations, disclosures are authorized only when the necessary information cannot be reasonably obtained in accurate and sufficiently probative form or in a timely manner, and without impairing the proper performance of... official duties. 26 C.F.R. § 301.6103(k)(6)-1(a) & (b). Whether a disclosure is authorized depends upon the facts and circumstances of the particular case. Id. Rather than foreclosing the possibility that the taxpayer could ever be a source from whom necessary information may reasonably be obtained, the regulations reflect the fact-intensive nature of the inquiry. 28 While we find no previous case that addresses the precise argument made by the United States here, this court's decision in Barrett I implicitly considers the taxpayer a reasonably available source of necessary information. There, the court reversed a summary judgment in favor of the IRS, finding a fact issue as to whether certain third-party contacts were necessary. Noting evidence that the IRS had free access to the taxpayer's bank records, the court concluded that some disclosures, perhaps all, might have been avoided by reviewing and analyzing [those] bank records. Barrett I, 795 F.2d. at 450. 29 In Kemlon Products & Development Co. v. United States, 638 F.2d 1315 (5th Cir. 1981), modified on pet. for rehearing, 646 F.2d 223 (5th Cir.1981), this court reversed the granting of a permanent injunction prohibiting the IRS from disclosing the taxpayer's return information to its customers. The injunction was held to have violated the Anti-Injunction Act, 26 U.S.C. § 7421(a) (1999), because the taxpayer had not proved irreparable harm from the contacts. Id. at 1322. The court then suggested that even if irreparable harm had been established, in all likelihood the United States could defend a lawsuit on the basis of § 6103(k)(6). The underlying issue involved the value of certain patents, and the court noted the affidavit of the investigating agent that direct contact with the taxpayer's customers would be necessary to ensure candid responses. Id. at 1325. The tenor of this dicta indicated that the panel was evaluating the facts in that particular case and not endorsing an inflexible rule. 1 30 The United States argues that it has the duty to corroborate a taxpayer's admissions and to investigate all reasonable leads to eliminate non-taxable deposits. See Smith v. United States, 348 U.S. 147, 154, 75 S.Ct. 194, 198, 99 L.Ed. 192 (1954); United States v. Hiett, 581 F.2d 1199, 1201-1202 (5th Cir.1978); United States v. Boulet, 577 F.2d 1165, 1168 (5th Cir.1978). Both of these tasks, the United States asserts, may only be accomplished through third-party contacts. To the extent that necessary evidence, corroborating or otherwise, is not reasonably available from sources provided by the taxpayer, § 6103(k)(6) obviously authorizes third-party contacts. However, even corroborating evidence might be available from bank or other records to which a taxpayer voluntarily grants access, thus negating the necessity of contacting third-parties. At any rate, in this case Batista was not merely corroborating information previously provided by Payne. Further, we find no contradiction between the need to eliminate nontaxable sources of income while still considering the taxpayer an available source of information, because [i]n the typical case, the taxpayer gives the IRS `leads' to possible nontaxable sources. Hiett, 581 F.2d at 1201; see also Boulet, 577 F.2d at 1169. 31 We do not hold that the taxpayer is always such a fruitful and reliable source of information that IRS agents may never approach third-parties for necessary information. We hold only that such a determination must be made in light of the facts and circumstances of the case, and that the taxpayer's cooperation legitimately forms part of the inquiry.