Because of the complexity of Internal Revenue Service Code Section 6050I, this article is broken down into five parts: (1) Enactment of Section 6050I, (2) Operation of Section 6050I, (3) Use of Section 6050I in Law Enforcement, (4) Form 8300 Disclosures, and (5) Tax Policy. So hold onto your seats as we peel off the layers of Section 6050I to expose its true purpose.

D. Form 8300 Disclosures

Section 6050I’s use as a weapon in the IRS’s criminal arsenal began in 1998. That year, Congress authorized the Secretary of the Treasury to disclose Form 8300s to officers and employees of any federal agency for the administration of federal criminal statutes not related to tax administration. However, because Form 8300s are considered tax returns and tax returns are subject to restrictions on their release, Form 8300 disclosure for non-tax investigations turned on disclosure rules that applied to tax returns. Thus, the information contained in these returns was subject to restrictions on their release.

In the 1990s, both the GAO and the Treasury called for wider dissemination of completed Form 8300s for use in both state and federal law enforcement investigations. In 2001, Congress detached Form 8300s from their tax law origins by reenacting the Form 8300 requirement as part of the BSA. That made it easier for law enforcement agencies engaged in non-tax investigations – e.g., State law enforcement agencies – to access Form 8300 information. As of January 1, 2002, Form 8300 disclosures are authorized under the more permissive disclosure provisions of the BSA and accompanying regulations. As a result, Form 8300 has become the first link in a criminal investigative chain.

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Footnotes for full post

i – Gerald A. Feffer et al., Proposals to Deter and Detect the Underground Cash Economy, in Income Tax Compliance: A Report of the ABA Section of Taxation Invitational Conference on Income Tax Compliance 293 (1983); see also Michael C. Durst, American Bar Ass’n Sec. of Taxation & American Bar Found., Report of the Second Invitational Conference on Income Tax Compliance, 42 Tax Law. 705 (1988) (discussing problems of income tax compliance in the United States and policy recommendations).

ii – United States General Accounting Office, Report to the Joint Committee on Taxation, Reducing the Tax Gap: Results of a GAO Sponsored Symposium (GAO/GGD-95-157 1995).

iii – The Secretary of Treasury, and by delegation the Commissioner of Internal Revenue are given broad authority to administer the federal tax law: Except where such authority is expressly given by this title to any person other than an officer or employee of the Treasury Department, the Secretary shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue. I.R.C. 7805(a) (1994). The Justice Department represents the Commissioner of the Internal Revenue Service in Article III Courts.

iv – I.R.C. 6050I(a) (1994). Businesses subject to the Bank Secrecy Act, e.g., banks and other financial institutions, are excepted from section 6050I’s reporting provisions. Id. 6050I(c)(1)(B).

v – FinCEN Form 8300: Report of Cash Payments Over $ 10,000 Received in a Trade or Business, http://www.irs.gov/pub/irs-pdf/f8300.pdf (last visited Nov. 13, 2009).

vi – Id.

vii – Id.

viii – Id.

ix – Id.

x – United States General Accounting Office, Report to the Chairman, Permanent Subcommittee on Investigations, Committee on Governmental Affairs, U.S. Senate, Money Laundering: State Efforts to Fight it are Increasing but More Federal Help is Needed (GAO/GGD-93-1 1992) [hereinafter GAO Report].

xi – Harrington, 24 Hofstra L. Rev. at 637 (1996).

xii – Id.

xiii – Treas. Reg. 1.6050I-1(b).

xiv – Treas. Reg. 1.6050I-1(c)(7)(ii).

xv – 31 U.S.C. § 5324(b).

xvi – I.R.C. 6050I(f)(2) provides for both criminal and civil penalties to be assessed against any person who “causes or attempts to cause a trade or business to fail to file a return.” I.R.C. 6050I(f)(1)(A) (1994). The provisions of 31 U.S.C. 5313 require financial institutions – which are otherwise exempt from the provisions of 26 U.S.C. 6050I – to file “currency transaction reports” whenever they receive cash deposits in excess of $ 10,000. 31 U.S.C. 5313(a) (1994).

xvii – See Peter Reuter & Edwin M. Truman, Chasing Dirty Money: The Fight Against Money Laundering 66 (2004); Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690, 102 Stat. 4181.

xviii – See I.R.C. § 6103(i)(8) (2006); see also Internal Revenue Manual §§9.5.5.4.8.4, 9.5.5.4.8.5 (2007) (setting forth the elaborate procedures an IRS agent must follow to disseminate a Form 8300 under Title 26 authority).

xix – Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. No. 107-56, tit. III, § 365(a), 115 Stat. 272 (codified as amended at 31 U.S.C. § 5331 (2006)).

xx – See Internal Revenue Manual § 9.5.5.4.8 (2007) (“The rules under Title 26 strictly limit [Form 8300] disclosures, whereas the rules under Title 31 are less restrictive.”).

xxi – I.R.C. 170 (1994) (charitable deductions).

xxii – I.R.C. 162(e) (denial of exclusion for lobbying expenses) and I.R.C. 5881 (excise tax on corporate “greenmailers”).

xxiii – Al Capone was finally convicted and sent to prison on income tax evasion. David Laro, The Evolution of the Tax Court As an Independent Tribunal, 1995 U. Ill. L. Rev. 17, 21.

xxiv – Harrington, 24 Hofstra L. Rev. at 670.

xxv – Id.

xxvi – See, e.g., Eric A. Lustig, The Emerging Role of the Federal Tax Law in Regulating Hostile Corporate Takeover Defenses: The New Section 5881 Excise Tax on Greenmail, 40 U. Fla. L. Rev. 789 (1988); Edward A. Zelinsky, Greenmail, Golden Parachutes and the Internal Revenue Code: A Tax Policy Critique of Sections 280G, 4999, and 5881, 35 Vill. L. Rev. 1 (1990).

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