STATEMENT OF DONALD C. ALEXANDER COMMISSIONER OF INTERNAL REVENUE BEFORE THE SUBCOMMITTEE ON GOVERNMENT INFORMATION AND INDIVIDUAL RIGHTS OF THE COMMITTEE ON GOVERNMENT OPERATIONS OF THE U.S. HOUSE OF REPRESENTATIVES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP77M00144R000800070054-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 12, 2016
• Document Release Date: November 23, 2001
• Sequence Number: 54
• Publication Date: May 1, 1976
• Content Type: STATEMENT

Approved For Release 20(F4'?.AjC TuTCFA FCl?MO0144R000800070054-1
DONALD C. ALEXANDER
COiv11M1SSIONEll OF INTERNAL RE'i,'2':NUE
BEFORE THE
SUBCOMMITTEE C)N GOVERNMENT INFORMATION
AND INDIVIDUAL RIGHTS
OF THE
COMMITTEE ON GOVERNIVIE.NT OPERATIONS
OF THE
U. S. HOUSE OF REPRESENTATIVES
MAY , 197 6
Ms. Chairwoman and Members of the Committee:
I am. pleased to have this opportunity to meet with you and discuss
the provisions of H. R. 12009, a Bill to amend the Privacy .Act of
1974, as they would affect the operations of the Internal Revenue Service.
Certainly, all of us here are mindful of the issues and events .which
have led Ms. Abzug to introduce the measurers embodied by H. R. 12039.
You can be assured that the present policy and procedures of the Internal
Revenue Service do not permit, or tolerate, the kinds of abuses Identified
in the proposed.legislation.
The Bill does contain, however, several provisions which give
us problems. The balance of my statement discusses these problems
and comr,tents on some of the subcommittee 1 o0her areas of inquiry.
Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
 Approved For Release 2002/01/02?CIA-RDP77M00144R000800070054-1
One problem concerns the Bill's pro isions relating to
persons with respect to whom information was included in the figs
established by the Special Service Staff. this Staff was created
in 1969 and all activities were terminated in 1973. The Staff's files
would have been destroyed long a;o if Congressional leaders
had not asked that they be retained. These files are inactive
and outdated and, because of thin , considerable time and effort
would be required to comply ',rith the Bill's notification require-
ments. Detailed checks would have to be made to determine
current addresses of all persons included in the files. Also, some
individuals included in the file may be deceased and organizations
liquidated or other prise disposed of since Special Service Staff
activities were terminated. In addition, to my knowledge none
of the i iformation included in the files was ever used for purposes
other then those specifically authorized by statute to enforce the
internal revenue laws. In view of this, 1 seriously question the
advantages to be gained from incurring the substantial costs
required to inform persons mentioned in the files that they are
mentioned and can have all information about them destroyed,
The Service will., of course, continue to preserve the Special
Service Staff files until the needs of the select Congressional
Committees have been meta Arrangements will Mien be made
with the Senate and House leadership for disposition of the files
Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
I
 A'pprb*hdsffl54~111
accordance with Presidential directives arid as otherwise
provided by law.
Another problem relates to that portion of 11. R. 120;9 which
provides that Federal agencies maintaining information about
certain persons must notify such persons of this fact, furnish
them with a clear and concise statement of their rights under
the Privacy and Freedom of Information Acts, and give them
the right to require that all copies of the information included in
files be destroyed. Persons subject to this provision are those
who were "the sender or receiver of any written cornirrunication,
or communication by wire, cable, radio, or other means, which
was intercepted, recorded, or otherwise examinedby the agency
t~
without a search warrant, or ,wdthout the consent of both the sender
and receiver". I assume that this language relates to information
obtained through illegal investigative procedures. However, without
further clarification, the Bill Is language, as it relates to the Internal
Revenue Service, could be interpreted to include, virtually every
written or other exchange between two persons involving the deternli_
nation of a taxpayer's correct tax liability. This interpretation would
place severe restrictions on the Service's ability to obtain and review
ban'.: statements, insurance records, financial reports, sales and
purchases invoices, and other data directly related to determination
of tax liability. This type of information, which is now legally
obtainable by t; e Service for tu:t adl~i rjjst1 atio1A purposes, is USUally
Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
 Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
secured from third parties under Code provisions authorizing
the use of administrative summonses for the information to persons
in possession of the requested data. The recipient of the summons
can, of course, refuse to honor the sL mmQns and request a . s
court hearing to determine if the data should be made available
to the Service. To avoid potential?problems from misinterpretation
of the Bill's provisions in this area, I strongly recommend that
the provisions be modified. to clearly state that they apply only to
information obtained from communications using illegal investigative
methods.
Our final problem with the Bill concerns the period covered by
its provisions. Since the Bill contains no effective date and
provision's concerning the notification of persons subject to illegal
information gathering activities are all written in the past tense,
I assume that the effective date is the same as that of the Privacy
Act, which it amends, and that the notification provisions only
apply to information illegally obtained prior to this date and still
maintained by the Service. If this is the intent of the proposed
legislation, the provisions of the Bill should be amended to clearly
reflect their retroactive nature.
In addition. to the above specific comments about provisions
of the Bill, I would, in the belief that it may he helpful, like to
comment on Service files other than the Special Service Staff
files which are directl.,;, dealt with in the Bill. In my judgment,
none of these files are covered by provisions in IT. R. 12039;
Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
 ..5
.Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
however, it is possible that the present language in the Bill
could be interpreted to cover our regular tax administration files.
All of the information in the files is totally relevant and necessary
to accomplish the Service mission of enfU sing the internal reveirue
laws. The records are as accurate as we can make them and
contain no information about how any individual exercises rights
guaranteed by the First Amendment.
As you know, the Service 'collects and maintains files
containing enormous quantities of information covering every
taxpaying entity in the Nation. This information is essential, in
determing a taxpayer's proper tax liability. The vast preponderance
of this data is submitted. to us, timely and accurately, by the tax--
payers themselves. However, the Service does collect additional
information regarding taxpayers, under three general sets of
circumstances.
The first, and by far the largest, is our normal audit process,
where we are generally seeking evidence to support information
reported on tax returns. In the second set of circtunstances,
additional information regarding taxpayers is sought by the Service,
in connection with specific tax investigations, where we have established
a controlled case file based upon data already in our hands that
suggests the probable existence of criminal or civil tax fraud.
The establishment of such an 'investigation will frequently
have cone about as a result of our normal. audit procedures, such
as the application of the discriminant function by o,ar Service
Center computers, or as a result of data acquired ..ncident to
Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1,
 Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1
-6-
the audit of another taxpayer. The collection ol specific, case-
related information is made through legal law enforcement
investigative methods, such as personal intervieuws and the
examination of third party records using administrative summonses.
The third set of circumstances in which information is gathered
by the Service, which may be described as "intclli_g~lnnce gather. ing",
involves the evaluation of a variety of information items from
many sources as potential indicators of revenue non-compliance
or of breaches of integrity by our employees. All of these files
contain information vital to the tax administration process.
Without it, the Service would be hard-pressed to meet its respon-
sibilities for administrating the internal revenue laws in a fair. and
equitable way. I suggest, therefore, that the provisions of the
Bill be revised or that the committee report be written to make it
very clear that the files I have described are not subject to the
privacy protection procedures contained in :El. R. 12039.
I hope these comments will be helpful to you in considering
the proposed legislation. My associates and I will be glad to
answer any of your questions..
. Approved For Release 2002/01/02 : CIA-RDP77M00144R000800070054-1