Appendix B
Recent Legislation Governing Data Sharing and Access to Federal Tax Data

The Confidential Information Protection and Statistical Efficiency Act (CIPSEA) was passed as Title V of the E-Government Act of 2002 (P.L. 107-347). Enactment of CIPSEA culminated more than 30 years of efforts to standardize and strengthen legal protections for data collected for statistical purposes by federal agencies while permitting limited sharing of individually identifiable business information among three statistical agencies for efficiency and quality improvement.1

Title V has two subtitles. Subtitle A, Confidential Information Protection, strengthens and extends confidentiality protection for all statistical data collections of the U.S. government. For all data furnished by individuals or organizations to an agency under a pledge of confidentiality for exclusively statistical purposes, it provides that the data will be used for statistical purposes only and will not be disclosed in identifiable form to anyone not authorized by the title. It makes knowing and willful disclosure of confidential statistical data a class E felony with fines up to $250,000 and imprisonment for up to five years.

Subtitle A pertains not only to surveys, but also to collections by a federal agency for statistical purposes from administrative records (e.g., state government agency records). Data covered under subtitle A are not subject to release under a Freedom of Information Act request. Guidance from the Office of Management and Budget, which is charged to oversee

1

This overview of CIPSEA is reproduced from National Research Council (2005).



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Improving Business Statistics Through Interagency Data Sharing: Summary of a Workshop Appendix B Recent Legislation Governing Data Sharing and Access to Federal Tax Data The Confidential Information Protection and Statistical Efficiency Act (CIPSEA) was passed as Title V of the E-Government Act of 2002 (P.L. 107-347). Enactment of CIPSEA culminated more than 30 years of efforts to standardize and strengthen legal protections for data collected for statistical purposes by federal agencies while permitting limited sharing of individually identifiable business information among three statistical agencies for efficiency and quality improvement.1 Title V has two subtitles. Subtitle A, Confidential Information Protection, strengthens and extends confidentiality protection for all statistical data collections of the U.S. government. For all data furnished by individuals or organizations to an agency under a pledge of confidentiality for exclusively statistical purposes, it provides that the data will be used for statistical purposes only and will not be disclosed in identifiable form to anyone not authorized by the title. It makes knowing and willful disclosure of confidential statistical data a class E felony with fines up to $250,000 and imprisonment for up to five years. Subtitle A pertains not only to surveys, but also to collections by a federal agency for statistical purposes from administrative records (e.g., state government agency records). Data covered under subtitle A are not subject to release under a Freedom of Information Act request. Guidance from the Office of Management and Budget, which is charged to oversee 1 This overview of CIPSEA is reproduced from National Research Council (2005).

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Improving Business Statistics Through Interagency Data Sharing: Summary of a Workshop and coordinate the implementation of CIPSEA, is under development. It is intended to cover such topics as the steps that agencies must take to protect confidential information; wording of confidentiality pledges in materials that are provided to respondents; steps that agencies must take to distinguish any data or information they collect for nonstatistical purposes and to provide proper notice to the public of such data; and ways in which agents (e.g., contractors, researchers) may be designated to use individually identifiable information for analysis and other statistical purposes and be held legally responsible for protecting the confidentiality of that information. Subtitle B of CIPSEA, Statistical Efficiency, permits the Bureau of Economic Analysis (BEA), the Bureau of Labor Statistics (BLS), and the Census Bureau to share individually identifiable business data for statistical purposes. The intent of the subtitle is to reduce respondent burden on businesses; improve the comparability and accuracy of federal economic statistics by permitting these three agencies to reconcile differences among sampling frames, business classifications, and business reporting; and increase understanding of the U.S. economy and improve the accuracy of key national indicators, such as the national income and product accounts. A key limitation of CIPSEA is that data in the Census Bureau’s Business Register, which is constructed in large part out of Internal Revenue Service (IRS) tax data, cannot be shared. New legislation would be required to amend Title 26, which governs access to IRS tax data by BLS, BEA, and other agencies. All access to federal tax information, even within IRS, must be authorized by statute, meaning that legislation has been codified as part of Title 26 of the Internal Revenue Code. Title 26, Section 6103, is the primary law articulating IRS’s data-sharing constraints. Section 6103 provides that tax returns and return information are confidential and may not be disclosed by the IRS to other government agencies or employees except as provided in the code. It further specifies non-IRS access, indicating which agencies (or other entities) may have access to tax return information. Congress must enact legislation to add users. Accompanying regulations clarify the purposes for which access may be granted, detailing specific items that can be shared and under what conditions the information will be received. The assistant secretary for tax policy of the Treasury Department is responsible for setting regulations. As with all users, BEA access to IRS tax data is codified in Section 6103. For example, Section 6103(j) specifies (in the accompanying regulations) BEA access to Statistics of Income sample files of corporations; Section 6103(n) grants access to some extracts for partnerships and sole proprietorships. In some cases, policy agreements (such as the Census Bureau-IRS Criteria Agreement) may supplement statute and regulations. Because the confidentiality of tax data is considered crucial to vol-

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Improving Business Statistics Through Interagency Data Sharing: Summary of a Workshop untary 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. The papers by Nick Greenia and Mark Mazur and by Robert Parker in this volume provide further details of statistical agency access to IRS data. The full text of the CIPSEA legislation can be found at <http://www.eia.doe.gov/oss/CIPSEA.pdf>. REFERENCES National Research Council 2005 Principles and Practices for a Federal Statistical Agency, Third Edition. Committee on National Statistics, M.E. Martin, M.L. Straf, and C.F. Citro, eds. Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press. U.S. Congress 2002 Confidential Information Protection and Statistical Efficiency Act of 2002. (HR4528). Available: http://www.eia.doe.gov/oss/CIPSEA.pdf [accessed May 2006].