I.R.C. § 7612(a) General Rule —
For purposes of this title--
I.R.C. § 7612(a)(1) —
except as provided in subsection (b), no summons may be issued under this title, and the Secretary may not begin any
action under
section 7604 to enforce any summons to produce or analyze any tax-related computer software source
code; and
I.R.C. § 7612(a)(2) —
any software and related materials which are provided to the Secretary under this
title shall be subject to the safeguards under subsection (c).
I.R.C. § 7612(b) Circumstances Under Which Computer Software Source Code May Be Provided
I.R.C. § 7612(b)(1) In General —
Subsection (a)(1) shall not apply to any portion, item, or component of tax-related computer software
source code if--
I.R.C. § 7612(b)(1)(A) —
the Secretary is unable to otherwise reasonably ascertain the correctness of any
item on a return from--
I.R.C. § 7612(b)(1)(A)(i) —
the taxpayer's books, papers, records, or other data; or
I.R.C. § 7612(b)(1)(A)(ii) —
the computer software executable code (and any modifications thereof) to which such
source code relates and any associated data which, when executed, produces the output
to ascertain the correctness of the item;
I.R.C. § 7612(b)(1)(B) —
the Secretary identifies with reasonable specificity the portion, item, or component
of such source code needed to verify the correctness of such item on the return;
and
I.R.C. § 7612(b)(1)(C) —
the Secretary determines that the need for the portion, item, or component of such
source code with respect to such item outweighs the risks of unauthorized disclosure
of trade secrets.
I.R.C. § 7612(b)(2) Exceptions —
Subsection (a)(1) shall not apply to--
I.R.C. § 7612(b)(2)(A) —
any inquiry into any offense connected with the administration or enforcement of
the internal revenue laws;
I.R.C. § 7612(b)(2)(B) —
any tax-related computer software source code acquired or developed by the taxpayer
or a related person primarily for internal use by the taxpayer or such person rather
than for commercial distribution;
I.R.C. § 7612(b)(2)(C) —
any communications between the owner of the tax-related computer software source
code and the taxpayer or related persons; or
I.R.C. § 7612(b)(2)(D) —
any tax-related computer software source code which is required to be provided or
made available pursuant to any other provision of this title.
I.R.C. § 7612(b)(3) Cooperation Required. -- —
For purposes of paragraph (1), the Secretary shall be treated as meeting the requirements of subparagraphs (A) and (B) of such paragraph if--
I.R.C. § 7612(b)(3)(A) —
the Secretary determines that it is not feasible to determine the correctness of
an item without access to the computer software executable code and associated data
described in paragraph (1)(A)(ii);
I.R.C. § 7612(b)(3)(B) —
the Secretary makes a formal request to the taxpayer for such code and data and to
the owner of the computer software source code for such executable code; and
I.R.C. § 7612(b)(3)(C) —
such code and data is not provided within 180 days of such request.
I.R.C. § 7612(b)(4) Right To Contest Summons —
In any proceeding brought under section 7604 to enforce a summons issued
under the authority of this subsection, the court shall, at the request of any party,
hold a hearing to determine whether the applicable requirements of this subsection
have been met.
I.R.C. § 7612(c) Safeguards To Ensure Protection Of Trade Secrets And Other Confidential Information
I.R.C. § 7612(c)(1) Entry Of Protective Order —
In any court proceeding to enforce a summons for any portion of software, the court
may receive evidence and issue any order necessary to prevent the disclosure of trade
secrets or other confidential information with respect to such software, including
requiring that any information be placed under seal to be opened only as directed
by the court.
I.R.C. § 7612(c)(2) Protection Of Software —
Notwithstanding any other provision of this section, and in addition to any protections
ordered pursuant to paragraph (1), in the case of software that comes into the possession or control of the Secretary
in the course of any examination with respect to any taxpayer--
I.R.C. § 7612(c)(2)(A) —
the software may be used only in connection with the examination of such taxpayer's
return, any appeal by the taxpayer to the Internal Revenue Service Independent Office
of Appeals, any judicial proceeding (and any appeals therefrom), and any inquiry
into any offense connected with the administration or enforcement of the internal
revenue laws;
I.R.C. § 7612(c)(2)(B) —
the Secretary shall provide, in advance, to the taxpayer and the owner of the software
a written list of the names of all individuals who will analyze or otherwise have
access to the software;
I.R.C. § 7612(c)(2)(C) —
the software shall be maintained in a secure area or place, and, in the case of computer
software source code, shall not be removed from the owner's place of business unless
the owner permits, or a court orders, such removal;
I.R.C. § 7612(c)(2)(D) —
the software may not be copied except as necessary to perform such analysis, and
the Secretary shall number all copies made and certify in writing that no other copies
have been (or will be) made;
I.R.C. § 7612(c)(2)(E) —
at the end of the period during which the software may be used under subparagraph
(A)--
I.R.C. § 7612(c)(2)(E)(i) —
the software and all copies thereof shall be returned to the person from whom they
were obtained and any copies thereof made under subparagraph (D) on the hard drive of a machine or other mass storage device shall be permanently
deleted;
and
I.R.C. § 7612(c)(2)(E)(ii) —
the Secretary shall obtain from any person who analyzes or otherwise had access to
such software a written certification under penalty of perjury that all copies and
related materials have been returned and that no copies were made of them;
I.R.C. § 7612(c)(2)(F) —
the software may not be decompiled or disassembled;
I.R.C. § 7612(c)(2)(G) —
the Secretary shall provide to the taxpayer and the owner of any interest in such
software, as the case may be, a written agreement, between the Secretary and any
person who is not an officer or employee of the United States and who will analyze
or otherwise have access to such software, which provides that such person agrees
not to--
I.R.C. § 7612(c)(2)(G)(i) —
disclose such software to any person other than persons to whom such information
could be disclosed for tax administration purposes under section 6103; or
I.R.C. § 7612(c)(2)(G)(ii) —
participate for 2 years in the development of software which is intended for a similar
purpose as the software examined; and
I.R.C. § 7612(c)(2)(H) —
the software shall be treated as return information for purposes of section 6103.
For purposes of subparagraph (C), the owner shall make available any necessary equipment or materials for analysis
of computer software source code required to be conducted on the owner's premises.
The owner of any interest in the software shall be considered a party to any agreement
described in subparagraph (G).
I.R.C. § 7612(d) Definitions —
For purposes of this section--
I.R.C. § 7612(d)(1) Software —
The term “software” includes computer software source code and computer software
executable code.
I.R.C. § 7612(d)(2) Computer Software Source Code —
The term “computer software source code”
means--
I.R.C. § 7612(d)(2)(A) —
the code written by a programmer using a programming language which is comprehensible
to appropriately trained persons and is not capable of directly being used to give
instructions to a computer;
I.R.C. § 7612(d)(2)(B) —
related programmers' notes, design documents, memoranda, and similar documentation;
and
I.R.C. § 7612(d)(2)(C) —
related customer communications.
I.R.C. § 7612(d)(3) Computer Software Executable Code —
The term “computer software executable code”
means--
I.R.C. § 7612(d)(3)(A) —
any object code, machine code, or other code readable by a computer when loaded into
its memory and used directly by such computer to execute instructions; and
I.R.C. § 7612(d)(3)(B) —
any related user manuals.
I.R.C. § 7612(d)(4) Owner —
The term “owner” shall, with respect to any software, include the developer of
the software.
I.R.C. § 7612(d)(5) Related Person —
A person shall be treated as related to another person if such persons are related
persons under section 267 or 707(b).
I.R.C. § 7612(d)(6) Tax-Related Computer Software Source Code —
The term “tax-related computer software source code” means the computer source
code for any computer software program intended for accounting, tax return preparation
or compliance, or tax planning.
(Added Pub. L. 105-206, title III, Sec. 3413(a), July 22, 1998, 112 Stat 685; Pub. L. 116-25, title I, Sec. 1001(b)(1)(J), July 1, 2019, 133 Stat. 981.)
BACKGROUND NOTES
Prior Provision
A prior provision numbered 7612 was redesignated as section 7613 by Pub. L. 105-206, Sec. 3413(a).
AMENDMENT
2019- Subsec. (c)(2)(A). Pub. L. 116-25, title I, Sec. 1001(b)(1)(J), amended subpar. (A) by substituting “Internal Revenue
Service Independent Office of Appeals” for “Internal Revenue Service Office of Appeals”.
EFFECTIVE DATE OF 2019 AMENDMENT
Amendment by Pub. L. 116-25, title I, Sec. 1001(b)(1)(J), effective on the date of the enactment of this Act
[Enacted: July 1, 2019].
EFFECTIVE DATE
Section 3413(e) of Pub. L. 105-206 provided that:
“(1) In general.--The amendments made by this section shall apply to summonses issued,
and software acquired, after the date of the enactment of this Act [enacted: July
22, 1998].
“(2) Software protection.--In the case of any software acquired on or before such
date of enactment, the requirements of section 7612(a)(2) of the Internal Revenue Code of 1986 (as added by such amendments) shall apply after the 90th day after such date.
The preceding sentence shall not apply to the requirement under section 7612(c)(2)(G)(ii)
of such Code (as so added).”
