Frequently Asked Questions
Who is eligible for the Tax-Related Computer Software Source Code Protection?
Applies to owners and developers of tax-related software. Taxpayers can contest a summons in court to prevent the disclosure of proprietary source code and trade secrets.
How does the Tax-Related Computer Software Source Code Protection work?
The IRS is generally prohibited from summoning computer software source code unless they can prove they cannot verify return accuracy through other means and the need outweighs the risk of trade secret disclosure.
What law authorizes the Tax-Related Computer Software Source Code Protection?
The Tax-Related Computer Software Source Code Protection is authorized under IRC §7612 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §7612
Source: Internal Revenue Code, Title 26, United States Code
§ 7612. Special procedures for summonses for computer software(a) General ruleFor purposes of this title—(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
(2) any software and related materials which are provided to the Secretary under this title shall be subject to the safeguards under subsection (c).
(b) Circumstances under which computer software source code may be provided(1) In generalSubsection (a)(1) shall not apply to any portion, item, or component of tax-related computer software source code if—(A) the Secretary is unable to otherwise reasonably ascertain the correctness of any item on a return from—(i) the taxpayer’s books, papers, records, or other data; or
(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;
(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
(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.
(2) ExceptionsSubsection (a)(1) shall not apply to—(A) any inquiry into any offense connected with the administration or enforcement of the internal revenue laws;
(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;
(C) any communications between the owner of the tax-related computer software source code and the taxpayer or related persons; or
(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.
(3) Cooperation requiredFor purposes of paragraph (1), the Secretary shall be treated as meeting the requirements of subparagraphs (A) and (B) of such paragraph if—(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);
(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
(C) such code and data is not provided within 180 days of such request.
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