§7612 Special procedures for summonses for computer software

Summary

The IRS may not force a taxpayer or software owner to hand over tax-related computer source code or sue to get it, and any software given to the IRS must be kept under special protections. The IRS can ask for parts of source code only if it cannot check a return any other way, it specifies exactly which parts it needs, and it decides those parts are necessary despite trade-secret risks. The rule does not block requests tied to criminal tax investigations, to software made mainly for a taxpayer’s internal use, to communications between the owner and the taxpayer, or to code that must be provided under some other law. If the IRS says it needs executable code and data and asks the taxpayer and the software owner for them in writing, the IRS will be treated as meeting the “other ways checked” rule if those items are not provided within 180 days. Either side can ask a court for a hearing to decide if these limits were followed. Courts can seal or protect secret parts of software. When the IRS has software for an audit, it may use it only for that audit, related appeals, court cases, or criminal tax inquiries. The IRS must give the taxpayer and owner a written list of people who will see the software, keep the software in a secure place, avoid removing source code from the owner’s site unless allowed or ordered, limit copying and number and certify any copies, return and delete copies afterward, get written sworn certification that all copies were returned, not decompile the code, and require outside analysts to sign agreements not to disclose the code and not to work on similar software for 2 years. Definitions: “software” = source and executable code; “source code” = human-readable code plus notes/docs and customer messages; “executable code” = machine-readable code and user manuals; “owner” = developer; “related person” = related under tax rules; “tax-related source code” = programs for accounting, tax return work, compliance, or tax planning.