FC: IRS gives out taxpayer information, from Privacy Journal

[Declan McCullagh <declan () well com>]

[It sure looks like the IRS violated the law. But one quibble: The Privacy 
Journal article says: "Under standard direct-mail industry practice, the 
names and addresses of respondents become the property of H&R Block." I 
don't believe that is usually the case; database firms have little 
incentive to give away their only asset in a one-time deal that would mean 
no repeat businesses. In my experience, clients usually lease the names for 
one-time use, but I'd be open to seeing figures proving me wrong. --Declan]

********

From: "Robert Ellis Smith" <ellis84 () ma ultranet com>
To: "Declan McCullagh" <declan () well com>
Date: Thu, 7 Dec 2000 17:45:53 -0500

PRIVACY JOURNAL     electronic edition, December 2000
In accepting this electronic edition, the subscriber agrees not to transmit
or copy this text, except for brief excerpts of 250 words or fewer, without
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Or, if you prefer, go to amazon.com:
www.amazon.com/exec/obidos/redirect-home/privacyjournal

[snip--DBM]

IRS Generates Commercial Mail Advertising to Taxpayers
As soon as Duane Horton received the mailing, he spotted something fishy.
It was an unsolicited CD-ROM containing Kiplinger TaxCut software and an
appeal from H&R Block, the tax-preparation people, to sign up for electronic
filing of his federal in-come-tax returns. It was the mailing label that was
suspicious. The solicitation was ad-dressed to Horton and his wife in a
format that appears only on their tax returns and to a post office box in
Rhode Island at which the only joint mail they receive is from state and
federal tax agencies.
Horton suspected that the Internal Revenue had disclosed his name and
address to its friends at H&R Block. Block's home office in Kansas City wasn
't much help in answer-ing Horton's questions. In fact, it asked for Horton'
s Social Security number before it would even talk to him.
Duane Horton is a persistent man. He wrote a complaint to the IRS Criminal
Investiga-tion Division, and five months later, in June, he sent a Freedom
of Information Request to the revenue service demanding all of its records
about his complaint. In September, he received a copy of a seven-page
Memorandum of Agreement between IRS and H&R Block, in which the IRS agreed
to mail out the tax-preparation software to 225,000 tax-payers selected from
its own "marketing database." It agreed to mail out an additional 225,000
pieces of mail later. It's part of the IRS campaign to get more taxpayers to
file returns electronically, not manually. IRS paid for the mailing.
The federal tax code prohibits the release of taxpayer information by IRS,
and the Pri-vacy Act prohibits sale of government mailing lists. IRS
provided the labels to a private mail house but does not consider that as a
disclosure of taxpayer information, as prohib-ited by law. But the point of
the mailing was to have recipients respond to H&R Block and sign up for
electronic filing. Under standard direct-mail industry practice, the names
and addresses of respondents become the property of H&R Block. The company
is free to solicit more business from them, and the memo of agreement does
not prohibit this.
Originally a folksy tax-preparation service, Block now has subsidiaries that
provide fi-nancial advice, mortgage loans, mortgage brokering, accounting,
investments, and tax-filing software including TaxCut, in the U.S., Canada,
Australia, and England. Under a new federal law enacted in 1999, even if a
consumer objects, the conglomerate is free to exchange among all its
affiliates the personal information it has harvested from the IRS
arrangement.
The memo implies that IRS has similar arrangements with other businesses.
Because the names and addresses for the original mailing were selected with
specific criteria, H&R Block now knows something about the re-spondents:
they filed a paper re-turn for 1998; they had a refund; they prepared their
own returns; they apparently used no computer software previously; and they
have a joint gross income of $40,000 or more. H&R Block knows all of that
about the respondents, and we now know all of that about Duane Horton.

[...]

Index to This Newsletter
To find articles in your stored copies of PRIVACY JOURNAL, you need the
Index to Volumes 21-26, 1994 through October 2000. It has more than 250
entries on pri-vacy, from Adoption to Zero Knowledge.

Order today from PRIVACY JOURNAL, 401/274-7861, fax 401/274-7861.
privacyjournal () prodigy com.

[...]




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