Are Business Tax Returns Public Records?

Are Business Tax Returns Public Records?

The short answer is no. Corporate tax returns are private, simply because they are deemed confidential and are protected under Section 6103 of the Internal Revenue Code, as enacted by the Tax Reform Act of 1976. Because of this, corporate returns are also not available to certain government agencies.

A Brief History

In the 19th century, up to certain parts of the 20th century, corporate tax returns were available to the public at varying degrees. Back then, tax information was posted on courthouse doors, and even published in newspapers. The goal was to promote public inspection. The tax returns were subject to the public’s eyes, and therefore, to surveillance and scrutiny. However, times have passed, and policymakers began the need to seek confidentiality.

Business Tax Returns: Why are they Confidential?

All tax returns contain very confidential information. They contain SSNs, addresses, EINs and other information that can compromise the owner’s privacy. In today’s world, the release of such information can render the owners vulnerable to identity theft and cybercrimes. Also, corporate tax returns include the company’s financial position and divulging it to the public might increase their vulnerability to certain crimes, threats, and fraudulent events brought by the public and other companies.

Confidentiality and Public Awareness

Some debates seek a balance between confidentiality and public awareness. The proponents of disclosures state that certain disclosure measures, when placed in effect, will encourage tax compliance and reduce corruption. If corporate tax returns were deemed as public information, more people will have the capacity to scrutinize these returns. They may include lawyers, economists, accountants, as well as the general public. They will be able to review corporate returns and raise awareness regarding possible instances of discrepancies, suspicious tax strategies, and even fraud. In effect, the public can potentially serve as watchdogs. In fact, corporate tax information is considered public records in some countries like Japan, Finland, Norway, and Sweden. Though they consider corporate tax returns as public records, they limit the amount of information that can be disclosed.