Typically, state laws determine whether a party in a civil lawsuit may subpoena an individual or a company’s tax returns. Certain states, such as California, have a tax return privilege in their code of civil procedure. This means a party does not have to disclose their tax returns in the lawsuit.
The privilege is made implicit by California Revenue and Taxation Code Sections 19542 and 7056. These statutes establish a penalty for tax authorities who release confidential tax information. California’s privilege applies to state and federal tax returns and exempts tax returns from discovery during civil litigation for California state court cases or cases in federal courts based on California law.
Party to Provide Tax Return Information
The party requesting tax returns does so through a discovery request served on the opposing party. If the opposing party refuses to voluntarily provide the requested tax returns, the party requesting them should take a blank subpoena form to the court clerk. If the court agrees that the tax returns are relevant to the lawsuit, the court will issue the subpoena against the opposing party. If the court does not agree that the tax returns are relevant to the lawsuit, the party requesting them should file a motion to set the matter for a hearing where the party requesting the tax returns must show the court why they are relevant to the lawsuit.
If the court issues a subpoena, and the opposing party still refuses to provide the tax returns, the opposing party may be found in contempt of court. When the court finds the opposing party in contempt, it may again order the opposing party to provide the tax returns. The opposing party can appeal the ruling and refuse to provide the tax returns. As the case makes its way through the appeals process, the party requesting the tax returns can try serving a subpoena that contains documentation of the court’s order upon the opposing party’s employer, tax preparer and/or the Internal Revenue Service (IRS).
Type of Subpoena to Use
The appropriate type of subpoena to use to request tax returns is a subpoena duces tecum. This is a subpoena for the production of evidence. It is a court order to produce documents such as financial records like tax returns. A party can comply with such a court order by mailing the tax returns, sending them via email or providing them personally on a specified date. The court typically issues and requires compliance with a subpoena duces tecum before a hearing or trial.
How to File a Subpoena to Produce Records
States have different procedures for filing a subpoena duces tecum. California asks that a party requesting records take a blank civil subpoena duces tecum form to the court. The court will return the subpoena with a signature and court seal. The party requesting the documents should then enter the full and correct name of the other party or witness. They should describe the papers that the entities must bring to the hearing or trial.
The party requesting should make at least two copies of the subpoena, one for themselves and the other for the other party or witness. Then they should serve a copy of the subpoena on the person they want to produce the papers. They must serve the subpoena in person and within a reasonable time.
The party requesting the tax returns should then have the person who served the subpoena sign it in the appropriate spot to show it was served. The requesting party should then return the subpoena to the clerk before the hearing or trial.
Tax Returns and Public Records
An individual’s or a company’s income tax returns is private information. Such tax records are not public records, and the IRS may not release taxpayer information except to authorized agencies and persons, such as a party under a court order to provide tax returns. An organization that does not have to pay taxes, such as a nonprofit, must make their tax returns publicly available. A member of the public, including a taxpayer, can request that the IRS provide the organization’s tax returns.
The IRS will provide the tax returns, not the organization. Entities that do not pay taxes include nonprofit organizations, political organizations, churches and other religious organizations, charities, including charities associated with churches and religious, and private foundations. The IRS does not post the tax returns of tax-exempt organizations online, but provides such documents only after a person makes a request.
No Records From State Agencies
Some states, like Florida, do not have a privilege for tax returns. This does not mean individuals can request tax returns from state government. The Florida Department of Revenue (FDOR) makes this clear on its website. FDOR says that it cannot disclose federal taxpayer information or federal income tax returns. FDOR also provides that it cannot disclose ad valorem tax returns for real property, or property tax returns based on the value of the property of a parcel of real estate.
Exceptions to Tax Return Privilege
Even when there is a state privilege for tax returns, tax returns are not always privileged from disclosure. The ruling of the 2016 case of Li v. Yan from the Court of Appeal of the State of California in the First Appellate District shows that the privilege is not absolute. The privilege does not apply when the circumstances indicate an intentional waiver of the privilege; the gravamen, or essence of the lawsuit, is inconsistent with the privilege; or a public policy greater than the confidentiality of tax returns is involved.
The instant case involved a judgment debtor examination, which has the purpose of uncovering all the assets the debtor has to respond to the judgment. Since the reason for the lawsuit was to determine what assets the debtor had to satisfy the judgment, the public policy reason for the lawsuit necessitated the disclosure of the tax returns.
Cases That Require Tax Returns
Whether a tax return is discoverable in state or federal courts depends on the type of case that is being heard and the tax return’s relevance to the lawsuit. A party may choose to request a tax return if the opposing side fails to disclose their income, such as in a divorce case. A party may be required by a federal court to disclose tax returns in a bankruptcy case, and a parent owed child support may request tax returns in a case for unpaid child support.
California Family Code Sections 3664 and 3365 provide that at any time following a judgment of dissolution of marriage or legal separation of the parties or a determination of parentage that provides for payment of support, a party may serve a request on the other party for production of a completed current income and expense declaration. A copy of the prior year’s federal and state personal income tax returns must be attached to the income and expense declaration of each party. If there is no response within 35 days of service of the request or the declaration is incomplete as to any wage information, including the attachment of income tax returns, the requesting party may serve a request on the employer of the other party for information limited to the income and benefits provided to the party.
Parties in such cases are not allowed to disclose the contents of the tax returns. They may not provide copies of the other party’s tax returns to anyone except the court, their attorney, their accountant or any other financial consultant assisting with matters relating to the proceeding or any other person permitted by the court. The court controls the tax returns and keeps them confidential.
- California Code of Civil Procedure: Section 2017.010, Scope of Discovery
- California Family Code: Section 3664, Discovery Before Commencing Modification or Termination Proceeding
- U.S. Bankruptcy Court, District of Columbia: Important Information About Tax Returns
- Justia.com: Li v. Yan, 5/2/16 – Case no. A144994
- California Code of Civil Procedure: Sections 1985 to 1997, Means of Production
- Florida Department of Revenue: Open Government Bill of Rights
- California Courts: Notices to Attend a Hearing and Subpoenas
- IRS.gov: 11.3.35, Requests and Demands for Testimony and Production of Documents
- California Revenue and Taxation Code: Section 19542, Disclosure of Information
- California Revenue and Taxation Code: Section 7056, Administration
- IRS.gov: Exempt Organizations Public Disclosure - Obtaining Copies of Documents from IRS
Jessica Zimmer is a journalist and attorney based in northern California. She has practiced in a wide variety of fields, including criminal defense, property law, immigration, employment law, and family law.