Are Business Tax Returns Public Record?

For most businesses in the United States, tax returns are private documents and not part of the public record. This confidentiality protects sensitive financial information and encourages businesses to report their data to tax authorities accurately. While the rule of privacy is broad, it is not absolute, as specific exceptions exist for certain organizations.

The General Rule of Tax Return Confidentiality

Federal law provides protection for taxpayer information, shielding it from public disclosure. Internal Revenue Code Section 6103 establishes that tax returns and the information contained within them are confidential. The IRS and its employees are prohibited from disclosing this information, and violations can lead to significant penalties, including fines and imprisonment.

This rule of confidentiality applies across the most common types of for-profit business structures, including:

• C corporations, which file Form 1120, U.S. Corporation Income Tax Return.
• S corporations, which file an informational Form 1120-S.
• Partnerships, which file an informational Form 1065.
• Sole proprietorships, where business income is reported on Schedule C of the owner’s personal Form 1040.

The definition of “return information” under the law is extensive, covering not just the tax return itself but also a taxpayer’s identity, the amount of their income, payments, deductions, assets, and liabilities. It also includes whether a return is being or will be examined by the IRS.

The Exception for Tax-Exempt Organizations

An exception to tax return confidentiality applies to tax-exempt organizations. In exchange for being exempt from federal income tax, organizations such as 501(c)(3) charities and private foundations are subject to public disclosure requirements. This requirement is rooted in the idea that organizations receiving public benefits, like tax exemption, should be transparent about their finances and operations.

The primary document subject to disclosure is the Form 990, or its variations like the 990-EZ or 990-PF. These forms provide a detailed overview of the organization’s finances, including revenue, expenses, and a balance sheet. They also disclose information on governance, program service accomplishments, and the compensation of key executives. An organization’s application for tax-exempt status, Form 1023, is also a public document.

The public can access these documents directly from the organization, which is required to provide copies of its three most recent Form 990s upon request or by posting them on its website. The IRS also makes these returns available through its Tax Exempt Organization Search tool, and they are accessible through third-party databases. While most of the return is public, the names and addresses of individual donors on Schedule B are not subject to disclosure for public charities.

Publicly Available Financial Information vs Tax Returns

Confusion often arises with publicly traded companies, leading some to believe their tax returns are public. While their actual tax returns filed with the IRS remain confidential, these companies must file extensive financial reports with the U.S. Securities and Exchange Commission (SEC). These SEC filings, accessible through the EDGAR database, are distinct from tax returns and serve a different purpose.

The most comprehensive of these filings is the Form 10-K, an annual report that provides a detailed summary of the company’s financial performance. The Form 10-K includes audited financial statements like the income statement, balance sheet, and cash flow statement. Within these statements, a company provides information about its income tax expense, deferred tax assets and liabilities, and a reconciliation of its effective tax rate to the statutory federal rate.

The financial statements in a Form 10-K are prepared according to Generally Accepted Accounting Principles (GAAP), which are designed for investors. Tax returns are prepared based on the Internal Revenue Code, which is for tax collection. The rules for recognizing revenue and expenses can differ significantly between GAAP and the tax code, meaning the net income reported to shareholders is often different from the taxable income reported to the IRS.

Authorized Disclosures in Specific Scenarios

Beyond the exception for tax-exempt organizations, specific, controlled situations exist where confidential tax information can be disclosed. These scenarios do not make the returns public record but grant access to authorized parties for specific purposes. The most common instance is when a business voluntarily provides its tax returns to a third party, such as a lender for a loan application or a potential buyer during an acquisition.

Federal law also permits disclosure under specific legal and governmental circumstances. A valid court order or a federal grand jury subpoena in a non-tax criminal investigation can compel the IRS to release tax returns to law enforcement. The Department of Justice can request tax information for use in federal criminal investigations, and certain congressional committees can also formally request and obtain tax return information.

These disclosures are tightly regulated. For instance, a request from a federal agency must be made in writing by a high-level official and detail the specific need for the information. The IRS can resist disclosure if it determines that doing so would impair tax administration, such as by identifying a confidential informant or interfering with an ongoing investigation.