The IRS provides data extracts containing FTI to state tax agencies on a recurring basis, which state tax agencies use to administer state tax laws. A data extract is a computer-generated file that contains specific data elements. Extracts are currently provided electronically via an IRS approved secure electronic transmission used to securely exchange electronic files with external entities. State tax agencies may choose from multiple data extracts that make up the program. For some extracts, state tax agencies are required to submit input files, also known as tickler files, to the IRS. These GLDEP tickler files must be submitted to the IRS via an IRS approved secure electronic transmission.

Extracts may only be used as authorized by IRC 6103(d). Data contains FTI which is shared with state tax agencies based on their need and use of the information for state tax administration purposes. The safeguarding requirements of IRC 6103(p)(4) apply to state tax agencies receiving FTI under IRC 6103(d). State tax agency personnel and authorized contractors must maintain the confidentiality of FTI received via the GLDEP and are subject to the civil and criminal sanctions of IRC 7213 and IRC 7431 for unauthorized access or disclosure of FTI. Applicable safeguard procedures may be found in Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies.

The following items govern the authority pertaining to the GLDEP in which certain data-sharing activities take place between the IRS and state tax agencies:

This IRM is used by all Governmental Liaison, Disclosure and Safeguards (GLDS) personnel and ensures policies comply with the disclosure and safeguarding requirements of IRC 6103.

Data Services regularly reports program status through operational reviews to the Director, Governmental Liaison, Disclosure, and Safeguards (GLDS).

Data Exchange and Quality Initiatives, under Data Services, is responsible for program operation and maintenance.

The GLDEP analysts coordinate with IT to review and account for total disclosures made to participating agencies on a recurring basis dependent upon the relative extract (i.e., weekly, monthly, quarterly, periodically, or annually).

Disclosure of FTI through the GLDEP is subject to accounting per IRC 6103(p)(3) and must be reported to the Joint Committee on Taxation annually, within 90 days after the close of each calendar year.

Governmental Liaison, Disclosure and Safeguards (GLDS) is responsible for overseeing the exchange of data to state and government agencies, ensuring FTI is appropriately disclosed and ensuring FTI provided to federal, state and local agencies remains confidential. Through its functions, GLDS provides administration, guidance, support and technical assistance to the IRS Business and Functional Operating Division (BOD/FOD) as owner of the records, in the development of computer matching programs, data extracts, agreements, notices and reports.

Data Services provides support to GL, Safeguards and Disclosure programs through a variety of information technology and data initiatives including managing the Governmental Liaison Data Exchange Program (GLDEP).

A comprehensive list of terms used throughout this IRM can be found in Exhibit 11.4.2-1.

A comprehensive list of acronyms used throughout this IRM can be found in Exhibit 11.4.2-2.

The following is a list of other related resources regarding the GLDEP:

The annual enrollment process starts in June and ends in August to allow the GLs and state tax agencies adequate time for the enrollment and approval process. State tax agencies wishing to participate in the GLDEP must complete the IRS GLDEP Enrollment Form annually and is used to designate which extracts are needed for the enrollment year. In addition to the enrollment form, state tax agencies are required to justify to the IRS the need for the FTI being requested and how the FTI will be used. By law, the IRS may only disclose FTI to state tax agencies that establish a need and use for the FTI requested. A need and use justification form must be completed and accompany all enrollment forms prior to disclosure of FTI to the state tax agency.

The mechanics of the annual enrollment process are as follows:

The GL will act as consultants to the enrolling state tax agency during the enrollment process. The GL will become involved in the process of completing the IRS GLDEP Enrollment Form and must review the form carefully when received from the enrolling state tax agency. If a state tax agency is enrolling to receive an extract in which they were not previously enrolled, the GL must discuss how the state tax agency plans to use the information. If a state tax agency is not re-enrolling in an extract that they have received in the past, the GL will question the omission of that extract. The more familiar a GL becomes with the operation of state tax agencies within their jurisdiction, the better able they will be to assist with their decision regarding which FTI to request.

The annual ODES process takes place in the spring of each year. State tax agencies enrolled to receive the IMF/IRTF and/or BMF/BRTF extracts must complete an ODES package annually which includes submission instructions, an authorization/signature form, and four tables (IMF-Table I; IRTF-Table II; BMF-Table III; BRTF-Table IV). Enrolled state tax agencies use the tables to identify optional data elements (specific line items) from individual and/or business federal tax returns for which they would like to receive. On the ODES tables, state tax agencies are required to justify to the IRS the need for the data element being requested and how it will be used. The need and use justification column on each table must be completed for every data element selected. Completed ODES tables, with the signed authorization/signature form, must be returned by GL to the designated Data Services GLDEP analyst timely. Approved ODES selections will be provided to each tax agency enrolled in BMF/BRTF and/or IMF/IRTF extracts.

The mechanics of the annual ODES process are as follows:

The GL will act as consultants to the enrolling state tax agency during this process to ensure the state tax agency accurately completes the package. The GL must carefully review the packages submitted to them to ensure they are accurate, complete, and submitted timely by the date requested. The authorization/signature document, which is in PDF format, must be digitally signed by the state tax agency, and GL, and submitted with the completed ODES tables. The ODES tables will be machine read and must remain in Microsoft Word format.

The ODES package contains sensitive but unclassified (SBU) information. State tax agencies must adhere to the IRS encryption and media transport guidelines as stated in Pub 1075, Tax Information Security Guidelines for Federal, State and Local Agencies.

Source of data: Data is extracted from the IRS Information Returns Master File (IRMF). The 1099-NEC extract provides nonemployee compensation information from the federal Form 1099-NEC, Nonemployee Compensation.

Distribution: The 1099-NEC extract is distributed annually in June.

Uses:

Source of data: The BMF and BRTF extracts contain data from the Business Master File (BMF) and the Business Returns Transaction File (BRTF) and provide information from the following forms: Form 941, Form 1041, Form 1065, Form 1120, Form 1120-S, Form 709, and Form 706.

The BMF contains general entity information (EIN, name, address, and filing requirements) from the business returns.

The BRTF contains transcribed data from the business tax returns information as initially processed (raw data from return) and is not updated to reflect amended returns or adjustments.

State tax agencies must receive the BMF extract in order to get the BRTF extract, as name and address information is only included on the BMF; the only exception is that an agency may obtain the BRTF only for the Form 706, which includes name and address information.

Agencies must participate in the ODES process to receive data and agencies must enroll in both BMF and BRTF extracts to participate in the State Reverse File Matching Initiative (SRFMI) program.

Participants may enroll to receive the extracts by state code, ZIP Code, and/or EIN. City tax agencies will receive data based on approved ZIP Code listing for their city (not state code) and may choose to submit tickler files to obtain information by EIN.

Distribution: The BMF and BRTF extracts are created and transmitted separately. They are distributed annually in October, November and December, depending on the sort (state code, ZIP Code and EIN).

Uses: General uses of the BMF/BRTF extracts include:

Source of data: Data is extracted from the IRS Business Master File.

The extract will provide entity information on parent corporations filing a consolidated return as well as on the subsidiary corporations in the affiliated group on whose behalf the parent filed. When a parent corporation files a consolidated return Form 1120, U.S. Corporation Income Tax Return, a Form 851, Affiliations Schedule, is attached which lists the subsidiary corporations in the affiliated group.

The Corporate Affiliations Extract by State Code (a range of ZIP Codes will be used for city tax agencies) will provide state tax agencies with entity information on parent and subsidiary corporations. Records for state tax agencies will be extracted based on a subsidiary corporation having an address within the state of the requesting state tax agency (by state code). When a subsidiary corporation's address matches the state of the requesting state tax agency, the requesting state tax agency will receive a set of records that will include all subsidiary corporations in the affiliated group and the parent corporation, regardless of what state the parent or the other affiliated subsidiaries are located.

Records are extracted by state code based on the subsidiary corporation appearing on a Form 851, Affiliations Schedule. A subsidiary corporation will only be associated with the most current parent corporation that is filing on its behalf.

In addition to the state code sort, the extract is also available by an EIN sort based on a tickler file submission by enrolled state tax agencies. City tax agencies can receive the extract based on an approved list of ZIP Codes or by EIN sort.

Distribution: The Corporate Affiliations Extract by State Code and EIN are scheduled to be distributed annually in September.

Uses: General uses of the Corporate Affiliations extract include:

Source of data: The CP2000 extract contains information from the IRS Automated Underreporter (AUR) cases. The IRS matches information returns, such as Form W-2, Wage and Tax Statement, and Form 1099, filed by employers, banks, businesses, and other payers with information from individual tax returns. Discrepancies are reviewed and, if not resolved at the campus, an AUR case is generated. The CP2000, Request for Verification of Unreported Income, Payments, and/or Credits, is sent to the taxpayer proposing an adjustment to their account. Taxpayer information from accounts, that result in additional federal tax assessments, is provided in the extract for participating state tax agencies.

Distribution: The CP2000 extract has an irregular distribution schedule with 6 distributions over approximately 20 months, followed by a one-time SSN tickler option (Distribution #7).

Uses: General uses of the CP2000 extract include:

Source of data: The EOAD extract contains the IRS closed examination case information, which is primarily used to determine the impact of federal audit assessments on state/local liabilities. Examination closing reports are generated from the following systems:

Distribution: Monthly beginning in February of each year, with data extracted from previous month, for the period January through December. The annual tickler information is run against the monthly extract and matches are sent in a separate file.

Uses: General uses of the EOAD extract (same as for Exam/Appeals) are to:

Source of data: Examination records reflect results of individual and/or business cases closed by Examination during a fiscal year (October 1 - September 30). The data is extracted annually from the IRS database, the Audit Information Management System (AIMS). The Appeals records provide the same type of information pertaining to cases closed by Appeals during a calendar year (January 1 - December 31). This information is taken from the IRS database, Appeals and Non-Docketed Reporting System (LAND).

The state tax agency submits an annual tickler file of TINs to generate the extract. This tickler is due each year by March 1.

Distribution: The extract is distributed annually in June.

Uses: General uses of the Exam/Appeals extract are to:

Source of data: The data for the FEIN extract is obtained from the BMF using the EIN Research and Assessment System (ERAS). The source of that file is the federal Form SS-4, Application for Employer Identification Number. The newly issued FEINs will be provided monthly regardless of how the FEIN is issued, i.e., internet, tele-filers, fax, or mail. This extract will be sorted by the address of the entity receiving the new FEIN for the state code sort and further sorted for the cities based on a pre-approved listing of ZIP Codes. The majority of data elements (line items) from the Form SS-4 are captured.

Distribution: The FEIN extract is distributed monthly. The distribution year runs from February to January. Each distribution will consist of new FEINs issued in the previous month.

Uses: General uses of the FEIN extract are to:

Source of data: The data will be extracted from the ITIN database which contains information captured from the Form W-7, Application for IRS Individual Taxpayer Identification Number. The ITIN information can also be obtained from the IMF/IRTF extracts. All of the FTI provided by the taxpayer will be included in the data fields provided to the requesting state tax agencies. The information on this extract is similar to the FEIN extract, except it is for individual returns instead of business returns. Only validated ITINs will show up in this extract. The ITINs always begin with a "9" and will have the numbers "50" to "65" ,"70" to "88" , "90" to "92" or "94" to "99" as the 4th and 5th digits.

Distribution: The ITIN extract is distributed monthly from February through January. All ITINs issued for the previous month will be included. There is also a TIN tickler option. The annual tickler is due in November, and the output file is distributed the following February. State tax agencies enroll for the tickler option separately on the annual enrollment form.

Uses: General uses of the ITIN extract are to:

Source of data: The IMF/IRTF extract contains data from the IMF and the IRTF.

The IMF contains general entity information (SSN, name, address, wages, adjusted gross income, interest income, etc.) for individual income taxpayers.

The IRTF contains fields currently transcribed from Form 1040, U.S. Individual Income Tax Return, Form 1040-NR, U.S. Nonresident Alien Income Tax Return, Form 1040-SR, U.S. Income Tax Return for Seniors, and their accompanying forms and schedules. The Tax Cuts and Jobs Act (TCJA), signed into law on December 22, 2017, eliminated Form 1040-A & Form 1040-EZ for tax year 2018 and beyond.

The extract may include these prior year returns (original or adjusted) if they are posted during the extract period. The IRTF information is obtained from the tax return as originally filed by the taxpayer but can reflect math error corrections. The information is not updated to reflect amended returns or subsequent adjustments. Data in these records will reflect any corrections that were made by the campus before the return could be posted (math error corrections). Information that is obviously incorrect, such as math errors, cannot be posted to master file. When a math error is corrected, a notice is sent to the taxpayer explaining the change. Brief explanations of these notices are included in the IMF/IRTF spec book.

Since the IMF contains entity information and the IRTF does not, the files must be received together. The state tax agency may receive their IMF/IRTF extracts based on the address of the taxpayer (state code), by state supplied ZIP Code (ZIP Code tickler file) or state supplied SSNs (the SSN tickler file can include ITINs). The IMF/IRTF extracts by ZIP Code are most frequently requested by city tax agencies, allowing the city tax agencies to receive information on taxpayers located within their jurisdiction; city tax agencies cannot receive the extracts by state code.

Distribution: The IMF/IRTF extract is distributed annually in September by state code sort, in October by ZIP Code sort, and in November by SSN sort.

Uses: General uses of the IMF/IRTF extract are to:

Source of data: The data for the ITPI extract is obtained from the IMF. The extract includes entity information (name, address, taxpayer identification number) for an individual that has been identified as either a potential risk for identity theft (e.g. the taxpayer has reported an incident that could lead to identity theft) or the taxpayer has experienced identity theft which impacted a tax record or tax records.

Distribution: The ITPI extract is distributed monthly. The distribution year runs from January to December. Records on the monthly extract will be cumulative so that all taxpayers that remain at risk from the previous month will be on the extract for the following month in addition to any newly identified taxpayers.

Uses: General uses of the ITPI extract are to:

Source of data: The IRMF extract contains data from the IRMF which is a database containing all transcribed information returns filed under the information returns reporting requirements of the IRC. It contains information regarding both the payer (filer) and the payee (recipient of income) from various information return documents including Form 1099, Form 1098, Schedule K-1, Form 5498, Form 8300, Form W-2 and Form W-2 G.

There are two separate IRMF extracts, IRMF by Payee State Code and IRMF Non-Resident K-1.

The IRMF by Payee State Code extract is provided annually to the state tax agencies by payee state code and to cities by ZIP Code through the city’s approved ZIP Code listing. This extract will contain only records extracted based on the address of the payee (recipient of income). If multiple payee addresses are present for the same taxpayer, each impacted state tax agency participating in the extract receives all information returns for that taxpayer.

The IRMF Non-Resident K-1 extract with an option to select additional records will include Schedule K-1 for Form 1065, Form 1041, and Form 1120-S.

Agencies that enroll for this extract can also select the optional Non-Resident W-2/W-2G/1099-MISC/1099-NEC records.

For enrolled state agencies, records will be included on the Non-Resident K-1 extract by payer state code provided the address of the payer is within the requesting agency’s state and the payee’s address (non-resident) is outside the requesting agency’s state.

For enrolled city agencies, records will be included on the Non-Resident extract provided the payer’s ZIP Code is within the city agency's list of ZIP Codes and the ZIP Code of the payee is outside the city agency's list of ZIP Codes.

Agencies must enroll for the IRMF Non-Resident K-1 extract to select the optional Non-Resident W-2/W-2G/1099-MISC/1099-NEC records.

Distribution: The IRMF by Payee State Code extract is scheduled for distribution in July. The IRMF Non-Resident extract is scheduled for distribution in October. If multiple payee addresses are present for the same taxpayer on the IRMF by Payee State Code extract, each state tax agency participating in the extract receives all information returns for that taxpayer.

Due to the volume of records, the IRMF extracts are divided into 26 segments (files) using the last two digits of the payee's TIN as the indicator for the divisions.

Uses: General uses of the IRMF extract are to:

Source of data: The Levy extract contains data extracted from the IRMF and reflects payer and payee data for specific taxpayers from Form 1099-INT, Form 1099-DIV, Form 1099-NEC, Form 1099-K, Form 5498, and Form W-2, as well as Schedule K-1.

The data is extracted monthly using a state tickler file that contains the name control and TIN of payers. State tax agencies enrolled for the Levy extract will receive an output file for each month that they submit a tickler file; however, they need not submit a tickler file every month.

Distribution: Distribution is on a monthly basis depending on a tickler file submission. The distribution year begins in February and ends in December.

Uses: General uses of the Levy extract are to:

Source of data: The Department of Defense (DOD) active duty military combat zone personnel information (PC 500 Combat Zone) file is received by the IRS on a monthly basis and posted to the IRS Master File.

The extract file contains a combat zone entrance date and exit date for all active duty military personnel that DOD has identified as deployed in a military combat zone. The file includes full-time and reserve personnel from the five branches of the military (Army, Navy, Air Force, Marines and Coast Guard) as well as National Guard personnel (Army and Air Force). Information is validated by each branch of service. The extract is sorted by state code (address of taxpayer) using the legal state of residence from military records. This extract is not available to city tax agencies because the ZIP Code is not captured by DOD and this would be the only way city tax agencies could be authorized to receive the information.

Distribution: The Military Combat Zone extract is distributed monthly beginning in January and ending in December each year.

Uses: General use of the Military Combat Zone extract is to:

Source of data: Data is extracted from the IRS IMF and the IRTF. This extract is available to state tax agencies based on state code and to city tax agencies based on ZIP Codes.

The Non-Itemizer extract provides a list of individuals who did not itemize on their prior year federal income tax return. The extract is based on the address of the taxpayer as indicated on the federal tax return (state code sort). By matching extract data with state tax agency refund recipients, state tax agencies can identify those refund recipients who did not itemize on their prior year federal tax return. Because these taxpayers did not itemize, the state tax agency is not required to issue Form 1099-G, Certain Government Payments, to these taxpayers, therefore providing a cost and resource savings to the state. There will be a record on the Non-Itemizer extract as long as there is not a duplicate or amended return posted for the same tax year.

Distribution: The Non-Itemizer extract is distributed annually in November.

Uses: General uses of the Non-Itemizer extract are to:

Source of data: Data is extracted from the PTIN database and the National Accounts Profile (NAP). The PTIN extract provides the SSN and PTIN for tax preparers nationwide who have been issued a PTIN. All tax preparers must apply for or renew a PTIN annually. The PTIN must be used as an identifying number by paid tax preparers.

Distribution: The PTIN extract is distributed weekly (January through December) and is cumulative.

Uses: General use of the PTIN extract is to:

Source of data: The source of data for the TAR extract is the IRS IMF. The extract contains taxpayer address data from the IMF and is based on a state tax agency supplied tickler file containing the SSNs and name controls of specific taxpayers.

Accounts for married individuals are established on the IMF using the SSN of one spouse as the primary SSN. Submissions for TAR will be run against the Spouse-Primary Cross-Reference File to determine the primary SSN. Primary and secondary SSNs and the taxpayer's name and address will be extracted for the file returned to the state tax agency. In addition, the latest tax module year is provided to establish accuracy of the information.

Distribution: This extract is distributed weekly from February through January in response to a state-submitted tickler file. Participants who enroll during the enrollment period can begin to submit ticklers in February the following year.

Uses: General uses of the TAR extract are to:

Background: The IRS provides federal tax return information to state tax agencies for state tax administration purposes. However, through the SRFMI, the role is reversed. State tax agencies provide tax return information filed with the state directly to the IRS for federal tax administration purposes.

State agencies must be enrolled in both BMF & BRTF and/ or IMF & IRTF to participate in SRFMI.

State tax agencies are asked to compare the last BMF/BRTF by State Code, BMF/BRTF by EIN, IMF/IRTF by State Code, and IMF/IRTF by SSN extracts received from the IRS against their business and individual master file records to produce the extracts for the IRS. The extract will include records that exist on the state master file but not on the IRS files or contain discrepancies between the state and the IRS amounts.

SRFMI has four categories for which the agency can submit this information:

Uses: General uses of the SRFMI extract are to:

The IRS can only provide data that is currently transcribed to IRS Master File and cannot incur expenses for transcribing data not required for federal tax administration.

Participating state tax agencies requesting modifications, and data availability, must recognize the process within IRS may be time-intensive and, if approved, may be provided no sooner than the following extract year.

Any state, city, or qualifying group of municipalities covered by IRC 6103(d) and currently enrolled in the IRS GLDEP may request a modification to an existing extract or request a new extract.

Prior to submission of a request, state tax agencies must contact their respective GL regarding the "IRS Governmental Liaison Data Exchange Modification and New Extract Request-Response Form." The GL can assist the agency with preparing the form and coordinate with Data Services to confirm the requested information is currently transcribed to the IRS Master File.

The state tax agency must identify the specific information requested by preparing and submitting the request form to the GL. A need and use justification must also be provided. If the request is for additional data elements, the request must contain the specific line items (data elements) as part of the request.

If the state tax agency is seeking to submit a tickler file as part of the of the agency request, the following information is required:

The GL must research the request to determine if it is a potential modification or a request for FTI availability.

The GL must attach a statement of the detailed research conducted for the request. The following documents will help the GL in determining if the requested information is currently offered or if the request is valid:

The GL will secure Data Services up-front review of the request (i.e. availability of data and the impact on the IRS resources) to ensure it can be accommodated. "Impact on the IRS resources" includes, if the request is for a new set of information not currently part of existing, available extracts, clearing the request through IT, to ensure IT has the resources available to accommodate the request.

If Data Services states the request is feasible, the GL will forward the request to the appropriate DM (based on the requesting state) for review and approval before submitting it to GLDEP.

The DM will review the request for appropriate need and use justification and statutory authority.

If the DM approves the request, they will sign the form indicating approval of the need and use based on the information available and will forward the request to Disclosure’s area technical analyst (TA).

The TA will review and ensure the DM conducted, documented (i.e. within the e-mail to TA), and arrived at the appropriate determination, and then forward to the Disclosure Policy & Program Operations (PPO) point of contact (POC) for review and concurrence or non-concurrence.

The PPO POC will provide the TA, via email, concurrence or non-concurrence based on the documented research/substantiation/statutory authority provided by state/DM/TA, etc. If the PPO POC concurs, then the TA will coordinate with Disclosure’s Area Manager for approval and signature; then return it to the GL, and copy to DM, for continued coordination with Data Services.

The request will be assigned to a GLDEP analyst for review. The modification request will be documented and assigned a unique number. Upon confirming the modification request is complete, it will be sent to IT for review and approval or disapproval.

The GLDEP analyst will work with IT to prepare a WR or any other required documents and will keep the GL informed of progress.

The response from IT may take as long as 90 days.

Once the GLDEP analyst receives a definitive response from IT, they will complete the modification response portion of the form to be signed by the chief, Data Exchange and Quality Initiatives, and return the form to the GL. The GL will then prepare a response to the requesting state tax agency.