[Congressional Record Volume 152, Number 41 (Tuesday, April 4, 2006)]
[Senate]
[Pages S2801-S2802]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THOMAS (for himself, Mr Schumer, and Mr. Enzi):
  S. 2498. A bill to amend the Internal Revenue Code of 1986 to 
prohibit the disclosure of tax return information by tax return 
preparers to third parties; to the Committee on Finance.
  Mr. THOMAS. Mr. President, today I rise to introduce a taxpayer 
privacy bill.
  Much attention has been focused recently on IRS-proposed changes to 
regulations regarding taxpayer privacy. Interestingly, these proposed 
changes have been widely--and incorrectly--reported as changing the law 
to allow tax preparers to sell taxpayer information to third parties 
for marketing purposes. In fact, an IRS regulation put into place more 
than 30 years ago already allows confidential taxpayer information to 
be shared in this manner, as long as the taxpayer consents.
  The public uproar that has surrounded the proposed changes to this 
regulation makes it clear that taxpayers are not aware of this fact and 
expect that their return information will be kept confidential. 
Confidentiality of taxpayer information is a key underpinning of our 
voluntary tax system, encouraging taxpayers to provide complete and 
honest returns.
  The complexity of the tax code has resulted in 60 percent of all 
returns being completed by paid preparers. The process is a very 
intimidating one for most. Given the stress and vulnerability of 
taxpayers during the process, and the high dollar value of confidential 
taxpayer information, I am concerned that financially-motivated tax 
preparers may present the taxpayer with a stack of papers for the 
taxpayer to sign, including, unbeknownst to the taxpayer, a consent 
form to share the information with third parties. The taxpayer could 
easily be under the impression that all of the papers are required to 
be signed in order to have the return prepared, completely undermining 
the requirement of signed, informed consent.
  In an era of lightning-fast electronic communication--in which 
information can travel around the world and back in a matter of 
seconds--and the proliferation of identity theft, it seems to me that 
we ought to bring the law in line with taxpayer expectations. When this 
regulation was promulgated back in 1974, our citizens weren't anywhere 
nearly as vulnerable to this crime as they are today. We have made 
changes with regard to credit reports and individuals' access to them, 
we have removed Social Security numbers from drivers' licenses and 
medical ID cards, and we need to similarly remove the threat of 
taxpayer information being shared in ways that are not condoned by the 
individual taxpayer. This bill would do just that by prohibiting tax 
preparers from both soliciting consent and sharing tax return 
information with third parties.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2498

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PROHIBITION OF TAX PREPARERS DISCLOSING TAX RETURN 
                   INFORMATION.

       (a) In General.--Paragraph (3) of section 7216(b) of the 
     Internal Revenue Code of 1986 (relating to regulations) is 
     amended to read as follows:
       ``(3) Regulations.--
       ``(A) In general.--Subsection (a) shall not apply to a 
     disclosure or use of information which is permitted by 
     regulations prescribed by the Secretary under this section.

[[Page S2802]]

       ``(B) Peer reviews.--The regulations under this section 
     shall permit (subject to such conditions as such regulations 
     shall provide) the disclosure or use of information for 
     quality or peer reviews.
       ``(C) Disclosure to third parties.--
       ``(i) In general.--The regulations under this section shall 
     not permit the disclosure or use of information for purposes 
     of facilitating the solicitation of the taxpayer's use of any 
     services provided or facilities furnished by a person 
     unless--

       ``(I) such person is a person described in subsection (a) 
     or a person who is a member of the same affiliated group 
     (within the meaning of section 1504) as such person, and
       ``(II) the taxpayer has granted consent to such disclosure 
     or use.

       ``(ii) Solicitation of consent.--The regulations under this 
     section shall not permit any person described in clause 
     (i)(I) to request the consent of a taxpayer to disclose or 
     use information for any purpose other than a purpose 
     described in clause (i).''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.
                                 ______