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MORE ON SELLING TAX RETURN DATA
April 11, 2006
Perhaps the only thing more intimidating to me than finding out that Tax Professor and prolific tax scholar James Maule is reading my tax posts is to find that he is responding to them.
I feel new IRS proposals on taxpayer confidentiality don't open the door to tax preparers selling their clients data; I feel that door is already ajar. Dr. Maule demurs:
The simple fact of the matter is that the proposed language simply says "a tax return preparer may not disclose or use a taxpayer's tax return information prior to obtaining a consent from the taxpayer." No longer must the disclosure be "AS THE TAXPAYER MAY DIRECT." What is currently a two-prong test, requiring both taxpayer direction and consent, becomes a one-prong test satisfied by getting the taxpayer's signature on a document prepared by the preparer and not originating with the taxpayer.
I believe that a crafty preparer can get a lot of taxpayers to "direct" him to sell tax data to all comers, regardless of Dr. Maule's distinction. Still, I agree wholeheartedly with Dr. Maule's main point: that preparers shouldn't be allowed to sell their client data to third parties; that's where I would like the regulations to be focused.
Dr. Maule embraces my idea for a 200% excise tax on proceeds of selling taxpayer data, and he helpfully provides draft statutory language. I would narrow his language slightly to protect preparers who charge a client for photocopies when he provides returns to third parties at the client's requiest. My changes are in boldface:
No tax return preparer shall transfer or otherwise make available to any other person, other than the taxpayer, in any manner whatsoever, a taxpayer's tax information in exchange for money or other consideration whether or not measurable in money or money's worth. Any tax return preparer who does transfer or otherwise make available to any other person, other than the taxpayer, in any manner whatsoever, a taxpayer's tax information in exchange for money or other consideration paid by the transferee or a party other than the taxpayer, whether or not measurable in money or money's worth, shall be liable for a tax equal to 200% of the proceeds of such a transfer.
Dr. Maule also says I am wrong to call him "irate" about the proposed disclosure rules. I'll accept that. I don't want to make him angry.
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Comments
With all due respect to the esteemed Professor, I think you've got the better of the argument here. If protected health information can be sold or published pursuant to a valid consent under the Health Insurance Portability and Accountability Act regulations, why should tax information be any different? Not many people would or do agree to disclosure of either type of information but there is clearly value to it from a statistical and marketing perspective. At the right price some portion of the people will sell. Prof. Maule may not like that outcome and may not choose it himself, but the principles underpinning it have served our country well for the last 200+ years.
Posted by: Chad | April 11, 2006 1:05 PM