Congressional Act Allows IRS to Provide Taxpayer Information to Law Enforcement Officials

Posted on June 07, 2016

The IRS is generally prohibited from sharing taxpayer information with others in order to protect taxpayer privacy and to maintain voluntary tax compliance with the tax system. The prohibition about information-sharing may be about to change.

The House recently approved the Recovering Missing Children Act that would allow the IRS to provide tax return information to state and local law enforcement officials that are working with federal agencies to recover missing children if they have a court order to do so. The sponsor of the bill, Erik Paulsen, stated that he was inspired by the story of Jacob Wetterling, a boy that was abducted at the age of 11 over 38 years ago.

Under the proposed legislation, the IRS would be allowed to release tax return information that includes the address of a parent who abducts a child and seeks to receive a child tax credit. The bill would limit the use of that information only to efforts to find a missing child, to a grand jury proceeding or to any judicial or administrative proceedings.

The proposed legislation has opened up a debate over taxpayer privacy, especially at a time when the IRS has been criticized for not guarding tax return data closely enough. Further, some tax experts believe that expanding the law in this fashion would dampen voluntary compliance with the tax system insofar as taxpayers may falsify their tax submission or provide an incomplete one so as to not share their tax information with the public. This, in turn, might reduce federal revenue.

In 2003, IRS National Taxpayer Advocate Nina Olson expressed concern about allowing greater access to taxpayer information, fearing that the Internal Revenue Code section that protects taxpayer privacy would turn into a “piece of Swiss cheese.”

What do you think about expanding access to private taxpayer information if it results in recovering missing children?