As part of the Taxpayer First Act that was passed into law earlier this year on July 1, 2019, a lender who obtains a borrower’s tax transcript during the origination process must obtain the borrower’s consent to share that information with any other party, including an investor to whom the loan is sold. The part of the law requiring the specific consent of the borrower to share their tax information, Section 2202 of the Act, becomes effective December 28, 2019.

Does anyone know if the consent requirement also applies in situations where the borrower provided copies of their tax returns and no tax transcript was ordered?

It does not appear to be covered, but likely the secondary market is going to require consent regardless.

We sell loans on the secondary market. I admit I must have missed something. I am not familiar with this new requirement. Can anyone point me in the right direction to get additional information regarding delivery & content of the consent form? I searched IRS.gov to no avail. Thanks

Perfect! Thank you.

I may be missing the point in my interpretation but my research thus far indicates that the requirement to obtain consent likely is a secondary market issue versus a statutory absolute. I guess the subtle difference is whether any future violations for failure to obtain consent should be considered a regulatory issue.

The new Section 2202 of the Taxpaxer First Act (Limit Redisclosures and uses of Consent based Disclosures for Tax Return Information) specifically refers to U.S. Code Sec 6103. Sec 6103 only appears to be applicable to the following entities:

1) Officer or employee of the U.S.;
2) Officer or employee of a state or local law enforcement agency, local child support agency or other local agencies; or
3) “Any other person”. (Note: In regards to US Code 6103 – a “person” is defined as “any governmental unit (and any agency or instrumentality thereof).”


SEC. 2202. LIMIT REDISCLOSURES AND USES OF CONSENT-BASED DISCLOSURES OF TAX RETURN INFORMATION.

(a) 26 USC 6103.>> In General.--Section 6103(c) is amended by adding at the end the following: ``Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer.''.

U.S. Code § 6103. Confidentiality and disclosure of returns and return information6103(a) General rule Returns and return information shall be confidential, and except as authorized by this title—
(1) no officer or employee of the United States,

(2) no officer or employee of any State, any local law enforcement agency receiving information under subsection (i)(1)(C) or (7)(A), any local child support enforcement agency, or any local agency administering a program listed in subsection (l)(7)(D) who has or had access to returns or return information under this section or section 6104(c), and

(3) no other person (or officer or employee thereof) who has or had access to returns or return information under subsection (e)(1)(D)(iii), paragraph (10), (13), or (14) of subsection (k), paragraph (6), (10), (12), (16), (19), (20), or (21) of subsection (l), paragraph (2) or (4)(B) of subsection (m), or subsection (n), shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section. For purposes of this subsection, the term “officer or employee” includes a former officer or employee.

Definition of term “person” - The term “person” includes any governmental unit (and any agency or instrumentality thereof).”

I am not really sure how you determined that was the definition of a "person" in 26 USC 6103?

The amendment was made to this section of the law:

(c) Disclosure of returns and return information to designee of taxpayer

The Secretary may, subject to such requirements and conditions as he may prescribe by regulations, disclose the return of any taxpayer, or return information with respect to such taxpayer, to such person or persons as the taxpayer may designate in a request for or consent to such disclosure, or to any other person at the taxpayer’s request to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person. However, return information shall not be disclosed to such person or persons if the Secretary determines that such disclosure would seriously impair Federal tax administration.

The amendment then adds:

``Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any
other person without the express permission of, or request by, the taxpayer.''.

Anyone found a consent form model yet?

MISMO has put out a proposed format.

http://www.mismo.org/standards-and-...-and-resources/taxpayer-consent-language

Related topic question: In regards to the amendment ``Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose..."

Is express purpose defined? Is it the signature on application for the authorization to release tax information or using form 4506T etc..?

Does the new consent form apply to business tax returns as well?

Unfortunately we're not members of MISMO. Still trying to find something. DocMagic has put out a form, but we don't have access to that either.

I do not understand your question. What does this have to do with a signature on an application?

You don't have to be a member. Go to the link I provided, click on the I am not a member - complete the brief registration information and you can download the model language.

A taxpayer is a taxpayer, regardless of whether they are an individual or business.

Great - thank you Randy!

Thank you, Randy.

Does anyone see a problem with incorporating the Tax language in on the Borrower Authorization Form? I'm hoping to stay away from a seperate sheet. We'd label it so it stands out just print it on the same page.

Truffle - this is exactly where we incorporated ours so we didn't have to add an extra piece of paper.

Does this pertain only to mortgage lending?

Bump

Would the "sharing" consent requirement also apply to loan reviews by a third party, or examiners who look at loan files and see the tax returns? I don't believe there are any exemptions on the sharing aspect.

Oh, one more question I wanted to ask - can the taxpayer withdraw consent?

Not addressed in the statute.

Does this apply to a loss mitigation application?

It applies to sharing IRS return information. The purpose of which is not important. It actually has nothing specifically to do with the fact that you are lending, but whether or not you are going to be sharing the return information with a third party for whatever purpose.