The Taxpayers First Act has a provision that indicates that we can't share tax information with other parties unless we specifically tell the borrowers that we will be sharing the information. This stemmed from a secondary market requirement to provide a disclosure to the borrower, although the Act doesn't specifically state the specifics of the disclosure.

So my questions are: does anyone know about this Act? What are you doing to prepare? Are other loans impacted besides just mortgages (for example, I think our business loans will be impacted)? o

I can't seem to find any discussion on this with the exception of mortgage -- specifically MISMO.

Has anyone dived into this yet?

It covers all taxpayers - individuals and entities. The purpose of the loan is irrelevant..

Where can details be found. I've also seen nothing other than random mentions here and there.

Just google Taxpayer Consent Form - there are a lot of articles on the new law.

My question..........I have added the required notice in my MLO software and I am now working to add it to our commercial loan application process. I can't seem to find if this notice needs to stand alone or if it can be part of our commercial application. Any suggestions?

Also, is everyone adding this disclosure to their retail/consumer applications? We rarely get tax returns for these transactions, but it does happen.

Thanks

Who do you share loan files with that may include tax returns on those types of transactions would be the first question.

We sell everything so I included the notice language on our authorization form for every file.

Our Mortgage vendor updated our packets but our commercial doc vendor says they don't need to add. Grrr. I'll work on that issue but we do a fair amount of participation sales throughout the year.
What are your thoughts on us doing a participation sale after the effective date but we may have originated the loan a year or two ago. Would we be required to obtain express permission for these loans? I don't think so but you never know.

From what I have been able to determine if you intend to share the taxpayer's tax records with a third party on or after 12/28/2019 you will need their consent. I have been unable to find any "grandfather" clause for tax records obtained prior to 12/28/2019.

I'm struggling with it being retroactive tho, Dan, and would appreciate other's opinions on it.
We hedge our loans so they may sit for 30-90 days before going to investors.
No other new rule has forced us to go back to get something on a loan that predates the effective date of the ruling.
Hopefully this one doesn' either.

However this is only for tax returns obtained online - not provided by the customer - correct? That's how I understand it.

(c) <<NOTE: Applicability. Time period. 26 USC 6103 note.>>
Effective Date.--The amendments made by this section shall apply to
disclosures made after the date which is 180 days after the date of the
enactment of this Act.

It is going to be sort of hard to say it does not apply to information obtained prior to the effective date the way the statute is written since it references disclosures made after the date, not the date that the information was obtained..

To go along with what Randy posted this is from Freddie;

Taxpayer First Act - use of tax return information

Effective December 28, 2019

In connection with the Taxpayer First Act (the “Act”), which requires the taxpayer’s consent to be obtained prior to any disclosure of the taxpayer’s tax return or tax return information to a third party, we are adding language to the Guide requiring that, if a signed consent form is required under the Act, a signed copy must be maintained in the Mortgage file. Whether the Seller is required to obtain the consent form is based on the language in “the Act” and not on the Settlement Date of the Mortgage.

Guide impact: Section 3301.11

preping for exam so I haven't time to research much and therefore taking advantage of you, Randy, but what exactly does 'disclosures' mean?
Is that disclosing to the borrower via the required express consent? 'cause if that's the case, I think I'm ok.
But if 'disclosure' equals 'sharing' the information, that's gonna be a big problem. I really can't fathom that the rulemakers really intended to make everyone go back to borrowers to get permission to share tax info when use of the 4506T sufficed as implied consent at the time the loan was made.
Just thinking out loud and maybe way off base.

Skittles, I don't get that it only applies to electronic records unless I missed something which is quite possible with this Act.

Everything I've read refers to the taxpayers "tax records". I don't see where it refers to taxpayer's "electronic tax records". The Act is to help protect the taxpayers personal information and to help prevent identity theft. What would be the difference in sharing that information as a paper copy vs an electronic copy with a third party?

If I've missed that it only applies to electronic transcripts then I would appreciate knowing where that cite is because I have advised our people it applies to all tax records.

unverified source stated:

1. The Act is only applicable if/when you request returns via a 4506-T from the IRS. If a taxpayer voluntarily provides their returns the disclosure is not necessary

I know this may be a little off topic, but does anyone see the need to have the form signed twice, once with the initial disclosures and again at closing? This is how our doc provider has it set up. It seems a bit redundant to me.

Dan - the more I read the more I think this relates to return information obtained from the IRS and not just the taxpayer. I thought the same myself originally, but am starting to lean the other way when reading that section of the IRS Code in total.

As far as obtaining consent, I see no reason to obtain the consent multiple times. Once they give consent, they have consented.

well, I'll have examiners inhouse soon and will take advantage of the situation to ask them to opine on whether we have to go back and get consent for loans that predate the Act just because we're selling them.

TR, would you also ask their opinion on only electronically received info?

The ABA Newsbytes today contained a link to the ABA's review of taxpayer first act disclosures. It also stated this was applicable only to tax returns 'only in situations where information is obtained directly from the government at the direction of the taxpayer'.

I think the IRS also answered most of our questions, including the retroactive part:

This provision limits the redisclosure and use of return information in the case of taxpayers who have consented to the disclosure of their return information by the Internal Revenue Service to a third party under IRC section 6103(c). Section 2202 of the Taxpayer First Act applies only to disclosures made by the Internal Revenue Service after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.