[rcooper]

A question we recently received from a member:
We recently received a forms update from Wolters Kluwer which included a new form for our customers to sign in relation to the Taxpayer First Act. The new form is the Borrower Consent to the Use of Tax Return Information. Our main question with this is if we are including business or corporation tax returns in with the underwriting of the loan do we need one of these forms for the business returns as well as the individual returns?

[rcooper]

• Effective December 28, 2019 and summary:
From Thomas Reuters (https://tax.thomsonreuters.com/news/president-signs-taxpayer-first-act-fixing-effective-date-of-various-provisions/ )“Limit on re-disclosures of consent-based disclosures. Effective for disclosures made after Dec. 28, 2019 (180 days after the date of enactment), the Act provides that persons designated by the taxpayer to receive return information must not use the information for any purpose other than the express purpose for which consent was granted and must not disclose return information to any other person without the express permission of, or request by, the taxpayer. (Code Sec. 6103(c), as amended by Act Sec. 2202)”

• IRS form 4506 – T “Request for Transcript of Tax Returns” allows for requesting business transcripts in the instructions of the form which says “Line 1b. Enter your employer identification number (EIN) if your request relates to a business return.” https://www.irs.gov/pub/irs-pdf/f4506t.pdf. However, it seems to no longer be sufficient to allow you to use the transcripts without consent to specific use, which is where the new form comes in.
• In addition to that, the Taxpayer First Act (https://www.congress.gov/116/plaws/publ25/PLAW-116publ25.pdf) amends IRS law 26 USC 6103(c) to include the following language:
“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.”

o Under 26 USC 6103(c), the term “taxpayer” means any person subject to any internal revenue tax. (26 USC 7701(a)(14))

o The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation. (26 USC 7701(a)(1))

So, again, based on this information I would say it does apply to businesses; and since this is also the safest approach (obtaining consent from business customers) that is what I would recommend. If I come across additional information that indicates otherwise I will pass it along.

[dcsluder1]

I also had a question, does this apply to all consumer/business loans if the taxpayer brings his/her tax return in to the bank, does this apply?

[rcooper]

We published an article on this recently. It does seem to apply to businesses as well as individuals. Based on information from the IRS, it seems to only apply to information obtained from the IRS. Here’s the article: https://mycomplianceresource.com/taxpayers-first-act/.

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