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By Roy Whitehead, Jr., JD, LLM, and Ken Griffin, DBA, The University of Central Arkansas

Angered by GAO reports that IRS agents had titillated themselves on 800 to 1,000 occasions by browsing taxpayer returns, Congress enacted, and the President has signed, the Taxpayer Browsing Protection Act (H.R. 1226). The act, introduced by Ways and Means Chairman, Bill Archer, with strong bipartisan support, on Taxpayer Freedom Day, affirms the taxpayer's expectation that personal information required on a return is confidential unless a government officer or employee has a need to know. The act will dramatically expand the privacy protection of tax return information in three ways. First, it provides criminal sanctions for unauthorized inspection (browsing) of returns or return information. This is a significant change because the previous law only prohibited unlawful disclosure of return information. Secondly, the act also broadly casts its criminal and civil liability net over, not just IRS employees, but any Federal employee described in IRC section 6103(n) or a state government officer or employee who willfully inspects, without authorization, any return or return information. Finally, the act requires the Secretary to provide actual notice to taxpayers when prohibited browsing activity concerning their return is discovered.

The act is effected by adding IRC section 7431A prohibiting the unauthorized inspections (browsing) of returns or return information, by any officer or employee of the United States, or of a state, or other employees, like IRS contractors who might have access to return information. Willful violation of the act provides for criminal penalties of one year imprisonment and a $1,000 fine. In addition, convicted Federal officers and employees must be dismissed from office or discharged from employment. This section significantly strengthens the IRS's enforcement power by adding criminal and civil penalties to the administrative disciplinary procedures generally relied on in the past.

The legislation also provides for civil damages, including compensatory and punitive damages and costs, for unauthorized inspection or disclosure of returns and return information by amending IRC section 7431. The same amendment also adds the requirement that when any covered Federal or state employee is criminally indicted or charged with inspection or disclosure of a taxpayer's return or return information, the Secretary shall notify the effected taxpayer as soon as practicable. Finally, subsection 7431(b) of the act protects those employees acting in good faith (honestly) by providing that no liability will arise in circumstances of inspection or disclosure 1) which results from a good faith, but erroneous, interpretation of section 6103, or 2) which is requested by the taxpayer.

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