IBA Compliance Connection

Your go to source for compliance!

Regarding the Taxpayer First Act (TFA), if we have a commercial loan with twelve guarantors, must all twelve sign taxpayer consent forms, or can we add a signature addendum allowing all guarantors to sign the same form? If borrowers or guarantors provide updated tax return information after loan origination, do we need to obtain new consent forms, or would the original consent form cover all future tax returns? Also, if we have a loan participation that was originated before Act’s consent provisions became effective, but sold after the effective date, is the consent form required at the time of the sale?

—

by

admin

Yes, we believe that your bank can have all twelve guarantors sign the same consent form. The TFA requires express consent from each taxpayer before obtaining their tax return information, but there is no requirement that each taxpayer provide their consent on a separate form.

We believe that your bank can structure a consent form that would cover future tax return information obtained after a loan has been originated. The TFA prohibits your bank from using tax return information obtained from the IRS “for any purpose other than the express purpose for which consent was granted.” Consequently, your bank’s consent forms should include the express purpose of obtaining future tax return information after loan origination.

For a loan that was originated before the effective date of the TFA’s consent provisions, we believe that a consent form would be required if your bank will be disclosing the borrower’s tax return information as part of the sale. The IRS has issued guidance clarifying that the TFA 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.” Consequently, if your bank is redisclosing borrower tax return information after December 28, 2019 as part of the sale, we recommend obtaining the borrower’s consent.

For resources related to our guidance, please see:

  • Internal Revenue Code, 26 USC 6103(c) (“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. [Additional text added by the Taxpayer First Act, effective December 28, 2019: 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.]”)
  • IRS, Taxpayer First Act FAQs (“Limit on re-disclosures of consent-based disclosures (Section 2202). 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.”)