Washington State

Office of the Attorney General

Attorney General

Bob Ferguson


SEATTLE – Attorney General Rob McKenna this week filed formal objections to the Internal Revenue Service’s proposed rules that would make it easier for businesses to sell and share personal information included on tax returns.

McKenna, a Republican, and California Attorney General Bill Lockyer, a Democrat, cosponsored a six-page letter signed by attorneys general from 46 states and the District of Columbia. The letter addressed to IRS Commissioner Mark Everson opposes the new rules, addresses specific concerns related to identity theft and recommends solutions to safeguard consumers’ privacy.

“We are greatly concerned that this regulation, if adopted as proposed, will erode consumer privacy and the security of sensitive personal information, with a consequent increase in such serious problems as identity theft and intrusive or even abusive marketing practices,” the attorneys general wrote.

“The spread of tax return information to far greater numbers of individuals, companies, databanks and records repositories represents a nightmare to the law enforcement community,” they added. “As representatives of law enforcement, we believe more, not less, privacy protection is needed.”

McKenna first spoke in opposition of the proposed IRS rule last month during a bipartisan roundtable event with U.S. Rep. Jay Inslee, D-Mountlake Terrace, and members of the Washington Society of Certified Public Accountants, the Evergreen Freedom Foundation and WashPIRG.

“The IRS says these rules would improve taxpayers’ control over their use of their tax return information, but the changes it proposed would turn current privacy protections on their head,” McKenna said. “The current regulations strictly limit disclosure of tax return information, while the new rules would allow a much more permissive consent procedure under which information could be sold and possibly resold. We’ve all heard devastating stories about what happens when personal information falls into the wrong hands.”

McKenna and the other attorneys general said “the best, most prudent course” the IRS could take to protect individuals’ privacy would be to ban tax preparers from sharing their customers’ information for any purpose unrelated to preparation of tax returns.

“There is simply too much at risk for American taxpayers ... to increase the likelihood that their most personal information will be stolen or misused,” the attorneys general wrote. “Crucially, there is no pressing need to put that information at risk: American consumers’ financial information is already copiously provided to businesses offering financial services and related products. We are aware of no complaints from taxpayers that they receive too few solicitations from these companies.”

The attorneys general recommended the following safeguards should the IRS permit tax return information to be sold or exchanged:

  1. Prohibit or greatly restrict the use of disclosure of tax return information for marketing purposes.
  2. Ensure taxpayers knowingly and voluntarily consent to each specific use of their return information. The regulations should prohibit or restrict obtaining consent to multiple uses or multiple disclosures in a single document.
  3. Prohibit making any service conditional on taxpayers’ agreeing to share their return information.
  4. Prohibit tax preparers from using or disclosing return information not needed to obtain the specific services requested by customers.
  5. Prohibit the use of raffles, lotteries and similar games as a means of inducing taxpayers to share their return information.

Current IRS rules allow tax preparers, after obtaining customers’ written consent, to share return information with banks and other third parties to facilitate offering of ancillary, tax-related services. The proposed regulations would expand preparers’ ability to share taxpayers’ personal information, and third parties’ ability to access and use that information.

Specifically, the rules would allow preparers, with written consent, to share or sell customers’ return information with any third party, including third parties that have no arrangements with the tax preparer to provide ancillary, tax-related services. Not bound by the regulations, the third parties then could use the information for marketing or other purposes without obtaining consumers’ consent.

Additional materials:

Attorneys General Letter

Q&A Comparison of Current IRS Rules and Proposed Revisions

- 30 -

Media contacts:

Kristin Alexander, Public Information Officer, (206) 464-6432, kalexander@atg.wa.gov