20-01: Taxpayer First Act

The Taxpayer First Act was signed into law on July 1, 2019. It includes a provision that persons receiving tax return information must obtain the express permission of taxpayers prior to disclosing that return information to any other person. This component of the law goes into effect December 28, 2019.

 

If consent is required under the Act, it should be obtained in a timely manner and documented in the loan file. The Mortgage Industry Standards Maintenance Organization (MISMO®) published model taxpayer consent language designed to allow sellers/servicers to disclose tax return information to any other person. Sellers/servicers may also prepare their own taxpayer consent language. Whether a seller/servicer is required to obtain consent is based on the language in the Act and not on the date the loan is purchased or securitized.

 

The IRS has issued the following guidance regarding the coverage of the new consent requirement:

 

Section 2202 of the Taxpayer First Act amended the provisions of IRC section 6103(c) by adding 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.”

 

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.

 

CBC Mortgage Agency will require the consent form to be in file prior to purchase for all loans prior to purchase where tax returns were used to qualify the borrower and for all loans with closing dates effective 12/28/19.

 

Thank you,

CBC Mortgage Agency