n-05-93.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Notice 2005-93

This notice contains a proposed revenue procedure that would provide guidance
to tax return preparers regarding the format and content of consents to use and
consents to disclose tax return information under proposed section 301.7216-3 of the
Regulations on Procedure and Administration (26 CFR Part 301), which is being
published contemporaneously with this notice. The proposed revenue procedure would
also provide specific requirements for electronic signatures when a taxpayer executes
an electronic consent to the use or disclosure of the taxpayer's tax return information.

The IRS requests comments on this proposed revenue procedure. In particular,
the IRS requests comments regarding the methods for a tax return preparer to obtain a
taxpayer's electronic signature on a consent to use or a consent to disclose tax return
information. The comments should address procedures by which individuals commonly
execute electronic signatures to provide knowing consent.

Written comments must be received by March 8, 2006. Comments should be
submitted to: CC:PA:RU (Notice 2005-93), Room 5526, Internal Revenue Service, Ben
Franklin Station, Washington, DC 20224. Alternatively, comments may be hand
delivered between the hours of 8:00 AM and 5:00 PM to CC:PA:RU (NOT-132007-05),
Courier's Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington,
DC. Comments may also be transmitted electronically via the following e-mail address:

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Notice.Comments@irscounsel.treas.gov. Please include "Notice 2005-93" in the subject
line of any electronic communications.

For further information regarding this notice, contact Dillon Taylor of the Office of
Associate Chief Counsel (Procedure and Administration), Administrative Provisions and
Judicial Practice Division. Mr. Taylor may be contacted at 202-622-4940 (not a toll-free
call).

# APPENDIX (PROPOSED REVENUE PROCEDURE)

## SECTION 1. PURPOSE

This revenue procedure provides guidance to tax return preparers regarding the
format and content of consents to use and consents to disclose tax return information
under section 301.7216-3 of the Regulations on Procedure and Administration (26 CFR
Part 301). This revenue procedure also provides specific requirements for electronic
signatures when a taxpayer executes an electronic consent to the use or disclosure of
the taxpayer's tax return information.

## SECTION 2. BACKGROUND

.01 Section 7216(a) prescribes a criminal penalty for tax return preparers who
knowingly or recklessly disclose or use tax return information for a purpose other than
preparing a tax return. A violation of section 7216 is a misdemeanor, with a maximum
penalty of up to one year imprisonment or a fine of not more than $1,000, or both,
together with the costs of prosecution

.02 Section 7216(b) establishes exceptions to the general rule and also

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authorizes the Secretary to promulgate regulations prescribing additional permitted
disclosures and uses. Section 6713(a) prescribes a related civil penalty for disclosures
and uses that constitute a violation of section 7216. The penalty for violating section
6713 is $250 for each disclosure and use, not to exceed a total of $10,000 for a
calendar year. Section 6713(b) provides that the exceptions in section 7216(b) also
apply to section 6713. Under section 7216(b), the provisions of section 7216(a) will not
apply to any disclosure or use permitted under regulations prescribed by the Secretary.

.03 The regulations under section 7216 provide exceptions to the general rule.
Section 301.7216-3 provides that, unless section 7216 or §301.7216-2 specifically
permits the disclosure or use of tax return information, a tax return preparer may not
disclose or use a taxpayer's tax return information prior to obtaining a consent from the
taxpayer. The consent must be knowing and voluntary. Section 301.7216-3(a)(3)
provides that the Commissioner may, by revenue procedure, prescribe the form and
content of consents, as well as the requirements for a valid signature on an electronic
consent under section 7216. This revenue procedure provides those requirements.

## SECTION 3. SCOPE

This revenue procedure applies to all tax return preparers, as defined in
§301.7216-1(b)(2), who seek consent to disclose or use tax return information pursuant
to §301.7216-3.

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SECTION 4. FORM AND CONTENT OF A CONSENT TO USE OR A CONSENT TO
DISCLOSE TAX RETURN INFORMATION

.01 Separate Written Document. Except as provided by §301.7216-3(c)(1)
(special rule for multiple disclosures or uses within a single consent form), under
§301.7216-3, a taxpayer's consent to each separate disclosure or use of tax return
information must be contained on a separate written document, which can be furnished
on paper or electronically.

.02 A consent on paper must be provided on one or more sheets of 81/2 inch by
11 inch or larger paper. All of the text on each sheet of paper must pertain solely to the
disclosure or use the consent authorizes, and the sheet or sheets, together, must
contain all the elements described in section 4.04 and, if applicable, section 4.06. All of
the text on each sheet of paper must also be in at least 12-point type (or 12 characters
per inch).

.03 An electronic consent must be provided on one or more computer screens.
All of the text on each screen must pertain solely to the disclosure or use the consent
authorizes. The text of the consent must be easily readable and meet the following
specifications: the size of the text must be at least the same size as, or larger than, the
normal or standard body text used by the website or software package for direction,
communications or instructions; and there must be sufficient contrast between the text
and background colors to ensure easy reading. In addition, each screen or, together,
the screens must-

(1) contain all the elements described in section 4.04 and, if applicable, section

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4.06,

(2) be able to be signed as required by section 5 and dated by the taxpayer,

(3) separate all paragraphs by a blank line, and

(4) be printable in a printer friendly format on 81/2 inch by 11 inch paper.

.04 Requirements for Every Consent.

(1) Names and date. A taxpayer's consent to a tax return preparer's disclosure
or use of tax return information must include the name of the tax return preparer, the
name of the taxpayer, and the date on which the taxpayer signs the consent.

(2) Disclosure or use clearly stated. If a taxpayer consents to a disclosure of tax
return information, the consent must identify the recipient or recipients of the tax return
information and the intended purpose of the disclosure. If the taxpayer consents to use
of tax return information, the consent must describe the particular use authorized. If the
tax return preparer intends to use tax return information to generate solicitations for
products or services other than tax return preparation, the consent must identify each
specific type of product or service for which the tax return preparer may solicit use of the
tax return information. Examples of products or services that must be identified, if
solicited using tax return information, include, but are not limited to, refund anticipation
loans, balance due loans, mortgage loans, mutual funds, individual retirement accounts,
and life insurance.

(3) Purpose. A consent to use or a consent to disclose tax return information
must clearly state that the information may not be used for any purpose not specifically
prescribed in the consent.

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(4) Identification of tax return information to be disclosed or used. The consent
must specify the particular items of tax return information to be disclosed to each
recipient or used by the return preparer.

(5) Contact telephone number for suspected violations of section 7216. The
consent must include the contact telephone number for the Treasury Inspector General
for Tax Administration (TIGTA), 1-800-366-4484. This telephone number allows
taxpayers to report suspected unauthorized uses or disclosures of tax return
information.

(6) Mandatory statements in the consent.

(a) A consent to disclose tax return information must contain the following
statement in the following format:

We generally are not authorized to disclose your tax return
information for purposes other than the preparation and filing of your
tax return. We may disclose your tax return information to third parties
only if you consent to each specific disclosure. Your consent is valid
for one year.

Warning: Once your tax return information is disclosed to a third
party per your consent, we have no control over what that third
party does with your tax return information. If the third party uses
or discloses your tax return information for purposes other than the
purpose for which you authorized the disclosure, under Federal tax
law, we are not responsible for that subsequent use or disclosure,
and Federal tax law may not protect you from that disclosure.

(b) A consent to use tax return information must contain the following statement
in the following format:

We generally are not authorized to use your tax return information
for purposes other than the preparation and filing of your tax return.

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We may use your tax return information for other purposes only if you
consent to each specific use. Your consent is valid for one year.

(c) All consents must contain the following statement in the
following format:

If you believe that your rights have been violated

If you have any questions or concerns about your rights
regarding the use or disclosure of your tax return
information, visit www.irs.gov/advocate for more information,
or contact the Taxpayer Advocate Service of the Internal
Revenue Service at 1-877-777-4778.

If you believe we have used or disclosed your information
without your permission, you may contact the Treasury
Inspector General for Tax Administration at 1-800-366-4484.

(7) Mandatory statement in any consent to disclosure outside of the United
States. If a tax return preparer to whom the tax return information is to be disclosed is
located outside of the United States, the taxpayer's consent under §301.7216-3 prior to
any disclosure is required. See §301.7216-2(c) and (d). All consents for disclosures of
tax return information outside of the United States must contain the following statement
in the following format:

This consent to disclose will result in your tax return information being disclosed to a
tax return preparer located outside the United States.

(8) Affirmative consent. All consents must require the taxpayer's affirmative
consent to a tax return preparer's disclosure or use of tax return information. A consent
that requires the taxpayer to remove or "deselect" uses or disclosures that the taxpayer
does not wish to be made, i.e., an "opt-out" consent, is not permitted.

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(9) Signature. All consents to use or disclose tax return information must be
signed by the taxpayer.

(a) For consents on paper, the taxpayer's consent to a use or disclosure must
contain the taxpayer's signature.

(b) For electronic consents, a taxpayer must sign the consent by any method
prescribed in section 5, below.

.05 Special rule for multiple disclosures within a single consent form or multiple
uses within a single consent form. Section 301.7216-3(c)(1) provides that a taxpayer
can consent to multiple uses within the same written document, or multiple disclosures
within the same written document. Multiple disclosure consents and multiple use
consents must provide the taxpayer with the opportunity, within the separate written
document, to affirmatively select each separate use or disclosure. Further, the taxpayer
must be provided the information in section 4.04(2)-(4) for each separate use or
disclosure.

.06 Disclosure of entire return. If, under §301.7216-3(c)(2), a consent authorizes
the disclosure of all information contained within a return, the consent must contain an
explanation of the reasons why a consent authorizing a more limited disclosure of tax
return information would not satisfy the purpose of the consent.

SECTION 5. ELECTRONIC SIGNATURES

01\. If a taxpayer furnishes consent to use or disclose tax return information
electronically, the taxpayer must furnish the tax return preparer with an electronic
signature that will verify that the taxpayer consented to the use or disclosure. The
regulations under §301.7216-3(a) require that the consent be knowing and voluntary.
Therefore, for an electronic consent to be valid, it must be furnished in a manner that

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ensures affirmative, knowing consent to each use or disclosure.

.02 A tax return preparer seeking to obtain a taxpayer's consent to the
disclosure or use of tax return information must obtain the taxpayer's signature on the
consent in one of the following manners:

(a) Assign a personal identification number (PIN) that is at least 6 characters long
to the taxpayer when the taxpayer first starts using the tax preparation software. To
consent to the use or disclosure of the taxpayer's tax return information, the taxpayer
may type in the pre-assigned PIN as the taxpayer's signature authorizing the disclosure
or use. A PIN may not be automatically furnished by the return preparation software so
that the taxpayer only has to click a button for consent to be furnished. The taxpayer
must affirmatively enter the PIN for the electronic signature to be valid; or

(b) Have the taxpayer type in the taxpayer's name and then hit "enter" to
authorize the consent. The tax preparation software must not automatically furnish the
taxpayer's name so that the taxpayer only has to click a button to consent. The
taxpayer must affirmatively type the taxpayer's name for the electronic consent to be
valid; or

(c) Any other manner in which the taxpayer affirmatively enters 6 or more
characters that are unique to that taxpayer that can be used by the tax return preparer
to verify the taxpayer's identity. For example, entry of the same information by which a
taxpayer authorizes credit card payment of preparation fees could be the type of
information by which the taxpayer authorizes use or disclosure of tax return information.
SECTION 6. EXAMPLES

.01 The application of this revenue procedure is illustrated by the following
examples:

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(1) Example 1. Preparer P offers tax preparation services over the Internet. P
wishes to use targeted banner advertisements (i.e., electronic advertisements
appearing on the computer screen based on the taxpayer's tax return information)
during tax return preparation. P contracts with various corporations to advertise
services and products not directly related to tax return preparation.

(a) P posts, in pertinent part, the following consent on the computer screen for
taxpayers to indicate approval. If a taxpayer does not indicate approval, the tax return
preparation software does not permit the taxpayer to use the software --

### PRIVACY STATEMENT

Your privacy is very important to us at P. We are providing this
statement to inform you about the types of information we collect from
you, and how we may use or disclose that information in connection with
the services we provide. This Privacy Statement describes the privacy
practices of our company as required by applicable laws. ... During the
course of providing our services to you, we may offer you various other
services that may be of interest to you based on our determination of your
needs through analysis of your data. Your use of the services we offer
constitutes a consent to our disclosure of tax information to the service
providers. If at any time you wish to limit your receipt of promotional offers
based upon information you provide, you may call us at the following. . . .

(b) Beneath this Privacy Statement, the following acknowledgment line appears
next to two button images stating "yes" and "no:"

"I have read the Privacy Statement and agree to it by clicking here."

(c) If the taxpayer clicks "no," a message appears on the screen informing the
taxpayer that tax return preparation will not proceed without the taxpayer agreeing to
the company's Privacy Statement.

(d) P has failed to comply with the requirements of §301.7216-3 and this
revenue procedure. (1) P has attempted to obtain consent from the taxpayer by making

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the use of the program contingent on the taxpayer's consent to P's use and disclosure
of the taxpayer's tax return information for purposes other than tax preparation (e.g., for
use in displaying targeted banner advertisement). Thus, the consent is not voluntary,
as required by §301.7216-3(a). (2) P has failed to identify the specific tax return
information that it will use or disclose, as required by section 4.05, to identify the
purposes of the uses and disclosures themselves, as required by section 4.04, and to
the extent that P intends to disclose the entire return, P has failed to provide a consent
containing an explanation why a more limited disclosure of tax return information would
not satisfy the purpose of the consent, as required by section 4.06. (3) The single
document attempts to have the taxpayer consent to both uses and disclosures, in
violation of section 4.05. (4) P has not used the mandatory statements required by
section 4.04(6) and has not provided a means for the taxpayer to electronically sign the
consent in a form authorized by section 5. (5) The consent is not dated as required by
section 4.04(1).

(2) Example 2. Preparer Q offers tax preparation services over the Internet and
wishes to use targeted banner advertisements during tax return preparation. Q
contracts with Bank A regarding the advertisement of Individual Retirement Accounts
(IRAs), and with Bank B regarding the advertisement of refund anticipation loans
(RALs). Preparer Q displays advertisements to the taxpayer only if the taxpayer's tax
return information indicates that the services are relevant to the taxpayer (i.e., they are
targeted banner advertisements). A taxpayer using Q's software must enter a password
to begin the process of preparing a return.

(a) Before the taxpayer starts providing tax return information, the following screen
appears on Q's tax preparation program.

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# CONSENT TO USE OF TAX RETURN INFORMATION

We generally are authorized to use your tax return information
only to prepare and file your tax return. We may use your tax
return information for other purposes only if you consent to each
specific use. Your consent is valid for one year.

For your convenience, Q has entered into arrangements with certain
banks regarding the provision of two services that may interest you. The
services are Individual Retirement Accounts (IRAs) and refund anticipation
loans (RALs). To determine whether these services may be of interest to
you, Q will need to use your tax return information.

If you would like Q to use your tax return information to determine
whether these services are relevant to you while we are preparing your
return, please check the corresponding box for the service(s) in which you
are interested, provide the information requested below, and sign and date
this consent to the use of your tax return information.

☐
I, [INSERT NAME] authorize Q to use the information I provide
regarding whether I contributed to an IRA for the 2006 tax year, and the
amount I contributed to an IRA for the 2006 tax year, to determine whether
to offer me an opportunity to invest in an IRA.

☐
I, [INSERT NAME] authorize Q to use the information on my return
for the 2006 tax year regarding whether I have overpaid my taxes and am
entitled to a refund to determine whether to offer me a RAL.

Signature: [INSERT SIGNATURE AS PRESCRIBED UNDER
SECTION 5]

Date:
[INSERT DATE]

If you believe that your rights have been violated

If you have any questions or concerns about your rights
regarding the use or disclosure of your tax return
information, visit www.irs.gov/advocate for more
information, or contact the Taxpayer Advocate Service of the
Internal Revenue Service at 1-877-777-4778 (a toll-free call).

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If you believe we have used or disclosed your information
without your permission, you may contact the Treasury
Inspector General for Tax Administration at 1-800-366-4484
(a toll-free call).

(b) If the taxpayer selects one or both of the consents above, the taxpayer
is directed to print the screen. Later, after the taxpayer has entered data
reflecting that he is eligible for both a RAL and an IRA, the following screen is
displayed:

# CONSENT TO DISCLOSURE OF TAX RETURN INFORMATION

We generally are not authorized to disclose your tax return
information to third parties. We may only disclose your tax return
information to third parties if you consent to each specific
disclosure. Your consent is valid for one year.

Warning: Once your tax return information is disclosed to a
third party per your consent, we have no control over what
that third party does with your tax return information. If the
third party uses or discloses your tax return information for
purposes other than the purpose for which you authorized
the disclosure, we are not responsible for that unauthorized
disclosure, and federal tax law may not protect that
unauthorized disclosure.

You have indicated that you are interested in obtaining information
on IRAs or RALs, or both. To provide you with this information, Q must
forward your tax return information, as indicated below, to the banks that
provide these services.

If you would like Q to disclose your tax return information to the banks
providing these services, please check the corresponding box for the
services in which you are interested, provide the information requested
below, and sign and date your consent to the disclosure of your tax return

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information.

☐
I, [INSERT NAME], authorize Q to disclose to A the information I
provide regarding IRA contributions for the 2006 tax year, and/or the
amount I contributed to an IRA for the 2006 tax year, so that A can provide
information on obtaining an IRA or increasing my contribution to an IRA for
the 2006 tax year.

☐
I, [INSERT NAME], authorize Q to disclose to B the information on
my return regarding whether I have overpaid my taxes and am entitled to
a refund, and my social security number, so that B can determine whether
I will qualify for a RAL for the 2006 tax year, and so that Bank B can
provide information on obtaining a RAL for the 2006 tax year.

Signature:

[INSERT SIGNATURE AS PRESCRIBED

UNDER SECTION 5]

Date:

[INSERT DATE]

If you believe that your rights have been violated

If you have any questions or concerns about your rights
regarding the use or disclosure of your tax return
information, visit www.irs.gov/advocate for more information,
or contact the Taxpayer Advocate Service of the Internal
Revenue Service at 1-877-777-4778 (a toll-free call).

If you believe we have used or disclosed your information
without your permission, you may contact the Treasury
Inspector General for Tax Administration at 1-800-366-4484
(a toll-free call).

If the taxpayer consents to the disclosure of the tax return information using the
screen above, the taxpayer is directed to print the screen. Q will then transmit
the relevant tax return information to the banks.

(c) These two consent documents, above, satisfy the requirements of
§301.7216-3(c) and this revenue procedure for the use or disclosure of the

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information provided therein for the specific purposes stated.

## SECTION 7. EFFECTIVE DATE

This revenue procedure is effective on [
1.

## SECTION 8. DRAFTING INFORMATION

The principal author of this revenue procedure is Dillon Taylor of the Office of
Associate Chief Counsel (Procedure and Administration), Administrative Provisions &
Judicial Practice Division. For further information regarding this revenue procedure
contact [
] on [
] (not a toll-free call).

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