The Senate Finance Committee on April 20, 2016, approved a bill to curb identity theft and tax refund fraud that was stripped of controversial language regarding the regulation of tax return preparers, and the separate Taxpayer Protection Act of 2016.

The identity theft and tax refund bill was approved by voice vote during a morning markup. The Taxpayer Protection Act of 2016 was also approved by voice vote in a continuation of the executive session held later in the day.

Provisions in the Chairman's Mark of the identity theft and tax refund fraud bill include expanding and increasing certain penalties, and requiring the IRS to develop a report and guidelines on identity theft and to study the feasibility of blocking the processing of electronically-filed tax returns.

A Chairman's modification of the bill removed the proposal to provide the Department of the Treasury and the IRS the authority to regulate all paid tax return preparers. A group of Committee Democrats, led by Ranking Member Ron Wyden (D-OR), offered an amendment that would provide the Department of Treasury authority to develop and impose minimum standards for paid tax return preparers but leave the IRS out of the process. The amendment was defeated 12-13.

A Chairman's modification the Taxpayer Protection Act of 2016 added several provisions, including those to repeal the substantiation exception for certain charitable contributions reported by the donee organization and clarify that the IRS Commissioner has the power to fire senior executives who have failed in their performance or committed serious misconduct. It also included a provision to prohibit IRS from rehiring former employees who were involuntarily separated for misconduct. A House bill with the same purpose, the Ensuring Integrity in the IRS Workforce Act of 2016 (H.R. 3724) sponsored by Rep. Kristi Noem (R-SD), was approved by the House Ways and Means Committee last week and is expected to be voted on in the full House tomorrow.

Sen. Chuck Grassley's (R-IA) amendment to require a taxpayer to be notified if the IRS or Federal or State agency proposes an administrative determination as to disciplinary or adverse action against an employee arising from the employee's unauthorized inspection or disclosure of the taxpayer's return or return information was adopted by voice vote.

An amendment by Sen. Sherrod Brown (D-OH) and others to raise the cap for the IRS VITA matching grant program allocation to $30 million, subject to an appropriation override, was also adopted by voice vote.

An amendment by Sen. Dan Coats (R-IN) regarding the protection of victims of employment-related identity theft was adopted to both bills.

"Today the Finance Committee acted in a strong bipartisan fashion to advance commonsense legislation that will ensure better stewardship of taxpayer dollars and shield Americans from fraudsters seeking to steal identities and claim tax refunds that don't belong to them," Chairman Orrin Hatch (R-UT) said in a press release.

The Committee's release on the results of the executive session is attached. See all of the materials related to the markup.

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ATTACHMENT

Results of Executive Session