The Taxpayer First Act (the “Act” or “TFA”) imposes new limits on the disclosure of US taxpayer tax information obtained on or after December 28, 2019. The Act is designed, among other things, to overhaul and modernize operations at the Internal Revenue Service (“IRS”). One provision of the TFA has a direct impact on a recipient of taxpayer return information obtained directly from the IRS. Although questions remain about the reach of the new rule, it is already finding its way into structured finance and secondary market transactions.

Section 6103 of the Internal Revenue Code (the “Code”) governs the confidentiality and disclosure of tax returns and the information contained in tax returns. The TFA, effective as of December 28, 2019, amends Code Section 6103(c) to require taxpayers to consent to: (i) the particular purposes for which the recipient will use the taxpayer’s tax return information (the recipient may not use the information for any other purpose); and (ii) the sharing of any information from the tax return with other persons. Prior to the TFA amendment, Code Section 6103(c) simply authorized the IRS to release a taxpayer’s tax return information to parties designated by the taxpayer to receive it.
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On Friday, January 24, the Consumer Financial Protection Bureau (“Bureau” or “CFPB”) published a Policy Statement clarifying how it intends to exercise its authority to prevent abusive acts or practices under the Dodd-Frank Act. According to CFPB Director Kathy Kraninger, the purpose of the Policy Statement is to promote clarity, which in turn should encourage both compliance with the law and the development of beneficial financial products for consumers.  The Policy Statement describes how the Bureau will use and develop the abusiveness standard in its supervision and enforcement work, pursuant to a three-part, forward-looking framework. Under the framework, the Bureau will: (1) generally rely on the abusiveness standard to address conduct only where the harm to consumers outweighs the benefit, (2) avoid making abusiveness claims where the claims rely on the same facts that the Bureau alleges are unfair or deceptive, and (3) not seek certain types of monetary relief against a covered person who made a good-faith effort to comply with a reasonable interpretation of the abusiveness standard. The Policy Statement suggests that the Bureau will use its abusiveness authority even less frequently than it has in the past. While that may be welcome news to regulated parties, it is also likely to mean slower development of meaningful guideposts as to what constitutes abusive conduct.
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