Taxpayer Consent Language

Published for Public Comment Period

The Taxpayer Consent Language was released on Monday, September 23rd, 2019 for a 30 day public comment period.  The comment period will open remain open until October 23rd, 2019.  Industry participants are encouraged to review the language and provide comments by responding to info@mismo.org.  


AUTHORIZED USAGE: This proposed MISMO Product was published on September 23, 2019 for a 30 day public comment period for the purpose of providing an opportunity for comment on the Taxpayer Consent Language.  Any other use of this MISMO Product, including implementation, is prohibited at this time. For more information, please see complete Authorized Usage / Patent Disclosure Request details or contact info@mismo.org.

Accessing the Standard

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Background

The Taxpayer First Act was signed into law on July 1st.  The Act is a broad reform of IRS systems to modernize technology platforms and to better protect taxpayers' private information.  Included within the broad provisions of the Act are two particular sections that impact the lending industry through the modernization of third-party income verifications (commonly known as the 4506-T process).  

Included within the law in Section 2202 of the Act is a provision that the taxpayer must provide their express permission for their tax information to be shared.  This is a new requirement.  This component of the law must be implemented within 180 days of the Act being signed.  The law does not state how the consent should be obtained or documented and the IRS has not stated how this should be managed.  It is unlikely that the IRS will modify the Tax Transcript Request Form (4506T) to accommodate this requirement, at least in the short-term.  As the IRS has expressed that they are not going to provide updated language to the 4506-T, they are leaving it to the industry to ensure proper taxpayer consent is obtained.  

For many years the lending industry has used a specific provision in the Internal Revenue Service code to order transcripts.  Essentially, having borrowers sign form 4506-T has always sufficed to indicate taxpayer consent.  Section 2202 modifies the tax code and now necessitates that entities ordering transcripts provide "express purpose" for which tax return information will be used.  Further, this Section now necessitates that borrowers provide "express permission" to allow the sharing of return information with other lending stakeholders.  Bottom line, just having form 4506-T signed will no longer suffice to meet these new consent requirements.  

Compliance with the new taxpayer consent provision is required 180 days after the enactment of the Act, putting the mandatory compliance date at Dec 28, 2019.  Knowing something had to be done quickly, industry participants appealed to the MBA and MISMO to use voluntary consensus processes to create the proposed taxpayer consent language.  This led to the Taxpayer Consent DWG being spawned with the explicit charter to accomplish this task. 

The DWG's charter was also explicit in not creating the implementation details of deploying the language.  Thus, this MISMO work product is purely the draft consent language.  It is seen as a starting point, model language, that can be integrated into lenders' and industry participants' disclosures.  Lenders and industry participants are free to use the language as-is, or modify the language to meet their compliance expectations. It is anticipated that lenders/industry participants will create new disclosure forms and/or add to existing disclosures that borrowers execute during the 3-day origination disclosure period, and/or within the closing disclosure package.   

For more information see HERE