HR-6495-119
Received in the Senate and Read twice and referred to the Committee on Finance.
Sponsored by W. Steube (R-FL)
What it does
This bill would expand the notice the IRS must give taxpayers before contacting a third party — such as an employer or bank — for information related to a taxpayer's federal tax liability. Currently, the IRS must notify a taxpayer at least 45 days before a period during which it plans to contact third parties, but does not have to specify what information it is seeking. Under this bill, the IRS would be required to specify each item of information it intends to seek from a third party, provided the IRS has not already requested that information from the taxpayer and the taxpayer could reasonably supply it. The taxpayer would then have at least 45 days — or longer if reasonably requested — to respond before the IRS contacts the third party. An exception applies when the IRS determines third-party contact is necessary regardless.
Who benefits
Individual taxpayers and small business owners who are subject to IRS audits or inquiries, particularly those who may be unaware of what information the IRS is seeking. Taxpayers who can provide requested information directly, avoiding potentially embarrassing or disruptive third-party contacts with employers or financial institutions. Tax attorneys and accountants who represent clients in IRS proceedings and benefit from greater procedural transparency. Privacy advocates who support stronger limits on government information gathering.
Who is hurt
The IRS, which would face additional procedural steps and potential delays in tax enforcement and audit investigations. Taxpayers who are owed refunds or whose cases depend on timely resolution may experience slower processing if IRS timelines are extended. Third parties such as banks and employers, who may face more complex compliance situations if taxpayers dispute or delay the process. The general public, to the extent that slower or more constrained tax enforcement reduces revenue collection and compliance.
Supporters argue
Supporters argue that the current 45-day notice requirement is insufficient because it does not tell taxpayers what information the IRS is actually seeking, making it impossible for taxpayers to proactively respond and avoid unnecessary third-party contact. They contend that requiring specificity respects taxpayer privacy and due process by giving individuals a meaningful opportunity to cooperate before the government contacts their employer or bank — contacts that can damage professional relationships and reputations even when no wrongdoing is found. The bill's exception for cases where the IRS deems third-party contact necessary preserves enforcement flexibility while adding a baseline of procedural fairness.
Opponents argue
Opponents argue that requiring the IRS to itemize each piece of information sought — and then wait an additional 45 days — could significantly slow tax enforcement, giving bad actors more time to conceal assets, coordinate stories with third parties, or otherwise obstruct legitimate investigations. They contend that the existing 45-day notice already provides meaningful warning, and that adding a specificity requirement may allow sophisticated taxpayers or their advisors to game the system by selectively providing partial information to delay or limit third-party contact. The exception clause, they argue, may be too narrow to protect the IRS's ability to conduct timely and effective audits.
Constitutional context
No significant constitutional tension is present. Congress has broad authority to set procedural rules governing IRS operations under the Taxing and Spending Clause (Art. I, §8, cl. 1). The bill's notice requirements touch on Due Process principles (5th Amendment), which generally require fair procedures before government action affecting individual interests, but this bill expands rather than restricts taxpayer protections, making a constitutional challenge unlikely.
Checks and balances
Congress gains authority to impose additional procedural constraints on IRS enforcement; the IRS retains discretion through the "necessary" exception, and courts remain available to taxpayers who believe the IRS has violated the notice requirements.
Historical precedent
The IRS Restructuring and Reform Act of 1998 previously established the original third-party contact notice requirement (the current 45-day rule), representing the closest direct legislative analogue to this bill's procedural expansion.