A bipartisan provision championed by Sen. Steve Daines to sharply increase penalties for unauthorized disclosure of taxpayer information cleared the Senate Finance Committee as part of a broader tax administration package, moving one step closer to becoming law.
The Daines-Cortez Masto provision passed as part of the Taxpayer Assistance and Service Act, which the Finance Committee approved 26-1. The broader bill also modernizes IRS digital filing, cracks down on scammers targeting tax professionals and protects taxpayers from penalties caused by IRS processing delays.
“Unauthorized disclosure of taxpayer information is a serious crime that demands a more serious punishment,” Daines said. “With passage of our bill today out of the Senate Finance Committee, we are one step closer to deterring this serious offense and breach of privacy.”
Daines introduced the underlying bill with Sen. Catherine Cortez Masto (D-Nev.) in June, citing growing reliance by the IRS on outside contractors as a key driver of data breach risk. Finance Committee Chairman Mike Crapo specifically recognized Daines for championing the provision, calling it a practical, taxpayer-focused reform that enhances accountability.
Under the provision, the existing criminal penalty for unauthorized disclosure of tax returns would rise from a maximum fine of $5,000 and up to five years in prison to a maximum fine of $250,000 and up to seven years in prison. The bill would also create a new felony offense for IRS contractors who willfully fail to enforce required data safeguards, with a maximum penalty of either a $500,000 fine or 25% of the total amount obligated under all IRS contracts held by the contractor in the first fiscal year when the contractor was given access to the relevant return information — whichever is greater. Civil damages for unauthorized disclosure would also increase, from a minimum of $1,000 per act to $5,000 per act.
The legislation now heads to the full Senate for consideration.