Senate Bill Would Allow IRS to Share Tax Abuse Information with SEC

A Senate bill would provide a powerful new tool to combat tax shelter abuses by ending outdated communication barriers between the IRS and other enforcement agencies such as the PCAOB, the SEC, and the bank regulators. The bill, S. 681, is sponsored by Carl Levin, chair of the Subcommittee on Investigations.

Currently, the federal tax code bars the IRS from communicating information to other federal agencies that would assist those agencies in their law enforcement duties. For example, the IRS is barred from providing tax return information to the PCAOB, SEC, and federal bank regulators even when that information might assist the SEC in evaluating whether an abusive tax shelter resulted in deceptive accounting in a public company’s financial statements or help the PCAOB judge whether an accounting firm had impaired its independence by selling tax shelters to its audit clients.

To address this problem, the bill would authorize the Treasury Secretary, with appropriate privacy safeguards, to disclose to the PCAOB and SEC, upon request, tax return information related to abusive tax shelters, inappropriate tax avoidance, or tax evasion. The agencies could then use this information only for law enforcement purposes, such as preventing accounting firms from promoting abusive tax shelters, or detecting accounting fraud in the financial statements of public companies.