SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Identify Theft and Tax Fraud 
Prevention Act''.

SEC. 2. CRIMINAL PENALTY FOR USING A FALSE IDENTITY IN CONNECTION WITH 
              TAX FRAUD.

    (a) In General.--Section 7207 of the Internal Revenue Code of 1986 
is amended--
            (1) by striking ``Any person who willfully'' and inserting 
        the following:
    ``(a) In General.--Any person who willfully'',
            (2) by striking ``Any person required'' and inserting the 
        following:
    ``(b) Information in Connection With Certain Exempt 
Organizations.--Any person required'', and
            (3) by adding at the end the following:
    ``(c) Misappropriation of Identity.--Any person who knowingly or 
willfully misappropriates another person's tax identification number in 
connection with any list, return, account, statement, or other document 
submitted to the Secretary shall be fined not less than $25,000 
($200,000 in the case of a corporation), or imprisoned not more than 5 
years, or both, together with the costs of prosecution.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns and information submitted after the date of the 
enactment of this Act.

SEC. 3. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF INFORMATION 
              BY PREPARERS OF RETURNS.

    (a) In General.--Section 6713(a) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``$250'' and inserting ``$1,000'', and
            (2) by striking ``$10,000'' and inserting ``$50,000''.
    (b) Criminal Penalty.--Section 7216(a) of the Internal Revenue Code 
of 1986 is amended by striking ``$1,000'' and inserting ``$100,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to disclosures or uses after the date of the enactment of this 
Act.

SEC. 4. PIN SYSTEM FOR PREVENTION OF IDENTITY THEFT TAX FRAUD.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury (or the 
Secretary's delegate) shall implement an identify theft tax fraud 
prevention program under which--
            (1) a person who has filed an identity theft affidavit with 
        the Secretary may elect--
                    (A) to be provided with a unique personal 
                identification number to be included on any Federal tax 
                return filed by such person, or
                    (B) to prevent the processing of any Federal tax 
                return submitted in an electronic format by a person 
                purporting to be such person, and
            (2) the Secretary will provide additional identity 
        verification safeguards for the processing of any Federal tax 
        return filed by a person described in paragraph (1) in cases 
        where a unique personal identification number is not included 
        on the return.

SEC. 5. AUTHORITY TO TRANSFER INTERNAL REVENUE SERVICE APPROPRIATIONS 
              TO USE FOR TAX FRAUD ENFORCEMENT.

    For any fiscal year, the Commissioner of Internal Revenue may 
transfer not more than $10,000,000 to the ``Enforcement'' account of 
the Internal Revenue Service from amounts appropriated to other 
Internal Revenue Service accounts. Any amounts so transferred shall be 
used solely for the purposes of preventing and resolving potential 
cases of tax fraud.

SEC. 6. LOCAL LAW ENFORCEMENT LIAISON.

    (a) Establishment.--The Commissioner of Internal Revenue shall 
establish within the Criminal Investigation Division of the Internal 
Revenue Service the position of Local Law Enforcement Liaison.
    (b) Duties.--The Local Law Enforcement Liaison shall--
            (1) coordinate the investigation of tax fraud with State 
        and local law enforcement agencies;
            (2) communicate the status of tax fraud cases involving 
        identity theft, and
            (3) carry out such other duties as delegated by the 
        Commissioner of Internal Revenue.

SEC. 7. REPORT ON TAX FRAUD.

    Subsection (a) of section 7803 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new paragraph:
            ``(4) Annual report on tax fraud.--The Commissioner shall 
        submit to the Committee on Finance of the Senate and the 
        Committee on Ways and Means of the House or Representatives an 
        annual report detailing--
                    ``(A) the number of reports of tax fraud and 
                suspected tax fraud received from State and local law 
                enforcement agencies in the preceding year, and
                    ``(B) the actions taken in response to such 
                reports.''.

SEC. 8. STUDY ON THE USE OF PREPAID DEBIT CARDS AND COMMERCIAL TAX 
              PREPARATION SOFTWARE IN TAX FRAUD.

    (a) In General.--The Comptroller General shall conduct a study to 
examine the role of prepaid debit cards and commercial tax preparation 
software in facilitating fraudulent tax returns through identity theft.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Comptroller General shall submit to the Committee on 
Finance of the Senate and the Committee on Ways and Means of the House 
of Representatives a report with the results of the study conducted 
under subsection (a), together with any recommendations.

SEC. 9. RESTRICTION ON ACCESS TO THE DEATH MASTER FILE.

    (a) In General.--The Secretary of Commerce shall not disclose 
information contained on the Death Master File to any person with 
respect to any individual who has died at any time during the calendar 
year in which the request for disclosure is made or the succeeding 
calendar year unless such person is certified under the program 
established under subsection (b).
    (b) Certification Program.--
            (1) In general.--The Secretary of Commerce shall establish 
        a program to certify persons who are eligible to access the 
        information described in subsection (a) contained on the Death 
        Master File.
            (2) Certification.--A person shall not be certified under 
        the program established under paragraph (1) unless the 
        Secretary determines that such person has a legitimate fraud 
        prevention interest in accessing the information described in 
        subsection (a).
    (c) Imposition of Penalty.--Any person who is certified under the 
program established under subsection (b), who receives information 
described in subsection (a), and who during the period of time 
described in subsection (a)--
            (1) discloses such information to any other person, or
            (2) uses any such information for any purpose other than to 
        detect or prevent fraud,
shall pay a penalty of $1,000 for each such disclosure or use, but the 
total amount imposed under this subsection on such a person for any 
calendar year shall not exceed $50,000.
    (d) Exemption From Freedom of Information Act Requirement With 
Respect to Certain Records of Deceased Individuals.--
            (1) In general.--The Social Security Administration shall 
        not be compelled to disclose to any person who is not certified 
        under the program established under section 9(b) the 
        information described in section 9(a).
            (2) Treatment of information.--For purposes of section 552 
        of title 5, United States Code, this section shall be 
        considered a statute described in subsection (b)(3)(B) of such 
        section 552.

SEC. 10. EXTENSION OF AUTHORITY TO DISCLOSE CERTAIN RETURN INFORMATION 
              TO PRISON OFFICIALS.

    (a) In General.--Section 6103(k)(10) of the Internal Revenue Code 
of 1986 is amended by striking subparagraph (D).
    (b) Report From Federal Bureau of Prisons.--Not later than 6 months 
after the date of the enactment of this Act, the head of the Federal 
Bureau of Prisons shall submit to Congress a detailed plan on how it 
will use the information provided from the Secretary of Treasury under 
section 6103(k)(10) of the Internal Revenue Code of 1986 to reduce 
prison tax fraud.
    (c) Sense of Senate Regarding State Prison Authorities.--It is the 
sense of the Senate that the heads of State agencies charged with the 
administration of prisons should--
            (1) develop plans for using the information provided by the 
        Secretary of Treasury under section 6103(k)(10) of the Internal 
        Revenue Code of 1986 to reduce prison tax fraud, and
            (2) coordinate with the Internal Revenue Service with 
        respect to the use of such information.

SEC. 11. TREASURY REPORT ON INFORMATION SHARING BARRIERS WITH RESPECT 
              TO IDENTITY THEFT.

    (a) Review.--
            (1) In general.--The Secretary of the Treasury (or the 
        Secretary's delegate) shall review whether current federal tax 
        laws and regulations related to the confidentiality and 
        disclosure of return information prevent the effective 
        enforcement of local, State, and federal identity theft 
        statutes. The review shall consider whether greater information 
        sharing between the Internal Revenue Service and State and 
        local law enforcement authorities would improve the enforcement 
        of criminal laws at all levels of government.
            (2) Consultation.--In conducting the review under paragraph 
        (1), the Secretary shall solicit the views of, and consult 
        with, State and local law enforcement officials.
    (b) Report.--Not later than 180 days after the date of enactment of 
this Act, the Secretary shall submit a report with the results of the 
review conducted under subsection (a), along with any legislative 
recommendations, to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.
Identify [sic] Theft and Tax Fraud Prevention Act - Amends the Internal Revenue Code to: (1) impose a fine and/or prison term on any person who knowingly or willfully misappropriates another person's tax identification number in connection with any list, return, account, statement, or other document submitted to the Internal Revenue Service (IRS); (2) increase the civil and criminal penalties for improper disclosure or use of taxpayer information by tax return preparers; (3) require the Commissioner of Internal Revenue to submit to the Senate Committee on Finance and the House Committee on Ways and Means an annual report on the number of reported cases of tax fraud and suspected tax fraud and the actions taken in response to such reports; and (4) require the head of the Federal Bureau of Prisons to submit to Congress a detailed plan on how it will use tax information provided by the IRS to reduce prison tax fraud.

Directs the Secretary of the Treasury to: (1) implement an identity theft tax fraud prevention program; and (2) review whether current federal tax law prevents the effective enforcement of local, state, and federal identity theft statutes.

Authorizes the Commissioner to transfer appropriated funds to be used solely to prevent and resolve potential tax fraud cases.

Directs the Commissioner to establish in the Criminal Investigation Division of the IRS the position of Local Law Enforcement Liaison to coordinate the investigation of tax fraud with state and local law enforcement agencies and communicate the status of tax fraud cases involving identity theft.

Directs the Comptroller General to study and report on the role of prepaid debit cards and commercial tax preparation software in facilitating fraudulent tax returns through identity theft.

Prohibits the Secretary of Commerce from disclosing information contained on the Death Master File relating to a deceased individual to persons who are not certified to access such information.
{"src": "billsum_test", "title": "A bill to prevent identity theft and tax fraud."}