CUNA Comment Letter

Eligible Obligations

October 13, 1999

Via e-mail

Ms. Michelle Lane
Contracting Officer
Electronic Transcript Delivery Pilot Project
Electronic Tax Administration
Internal Revenue Service
Room C5-463
5000 Ellin Road
Lanham, MD 20706

RE: Internal Revenue Service Pilot of an Electronic Transcript Delivery System

Dear Ms. Lane:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Internal Revenue Service (IRS) Pilot of Electronic Delivery of Taxpayer Information (Pilot). The notice appeared in the Federal Register on September 13, 1999 and requested comments on an IRS proposal to automate IRS delivery of taxpayer information, when the taxpayer requests the information be given to a third party. CUNA represents more than 90 percent of the nation's 11,000 state and federal credit unions and has solicited the opinion of credit unions on this matter.

The Pilot would automate the current system for retrieving taxpayer information for disbursement to a third party. Currently, a taxpayer makes a disbursement request on FORM 4506 and mails it to the appropriate IRS Service Center. The IRS receives this form, routes it internally, retrieves the requested information, and mails it. The IRS estimates that its internal processing time for this request (excluding mailing time) is 7-10 days. The Pilot would electronically automate the current system and possibly reduce the turnaround time to 24 hours. In the Pilot, the IRS will recruit 100 businesses (contractors) to participate using a 30-day Request for Proposal process and award renewable, one-year contracts to these participants.

The IRS requests public comments on the specific aspects of the implementation of this Pilot as well as on the security, authentication, and privacy concerns that this Pilot raises. In general, CUNA supports this Pilot because it has the potential to improve and drastically reduce the time for the income verification process.

CUNA requests that the IRS design and implement this Pilot to make it as accessible as possible for small financial institutions and consumers. With that goal in mind, CUNA recommends that the IRS use technology, such as encrypted internet or e-mail, that allows the most people to use the program. CUNA asks that the IRS avoid using any delivery system that requires prohibitively expensive software and thereby reduces accessibility to the Pilot. In addition, to improve access to the public and small credit unions CUNA asks that the IRS avoid charging for this service. Some consumers and credit unions may not want to pay extra for this service and automation may reduce the cost of the current manual retrieval system, making a fee unnecessary.

The IRS requested comment on whether automation that produces a real-time system, instead of one with a 24 hour turnaround, would offer more advantages. If a real-time system could be obtained on a cost-effective basis that is not substantially more expensive, then that would be better. If the turnaround time is reduced to 24 hours, however, such an improvement may not be worth the expense of further development.

The IRS requests comments on whether existing laws and regulations would adequately safeguard taxpayer information or whether additional legal standards are necessary. CUNA believes that implementing additional laws or regulations on financial privacy would not be prudent since Congress is currently considering federal legislation on financial reform that will require the National Credit Union Administration (NCUA) and other financial institution regulators to issue regulations governing release of financial information. In addition, consumers are protected under state law in their state constitutions, state common law, and state statutes.

Moreover, credit unions and other depository institutions have enforceable privacy policies. NCUA issues standard bylaws for federal credit unions that federal credit unions may adopt. These bylaws require the officers, directors, members of committees and employees of a credit union to hold in confidence all transactions of that credit union with its members and all information respecting a member's personal affairs, unless an exception to this requirement is permitted under current law. Like any other trade practice, these privacy policies must adhere to the restrictions against unfair or deceptive trade practices in the Federal Trade Commission Act.

CUNA believes that some of the report requirements in the Pilot are burdensome. For example, contractors will be required to complete a form that captures statistical data on discrepancies in income reporting. This will require the contractors to track and record the number of requests processed, the number of discrepancies from the information provided by the taxpayers and the number of loans that were declined based on the data provided by the Pilot. This IRS requirement that institutions complete and keep discrepancy reports will drastically increase processing time. CUNA recommends that the IRS work to find an expedited way to process additional requests related to discrepancy issues.

In conclusion, CUNA supports implementation of the Pilot in a manner that ensures that the program is as accessible to as many consumers and credit unions as possible. CUNA also asks that, in the future, the IRS provide the public with more time to comment on important proposals of this nature. Please feel free to contact me, if you have any questions or comments at (202) 218-7766.


Michelle Q. Profit
Assistant General Counsel