House OKs Steeper Penalties for Leaking Tax Data

House lawmakers passed Tuesday the Taxpayer Data Protection Act, legislation that increases the maximum penalty for making an unauthorized disclosure of tax information.

Current law states that any violation for the unauthorized disclosure of tax information is a felony punishable by a fine up to $5,000, up to five years in prison, or both.

H.R. 8292 increases the maximum fine to $250,000 and the maximum prison term to 10 years.

The measure “comes after the leak of thousands of Americans’ tax information, including the tax returns of President Trump,” by Internal Revenue Service contractor Charles Littlejohn, who was sentenced in January to the maximum penalty of five years in prison and a $5,000 fine, House Ways and Means Committee Chairman Jason Smith, R-Mo., said Tuesday in a statement.

The bill also clarifies that “any violation on which affects more than one taxpayer shall be treated as a separate, distinct violation,” Smith said.

Starting in 2019, Littlejohn stole taxpayer data and leaked it to The New York Times and ProPublica.

“Those organizations then published a significant amount of confiidential tax information targeting numerous American taxpayers, using information that the IRS is tasked with keeping confidential and secure,” according to a statement summarizing the bill.

“When Americans file their tax returns, they expect their personal data and tax information are confidential,” Smith said in a statement.

But between 2017 and 2021, Littlejohn “stole taxpayer information, and he stole a lot of it,” Smith said. “He gave it to The New York Times and ProPublica, who published articles containing that confidential tax information about President Trump and other notable figures. Mr. Littlejohn then destroyed evidence and obstructed law enforcement investigations.”

Those notable figures included billionaires like Jeff Bezos, Warren Buffett, Elon Musk and Peter Thiel. ProPublica used the data to report on tax avoidance techniques used by the ultra-wealthy, such as Thiel’s use of a Roth IRA to grow shares of a nascent startup into a tax-free multibillion-dollar retirement haul.

Current law “failed to deter Mr. Littlejohn from stealing and leaking private and sensitive taxpayer information,” Smith said.

Moreover, Smith continued, “the Department of Justice only charged Mr. Littlejohn with a single count of unauthorized disclosure of private tax information. Increasing the punishment for this crime will result in better deterrence for potential criminals, and fewer crimes of this sort being committed.”

The bill has 25 co-sponsors, all Republicans.