The Comptroller of Public Accounts proposes new §3.16, concerning delinquent taxpayer financial records; information exchange. The new section implements House Bill 1258, 87th Legislature, 2021, which enacted Tax Code, §111.025 (Delinquent Taxpayer Financial Records).

Subsection (a) provides definitions. Paragraphs (1) and (2) define "account" and "account owner record" using the definitions given in Tax Code, §111.025.

Paragraph (3) defines "comptroller's agent." Tax Code, §111.025 uses the term but does not define it. The comptroller proposes this definition to make the section easier to read and to memorialize that the comptroller will contract with a third-party vendor to facilitate the exchange of information with financial institutions as provided in §111.025(h).

Paragraph (4) defines the term "data match." Tax Code, §111.025 uses the term but does not define it. The comptroller proposes this definition to explain the process during which the comptroller will use the information financial institutions provide about accounts owned by delinquent taxpayers.

Paragraphs (5), (6), and (7) define the terms "delinquent taxpayer," "financial institution," and "inquiry file" using the definitions given in Tax Code, §111.025.

Subsection (b) describes the exchange of information between the comptroller and financial institutions. The subsection incorporates the limitation in Tax Code, §111.025(d) that the comptroller and its agent may only ask a financial institution to exchange information once each quarter.

Paragraphs (1) and (2) explain the two methods of exchanging information - the matched accounts method and the all accounts method - based upon the description of these two methods in Tax Code, §111.025(b).

Paragraph (3) implements the requirement in Tax Code, §111.025(c) that a request for information from the comptroller or its agent must be made in a manner that is compatible with the financial institution's data processing system.

Subsection (c) restates Tax Code, §111.025(e), which provides that a financial institution may not notify an account holder when it exchanges information with the comptroller or the comptroller's agent.

Subsection (d) addresses confidentiality, restating the limitation in Tax Code, §111.025(f) that the comptroller, its agent, and financial institutions may only use information obtained during an exchange of information for the purpose of performing a data match. Subsection (d) also memorializes the statement in Tax Code, §111.025(f) that the comptroller, its agent, and a financial institution must return, destroy, or erase information obtained during an exchange of information. For consistency, and to ensure compliance, subsection (d) provides a deadline by which the information must be returned, destroyed, or erased, which is the completion of the data match. Finally, subsection (d) expands on the statutory limitation on the use of account owner records, explaining that the comptroller will only use information obtained from a financial institution under this section to collect delinquent taxes and not for any other debt collection activities on behalf of the State.

Subsection (e) restates Tax Code, §111.025(g), which provides that a financial institution is not liable for any good faith actions it takes to comply with this section.

Subsection (f) provides that levies issued during a data match are made within the statutory framework established by Tax Code, Chapter 111.

Subsection (g) restates Tax Code, §111.025(i), which provides that a suit to enforce this statute must be brought by the Attorney General in the Travis County district courts.

Brad Reynolds, Chief Revenue Estimator, has determined that during the first five years that the proposed new rule is in effect, the rule: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rules' applicability; and will not positively or adversely affect this state's economy.

Mr. Reynolds also has determined that the proposed new rule would benefit the public by providing for the record match of information into the current statute to improve efficiency and increase return on delinquent tax collections. The proposed new rule would have no fiscal impact on small businesses or rural communities. The proposed new rule would have no significant fiscal impact on the state government, units of local government, or individuals. There would be no significant anticipated economic cost to the public.

You may submit comments on the proposal to James D. Arbogast, Chief Counsel for Hearings and Tax Litigation, P.O. Box 13528, Austin, Texas 78711-3528, or james.arbogast@cpa.texas.gov. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

The amendments are proposed under Tax Code, §111.002 (Comptroller's Rules, Compliance, Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2 (State Taxation), and Tax Code, §111.025(j), which gives the comptroller authority to adopt rules to implement the section.

This section implements Tax Code, §111.025 (Delinquent Taxpayer Financial Records).