Modifications to penalties for unauthorized disclosures of taxpayer information

(a) Criminal penalties (1) In general Paragraphs (1), (2), (3), (4), and (5) of section 7213(a) are each amended by striking $5,000, or imprisonment of not more than 5 years each place it appears and inserting $250,000, or imprisonment of not more than 7 years. (2) Failure of contractors to maintain safeguards (A) In general Part I of subchapter A of chapter 75 of subtitle F is amended by inserting after section 7213A the following new section: 7213B. Failure of IRS contractors to maintain safeguards (a) In general In the case of a contractor of the Internal Revenue Service that willfully fails to implement or enforce any applicable requirement under section 6103 (or regulations prescribed thereunder) to protect the confidentiality of returns or return information, if such failure results in the unauthorized disclosure of returns or return information, such contractor shall be guilty of a felony and, upon conviction thereof, shall be fined the greater of— (1) $500,000, or (2) an amount equal to 25 percent of the specific contract with the Internal Revenue Service under which such contractor was provided access to the returns or return information related to the unauthorized disclosure. (b) Definitions For purposes of this section, the term contractor of the Internal Revenue Service means any person described in section 6103(n) (including any officer or employee of such person) in connection with a written contract with the Internal Revenue Service.. (B) Clerical amendment The table of sections for part I of subchapter A of chapter 75 of subtitle F is amended by inserting after the item relating to section 7213A the following new item: Sec. 7213B. Failure of IRS contractors to maintain safeguards.. (C) Conforming amendments (i) Section 6103(e)(11) is amended by inserting 7213B, after 7213A,. (ii) Section 6105(d) is amended by inserting 7213B, after 7213A,. (iii) Section 7431(e) is amended by striking the first sentence and inserting the following: If any person is criminally charged by indictment or information with— (1) inspection or disclosure of a taxpayer's return or return information in violation of— (A) paragraph (1) or (2) of section 7213(a), (B) section 7213A(a), or (C) subparagraph (B) of section 1030(a)(2) of title 18, United States Code, or (2) failure to protect the confidentiality of returns or return information which results in the unauthorized disclosure of the taxpayer's return or return information in violation of section 7213B(a), the Secretary shall notify such taxpayer as soon as practicable of such inspection or disclosure.. (iv) Section 7513(c) is amended by striking section 7213 and inserting sections 7213 and 7213B. (b) Civil damages Section 7431(c)(1)(A) is amended by striking $1,000 and inserting $5,000. (c) Effective date The amendments made by this section shall apply to disclosures or inspections made after the date of the enactment of this Act.