STOP Identity Theft Act of 2012

Mr. Speaker, I rise today to urge my colleagues to support H.R. 4362, the Stopping Tax Offenders and Prosecuting Identity Theft Act of 2012, or simply the STOP Identity Theft Act.

Many of you have seen the recent headlines calling attention to the escalating nationwide epidemic of tax return identity theft. An unsuspecting taxpayer goes to file their tax return only to be told by the Internal Revenue Service that someone else has already filed and claimed their hard-earned tax refund.

This happened to one of my constituents, Joan Rubenstein, who was a 64-year-old teacher. When her accountant filed her 2010 tax return in April of last year, he was told by the IRS that she had already filed. Joan followed advice and filed a police report and reached out to the IRS. But after 10 months, she still had not received her refund. Only after working with my district office were we able secure her refund, which she desperately needed to assist her daughter with her student loan payments.

For her 2011 tax return, Joan was informed by the IRS taxpayer advocates office that she was okay to proceed with filing her return this year. Yet, shockingly, Joan's accountant filed only to learn that she was once again a victim of tax return identity theft for a second year in a row.

No one should have to go through the trauma of having their hard- earned tax refund stolen, and certainly not 2 years in a row. And Joan is not alone. This case, unfortunately, is not an anomaly. My office has been inundated with constituents who have also had their tax refunds stolen, and I know this is a rampant problem in Chairman Smith's district, and his home State of Texas as well. The amount of theft that goes on with this type of case is really astronomical.

It's stories like Joan's that prompted me to file this legislation that is before us on the floor today. The crime of tax return identity theft has quickly emerged over the last few years, and Congress must act to quickly address this epidemic. Tax return identity theft wreaks emotional and financial havoc on hardworking taxpayers like Joan and costs the Federal Government billions of dollars.

In 2011 alone, Mr. Speaker, the IRS reported that--listen to these numbers--851,602 tax returns and $5.8 billion were associated with fraudulent tax returns involving identity theft. That's a 280 percent increase since just 2010.

These tax return identity thieves hide behind a veil of technology by stealing Social Security numbers and filing false electronic returns where the payoffs are almost instantaneous. Right now, more thieves and criminal organizations are turning to this lucrative, low-risk, high- reward crime because law enforcement lacks the kind of stiff criminal penalties afforded many other forms of identity theft. Essentially, because of the small likelihood of getting caught, and the very minimal current penalty, it makes sense for these thieves to roll the dice because the chances of getting caught and actually doing any time at all is very low.

In this instance, technology has simply outstripped the enforcement tools that are currently on the books. Basically, this crime is worth it for the criminals who are committing it, and we need to make sure that it is not worth it any more so they don't have incentive to continue and they move on to the next thing, and then we can go after them for that.

We must protect the thousands of taxpayers like Joan who fall victim to this crime, many of whom belong to vulnerable groups like seniors, veterans, and even minors. The STOP Identity Theft Act brings together several measures to strengthen criminal penalties and increase the prosecution rate of tax return identity thieves.

H.R. 4362 will add tax return fraud to the list of predicate offenses for aggravated identity theft. The aggravated identity theft statute was created in 2004 to fight identity theft crimes committed to facilitate other types of felonies. However, at the time, the problem of tax return identity theft was very new, and it wasn't included as part of the predicate offenses under aggravated identity theft.

Today, it has become an urgent nationwide problem, and we must give law enforcement the additional tools needed to combat this crime. Each of the last two administrations have called for adding tax fraud to the predicate offenses under aggravated identity theft. With this change, the STOP Identity Theft Act will toughen sentencing for tax return identity thieves, which will help deter this kind of crime.

Importantly, the legislation also expands the definition of an identity theft victim to include businesses and charitable organizations. Often these organizations have their identities stolen and used in phishing schemes to extract the sensitive information from unsuspecting taxpayers used in tax return thefts. Essentially what happens, and we've all been warned about this, you get an email from what you think is your bank or the charitable organization that you are used to giving donations to, but it's really not because these thieves have stolen that organization's identity, and they are asking for your personal information, and unsuspecting victims give them that information.

By the way, you should never do that because your bank and charitable organization won't ask you for personal information.

These thieves then use the harvested information to file thousands of fraudulent tax returns. In fact, on the IRS Web site, it is noted that this type of phishing scheme is the most common one seen by the IRS. This amendment to the identity theft statutes will ensure that thieves who misappropriate the identities of any business, be it a small business or a nonprofit organization, can be prosecuted.

The STOP Identity Theft Act also calls for better coordination between the Department of Justice and State and local law enforcement to make the most efficient use of the law and resources. My own local law enforcement agencies in south Florida have been flooded with crime reports of tax return identity theft, and they need all the help they can get.

Finally, the legislation also calls for the Department of Justice to report back on trends, progress on prosecuting tax return identity theft, and recommendations for additional legal tools to combat it. Information and data about trends on tax return identity theft can be valuable tools to detect and prevent future fraud, and it will inform Congress of additional legislative actions that will help in the effort.

This legislation is just the strong beginning of the congressional effort to combat tax return identity theft. I know this issue is deeply concerning to many of my colleagues, and I look forward to working with them in their efforts.

This legislation is intended to provide targeted tools for law enforcement right away so that it is better prepared before next tax season rolls around and we have more victims who are really going to have months and months of problems and billions of dollars lost.

I want to thank Chairman Smith for your support and your leadership on this issue. It really is a pleasure to work with you. And as to the various organizations that have supported and helped craft this legislation, in particular I would like to recognize the National Conference of CPA Practitioners and the American Coalition for Taxpayers Rights for their support and efforts with this bill.

We must ensure that Federal laws are keeping pace with emerging crimes such as tax return identity theft. It is time to make prosecution of tax return identity theft a greater priority. The

STOP Identity Theft Act is an important step toward this goal, and I urge my colleagues to support this legislation.

Once again, I thank Chairman Smith for working with me on this legislation.

Mr. Speaker, I rise in support of H.R. 4362, the Stopping Tax Offenders and Prosecuting Identity Theft Act of 2012.

Tax-related identity theft is a wide-spread problem that must be addressed. The Internal Revenue Service (IRS) has reported that 641,052 taxpayers were affected by identity theft last year, more than double the number from 2010. This year, all indications point to an even greater number of incidents of tax-related identity theft. In April, the IRS had already blocked more than $1.3 billion in potentially fraudulent tax refunds.

While many taxpayers throughout the country have fallen victim to identity theft, the Tampa Bay area that I have the privilege to represent has unfortunately become a hotbed for this criminal activity. Local police have arrested street criminals with hundreds of Social Security Numbers, online tax preparation software, and prepaid debit cards containing tax refunds. Thieves are selling innocent people's identities for as little as $10 per Social Security Number.

After these criminals have stolen an identity, they file a false tax return using the victim's name and information. The IRS will send the criminal a refund on a prepaid debit card that is virtually untraceable. The IRS says that these fraudulent refunds could cost the taxpayers $26 billion over the next five years.

When the victim attempts to file his legal tax return, the IRS flags the account as having already received a refund and then begins an investigation to determine which return was actually filed by the valid taxpayer. Unfortunately, this process can take more than a year to complete and the victims are given no indication when they will receive their refund check. So now, not only has the victim's identity been stolen, the IRS will not give him the money that he or she is rightfully owed.

H.R. 4362 is good legislation in that it calls on the Department of Justice to do more to prosecute tax-related identity theft and strengthens criminal penalties on the thieves. However, I believe there is much more that can be done to combat this growing problem.

It is clear that the IRS needs to do a better job addressing this crime. There are steps that the IRS can and should take to prevent identity theft before it sends out fraudulent refunds. The IRS needs to do much better assisting the victims in getting their proper refunds. In May, the Treasury Inspector General for Tax Administration released a report titled, ``Most Taxpayers Whose Identities Have Been Stolen to Commit Refund Fraud Do Not Receive Quality Customer Service.'' More than 40 of my constituents have contacted me to express their personal experiences with tax-related identity theft and frustrations in getting the refunds they are owed from the IRS.

In April, I wrote to IRS Commissioner Douglas Shulman, to call on him to address the growing problem of identity theft. I asked the Commissioner to respond to me about the actions the IRS has taken to combat fraud, how the IRS can better utilize its resources to deal with identity theft, how we can ensure that victims receive their proper refunds in a timely manner, and how the IRS can better collaborate with law enforcement to identify and prosecute identity thieves. Despite the public's increasing concerns regarding this important issue, it took the IRS until the end of June to respond to my original inquiry. I would like to insert into the Record my letter to Commissioner Shulman as well as the response from the IRS.

The House Appropriations Committee, of which I am a senior member, has also indicated its strong concerns regarding the IRS's efforts to combat identity theft in the Fiscal Year 2013 Financial Services and General Government Appropriations bill. Section 103 of the legislation would require the IRS to ``institute policies and procedures that will safe-guard the confidentiality of taxpayer information and protect taxpayers against identity theft.'' Additionally, the Committee Report directs the IRS to report to the Congress regarding the number of cases of tax-related identity theft, the time it takes to resolve cases, and the agency's efforts to expedite resolution for these taxpayers.

The Stopping Tax Offenders and Prosecuting Identity Theft Act is a good start for addressing tax-related identity theft. But it is only a start. As our national debt approaches $16 trillion, we cannot afford to send out billions in fraudulent refunds to criminals. At the same time, the victims of this crime should not have to wait more than a year to receive the money that is owed to them. There is much the IRS can do on its own to address these issues. However, if more legislative changes are needed, I stand ready to work with my colleagues in the House to combat this problem.

Congress of the United States,

House of Representatives,

Washington, DC, April 12, 2012.

Hon. Douglas H. Shulman,

Commissioner, Internal Revenue Service, 1111 Constitution

Avenue NW, Washington, DC.

Dear Commissioner Shulman: As the deadline for individuals

to file their tax returns approaches, I would like to take

this opportunity to call on the IRS to address the issue of

tax fraud by identity theft.

As you arc well aware, this crime has been particularly

prevalent in the Tampa Bay region that I have the privilege

to represent. Several of my constituents have been victims of

identity theft and I thank you and your staff for your

efforts to help resolve their cases.

Tax season is stressful enough without the threat of

identity theft. The taxpayers we work for should not have to

worry that their identity has been stolen while they are

complying with the law and simply filing their tax returns.

Victims of identity theft can also experience significant

delays in receiving their refunds, depriving them of money

that many were counting on to help in these difficult

economic times. Often, these innocent citizens are left with

no idea of when they will be able to get the refund that is

rightly theirs.

At a time when the federal government is again projected to

run a deficit of more than $1 trillion, we should not be

paying out fraudulent tax refunds to identity thieves. The

IRS should do everything in its power to prevent this crime

and quickly assist victims. If the IRS requires additional

statutory authority to take these steps, I would urge you to

work with the Congress to find appropriate solutions.

To this end, I ask that you to respond to the following

questions:

1. What actions has the IRS taken in this tax filing season

to address the growing number of tax-related identity theft

cases?

2. How can the IRS better focus its resources to deal with

identity theft and assist victims?

3. What steps has the IRS taken to ensure the timely

issuance of refunds to victims of identity theft?

4. How can the IRS better work with federal, state, and

local law enforcement agencies to identify, investigate, and

prosecute identity thieves while protecting the privacy of

victims?

Again, thank you for your work to help the victims of tax-

related identity theft and your prompt reply to these

questions. With best wishes and personal regards, I am.

Very truly yours,

C.W. Bill Young,

Member of Congress.

Mr. Speaker, I yield myself such time as I may consume. I rise in opposition to H.R. 4362. It amends the Federal aggravated identity theft statute to add tax fraud to the list of predicate offenses. The penalty for aggravated identity theft is a mandatory term of imprisonment of 2 years or, for a terrorism offense, 5 years. This bill would, therefore, subject more people to mandatory minimum sentences and, therefore, to all of the problems that have been repeatedly shown to be associated with mandatory minimum sentences.

Fraud and identity theft are a serious and growing problem. But what we do to address the problems of fraud and identity theft should be measured and effective. While I appreciate the sentiments and efforts behind H.R. 4362, I cannot support an effort that seeks to stop one injustice by applying another. Because of the mandatory minimum sentences included in H.R. 4362, this bill is not an appropriate or effective solution to the problem of identity theft.

I'm not saying someone who commits these crimes should not be sentenced to 2 or 5 years, or even more. But it is inappropriate and unjust for Congress to sentence an offender based solely on the name of the crime, years before any of the facts or circumstances of the case, or their role in the particular case and the character of the defendant, are known and taken into account.

Mandatory minimum sentences have been studied extensively, and have been found to distort rational sentencing systems, to discriminate against minorities, to waste the taxpayers' money, and often to violate common sense. Even if everyone involved in the case, from the arresting officer, the prosecutor, the judge, and even the victim, after all of the facts and circumstances of the case are presented at trial by the prosecution and defense, if they all conclude that the mandatory minimum sentence would be an unjust sentence for a particular defendant in a particular case, it must still be imposed. Mandatory minimum sentences, based merely on the name of the crime, remove the sentencing discretion and rationality from the judge, and often require him to impose sentences that violate common sense. This is what brings about the result such as girlfriends who end up with much more time than their crack-dealing boyfriends, and often have to serve terms of 10-20 years or more, teenagers having consensual sex with their girlfriends getting 10 years, or a recent case of Marissa Alexander in Florida, a mother of three and a graduate student, who was sentenced to a mandatory minimum of 20 years for discharging a gun to warn off an abusive husband during a dispute. A warning shot. Ironically, if she had intentionally shot and killed him under those circumstances, the maximum penalty for voluntary manslaughter in that State is 15 years. If you want to know how those mandatory minimums pass, just watch this bill.

I offered an amendment at the committee markup of the bill which would have provided a maximum sentence of 4 years and 10 years instead of the 2 or 5, respectively. That way, offenders whose conduct warranted it could be sentenced to higher amounts of time, if it was appropriate, but for those whose conduct did not, such as bit players and those who play a minor role in a minor offense, the judge could arrive at a proper sentence. It is the height of legislative arrogance, in my view, for Congress to conclude that it has a better perspective to arrive at an appropriate sentence in advance, knowing nothing about the facts and circumstances of the case, than a judge charged with that responsibility who has heard all of the facts and circumstances of the case.

In addition, Mr. Speaker, the Department of Justice has recently expressed

concerns with the bill which indicate that we should have had a legislative hearing on the bill to hear from stakeholders and those who have concerns about the legislation. Even though I support the intent of the sponsors to do more to address identity theft, for the reasons stated, the 2 and 5 year mandatory minimum sentences make this bill indefensible, and I cannot support it.

I reserve the balance of my time.

Mr. Speaker, I yield such time as she may consume to the gentlelady from Florida (Ms. Wasserman Schultz), the sponsor of the legislation.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4362) to provide effective criminal prosecutions for certain identity thefts, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous materials on H.R. 4362 currently under consideration.

Mr. Speaker, I yield myself such time as I may consume.

I am pleased to be an original cosponsor of H.R. 4362, the Stopping Tax Offenders and Prosecuting Identity Theft Act of 2012, with my good friend and colleague, the distinguished gentlewoman from Florida, Debbie Wasserman Schultz. This is a bipartisan bill that strengthens criminal penalties for tax return identity thieves.

Tax fraud is a very real problem, and Congress should do all it can to protect citizens from this costly crime. Tax fraud through identity theft is a rapidly growing criminal enterprise in the United States. Criminals use stolen identities to steal income tax refunds from unsuspecting victims and from the Federal Government.

With nothing more than stolen identity information--Social Security numbers and their corresponding names and birth dates--criminals have electronically filed thousands of false tax returns and have received hundreds of millions of dollars in wrongful refunds.

The thieves deceive the Internal Revenue Service and file a return before the legitimate taxpayer files. The criminals then receive the refund, sometimes by check but often through a convenient but hard-to- trace prepaid debit card. The criminals then wait for the mail to deliver the cards and checks at abandoned addresses. According to reports in the media, postal workers have been harassed, robbed, and, in one case, murdered as they have made their rounds with their mail truck full of debit cards and master keys to mailboxes.

Tax thieves victimize innocent taxpayers in a number of ways. These thieves will file fake returns under a false name or claim someone who is no longer living as a dependent on their own forms. Often, the fraud is not detected until an individual files a tax return that is rejected by the IRS because someone else has already falsely filed and claimed their return.

The IRS has detected 940,000 fake returns for 2010 alone, from which identity thieves would have received $6.5 billion in refunds. And those are just the ones they caught early. It is estimated by the IRS that they missed an additional 1.5 million returns with possibly fraudulent refunds worth more than $5.2 billion. The number of these cases has increased by approximately 300 percent every year since 2008.

H.R. 4362 is a bipartisan bill that strengthens criminal penalties for tax return identity thieves. It adds tax return fraud to the list of predicate offenses for aggravated identity theft and expands the definition of an ``identity theft victim'' to include businesses and charitable organizations.

H.R. 4362 also improves coordination between the Justice Department and State and local law enforcement officials in order to better protect groups that are most vulnerable to tax fraud from becoming future victims. The changes to Federal law proposed by H.R. 4362 are important to keep pace with this ever-increasing crime.

Tax identity theft costs American families and taxpayers millions of dollars each year. It also results in confusion and needless worry, as taxpayers must work to correct the ID problem created by the false filers. It is critical that we take further steps to reduce the number of people who are victimized by this crime.

Again, I want to thank Congresswoman Debbie Wasserman Schultz for her great work on this issue, and I urge my colleagues to join me in support of H.R. 4362.

I reserve the balance of my time.

Mr. Speaker, I continue to reserve the balance of my time.

I yield back the balance of my time.

Mr. Speaker, I object to the vote on the ground that a quorum is not present and make the point of order that a quorum is not present.