State Agency - NASACT



TOPIC: IRS Pub. 1075 - Fingerprinting Requirement to Access Federal Tax InfoOFFICE: AuditorSTATE: MNDATE: 03/02/2017QUESTION / ISSUE: Our office heard recently about IRS Publication 1075, which appears to require anyone in a state agency who has access to federal tax information to have undergone FBI fingerprinting. ( - See section 5.1.1 on p. 26-28 of the report). I have contacted the IRS Office of Safeguards about this but am still waiting for a response. In the meantime, I have the following questions:Has your audit organization dealt with this issue? If so, how did you interpret whether your auditors and evaluators who access FTI need to undergo FBI fingerprinting, and how did you reach that conclusion?How are you interpreting the deadline when auditors and evaluators would have to be fingerprinted?StateCommentsColoradoWe are working closely with the Assistant Attorney General, Employment/ Personnel and Civil Rights Unit, Employment and Civil Litigation Section, Office of the Attorney General along with other State Agencies most significantly the Department of Revenue to coordinate efforts to address the requirements of this IRS Publication. We are working on the following items: Decide how to centralize the fingerprinting process and who will participate in this centralization.After accomplishing item a, implement policies at the separate agencies that describe and authorize the background check process (I am drafting a model policy and will be working with individual agencies to implement these policies). Pass a state statute authorizing CBI to release national criminal justice information to the various state agencies.Publication 1075 contains numerous security requirements geared towards protecting taxpayer information. For our purposes, the most important change was placing an affirmative requirement on governmental agencies to conduct background checks of applicants, employees, and contractors who may have access to Federal Tax Information (FTI). To be clear, this is information received directly from the IRS and not simply tax information passed on from individuals to our agencies. The agencies we’ve been identified as housing employees and contractors who have access to FTI are: the Department of Law, Department of Revenue, Department of Personnel and Administration, Governor’s Office of Information Technology, Colorado Department of Human Services, Colorado Department of Labor and Employment, the Judicial Department, Office of the State Auditor, and potentially some institutions of higher education. The Department of Revenue will take a leading role in implementing these requirements given the significant impact of the regulations on their operations. The requirements governing these agencies, from 5.1.1 of Publication 1075, are:Agencies must develop a written policy requiring that employees, contractors and sub-contractors (if authorized), with access to FTI must complete a background investigation that is favorably adjudicated. The policy will identify the process, steps, timeframes and favorability standards that the agency has adopted. The agency may adopt the favorability standards set by the FIS (Federal Investigative Standards) or one that is currently used by another state agency, or the agency may develop its own standards specific to FTI access. The written background investigation policy must establish a result criterion for each required element which defines what would result in preventing or removing an employee’s or contractor’s access to FTI. Agencies must initiate a background investigation for all employees and contractors prior to permitting access to FTI. State agencies must ensure a reinvestigation is conducted within 10 years from the date of the previous background investigation for each employee and contractor requiring access to FTI. Agencies must make written background investigation policies and procedures as well as a sample of completed employee and contractor background investigations available for inspection upon request. Background investigations for any individual granted access to FTI must include, at a minimum: FBI fingerprinting (FD-258) – review of Federal Bureau of Investigation fingerprint results conducted to identify possible suitability issues. (Contact the appropriate state identification bureau for the correct procedures to follow.) A listing of state identification bureaus can be found at: national agency check is the key to evaluating the history of a prospective candidate for access to FTI. It allows the agency to check the applicant’s criminal history in all 50 states, not only current or known past residences. Check of local law enforcement agencies where the subject has lived, worked, and/or attended school within the last five years, and if applicable, of the appropriate agency for any identified arrests.The local law enforcement check will assist agencies in identifying trends of misbehavior that may not rise to the criteria for reporting to the FBI database but is a good source of information regarding an applicant.Citizenship/residency – Validate the subject’s eligibility to legally work in the United States (e.g., a US citizen or foreign citizen with the necessary authorization).Employers must complete USCIS Form I-9 to document verification of the identity and employment authorization of each new employee hired after November 16, 1986, to work in the United States. Within 3 days of completion, any new employee must also be processed through E-Verify to assist with verification of his/her status and the documents provided with the Form I-9. The E-Verify system is free of charge and can be located at e-verify. This verification process may only be completed on new employees. Any employee with expiring employment eligibility must be documented and monitored for continued compliance. The IRS has stated that it will conduct audits for compliance with these new background check requirements during the next year, but it won’t impose any consequences for not being in full compliance. That being said, the requirement for the background checking of applicants went into effect on September 30, 2016, and the background checking of contractors and existing employees must be done by September 30, 2017. IllinoisOur auditors are expected to and have done a completed background check (which includes a fingerprint element) conducted by the Department of Revenue which meets the FBI criteria. This is the same background check the Department of Revenue conducts for its own staff members which is in accordance with Pub 1075.In our reading of section 5.1.1 of pub 1075, we interpreted it to mean if we need access to FTI then our auditors will need to have a FBI fingerprint check.Based on the following excerpt from pub 1075: "The requirements of Section 5.1.1 pertaining to initial and periodic background investigations for individuals before authorizing access to FTI is effective upon date of this publication. " and the effective date of the publication (September 30, 2016), we interpreted this to mean that our auditors will need to comply with the requirements prior to the start of each audit/attestation engagement (i.e., annually).MichiganWe have not specifically encountered the FBI fingerprint requirement related to federal tax information (FTI). However, we have had our auditors fingerprinted for other audits based on federal requirements. In our reading of section 5.1.1 of pub 1075, we interpret it to mean if we need access to FTI then our auditors will need to have a FBI fingerprint check. We also consulted with the Michigan Department of Treasury staff leading the effort to implement these changes. Their interpretation is consistent with our reading. They said they would require our staff requesting access to FTI to have a FBI fingerprint check.Based on the following excerpt from pub 1075: "The requirements of Section 5.1.1 pertaining to initial and periodic background investigations for individuals before authorizing access to FTI is effective upon date of this publication. " and the effective date of the publication (September 30, 2016), we interpret this to mean that our auditors will need to comply with the requirements the next time they request access to FTI. MontanaWe became aware of the publication in its draft form and determined that it did not pertain to us. That position has not changed now that the draft has become finalized. We have not been challenged by the Montana Department of Revenue (DoR), Department of Labor and Industry (DOLI), or any other Montana state agency regarding the requirements contained in the publication. As of 2011, our employees are fingerprinted pursuant to statute (5-13-305, MCA but that leaves other employees that have not undergone a background check. We do sign a memorandum of understanding with both DoR and DOLI which sets forth the understanding of the confidential nature of tax records and how we safeguard them during and after the audit process is complete.N/AAttached is a copy of the publication with my comments and highlights.VirginiaIn talking with our state Comptroller’s office, their understanding is that this publication applies to employees of agencies that receive federal tax information directly from the IRS. It does not apply to information that agencies may have on hand that they produce, such as W2 forms, or that the employee provides them, such as SSN, withholding allowances, etc. Since the auditor’s office would not be receiving any information directly from the IRS, we would not need to comply. The only exception could be for individuals who work on the Taxation audit, since Tax does receive data from the IRS. ................
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