Overview
Title
To amend the Internal Revenue Code of 1986 to prohibit certain activities constituting preparation of tax returns by the Secretary of the Treasury, and for other purposes.
ELI5 AI
This bill wants to make sure the government doesn't help people directly with filling out their tax forms by themselves, except through some special programs that already exist. It says the government needs special permission if they want to create new ways to help people do their taxes online.
Summary AI
S. 96, also known as the “FAIR PREP Act of 2025,” aims to amend the Internal Revenue Code to block the Secretary of the Treasury from preparing tax returns or claims for refunds. It restricts the use of government-operated electronic tax preparation services, like Direct File, while allowing certain programs like the IRS Free File Program and qualified return preparation services. The bill ensures that the Secretary cannot spend funds on developing or operating new electronic tax preparation services without specific legal permission.
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AnalysisAI
The proposed legislation titled the “Fostering Autonomy in Independent Returns by Prohibiting Redundant and Extralegal Programs Act of 2025,” or the “FAIR PREP Act of 2025,” seeks to amend the Internal Revenue Code of 1986. The primary aim of the bill is to prohibit the Secretary of the Treasury from engaging in certain activities related to the preparation of tax returns, particularly through electronic means. This initiative highlights a shift towards limiting government involvement in tax preparation, potentially increasing reliance on private tax preparation services.
General Summary of the Bill
The FAIR PREP Act aims to restrict the Secretary of the Treasury from preparing tax returns or claims for refunds with limited exceptions. These exceptions include rightfully recognized programs like the IRS Free File Program. The bill amends Section 6020 of the Internal Revenue Code, clarifying that any electronic tax preparation service run by the Treasury would be considered government-prepared and therefore restricted under the new rules. These changes apply to returns filed after the enactment of the bill and extend to prohibiting further Treasury expenditures on new or existing electronic tax preparation services unless explicitly authorized by new legislation.
Significant Issues
One of the primary concerns highlighted by the bill is the increase in taxpayer reliance on private tax preparation services. By restricting government-prepared tax filing options, those who can least afford private services might face higher costs or limited access to assistance. The bill's language on exceptions for qualified programs like the IRS Free File Partnership lacks clarity, which could lead to confusion about eligibility and program availability. Moreover, the prohibition on further expenditures by the Treasury could hinder the development and adoption of more efficient and taxpayer-friendly electronic filing systems unless specifically authorized, potentially affecting timely innovations.
Impact on the Public
For the general public, especially low-income individuals who rely on free government services, this bill could lead to increased dependency on private tax preparation services, which are often associated with fees. Given the intricate nature of tax filing, government-facilitated programs like IRS Free File play a vital role in ensuring compliance and understanding of tax obligations. Reduced access to such services can exacerbate challenges faced by individuals less familiar with tax filing complexities.
Impact on Stakeholders
The proposed legislation has distinct implications for various stakeholders. Taxpayers who depend on free or affordable tax preparation assistance from the government will likely see reduced access to these services, potentially increasing their out-of-pocket tax filing expenses. On the other hand, private tax preparation firms might benefit from a greater market share as more taxpayers could turn to their services in the absence of government alternatives.
However, the prohibition on expenditure by the Treasury could have a mixed impact on both existing and potential private contractors working with the government on electronic filing services, as they might face uncertainty regarding the continuation of their projects. This uncertainty could constrain innovation within the sector as new entrants may be discouraged by the need for specific legal authorization to offer government-affiliated services.
Overall, while the FAIR PREP Act seeks to reduce perceived redundancies and overreach by the Treasury in tax return preparation, it introduces substantial potential challenges for taxpayers needing accessible and affordable filing options. The legislative intent, therefore, needs careful deliberation to balance efficiency, access, and autonomy for all stakeholders involved.
Issues
The prohibition of the Secretary of the Treasury from preparing tax returns, including via electronic services, could significantly impact taxpayers who rely on government-provided tax preparation assistance. This is described in Section 2(a)(1) and (2), potentially increasing reliance on private tax services and raising costs for taxpayers.
The clause allowing exceptions for 'qualified return preparation programs' and the 'IRS Free File Program' in Section 2(a)(3) lacks clarity on which specific programs qualify and under what conditions, possibly limiting taxpayer access to these services without clear guidelines.
Section 3 limits expenditures for electronic tax preparation services without specific legal authorization, potentially stalling the development and maintenance of efficient tax filing options, which could delay service improvements or innovations needed by taxpayers.
The definitions of 'prepare' and 'electronic tax preparation service' in Section 2(a)(4) might lead to ambiguities in what constitutes preparation versus assistance, impacting how taxpayers understand their eligibility for government assistance.
The potential for legislation to favor existing tax preparation service providers, as identified in Section 3, could reduce competition and innovation in the electronic tax preparation market, affecting the quality and cost of services available to taxpayers.
Subsection (c) of Section 2 might be interpreted as allowing broad development of new electronic tax services by the Treasury despite prohibitions, leading to confusion about legislative intent and authority concerning new service initiatives.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill states its official title, which is the “Fostering Autonomy in Independent Returns by Prohibiting Redundant and Extralegal Programs Act of 2025,” or simply the “FAIR PREP Act of 2025.”
2. Prohibition of certain return preparation Read Opens in new tab
Summary AI
The section amends the Internal Revenue Code to prohibit the Secretary of the Treasury from preparing tax returns or claims for refunds, with exceptions for specific programs like IRS Free File. It clarifies definitions related to tax preparation and states that the changes apply to returns filed after a certain date while maintaining the Secretary's authority to offer tax filing services.
3. Limitation on further expenditures circumventing congressional authority Read Opens in new tab
Summary AI
The section prohibits the Secretary of the Treasury or their delegates from spending money on electronic tax preparation services unless it receives specific legal authorization to do so after the law's enactment date.