What is IRC 7216?
IRC 7216 is a federal criminal statute. It generally makes it a misdemeanor for a tax return preparer who knowingly or recklessly discloses return information, or uses it for a purpose other than preparing the return, unless an exception applies. Penalties can include a fine, up to one year in prison, or both.
Read the statute at 26 U.S.C. § 7216. The IRS also maintains a Section 7216 information center. A related civil penalty sits in section 6713.
What do the Treasury regulations require?
Treas. Reg. 301.7216-1 explains the penalty and defines tax return information broadly, including information furnished for or in connection with preparing a return. Treas. Reg. 301.7216-3 generally requires the taxpayer's prior written, knowing, and voluntary consent before a disclosure or use that is not otherwise authorized.
See 26 CFR § 301.7216-1 and 26 CFR § 301.7216-3. Consent generally must identify the preparer, the taxpayer, the purpose, the recipient or use, and the information, and be signed and dated. Consent cannot be retroactive.
What are tax return data privacy rules in this setting?
In plain terms, tax return information should not be swept into a data-licensing conversation as if it were ordinary operational records. Unless a specific exception in the statute or regulations applies, a valid consent that meets the regulation is the usual path, and an ordinary engagement letter may not be enough.
The Journal of Accountancy made that last point in Asked to sell firm data for AI training? Be very cautious (Nov. 2, 2026). Have counsel evaluate any proposed transaction. I do not give tax or legal advice.
Do anonymous statistical exceptions automatically allow an AI license?
No. The regulations include limited permissions, including certain anonymous statistical compilations, but those rules are narrow and conditioned. They are not a blanket green light to license tax return information for AI training. Whether any exception applies is a question for your counsel, not for this website.
The IRS Section 7216 information center summarizes permitted uses and their limits. When in doubt, leave tax return information out.
What should a firm do in practice?
Treat tax return information as a separate pile. Do not assume redaction or a buyer's anonymous-data label solves 7216. Ask your own counsel or ethics advisor before any disclosure or use that is not ordinary return preparation. Balance Sheet Data focuses on firm operational records, not on sending returns to a buyer.
Related reading: Can accounting firms sell anonymized data? and Can a CPA firm license its data?
FAQ
What is IRC 7216?
IRC 7216 is a federal criminal statute. It generally makes it a misdemeanor for a tax return preparer who knowingly or recklessly discloses return information, or uses it for a purpose other than preparing the return, unless an exception applies. Penalties can include a fine, up to one year in prison, or both.
What do the Treasury regulations require?
Treas. Reg. 301.7216-1 explains the penalty and defines tax return information broadly, including information furnished for or in connection with preparing a return. Treas. Reg. 301.7216-3 generally requires the taxpayer's prior written, knowing, and voluntary consent before a disclosure or use that is not otherwise authorized.
What are tax return data privacy rules in this setting?
In plain terms, tax return information should not be swept into a data-licensing conversation as if it were ordinary operational records. Unless a specific exception in the statute or regulations applies, a valid consent that meets the regulation is the usual path, and an ordinary engagement letter may not be enough.
Do anonymous statistical exceptions automatically allow an AI license?
No. The regulations include limited permissions, including certain anonymous statistical compilations, but those rules are narrow and conditioned. They are not a blanket green light to license tax return information for AI training. Whether any exception applies is a question for your counsel, not for this website.
What should a firm do in practice?
Treat tax return information as a separate pile. Do not assume redaction or a buyer's anonymous-data label solves 7216. Ask your own counsel or ethics advisor before any disclosure or use that is not ordinary return preparation. Balance Sheet Data focuses on firm operational records, not on sending returns to a buyer.