To amend the Internal Revenue Code of 1986 to prevent identity theft and tax fraud, and for other purposes.

Summary: Protect and Save Act of 2012 - Amends the Internal Revenue Code to: (1) authorize the Secretary of the Treasury to disclose tax return information to federal and state law enforcement agencies to assist in the investigation of the misuse of the identity of another person for purposes of filing a false or fraudulent tax return, (2) direct the Commissioner of Internal Revenue to establish within the Criminal Investigation Division of the Internal Revenue Service (IRS) the position of Local Law Enforcement Liaison to coordinate the investigation of tax fraud with state and local law enforcement agencies, and (3) make permanent the authority of the Secretary to disclose tax return information to federal and state prison officials to prevent the filing of false or fraudulent tax returns by prison inmates.

Requires the Secretary of the Treasury to: (1) implement an identity theft tax fraud prevention program; and (2) review whether current tax laws and regulations related to the confidentiality and disclosure of tax return information prevent the effective enforcement of federal, state, and local identity theft statutes.

Requires the Comptroller General (GAO) to conduct a study and report on: (1) the role of prepaid debit cards and commercial tax preparation software in facilitating fraudulent tax returns through identity theft, and (2) the role e-filing and electronic tax returns play in either facilitating or preventing fraudulent tax returns through identity theft.

Prohibits the Secretary of Commerce from disclosing information contained on the Death Master File relating to a deceased individual to persons who are not certified to access such information.

Requires the head of the Federal Bureau of Prisons to submit a detailed plan to Congress on how information obtained from the IRS will be used to reduce prison tax fraud.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protect and Save Act of 2012''.

SEC. 2. AUTHORITY TO DISCLOSE RETURN AND RETURN INFORMATION IN FEDERAL 
              AND STATE PROSECUTION LAW ENFORCEMENT.

    (a) In General.--Subsection (k) of section 6103 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(11) Disclosure of certain return information in 
        connection with identity theft and fraudulent returns.--
                    ``(A) In general.--In the case of an investigation 
                pertaining to the misuse of the identity of another 
                person for purposes of filing a false or fraudulent 
                return of tax, upon receipt of a written request which 
                meets the requirements of subparagraph (C), the 
                Secretary may disclose return information to officers 
                and employees of any Federal law enforcement agency, or 
                any officers and employees of any State or local law 
                enforcement agency, who are personally and directly 
                engaged in the investigation of any crimes implicated 
                in such misuse, but only if any such law enforcement 
                agency is part of a team with the Internal Revenue 
                Service in such investigation.
                    ``(B) Limitation on use of information.--
                Information disclosed under this subparagraph shall be 
                solely for the use of such officers and employees to 
                whom such information is disclosed in such 
                investigation.
                    ``(C) Requirements.--A request meets the 
                requirements of this clause if--
                            ``(i) the request is made by the head of 
                        the agency (or his delegate) involved in such 
                        investigation, and
                            ``(ii) the request sets forth the specific 
                        reason why such disclosure may be relevant to 
                        the investigation.
                    ``(D) Notification.--The Secretary shall determine 
                whether or not to grant the disclosure request 
                described in subparagraph (A) and notify the 
                petitioning law enforcement agency within 30 days of 
                receiving the request. This determination shall be 
                expedited in instances where the crimes of murder, 
                murder for hire, or arson are involved as certified by 
                the requesting agency's head.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 6103(a) of such Code is 
        amended by inserting ``or (k)(11)'' after ``subsection 
        (i)(7)(A)''.
            (2) Paragraph (4) of section 6103(p) of such Code is 
        amended--
                    (A) in the matter preceding subparagraph (A) by 
                inserting ``or (11)'' after ``(k)(10)'', and
                    (B) in subparagraph (F)(ii) by striking ``or (10)'' 
                and inserting ``(10) or (11)''.
            (3) Paragraph (2) of section 7213(a) of such Code is 
        amended by inserting ``(k)(11),'' after ``(7)(A)(ii),''.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to disclosures made after the date of the enactment of this Act.
    (d) Rule of Construction.--Nothing in section 6103 of the Internal 
Revenue Code of 1986 may be construed to prohibit Federal law 
enforcement officials from coordinating with State and local law 
enforcement agencies already investigating related crimes.

SEC. 3. LOCAL LAW ENFORCEMENT LIAISON.

    Section 7803 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(e) Local Law Enforcement Liaison.--
            ``(1) Establishment.--The Commissioner of Internal Revenue 
        shall establish within the Criminal Investigation Division of 
        the Internal Revenue Service the position of Local Law 
        Enforcement Liaison.
            ``(2) Duties.--The Local Law Enforcement Liaison shall--
                    ``(A) coordinate the investigation of tax fraud 
                with State and local law enforcement agencies,
                    ``(B) communicate the status of tax fraud cases 
                involving identity theft, and
                    ``(C) carry out such other duties as delegated by 
                the Commissioner of Internal Revenue.''.

SEC. 4. PIN SYSTEM FOR PREVENTION OF IDENTITY THEFT TAX FRAUD.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury (or the 
Secretary's delegate) shall implement an identify theft tax fraud 
prevention program under which--
            (1) a person who has filed an identity theft affidavit with 
        the Secretary may elect--
                    (A) to be provided with a unique personal 
                identification number to be included on any Federal tax 
                return filed by such person, or
                    (B) to prevent the processing of any Federal tax 
                return submitted in an electronic format by a person 
                purporting to be such person, and
            (2) the Secretary will provide additional identity 
        verification safeguards for the processing of any Federal tax 
        return filed by a person described in paragraph (1) in cases 
        where a unique personal identification number is not included 
        on the return.

SEC. 5. STUDY ON THE USE OF PREPAID DEBIT CARDS AND COMMERCIAL TAX 
              PREPARATION SOFTWARE IN TAX FRAUD.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study to examine the role of prepaid debit cards and 
commercial tax preparation software in facilitating fraudulent tax 
returns through identity theft.
    (b) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Comptroller General shall submit to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
of the House of Representatives a report with the results of the study 
conducted under subsection (a), together with any recommendations.

SEC. 6. STUDY ON THE USE OF E-FILING IN TAX FRAUD.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study to examine the role filing tax returns electronically 
(e-filing) and electronic tax returns play in either facilitating or 
preventing fraudulent tax returns through identity theft.
    (b) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Comptroller General shall submit to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
of the House of Representatives a report with the results of the study 
conducted under subsection (a), together with any recommendations.

SEC. 7. RESTRICTION ON ACCESS TO THE DEATH MASTER FILE.

    (a) In General.--The Secretary of Commerce shall not disclose 
information contained on the Death Master File to any person with 
respect to any individual who has died at any time during the previous 
two calendar years in which the request for disclosure is made or the 
succeeding calendar year unless such person is certified under the 
program established under subsection (b).
    (b) Certification Program.--
            (1) In general.--The Secretary of Commerce shall establish 
        a program to certify persons who are eligible to access the 
        information described in subsection (a) contained on the Death 
        Master File.
            (2) Certification.--A person shall not be certified under 
        the program established under paragraph (1) unless the 
        Secretary determines that such person has a legitimate fraud 
        prevention interest in accessing the information described in 
        subsection (a).
    (c) Imposition of Penalty.--Any person who is certified under the 
program established under subsection (b), who receives information 
described in subsection (a), and who during the period of time 
described in subsection (a)--
            (1) discloses such information to any other person, or
            (2) uses any such information for any purpose other than to 
        detect or prevent fraud,
shall pay a penalty of $1,000 for each such disclosure or use, but the 
total amount imposed under this subsection on such a person for any 
calendar year shall not exceed $50,000.
    (d) Exemption From Freedom of Information Act Requirement With 
Respect to Certain Records of Deceased Individuals.--
            (1) In general.--The Social Security Administration shall 
        not be compelled to disclose to any person who is not certified 
        under the program established under subsection (b) the 
        information described in subsection (a).
            (2) Treatment of information.--For purposes of section 552 
        of title 5, United States Code, this section shall be 
        considered a statute described in subsection (b)(3)(B) of such 
        section 552.

SEC. 8. EXTENSION OF AUTHORITY TO DISCLOSE CERTAIN RETURN INFORMATION 
              TO PRISON OFFICIALS.

    (a) In General.--Section 6103(k)(10) of the Internal Revenue Code 
of 1986 is amended by striking subparagraph (D).
    (b) Report From Federal Bureau of Prisons.--Not later than 6 months 
after the date of the enactment of this Act, the head of the Federal 
Bureau of Prisons shall submit to Congress a detailed plan on how it 
will use the information provided from the Secretary of Treasury under 
section 6103(k)(10) of the Internal Revenue Code of 1986 to reduce 
prison tax fraud.
    (c) Sense of House Regarding State Prison Authorities.--It is the 
sense of the House that the heads of State agencies charged with the 
administration of prisons should--
            (1) develop plans for using the information provided by the 
        Secretary of Treasury under section 6103(k)(10) of the Internal 
        Revenue Code of 1986 to reduce prison tax fraud, and
            (2) coordinate with the Internal Revenue Service with 
        respect to the use of such information.

SEC. 9. TREASURY REPORT ON INFORMATION SHARING BARRIERS WITH RESPECT TO 
              IDENTITY THEFT.

    (a) Review.--
            (1) In general.--The Secretary of the Treasury (or the 
        Secretary's delegate) shall review whether current Federal tax 
        laws and regulations related to the confidentiality and 
        disclosure of return information prevent the effective 
        enforcement of local, State, and Federal identity theft 
        statutes. The review shall consider whether greater information 
        sharing between the Internal Revenue Service and Federal, State 
        and local law enforcement authorities would improve the 
        enforcement of criminal laws at all levels of government.
            (2) Consultation.--In conducting the review under paragraph 
        (1), the Secretary shall solicit the views of, and consult 
        with, State and local law enforcement officials. Among the 
        Federal agencies the Secretary shall consult in conducting the 
        review are the following:
                    (A) The Department of Veterans Affairs.
                    (B) The Department of Justice.
                    (C) The United States Postal Inspection Service.
                    (D) The Social Security Administration.
    (b) Report.--Not later than 180 days after the date of enactment of 
this Act, the Secretary shall submit a report with the results of the 
review conducted under subsection (a), along with any legislative 
recommendations, to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives.