Bill puts digital transactions on par with paper

An amendment to the Internal Revenue Service restructuring bill created, for the first time in federal law, a requirement that agencies treat electronic transactions between the government and the public the same way as they treat traditional signed paper documents.

An amendment to the Senate's reform bill, which was passed last week, struck down a provision that would have allowed the IRS to assume that any tax return signed by electronic means was, in fact, sent by the person associated with that "virtual" signature.

That presumption would have been in direct contrast to how the IRS considers hand-written signatures on paper tax returns. For those returns, it is the responsibility of the IRS, not the tax filer, to prove that the signature on the form is in fact the signature of the person who purportedly signed it.

Under the original provision, a victim of fraud, such as forgery, could have been held criminally responsible by the IRS. But under the new amendment, that liability is removed from the tax filer.

Sens. Patrick Leahy (D-Vt.) and John Ashcroft (R-Mo.) contend that the old language would have placed a greater burden upon an electronic filer in any disputes with the IRS than upon a person who filed a report with a handwritten signature. The senators also said the provision could have deterred taxpayers from filing tax returns electronically, hurting the IRS' long-standing effort to encourage electronic filing.

IRS officials could not comment by press time.

The amendment marks the first time Congress has considered the liability issue for electronic authentication, said Philip Corwin, a partner with Federal Legislative Associates, Washington, D.C. Corwin said the amendment will be a precedent that other agencies will consider when they begin to use electronic transactions.

The liability issue has been the primary "stumbling block" for federal agencies seeking to interact electronically with other agencies and citizens, said John Pescatore, senior consultant with Network Associates Inc., an information technology security vendor.

"That has been a gigantic impediment," he said. "It's what killed Cyberfile," which was the IRS' effort to allow tax filing over the Internet.