SBA and IRS Data Sharing Inefficiencies Highlighted by GAO Report

A new report from the Government Accountability Office (GAO) reveals significant inefficiencies in the data-sharing process between the Tiny Business Administration (SBA) and the Internal Revenue Service (IRS) regarding disaster loan applications. The report, released on March 4, 2026, identifies opportunities for technological improvements and raises questions about the SBA’s approach to streamlining access to taxpayer information.

Current Challenges in Data Verification

Currently, both the SBA and the IRS rely on manual verification of tax request forms. This process, according to the GAO, is time-consuming, resource-intensive and susceptible to backlogs and delays. These delays are particularly concerning given the SBA’s Disaster Loan Program, established in 1953, provides critical low-interest loans to homeowners, renters, businesses, and nonprofits impacted by disasters.

GAO Recommendations and SBA’s Response

The GAO report suggests that the SBA has not actively pursued the legal authority needed to directly obtain taxpayer information from the IRS. Amending section 6103 of the Internal Revenue Code would be required to enable this direct access and facilitate near real-time data sharing. However, the SBA has expressed a preference for a broader legislative amendment covering potential future program changes, aiming to avoid repeated congressional action.

The GAO countered this argument, noting that amendments to section 6103 are typically narrow in scope due to the sensitive nature of taxpayer information. The GAO suggests the SBA could integrate consent requests directly into the loan application process, a solution independent of current IRS privacy regulations.

Technological Improvements Under Consideration

Despite disagreements on the legislative path forward, the GAO and the SBA agree on the potential benefits of technological improvements. Agency officials have indicated they are exploring technologies to reduce reliance on manual processing, lessen administrative burdens, and enhance fraud prevention within the disaster response programs. However, specific details regarding these technologies remain undisclosed.

Timeline for Addressing the Issues

The SBA plans to address the data-sharing concerns by October 31, 2027, coinciding with the renewal of the memorandum of understanding with the IRS. The agency has also affirmed its support for both statutory changes and technological advancements to improve data access and mitigate fraud.

The Role of the SBA

The Small Business Administration (SBA) plays a crucial role in supporting American small businesses by connecting entrepreneurs with lenders and funding opportunities. The SBA offers resources for planning, starting, and growing a business, including access to counseling, training, and government contracts.

Key Takeaways

• The current data-sharing process between the SBA and IRS for disaster loans is inefficient and relies heavily on manual verification.
• The GAO recommends the SBA pursue legal authority to directly access taxpayer information from the IRS, but the SBA prefers a broader legislative approach.
• Both agencies agree on the potential of technological improvements to streamline data sharing and reduce fraud.
• The SBA plans to address these issues by the October 31, 2027, renewal of its memorandum of understanding with the IRS.