(FORTUNE Magazine) – Tucked in the back of the December 20 Federal Register was a brief notice of a proposed IRS program called Compliance 2000. Out to cut cheating, the IRS proposed compiling a massive new database, filled with information sucked up from the kind of sources it now uses only during audits. According to the Register, those include "commercial databases, any state's department of motor vehicles (DMV), credit bureaus, state and local real estate records, commercial publications, newspapers, airplane and pilot information, U.S. Coast Guard vessel registration information, any state's department of natural resources information, as well as any other state and local records." Finally: "This system of records is exempt from certain provisions of the Privacy Act."

Hello, Big Brother. Hello, controversy. Charges Marc Rotenberg, director of the non-profit Electronic Privacy Information Center: "The proposal violates the central purpose of the Privacy Act of 1974, which is to limit access to personal data by government agen- cies." Worries Jerry Cerasale, spokesman for the Direct Marketing Association: "A belief that your purchases will put you on some government list could have a chilling effect on sales."

In February the IRS released a two-page clarification saying the new data would be used only to gauge compliance trends in broad market segments and would be stripped of all personal identifiers. Counters Rotenberg: "The IRS currently lacks adequate privacy oversight to ensure that access to this data is not routinely misused by the agency." The fine print on Compliance 2000 is not due for a few months, but the IRS appears to be backing down even further. National director of compliance research Wayne Thomas now claims the agency has no plans to use external data for anything other than audits. But Rotenberg, Cerasale, and others are not resting easy just yet.

- Jacqueline M. Graves