Earlier this month, Pennsylvania Gov. Tom Wolf joined elected officials across the country instituting “Stay at Home” orders and declaring that non-essential businesses must stay closed in response to the new coronavirus pandemic. By the end of this week, 21 such state orders are expected to be in effect, impacting more than half of the U.S. population
That means lawyers, accountants, and other service professionals are scrambling to work remotely. For some, it’s business as (nearly) usual. But for others, there are real challenges, including how to properly execute signatures on contracts, tax returns, powers of attorney, and closing documents.
There are solutions, but their usefulness and legality may vary. Here’s a brief rundown of some of the available options.
An electronic signature or e-signature is precisely what it sounds like: a signature that is recorded electronically. The signature is captured online using technology either in the form of a stamp or a physical act (including when you awkwardly attempt to sign a touchpad with your finger). Officially, an electronic signature is an “electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”
Electronic signatures don’t have to be in a particular format. It just must indicate a signature and may include a signed fax, your typewritten name at the end of an email, a user name and password to access a secure website, a signature using an electronic pen, and a voice print using biometric technology.
Standards for e-Signatures have been formalized under the Uniform Electronic Transactions Act (UETA). Today, 47 states, the District of Columbia, and the U.S. Virgin Islands have adopted the UETA. Illinois, New York, and Washington are the outliers.
Digital signatures are a specific type of e-signature. Relying on encryption-based technology, digital signature platforms use a protocol called public key infrastructure. PKI generates two numbers called keys. Those keys are linked to the identity of the user. When you create a digital signature by signing the document, the data is linked to you as the user. In essence, the equivalent of your digital fingerprint is created and subsequently encrypted. Your signature is also time-stamped: if the document is modified after that time, the digital signature is no longer valid.
Digital signatures are becoming more popular, but they aren’t accepted in all places for all uses. Some countries have laws or standards that guide how digital signatures are used; the same can be said about specific industries.
The Internal Revenue Service allows digital signatures as part of its e-signature option. As part of the process, identity verification must be completed each time a taxpayer electronically signs. However, if a taxpayer e-signs in the physical presence of the electronic return originator, and the taxpayer is known to the ERO from prior years, no further identity verification is needed.
In the current crisis, it’s useful to note that the IRS also accepts a remote transaction for e-signature. That allows taxpayers to electronically sign the form when the ERO is not physically with them. That doesn’t include handwritten signatures sent to an ERO by hand delivery, U.S. mail, private delivery service, fax, e-mail, or via a website.
In some cases, tax and legal documents may need to be signed and notarized. With electronic notarization (e-notarization), a notary attaches a digital signature or certificate to an electronic record. The technology, which is similar to those used for digital signatures, must be tamper-evident. The fundamentals of notarization still apply to e-notaries. In some states, this means that the physical presence of the signer in the presence of a notary is still required, as well as identity verification.
Not all notaries may e-notarize a document. Typically, a notary public must apply to the Department of State in their state of commission to perform notarial acts for electronic records. As part of the process, a notary must identify each technology the notary public intends to use for e-notarization to ensure security and compliance. In most cases, there is no additional notary education required to become an electronic notary.
Standards for e-notarization can be found in the Revised Uniform Law on Notarial Acts, created by the Uniform Law Commission. The act is intended to promote uniformity in notary laws and has been adopted in 12 states: Colorado, Idaho, Iowa, Minnesota, Montana, North Dakota, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, West Virginia.
Attorneys and others have been increasingly interested in remote e-notarization because of social distancing. With remote notarization, personal appearance and identity verification are still required, but actual physical presence is not: appearing via audio-visual communication or technology is sufficient. Remote notarization laws exist in 23 states, with more than half (17) in effect as of January 1.
In response to the coronavirus emergency, some states are easing restrictions to allow remote notarization, though these are extremely limited. For example, in Connecticut, Iowa, and New Hampshire, executive orders now temporarily allow remote notarization. Similar rules are pending or in place in New York, New Jersey, and Wisconsin.
In Florida, the state Supreme Court issued an administrative order allowing any Florida Notary to administer oaths for court proceedings remotely using audio-video technology. A similar emergency law in Pennsylvania allows notaries who are court reporters/stenographers participating in criminal, civil, and administrative proceedings to swear in witnesses remotely to enable depositions, arbitrations, hearings, and many other proceedings to move forward.
In almost every case, the criteria require that the signer must be personally known to the notary or present satisfactory evidence of identity at the time of the notarization, and the notary must record the complete notarial act and keep the recording for some time. But use caution and check the requirements in your state before taking action.
With these new rules popping up, there is concern about uniformity. Last week, Sen. Kevin Cramer (R-N.D.) introduced S. 3533, the “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020.” The bill would establish minimum standards for electronic and remote notarizations in inter-state commerce. The bill would also require federal courts to recognize notarizations when the notarization occurs during or affects inter-state commerce.
Extraordinary times result in exceptional measures. Safety and limiting exposure are essential, even as we’re trying to acclimate to this new normal. The bottom line? Now, even while practicing tax and law, you can social distance.
This is a weekly column from Kelly Phillips Erb, the TaxGirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.