diff --git a/src/stan/lang/ast/fun/has_var_vis_def.hpp b/src/stan/lang/ast/fun/has_var_vis_def.hpp
index 9e6469069d4..de3cb140805 100644
--- a/src/stan/lang/ast/fun/has_var_vis_def.hpp
+++ b/src/stan/lang/ast/fun/has_var_vis_def.hpp
@@ -47,7 +47,7 @@ namespace stan {
     bool has_var_vis::operator()(const variable& e) const {
       scope var_scope = var_map_.get_scope(e.name_);
       return var_scope.par_or_tpar()
-        || (var_scope.is_local() && !e.type_.base_type_.is_int_type());
+        || (var_scope.local_allows_var() && !e.type_.base_type_.is_int_type());
     }
 
     bool has_var_vis::operator()(const fun& e) const {
diff --git a/src/stan/lang/ast/scope.hpp b/src/stan/lang/ast/scope.hpp
index 36476d34ea6..82b8afd4ea5 100644
--- a/src/stan/lang/ast/scope.hpp
+++ b/src/stan/lang/ast/scope.hpp
@@ -65,6 +65,16 @@ namespace stan {
        */
       bool is_local() const;
 
+      /**
+       * Flags local scopes which permit parameter variables.
+       * Allows local blocks in functions, transfromed parameter,
+       * and model blocks; disallows local blocks in transformed data
+       * and generated quantities program blocks.
+       *
+       * @return true for local parameter origin block types
+       */
+      bool local_allows_var() const;
+
       /**
        * Flags scopes where parameter variables are declared,
        * i.e., top-level of parameter or transformed parameter block.
diff --git a/src/stan/lang/ast/scope_def.hpp b/src/stan/lang/ast/scope_def.hpp
index 8dd11856956..95364cc64b6 100644
--- a/src/stan/lang/ast/scope_def.hpp
+++ b/src/stan/lang/ast/scope_def.hpp
@@ -25,6 +25,12 @@ namespace stan {
       return is_local_;
     }
 
+    bool scope::local_allows_var() const {
+      return is_local_
+        && program_block_ != transformed_data_origin
+        && program_block_ != derived_origin;
+    }
+
     bool scope::par_or_tpar() const {
       return !is_local_
         && (program_block_ == parameter_origin
diff --git a/src/stan/lang/ast/sigs/function_arg_type.hpp b/src/stan/lang/ast/sigs/function_arg_type.hpp
index b940af676f5..fcefc34a8b0 100644
--- a/src/stan/lang/ast/sigs/function_arg_type.hpp
+++ b/src/stan/lang/ast/sigs/function_arg_type.hpp
@@ -60,7 +60,7 @@ namespace stan {
       /**
        * Return true if the `expr_type` of the specified
        * `function_arg_type` is not equal to the
-       * `expr_type` of this `function_arg_type</
+       * `expr_type` of this `function_arg_type`.
        * Ignore status of bool `data_only_`.
        *
        * @param fa_type other function argument type.
diff --git a/src/test/test-models/good/parser-generator/data_qualifier_scope_xformed_data.stan b/src/test/test-models/good/parser-generator/data_qualifier_scope_xformed_data.stan
new file mode 100644
index 00000000000..7c4391e9fdb
--- /dev/null
+++ b/src/test/test-models/good/parser-generator/data_qualifier_scope_xformed_data.stan
@@ -0,0 +1,28 @@
+functions {
+  vector target(vector y, vector theta, real[] x_r, int[] x_i) {
+    vector[2] deltas;
+    deltas[1] = y[1] - theta[1] - x_r[1];
+    return deltas;
+  }
+}
+
+transformed data {
+  vector[1] td_y;
+  {
+    vector[1] td_y_guess = [1]';
+    vector[1] td_theta = [1]';
+    real td_x_r[0] = {1.0};
+    int td_x_i[0];
+    td_y = algebra_solver(target, td_y_guess, td_theta, td_x_r, td_x_i);
+  }
+}
+generated quantities {
+  vector[1] gq_y;
+  {
+    vector[1] gq_y_guess = [1]';
+    vector[1] gq_theta = [1]';
+    real gq_x_r[0] = {1.0};
+    int gq_x_i[0];
+    gq_y = algebra_solver(target, gq_y_guess, gq_theta, gq_x_r, gq_x_i);
+  }
+}